<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended November 30, 1999.
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________
Commission file number: 333-84845
9278 Communications, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<S> <C>
Nevada 98-0207906
- -------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
1942 Williamsbridge Road, Bronx, New York 10461
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(Address of Principal Executive Offices)
(718) 792-5150
--------------
(Issuer's Telephone Number, Including Area Code)
iLink Telecom, Inc., 1177 West Hastings Street, Suite 1910,
Vancouver, British Columbia V6E 2K3
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common Stock, $.01 par value - 19,754,233 shares as of January 14, 2000
- -----------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INTERIM CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS AT NOVEMBER 30, 1999
<TABLE>
<CAPTION>
NOVEMBER 30,
ASSETS 1999
- ------------------------------------------------------------------------------------
<S> <C>
Current:
Cash and cash equivalents $ 29,815
Accounts receivable 106
Prepaid expenses and deposits 778
Due from related parties --
Other receivables 3,222
- ------------------------------------------------------------------------------------
Total current assets 33,921
Equipment 29,320
Goodwill 104,060
- ------------------------------------------------------------------------------------
167,301
====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------
Current:
Accrued liabilities $ 80,322
Loan 200,000
- ------------------------------------------------------------------------------------
Total current liabilities 280,322
- ------------------------------------------------------------------------------------
Stockholders' Equity:
Share Capital
Common stock -- $0.001 par value
25,000,000 authorized, 5,509,629
issued and outstanding 5,509
Preferred stock -- $0.001 par value
5,000,000 authorized
Series A Convertible issued and outstanding --
Additional paid in capital 824,243
Preferred stock to be issued --
Deficit accumulated in the development stage (942,773)
- ------------------------------------------------------------------------------------
Total stockholders' equity (113,021)
Commitments
Subsequent Events
- ------------------------------------------------------------------------------------
$167,301
====================================================================================
</TABLE>
See accompanying notes
2
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iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
FOR THE PERIOD For the Period
MARCH 1, 1999 TO March 1, 1998 to
NOVEMBER 30, 1999 November 30, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Sales $ 30,959 $ --
- ----------------------------------------------------------------------------------------------------------------
Expenses:
Amortization 50,797 --
Consulting fees 128,681 --
General and administrative 658,244 --
Professional fees 72,240 --
Loss on lease termination 40,056 --
- ----------------------------------------------------------------------------------------------------------------
950,018 --
- ----------------------------------------------------------------------------------------------------------------
Net Loss (919,059) --
- ----------------------------------------------------------------------------------------------------------------
Net loss attributable to common stockholders $(919,059) --
- ----------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share attributed to
common stockholders $ (0.30) --
- ----------------------------------------------------------------------------------------------------------------
Weighted average number of shares 3,112,714 1,571,056
================================================================================================================
</TABLE>
See accompanying notes
3
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iLINK TELECOM, INC.
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
FOR THE PERIOD For the Period
MARCH 1, 1999 TO March 1, 1998 to
NOVEMBER 30, 1999 November 30, 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net Loss $(879,003) $ --
Adjustments to reconcile net loss to net cash used in
operating activities --
Amortization 50,797 --
Shares issued for Services Rendered 202,090 --
Changes in operating assets and liabilities --
Increase in accounts receivable (106) --
Increase in prepaid expenses and
deposits (778) --
Increase in due from related parties -- --
Increase in other receivables (3,222) --
Increase accrued liabilities 37,785 --
- ---------------------------------------------------------------------------------------------------------------
Cash flows used in operating activities (592,437) --
Investing Activity:
Acquisition of capital assets (9,434) --
Financing Activity:
Proceeds from issuances of common stock 432,570 --
Loans 200,000 --
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 30,699 --
Cash and cash equivalents beginning of period -- --
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 30,699 $ --
===============================================================================================================
</TABLE>
See accompanying notes
4
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iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 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.
