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FORM 10-QSB
[As last amended in Release No. 33-7505, effective
January 1, 1999, 63 F.R. 9632.]
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH, 31 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________to_____________
Commission file number 000-26421
MILINX BUSINESS GROUP, INC.
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(Exact Name of small business issuer as specified in its charter)
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DELAWARE 91-1954074
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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SUITE 3827 - 1001 FOURTH AVENUE PLAZA, SEATTLE, WA 98154
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(Address of principal executive offices)
206-621-7032 / 604-647-7600
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
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 court. Yes _____ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
State number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date
9,216,000 shares as of May 10, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I
ITEM 1 - FINANCIAL STATEMENTS
MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Denominated in US Funds)
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MARCH 31, 2000 JUNE 30, 1999
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(UNAUDITED)
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ASSETS
CURRENT ASSETS
Cash $3,866,912 $ 4,522
Receivables
Trade 4,935 17,151
Subscriptions 865,000 -
Employee 8,750 -
Other 182,126 50,675
Due from Dacstar, Inc. 140,100 -
Prepaid expenses 53,171 34,873
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Total current assets 5,120,994 107,221
PROPERTY AND EQUIPMENT, net 951,138 714,232
OTHER ASSETS AND DEFERRED CHARGES
Licenses, net 57,468 261,250
Deposits 533,137 24,834
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$6,662,737 $1,107,537
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 569,596 $ 391,412
Accrued liabilities 816,795 105,079
Due to 569343 B.C., Ltd. 3,418 3,586
Due to 545731 B.C., Ltd. - 25,813
Due to Milinx International, Inc., current portion - 25,000
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Total current liabilities 1,389,809 550,890
Due to Milinx International, Inc., less current portion - 200,000
STOCKHOLDERS' EQUITY
Series A preferred stock 3,675 3,675
Series B preferred stock - -
Series C preferred stock - -
Common stock 9,216 8,470
Additional paid in capital 10,390,864 1,209,275
Accumulated deficit (5,101,884) (844,250)
Accumulated other comprehensive deficit (28,943) (20,523)
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5,272,928 356,647
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$6,662,737 $1,107,537
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MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(UNAUDITED)
(Denominated in US Funds)
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FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
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2000 1999 2000 1999
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Net Sales $ 56,926 $ 16,740 $ 156,735 $ 16,740
Cost of Sales 113,203 17,610 273,634 17,610
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Gross Profit (Loss) (56,277) (870) (116,899) (870)
Selling, General and Administrative expenses 1,530,870 152,646 4,143,556 152,646
Other Income (6,804) - (2,821) -
----------- --------- ----------- ---------
Net loss from operations $ 1,580,343 $ 153,516 $ 4,257,634 $ 153,316
=========== ========= =========== =========
Net Loss Per Common Share - Basic and Diluted $ 0.17 $ 0.02 $ 0.48 $ 0.02
=========== ========= =========== =========
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MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(UNAUDITED)
(Denominated in US Funds)
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FOR THE NINE MONTHS ENDED
MARCH 31,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(4,257,634) $(153,516)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 241,779 6,875
Write off of license and trademark costs 304,500 -
Stock compensation 32,000 -
Changes in assets and liabilities
Accounts receivable
Trade 12,216 -
Employee (8,750) -
Other (131,451) -
Prepaid expenses (18,298) -
Accounts payable 178,184 4,500
Accrued liabilities 711,716 3,008
Due from Dacstar, Inc. (140,100) -
Due to 545731 B.C. Ltd (25,813) -
Due to 569343 B.C. Ltd (168) 44,799
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NET CASH USED IN OPERATING ACTIVITIES (3,101,819) (94,334)
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (471,810) (8,463)
Acquisition of licenses and trademarks (157,468) (50,000)
Cash acquired through Forestay 500 -
Deposits (508,303) (6,925)
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NET CASH USED IN INVESTING ACTIVITIES (1,137,081) (65,388)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 230,000
Proceeds from issuance of preferred stock - 100
Proceeds from issuance of Class A Units 2,772,500 -
Proceeds from issuance of Class D Units 5,333,660 -
Proceeds from sale of common stock to employees 3,550 -
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NET CASH PROVIDED BY FINANCING ACTIVITIES 8,109,710 230,100
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Effect of the exchange rate changes on cash (8,420) -
Net increase in cash and cash equivalents 3,862,390 70,378
Cash and cash equivalents at beginning of period 4,522 -
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Cash and cash equivalents at end of period 3,866,912 70,378
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MILINX BUSINESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: FINANCIAL STATEMENTS
The unaudited consolidated financial statements of the Company and its
subsidiaries have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles (GAAP) have been
condensed or omitted pursuant to such rules and regulations. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the entire fiscal year ending June 30, 2000. The Company was
incorporated on December 10, 1998 and commenced its operations in February 1999.
