<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-KSB
(MARK ONE)
<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED
JANUARY 31, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
</TABLE>
COMMISSION FILE NUMBER 0-19705
------------------------
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEVADA 13-3469932 13-3469932
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
587 CONNECTICUT AVENUE 06854
NORWALK, CT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
</TABLE>
(203) 831-2220
(ISSUER TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $.003 PAR VALUE
(TITLE OF CLASS)
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 PAST 90 DAYS.
YES [X] NO
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $929,082
As of May 19, 2000 the aggregate market value of the voting stock held by
non-affiliates was approximately $9,844,934
Number of shares outstanding of the issuer's common stock, as of May 19,
2000 was 15,508,389
DOCUMENTS INCORPORATED BY REFERENCE
The issuer's proxy statement, primarily relating to the restructuring of
certain debts and the issuance of certain shares was filed with the Securities
and Exchange Commission on or about October 8, 1999 and was voted upon and
ratified by a substantial majority of the shareholders at a shareholders meeting
held on November 26, 1999 and is incorporated by reference into Part III of this
Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL BUSINESS
At the shareholders' meeting held on November 26, 1999, the new officers of
the Company were authorized to settle outstanding debts of the Company owed to
RG Capital Fund LLC and Syrinx Speech Systems Pty Ltd. The assumption of those
debts and capital infusion by PacketPort, Inc., as a conduit; with offices also
located at 587 Connecticut Avenue, Norwalk, Connecticut 06854; were done in
consideration of the issue of 4,500,000 shares of common stock at $.05 and an
option to purchase 1,500,000 shares of common stock for $.10. As part of the
debt restructuring plan proposed by PacketPort, Inc., the shareholders approved
a reverse split on a three share for one share basis, increase in par value from
$.001 to $.003, the issuance of 4,500,000 post reverse split shares to
PacketPort, Inc. at a cost of $.05 a share, the option to purchase 1,500,000
shares of common stock for $.10 and a new Board of Directors.
Also at that shareholders' meeting, authorization was given to change the
name of the Corporation from Linkon Corporation to PacketPort.com, Inc. In
accordance with this authorization, the name of the Corporation was changed
effective December 9, 1999 and the reverse split was also made effective
December 9, 1999.
PacketPort.com Inc. develops and markets Internet Protocol Telephony
products and services for the Internet, telecom and other data networking
industries. PacketPort.com is launching a complete line of Voice-over DSL
(VoDSL) products. Extending the capabilities of standard DSL service, VoDSL
allows the same line to provide multiple lines of Voice or Fax-over IP service
in addition to high-speed Internet access. PacketPort.com's products are sold to
International Carriers, Internet Service Providers and Next Generation Telcos.
Other IP Telephony and voice over DSL datacom equipment companies include public
companys' such as 3 Com (NASDAQ:), Clarent (NASDAQ: CLRN). CISCO Systems (Nasdaq
CSCO) and SONUS Networks (NASDAQ SONS). In addition private companies competing
include Copper Comm, Jetstream and Tollbridge.
Our software includes the Link O/S-TM- Operating System, which manages
digital signal processing resources, memory, and software objects for telephony,
fax, modem, speech compression, recognition, verification and synthesis.
PacketPort.com, Inc. also offers a Direct Driver Interface for board-level
programming, a signaling server engine for connecting Linkon-based systems to a
variety of communications networks, as well as high-level application
development tools such as Teravox-Registered Trademark-. Software applications
include the LinkNet-TM- IP (internet protocol) Telephony Software Suite and
LinkNet-TM- Gatekeeper Module.
Our hardware includes the Maestro-TM- System, a modular and scalable Digital
Signal Processing ("DSP")-based platform for processing voice, fax, voice
compression, modem, speech recognition and synthesis. The Maestro-TM- System
also provides public switched telephone network connectivity, echo cancellation
for IP Telephony applications, and computer bus and computer telephony bus
connectivity.
PacketPort.com, Inc. technology-based systems include the LinkNet-TM- IP
Telephony Gateway--a new offering for the rapidly growing Internet telephone
market--and the ESCAPE-TM- Enhanced Services Platform for the dynamic call
center automation market. Both products leverage Linkon's award-winning
Maestro-TM- System technology.
The Company has formed relationships with a variety of technology suppliers.
These include Continuous computing for whom we are value added reseller; Natural
Micro Systems a network interface and packet engine provider; Dax systems a PCI
bus enclosure provider, Audiocodes a packet engine supplier.