On December 10, 1999, the Company merged with and into 9278 Distributor
Inc., a company engaged in a different aspect of the telecommunications
industry, and subsequently changed its name to 9278 Communications Inc.
See Note 8(h).
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 November 30, 1999
and the results of operations and the changes in financial position for
the respective nine month period ended November 30, 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
included in the Company's Registration Statement on Form SB-2 declared
effective on November 30, 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:
<TABLE>
<S> <C>
Computer equipment 3 years
Furniture and office equipment 5 years
Telecom equipment 2 years
</TABLE>
5
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iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 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. The Company has
excluded 2,140,000 outstanding common shares as at November 30, 1999
from the determination of the weighted average number of common
shares which were issued for nominal consideration and are subject to
vesting agreement restrictions.
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.
6
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iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
3. EQUIPMENT:
<TABLE>
<CAPTION>
Accumulated NET BOOK
Cost Amortization VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $ 33,321 $ 8,155 $ 25,166
Furniture and office equipment 51,115 7,562 43,553
Telecom equipment 1,051 394 657
- ---------------------------------------------------------------------------------------------------------------------
$ 85,487 $16,111 $ 69,376
=====================================================================================================================
</TABLE>
4. SHARE STOCK:
<TABLE>
<CAPTION>
a) Issued -- Common stock Number
of Shares $
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
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 $2,497, April 1, 1999 1,903,500 432,570
Shares issued for services rendered, March 25, 1999 2,140,000 202,090
Shares issued in exchange for 145 Series A Convertible
Preferred Stock, September 30, 1999 96,666 144,999
Shares issued for capital assets, May 20, 1999 22,259 44,518
- ---------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1999 5,509,629 $829,752
=====================================================================================================================
</TABLE>
7
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iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
b) Issued -- Preferred stock, Series A convertible
<TABLE>
<CAPTION>
Number
of Shares $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares issued to acquire the capital stock of iLink
Telecom (B.C.) Inc., March 31, 1999 145 $145,000
- ---------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1999 0 0
=====================================================================================================================
</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.
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. with 96,666 shares of Common stock valued at $1.50 per
share, which shares are fully paid and non-assessable.
d) During March 1999 and May 1999, the Company issued 1,890,000 and 250,000
shares, respectively, 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 initially
recorded the issuance of the shares at nominal value equal to their par
value. At the time such shares were earned the Company recorded
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.
8
<PAGE>
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
The Company also vested 150,000 common shares to a consultant upon a
milestone being reached by the Company on November 30, 1999 as per the
Vesting Agreement dated March 25, 1999. A compensation expense of $149,850
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.
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 November 30, 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 received a loan in the amount of $50,000 from PTN Ltd., a
shareholder of the company. The term of the loan is one year, payable
by October 14, 2000 at an interest rate of 8.5%.
d) The Company received a loan in the amount of $50,000 from PTN Ltd., a
shareholder of the company. The term of the loan is one year, payable
by October 21, 2000 at an interest rate of 8.5%.
e) 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:
<TABLE>
<S> <C>
2000 $ 80,434
2001 107,246
2002 107,246
2003 35,748
</TABLE>
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:
<TABLE>
<S> <C>
2000 $10,191
2001 924
</TABLE>
9
<PAGE>
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
f) 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.
g) 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.
h) The Company entered into an Agreement dated November 9, 1999 to
provide IVR services to a customer for a one year renewable term.
6. MAJOR CUSTOMERS AND SUPPLIERS:
a) The Company earns its revenue from two customers. As at November 30,
1999, the aggregate accounts receivable balance relating to the
customers was $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.
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) 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 December 5, 2000 at an interest rate of 8.5%.
b) The company entered into a Debt Settlement Agreement with PTN Ltd.
dated December 6, 1999. The company authorized the issuance of
300,000 shares of the Company's Common Stock at a value of $1.00 per
share in full settlement of the outstanding debt and PTN Ltd. agreed
to waive the interest outstanding in consideration of certain
registration rights.