Therefore, comparative information is available only for the two months ended
March 31, 1999. This Form 10-QSB should be read in conjunction with the Form
8-K/A that includes consolidated financial statements for the year ended June
30, 1999 and the period ended September 30,1999 and Form 10-QSB for the period
ended December 31,1999.
NOTE 2: BASIC AND DILUTED NET EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Basic and diluted loss per share is based on the weighted average number of
common shares outstanding during the period. The weighted average number of
common shares outstanding during the three months and the nine months ended
March 31, 2000 was 9,152,802 and 8,837,400, respectively. The weighted average
number of common shares outstanding during the period ended March 31, 1999 was
5,127,895. Diluted loss per share includes the effect of all potentially
dilutive common stock equivalents. Diluted loss per share for the three months
and the nine months ended March 31, 2000 equaled basic loss per share due to the
anti-dilutive effect of the common stock equivalents.
NOTE 3. MANAGEMENT PLANS
The Company's negative cash flow from operations is expected to continue and
will accelerate in the foreseeable future to fulfill the purchase of licenses
and equipment, hire additional personnel, as well as to complete the
construction and commence the operation of the Data Center. The Company expects
that its existing capital resources will be adequate to satisfy the requirements
of its current and planned operations until the end of fiscal year 2000.
However, the rate at which the Company expends its resources is variable, may be
accelerated and will depend on many factors. The Company is currently in the
process of completing a private placement of Class D Units for $15 million with
results to date noted below. The Company will need to raise substantial
additional capital to fund its operations and may seek such additional funding
through public or private equity or debt financing. There can be no assurance
that such additional funding will be available on acceptable terms, if at all.
Subsequent to June 30, 1999 and through the date of this filing, the Company
raised through a series of private placements, $2,772,500 from 1,386,250 Class A
Units at $2.00 per Unit and $6,198,660 (net of placement costs) from 3,378,367
Class D Units at $2.00 per Unit.
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On March 31, 2000, $140,100 was receivable from Dacstar, Inc. This receivable
represented part of the placement proceeds deposited with Dacstar, Inc that were
repaid in April 2000. Subscriptions receivable outstanding at March 31, 2000
represent proceeds of sale of Class D Units that were collected subsequent to
March 31, 2000.
NOTE 4: ACQUISITIONS
On December 9, 1999, the Company entered into a Stock Exchange Agreement with
Forestay Corporation, a reporting company registered in Delaware, to acquire all
assets and liabilities of Forestay in exchange for 250,000 shares of the
Company's common stock. The Company has elected successor status under the
Exchange Act Rule 12g-3 (a) and became a reporting company with the filing of
Form 8-K on January 14, 2000 and Form 8-K/A on February 15, 2000. Net tangible
assets of Forestay at the time of the acquisition were valued at $500.
NOTE 5: CONTINGENCIES
Two related claims involving a computer software licensing agreement had been
previously asserted against the Company. The Litigation has now been completely
dismissed at no cost or further obligation to the Company.
NOTE 6: OTHER
During March 2000, the Company finalized agreements to acquire software from
iPlanet (the Sun/Netscape Alliance) and U-Force for Virtual Office and Unified
Messaging at a cost of $1,695,190, including maintenance contracts. A payment of
$1,255,000 was made during April 2000 and the balance of $440,190 is payable in
three (3) equal quarterly installments of $146,730 commencing May 29, 2000.