2
<PAGE>
THE MARKET FOR IP TELEPHONY
IP Telephony has rapidly gained the potential to transform the $62 billion
international telecommunications business. During 1996, the industry reached
consensus on important interoperability standards and gained the strong backing
of major computer vendors. The remaining technical limitations are quickly being
addressed, and the stage is now set for a direct assault on the world's most
lucrative telecom markets. According to Action Information Services, a
Washington DC-based market research firm, the IP telephony industry will impact
Public Switched Telephone Network revenues by more than $8 billion from 1998
through 2001. According to Frost and Sullivan, the market for IP Telephony
Gateways will rise from a projected $200 million in 1998 to $1.7 billion in
2001, which translates into a compounded annual growth rate of 229%. The growth
in revenues is being driven mainly by toll-bypass and toll reduction
capabilities, rapid product quality improvements, the growth of the Internet and
intranets, the desire or need to conduct multimedia communications, and the
integration of voice and data into a single network.
TECHNOLOGY OVERVIEW
Our hardware includes the Maestro-TM- System, a modular and scalable
DSP-based platform for processing voice, fax, voice compression, modem, speech
recognition and synthesis. The Maestro-TM- System also provides public switched
telephone network connectivity, echo cancellation for IP Telephony applications,
and computer bus and computer telephony bus connectivity.
PACKETPORT.COM, INC. TECHNOLOGY-BASED PRODUCTS
PacketPort.com, Inc. currently has the following distinct product lines: The
LinkNet-TM- Gateway System; The Escape-TM- System; and LinkNet-TM- SS7 Server.
THE LINKNET GATEWAY SYSTEM
The LinkNet Gateway System is based on the Company's unique technical
expertise, knowledge and experience of implementing voice communication
switching systems, network signaling protocols and real-time communication
requirements demanded by telecom networks. The rapid development of the internet
has introduced a new dynamic market of Internet based voice and fax
communications which requires the creation of a new communication paradigm based
in TCIP/IP communications and IP switching. As the new paradigm progresses the
convergence of traditional telecommunication networks with the internet will be
required. This creates a requirement for a new class of communication and
signaling server hardware and software applications to make the two disparate
networks work in a homogeneous fashion. To accomplish this task a sophisticated
level of "Carrier Grade TCP/IP Computer Telephony" integration and the
duplication of Class 4 and 5 level switch features on the platform is required.
Our approach to achieve this goal is to use best of breed system components,
specialized systems integration services, and high powered UNIX based server
platforms. Linkon's engineering team architects the systems and applies a
real-time communication model to TCP/IP networking to approximate the PSTN
telecommunication network supporting voice and fax communications.
The best of breed components include PacketPort.com, Inc.'s Voice and Fax
Internet telecom software, Sun Microsystems, Natural Microsystems PSTN
Interfaces and Audiocodes Packet Engines. Our signaling server API allows
control of the telecom server via specialized network control software including
vendor supplied H323 and SS7. LinkNet internet driver control is optimized for
real-time data transfer from computer network interfaces, and LinkVox suite of
"C" APIs enabling full control of all functions of the communication server and
creation of enhanced service modules required for messaging, network billing,
call progress monitoring and detailed session logging.
3
<PAGE>
LinkNet utilizes Sun Microsystems imbedded Sparc processors and Solaris
operating system in custom server configurations to manage all aspects of the
communications servers, data base registration and network control via signaling
interfaces. Software systems are provided by third party integrators selected
and approved to be used with LinkNet's system architecture. Desktop Web Phones
and other multimedia telecommunication devices as well as Java applications are
integrated into the system architecture delivering full telecommunication soft
phone features. It is important to note that there are many different "Web
SoftPhones" on the market. The server can utilize different software packages
supporting different voice compression types as long as the compression and
signaling types are supported on the PacketPort.com, Inc. telecom server.