10
<PAGE>
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
c) The company entered into an asset re-purchase agreement dated
December 2, 1999 selling the fixed assets purchased on May 20, 1999
for the sum of $10. The Company recorded a related loss of
approximately $40,000 at November 30, 1999.
d) The company and Holders of a total of 90,000 common shares amended
the Vesting Agreement made effective the 25th day of May, 1999 by
way of an Amending Agreement on December 8, 1999.
e) Entered into an agreement dated December 6, 1999 for consulting
services for a term of 12 months pursuant to which the Company agreed
to pay $400,000 upon the financing and closing of the Acquisition
contemplated by the company. The fees shall be paid through the
issuance and delivery of 200,000 shares of the company's common
stock, valued at $2.00 per share.
f) The company accepted the resignation of one Director and subsequently
appointed two new Directors to the Board.
g) The company engaged the services of a consultant on the 15th of
November, 1999 pursuant to which the Company agreed to pay $6,000 CDN
per month for an initial three month term, commencing December 1,
1999. Subsequently, the engagement was terminated by way of mutual
consent on December 20, 1999.
h) On December 10, 1999, the Company merged with 9278 Distributor Inc.,
a New York corporation engaged in the wholesale distribution of
prepaid telephone debit cards. Such acquisition was effected through
the merger of 9278 Distributor Inc. with and into a wholly-owned
subsidiary of the Company, resulting in 9278 Distributor Inc.
becoming a wholly-owned subsidiary of the Company. In consideration
for such acquisition, the shareholders of 9278 Distributor Inc.
received an aggregate of 14,900,000 shares of common stock of the
Company, a cash payment of $1,000,000 and a promissory note in the
amount of $2,000,0000. The Company entered into a three year
Employment Agreement with the President and principal shareholder of
9278 Distributor Inc. pursuant to which such individual will be
Chairman and Chief Executive Officer of the Company. In connection
with such transaction, 1,750,000 outstanding shares of common stock
of the Company, previously subject to a vesting agreement, were
cancelled. In addition, the Company conducted two private placements.
Through the first private placement, the Company sold an aggregate of
500,000 shares of common stock at a purchase price of $2.00 per
share. In addition, the Company sold 1,500 shares of the newly
created Series B Convertible Preferred Stock, at a purchase price of
$1,000 per share. The Series B Convertible Preferred Stock is
convertible into shares of common stock at a conversion price in
relation to the then prevailing market price of the common stock.
i) The Company vested 90,000 common shares to employees upon a milestone
being reached by the Company on December 10, 1999 as per the Vesting
Agreement dated March 25, 1999. A compensation expense will be
recorded using the cash per share price of the most recent private
placement.
11
<PAGE>
iLINK TELECOM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
j) The Company vested 100,000 common shares to a consultant upon a
milestone being reached by the Company on December 10, 1999 as per
the Vesting Agreement dated March 25, 1999. A compensation expense
will be recorded using the cash per share price of the most recent
private placement. As a result, all previously invested shares were
either vested or cancelled,
k) The company terminated the lease agreement for premises in the United
States as of December 15, 1999.
l) In January 2000, the holder of 200 shares of Series B Convertible
Preferred Stock elected to convert such shares into 94,604 shares of
common stock.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The financial information contained in this Quarterly Report
reflects the prior business operations of the Company under the name
iLink Telecom, Inc. As a result of a merger with 9278 Distributor Inc. on
December 10, 1999, as described below, the Company changed its name to
9278 Communications Inc. and succeeded to the business operations of 9278
Distributor Inc.
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 and
uncertainties, including those relating to the recent acquisition of a
new line of business described below. 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.