In addition, the company signed leases on March 8, 2000 with Sun Microsystems,
Inc. for computer equipment valued at $2,320,000. Down payments of $442,000 were
made on the same date. These leases have aggregate monthly payments of $53,000.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
Matters discussed herein contain forward-looking statements that involve risk
and uncertainties. Milinx Business Group, Inc. and subsidiary companies'
(Milinx) results may differ significantly from results indicated by
forward-looking statements. Other risk factors that might cause some
differences, include, but are not limited to:
o Adverse changes in general economic conditions;
o Changes in the present robust growth prospects for the Application Service
Provider (ASP) market including business-to-consumer and
business-to-business e-commerce;
o Changes in the competitive position and the entry of a number of new ASPs
in North America during the next two years;
o The ability of Milinx to complete the construction of a state-of-the-art
Data Center during the month of July 2000 (previous target date was April,
2000) providing the capacity to host software applications for rent over
the Internet and via private wireless and land based telephone lines;
o The ability of Milinx to meet additional unanticipated costs in the
completion of the Data Center.
o The delays that may occur during the start-up phase of the Data Center and
delivery of hosted software applications.
o The ability of Milinx to solicit subscribers commencing in May 2000 and to
achieve a subscriber base of 465,000 by June 30, 2002;
o The ability of Milinx to overcome concerns regarding security, reliability
and disaster recovery;
o The acceptance of the ASP business model by the marketplace;
o The ability of Milinx to recruit and train personnel with computer systems
and operations experience;
o The ability of Milinx to recruit, train and retrain personnel to provide
technical support for hosted programs;
o The ability of Milinx to provide the level of professional and integration
services at the outset to support marketing and sales efforts;
o The ability of Milinx to make satisfactory arrangements with firms that can
provide professional and integration services throughout North America.
o The ability to generate revenues from the Biometric Input Applications and
capabilities of the Company to service those customers.
o The ability of Milinx to raise sufficient equity and debt financing to
execute its business plan.
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PLAN OF OPERATION
Our view of the prospects of the North American Economy is an overall picture of
continued economic expansion, slightly increasing inflationary pressures, and
overall low unemployment. We strongly believe that small and medium sized
businesses (SMEs) will continue to gravitate to new technologies that will
dramatically improve their productivity and, ultimately, profitability.
The present main thrust for Milinx is to be a leading provider of advanced
services delivery, both as an Application Service Provider (ASP) enhanced by
innovative Research and Development leading to a unique bundle of integrated
product applications for small and medium sized businesses (SME's).
As a result of advancements in high bandwidth and data communications
technologies, the (ASP) delivery model has only recently been identified as a
way to enable the remote provision of applications. The Information Technology
Association of America (ITAA) defines an ASP as "Any for-profit company which
provides aggregated information technology resources to subscribers/clients
remotely via the Internet or other networked arrangement."
The key elements of this definition are that the provision of resources takes
place via the Internet (using a web browser interface, local access or dedicated
networking arrangements) and that revenues are earned through a "subscription
to" or "rental of" the resource. The ASP model places a new emphasis on the use
of applications rather than on ownership, creating numerous benefits for clients
by offering higher levels of flexibility, access to the latest technology, and,
according to Forrester Research, lower by up to 50% of the Total Cost of
Ownership (TCO).
According to Cahners In-Stat Group, Revenue from ASPs will soar from $7 million
in 2000 to about $7 billion in 2004 with users increasing in the same period
from 20,000 to 30 million.
The ASP delivery model effectively completes a circular journey in the
development of business computing. In the 1960s, computer hardware and software
was so expensive and complex to operate that businesses rented time on a
shared-use basis. As prices fell and ease of use increased, computing moved to
desktop PCs, either stand-alone or on a client/server basis. Inexorable
increases in both available computing power and businesses' reliance on IT for
competitive advantage has led to applications of ever-greater complexity and
cost, and a commercial imperative for reduced implementation time. Map these
dynamics onto an environment where IT skills are a scarce and costly resource,
and the scene is set for widespread preferred acceptance of the ASP delivery
model for software and computing power.
While the business practice of operating an in-house IT department is globally
accepted today, it is clearly not an efficient solution, diverting companies'
valuable resources away from their core competencies. Many firms have
acknowledged this inefficiency, but until recently, were left with no other
alternative (having been impeded by the technological obstacles of data
transmission).
Today, the ASP concept is being widely accepted, based on the availability of
high bandwidth and other recent advancements in communications technology. Data
transmission over the Internet has become faster, cheaper and more reliable. The
fact that the technology and infrastructure to support the ASP model has just
recently been developed, which explains why this industry is only emerging now -
the demonstrable need has been there for some time.
The ASP market is forecast to displace traditional packaged software, and to
become the pre-eminent business-computing model of the first decade of the 21st
century.
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During a speech to members of the Internet Professionals Network in
August 1999, Steve Ballmer, President/CEO of Microsoft, was quoted as saying,
"The notion of software as a packaged product will disappear, and that's a
fact."
Perhaps the most compelling argument to support the emergence of the ASP is that
this delivery model allows businesses to concentrate on their core competencies
- - not on their computers. Likewise, businesses' current IT resources are freed
from the requirements of system maintenance and upgrades, and are enabled to
concentrate on projects and processes that leverage the strategic objectives of
the firm. Thus, the ASP delivery model enables users to maximize their
competitiveness. The ASP model places a new emphasis on the use of the
application rather than on ownership, creating numerous benefits for clients by
offering higher levels of flexibility and access to the latest IT resources.
In the ultra-competitive business environment of the new millennium, the ASP
delivery model could arguably become obligatory for firms wishing to compete
effectively. With the financial efficiencies of the ASP delivery model, this
will be within the reach of every SME. Ultimately, few could afford to be
without it.
Representative of the market potential, many large corporations are establishing
positions in the ASP industry. For example, Microsoft, Lotus, Oracle, and Novell
are developing scaleable (expandable) versions of web-based groupware that will
be introduced to the ASP market in 2000. Furthermore, an ASP Industry Consortium
was established in May 1999 that will establish standards and foster research.
Members, including Milinx, of the Consortium include such influential companies
as Sun Microsystems, AT&T, Cisco, IBM, Compaq, and GTE.
COMPANY WITHIN THE ECONOMY
Milinx Business Group, Inc. ("Milinx"), a company incorporated December 1998 in
the State of Delaware and a Canadian wholly owned subsidiary, operating under
the name of Milinx Business Services, Inc., is focused on providing Internet
business services initially in the United States and Canada. Milinx Business
Group, Inc. commenced operations on February 10, 1999.
Milinx is primarily targeting the middle ground of the ASP market, which
specifically means providing communications, productivity and e-commerce
functionalities to Small and Medium Enterprises (SMEs) across North America. We
propose to set standards of excellence in the provision of such services, and to
develop and extend our competitive advantage by the introduction of related
value-added services unique to the Company, of which proprietary technology will
play a vital important role.
Once this Data Center is operational, it is the Company's plan to construct
similar facilities or partner with an existing communication providers, to
enable rapid expansion into the United States and then European and Asian
Markets.
Our current competitive advantages lie in the comprehensiveness of our services
and the reliability and scalability of our system. In addition, we have four
patent-pending proprietary technologies, one of which we feel will remove the
security risks inherent within Internet-based financial e-commerce transactions.
Milinx has formed an alliance among Sun Microsystems, Inc., Netscape, and their
affiliate, iPlanet, to be our strategic partners. Our partners have taken off
their gloves, so to speak, and are challenging industry leaders head on.
Together, we will have first-to-market advantage and will
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benefit from technology convergence, which will enable our net-centered
applications to be accessed by personal computers as well as a growing variety
of wireless handheld devices.
Another thrust for Milinx is in what it calls the Business Builder Toolbox
(BBT), a conceptual expression for a wide range of business functionalities. It
is not a static range of services. The BBT continues to evolve just as the
business environment does, while adhering to the principles of reflecting the
most advanced thinking and development of effective business and productivity
tools. Currently, the BBT is composed of Unified Messaging and Virtual Office
functionalities. Plans are well advanced to extend the offer with the provision
of Sun's StarOffice suite of office productivity software (which emulates
Microsoft Office 2000), a specially adapted version of Lotus Notes (created for
the ASP delivery model), and a suite of e-commerce functionalities. The latter
will be underpinned by our own proprietary technology including a patent-pending
biometric-encryption process that we feel will remove the security risks in
Internet financial transactions that has inhibited the growth of e-commerce.