OVERVIEW
Through and including November 30, 1999, the period which
financial information is presented herein, the Company conducted business
under the name iLink Telecom, exploring certain opportunities in the
telecommunications field. On December 10, 1999, the Company, through a
merger with a wholly-owned subsidiary of the Company, acquired 9278
Distributor Inc., a New York corporation engaged in the wholesale
distribution of prepaid telephone debit cards ("9278"). The Company
intends to file, on or before February 23, 2000, financial statements of
9278, as required by, and pursuant to, a Current Report on Form 8-K.
Because the sales volume and scope of the operations of 9278 is
significantly greater than that previously experienced by and conducted
by the Company, the future operations of the Company are expected to be
substantially different from those reflected in this quarterly report.
The financial statements contained herein do not reflect the business
operations of 9278, and accordingly should not be viewed as
representative of the Company's future financial performance.
As a consequence of such acquisition, the Company changed its
name to 9278 Communications Inc. and Sajid Kapadia, the principal
shareholder of 9278, became the Chairman and Chief Executive Officer of
the Company. The Company has entered into a three year Employment
Agreement with Mr. Kapadia. In connection with the acquisition of 9278,
the Company issued 14,900,000 shares of common stock to the shareholders
of 9278, and the Company made cash payments to such shareholders of
$1,000,000 as well as delivering a promissory note in the amount of
$2,000,000. Also in connection with such transaction, 1,750,000 shares of
common stock previously subject to a vesting agreement were cancelled.
Finally, the Company issued an aggregate of 500,000 shares of common
stock through a private placement transaction for an aggregate purchase
price of $1,000,000, and 1,500 shares of a newly created Series B
Convertible Preferred Stock at an aggregate price of $1,500,000.
RESULTS OF OPERATIONS
NINE MONTH PERIOD ENDED NOVEMBER 30, 1999 COMPARED TO THE YEAR ENDED
FEBRUARY 28, 1999
Revenues totaled $30,959 during this nine-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. Beginning in November 1999, we received
revenue from a second customer. For the interim period ending November 30
1999, we incurred a loss of $919,059 compared to a loss of $18,314 for
the year ended February 28, 1999. Costs and operating expenses for the
nine months ending November 30, 1999 were $950,018 compared to $18,314
for the year ending February 28, 1999. General and administrative
expenses increased to $ 658,244 during the first nine months of fiscal
year 2000. This increase in general and administrative expenses was due
primarily to compensation expenses recorded as a result of the vesting of
common shares, management fees, travel expenses and business development
by management and the
13
<PAGE>
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 the Company 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 $ 128,681 during this nine-month
period. The Company 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 our business.
The Company recognized a loss of $40,056 on the abandonment of
certain equipment.
Research and development expenditures were approximately
$15,000 during the nine month period ended November 30, 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 the Company 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 Calgary and in our offices at Vancouver. As new products are
developed, we will seek to obtain license, trademark, and/or proprietary
rights to the products as deemed appropriate.
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 November 30, 1999 we had a negative
working capital of $ 246,401 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 $432,570 of proceeds from
the private sale of the Company's common stock and a $200,000 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. These shares converted on September 30, 1999 into 96,666 shares
of the Company's common stock at a deemed price of $1.50 per share.
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. Such business plans, and
accordingly such capital requirements, are being readdressed by
management in light of the recent acquisition of 9278.
IMPACT OF THE YEAR 2000 ISSUE
The Company did not experience any disruptions in service or
operations as a result of Year 2000.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. On December 23, 1999, the Company filed a Current Report on
Form 8-K to report (i) the closing of its acquisition of 9278 Distributor
Inc. and (ii) the closing of two private placements of securities.
2. On December 29, 1999, the Company filed a Current Report on
Form 8-K to report (i) a change in its independent certified public
accountant, (ii) the change of the name of the Company to 9278
Communications Inc. and (iii) the change of the fiscal year end of the
Company to December 31.
3. On January 10, 2000, the Company amended the Current Report
filed on December 29, 1999.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
9278 Communications Inc.
--------------------------------------------
Date: January 18, 2000 /s/ Amar Bahadoorsingh
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President
(Principal Financial and Accounting Officer)
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