Milinx has assembled a team of skilled and experienced professionals in a
management framework that embraces all the professional disciplines required to
make the Company a successful and profitable major player. Our competitive
advantage lies in the comprehensiveness of our services, the reliability and
scalability of our industry-leading software and hardware, and the experience
and prior knowledge we have gained from developing proprietary messaging
software. We have purposely created a Corporate Culture of creative talent
building innovative products and services.
SIGNIFICANT CHANGES IN THE COMPANY'S COMPETITIVE POSITION
Milinx has yet to effectively establish a market share position. According to
research being conducted on an ongoing basis, a number of companies, including
Microsoft, AT&T and other majors, have plans to enter the ASP marketplace during
the next few months. It is anticipated that there will be significant
competition as more and more software vendors roll out their products so that
they can be delivered via the Internet.
ONGOING DEVELOPMENTS
Milinx commenced operations in February 1999 and comparatives are available only
for the February to March period.
Milinx has made substantial progress in completing the construction of a
state-of-the-art Data Center located in 14,000 square feet of rental space
across the street from the Vancouver offices with an estimated completion during
the month of July 2000 (the original date of completion was scheduled for April,
2000). The projected costs include use of special materials to provide the
highest level of security available, backup generators and disaster recovery
systems. The Data Center is projected to be fully operational by July 31, 2000.
There is the risk of delays due to the innovative challenges created in the
integration of computer systems and the delivery of backup generators and
mechanical equipment for the Data Center, which may delay product launches and
revenues.
Milinx has specified the highest standard of materials and systems to ensure the
physical security of the Data Center, including extensive protection from damage
by fire. The Center will be operational 24 hours a day seven days a week (24/7)
with qualified computer technical support personnel. The Data Center will have
two back-up power systems, batteries and a stand-by generator. Furthermore, all
programs and customer data will be operating on two parallel systems. In
addition, there will be
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off-site storage of data at a safe location for recovery purposes. On completion
of the project, it is anticipated the Data Center will meet or exceed the
highest standards of excellence for security and operations.
RECRUITMENT AND TRAINING OF IT PERSONNEL
There is generally a shortage of trained computer engineers, software
developers, and operations support personnel. The Company now has a fully
staffed Information Systems Department and is currently retraining some of the
personnel for the new positions. However, the Company will require additional
trained personnel from outside and recruitment has aggressively commenced to
staff the Data Center and related activities.
Milinx has recruited Account Executives with computer and software-related
experience who shall have responsibilities to perform systems analysis, make
presentations to senior management of corporations, conclude sales and maintain
ongoing customer service.
LEGAL
Litigation between Milinx Business Group, Inc. and Interactive Intelligence,
Inc., KRP Communications Ltd. and others set forth in Form 8K/A filed on
February 15, 2000 has been completely settled at no cost to the Company or
further obligation.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has adequate working capital to meet its ongoing
obligations but is dependant on continued supplier financing and the sale of
stock to fund operations in the short term. The current monthly burn rate is
$600,000 and expected to increase to $675,000 commencing July 1,2000. Capital
Expenditures for the final quarter of FY 2000 are projected to be $3.5 million,
which will substantially complete the construction and operation commencement of
the Data Center. See comments below under the heading CAPITAL EXPENDITURES.
Since inception in February 1999 to March 31, 2000, the Company has raised
$10,199,680 (net of placement expenses and including $865,000 shown as
subscriptions receivable as of March 31, 2000) through a series of private
placements of equity securities.
The Company is currently in the process of completing a private placement for D
units at $2.00 each, which is composed of one Series C Preferred share and 1/2
1999 Class D Warrant. Each Series C Preferred share is convertible into one
common share and each full warrant is exercisable at $2.00 each. The offering
has been increased to 7,500,000 units for funding of $15,000,000. At the date of
this report, $6,198,660 (after placement costs) has been received. There are no
guarantees that additional equity investment will be forthcoming.
CAPITAL EXPENDITURES
Milinx is constructing a state-of-the-art Application Service Provider Data
Center and the project is estimated to cost over $6,100,000. Milinx has received
a commitment for loan and lease financing of $2,700,000 from its hardware and
software vendors with $440,000 of the financing repayable over eight months,
$395,000 repayable over 1 year, $550,000 repayable over 2 years, and the balance
over 3 years. The remainder of the funding for the Data Center project and other
capital
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expenditures, estimated at $3,500,000, is expected to be funded from current
cash resources and additional investment capital.
Based on the Company's plans to expand the number of Data Centers over the
course of the next 30 months, it is estimated that an addition of $13,000,000
may be required. It is anticipated that $7,000,000 of the financing may be
available from hardware vendors and the balance of the funding will be generated
from cash flow and external cash resources provided by debt and equity
financing. In the event the Company is required to accelerate its business plan
to meet unexpected demand for its services in North America and internationally,
Milinx will be required to raise substantial additional funding capital.
RESULTS OF OPERATIONS
Revenues for the third quarter increased 5.7% ($3,088) to $56,926 due to a
slightly higher usage of the Business Builder Toolbox. However, the subscriber
base and revenues are expected to decline in the fourth quarter as the Company
makes a transition to the new scalable ASP systems business model. Revenues are
anticipated to increase sharply in the first quarter of the new fiscal year as
the new business model is implemented.
The loss on sales increased by $50,341 from $5,936 for the three-month period
ended March 31, 2000 compared to the previous quarter. Telecommunication costs
increased in the third quarter due to the addition of T1 lines and greater usage
by BBT subscribers. The total selling, general and administrative expenses
increased $12,487 (.8%) for the third quarter over the second quarter. The rate
of increase for these expenses is expected to increase substantially in the
fourth quarter as a transition is made to the new ASP business model
o Wages and benefits increased $68,054 (9.7%) during the third quarter
mainly in the Information Services area. The trend in this expense
category is expected to continue for the next two quarters as
additional personnel are recruited for the Data Centre, research and
development projects, Investor Relations, Marketing, and Customer
Sales/Support.
o Professional fees increased by $43,627 (25.6%) (28.5%) primarily due
to the legal costs incurred in connection with the legal action
against Interactive Intelligence Inc. This action has been settled and
legal expenses are expected to decrease in the fourth quarter.
o Management and consulting fees increased $13,301 (8.8%)12,206 (89%)
due to fees related to the integration of the hardware and software
for the new Data Centre.
o The expense for licensing fees of $204,500 in the second quarter is
non-recurring.
o Decreases in other expenses, including sales presentations and
promotional materials were offset by an increase in travel expenses.
Travel and education expenses will increase in the fourth quarter.
Expenses are expected to increase considerably in the fourth quarter as the ASP
business model is implemented. Operating expenses, primarily wages and benefits,
rent, travel and promotion are expected to increase at a higher rate than
previous quarters as the ASP business model is implemented and expansion occurs
in the United States and globally.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation between Milinx Business Group, Inc. and Interactive Intelligence,
Inc, KRP Communications Ltd. and others has been completely settled at no cost
or further obligation to the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 11, 1999 the Company authorized 71,000 common shares to be sold to
employees of the Company's subsidiary. On March 22, 2000 the shares were issued
at $0.05 per common share for cash proceeds of $3,550.
On March 31, 2000, the Company had issued privately 3,378,367 Class D units at
$2.00 per unit for net cash proceeds of $6,198,660.
The proceeds of the aforementioned placements were used to finance capital
expenditures, operating expenses and to provide working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
None
ITEM 5. OTHER INFORMATION
James W. Summers was appointed Chief Financial Officer of the Company on April
19, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K filed January 14, 2000 and Form 8-K/A filed February 15, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Milinx Business Group, Inc.
(Registrant)
By: /s/ James W. Summers, CFO
---------------------------
James W. Summers, CFO
Date: May 10, 2000
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<S> <C>
<PERIOD-TYPE> 3-MOS
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