ARCHITECTURE
The LinkNet product is designed as an open system platform with a full set
of enabling technologies and API tool set supporting IP to PSTN communication
applications. LinkNet's Gateway product goal is to supply to OEMs, Telcos, ISPs,
CTI System Integrators and communication service providers with System
Development, Integration, and Engineering capabilities of a solid foundation to
build IP telephony communication products/application solutions. As the IP
telephony market rapidly moves from the early adopter stage of an emerging
market the requirements for large scale reliable system platforms will become an
absolute necessity as new IP service revenues become mission critical to major
service providers. LinkNet's architecture is focused on the mission critical
applications with the same reliability of communication services that the public
switched networks offer today. To achieve this reliability LinkNet is based on
telco and ISP service provider proven system platforms, signaling and operating
systems. These platforms include UNIX (Solaris) operating systems, Sun
Microsystems Servers, and SS7 signaling control. All of these system components
are found in service providers' networks and have proven their performance with
a high level of reliability. In addition to solid hardware there is an abundance
of standard network management software packages and standards based interfaces
to other operation and maintenance systems. It is PacketPort.com, Inc.'s
objective position that if anew class of service provider is to generate new
revenue streams by entering the growing competitive market of telecommunication
services the network infrastructure has to be equivalent or better than existing
networks. LinkNet is positioned to take advantage of the best of the existing
networks, price advantage of open systems, and leveraging new communication
software applications. To fully understand the advantages of LinkNet's Gateway
Architecture you have to review the design criteria: 1) object oriented software
design with messaging interfaces, 2) hardware modularity, and 3) application
portability. To explain this architecture a discussion and description of the
gateway from the component level starting with the telecom interfaces, moving
through the DSP communication levels, to the highest application layer is
required. The following is a brief overview description of each of the Gateway's
component layers:
LINKNET SUN MICROSYSTEMS SPARC ADVANTAGE
SUN MICROSYSTEMS. Sun Microsystems architecture delivers a robust industry
standard data communication bus ideal for internet communications. SUN has the
experience and the installed based for internet gateways and a suite of powerful
RISC CPUs to support the demands of internet applications. SUN MICROSYSTEMS
TCP/IP NETWORK INTERFACES. Sun Microsystems is one of the leading web and
internet gateway servers on the market and one of the reasons is the support of
a number of different vendors providing networking interface cards. These cards
are proven performers in the data communication field and support very high
demand communication applications such as real time video. Voice communication
and the bandwidth required approximates the demands of video and audio and the
network communication equipment is there with a solid reputation for 24x7
operation.
4
<PAGE>
UNIX SOLARIS. Telecommunications infrastructure is based on Unix and
Solaris is an excellent operating system with a real-time kernel perfectly
suited for internet telephony.
REAL UNIX SERVERS. Sun Microsystems is a leader in Unix servers. Unlike
other computing platforms Unix and Sun are designed to work together. This
eliminated time consuming configuration and incompatible components. Real Unix
servers scale well and offer a variety of system sizes to meet all communication
requirements.
THE ESCAPE-TM- PLATFORM
The PacketPort.com, Inc. ESCAPE-TM- Voice Response Unit (IVR System) also
utilizes the Maestro-TM- System universal-port, DSP-based CTI boards and
application generation software. This hardware/software combination, built upon
a fully open-architected, telco-grade computer platform, provides great
flexibility in integrating previously disparate systems and emerging
technologies.
With ESCAPE-TM-, customers acquire a middleware system that applies not just
to current technologies, but also to emerging ones. ESCAPE-TM- enables the
exchange of information with other systems, regardless of whether they are old,
new, in-house, or third party. This allows a business to protect its existing
investments while reducing the costs associated with expanding services.
ESCAPE-TM- PLATFORM DESCRIPTION
The ESCAPE-TM- Platform utilizes its Maestro-TM- CTI architecture, which
enables the system to support either multiple channels of DTMF per DSP, or
"Universal Port" functionality supporting DTMF, Fax, Speech Recognition,
multiple voice compressions, modem, and Text-To-Speech.
Use of the Maestro-TM- boards in these VRU's offers significant advantages
over competitive products. According to Computer Telephony Magazine,
"Maestro-TM- delivers the best price performance while maintaining the Company's
reputation of producing the telecom market's "most powerful" board.
In addition to the Maestro-TM- Boards and application generator software,
each ESCAPE-TM- System is built upon a Pentium based Industrial Rack Mounted
Computer. This computer provides redundant power supplies, remote monitoring and
optional RAID disk storage capability.
SS7/C7 SIGNALING
Telephone company central offices use a signaling technology standard set by
the ITU. Termed SS7 in the US and C7 internationally, this standard provides
call control, routing and billing in large systems. The LinkNet gateway is fully
able to interoperate using this technology. To its knowledge, Linkon is the only
provider of VoIP equipment that has ISUP and TCAP gateways in commercial
deployment.
5
<PAGE>
RESEARCH AND DEVELOPMENT
The nature of the computer hardware and software industries is such that
research and development is deemed mandatory by management in order to ensure
competitiveness. The Company incurred research, development of approximately
$249,089 and $370,448 for the fiscal years ended January 31, 2000 and 1999
respectively. The Company's research and development activities seek to maintain
market competitiveness by designing and developing advanced hardware products
(communications boards) and more efficient software products to operate them.
Our product strategy calls for products with an "OPEN" architecture design.
This permits them to interface with all existing competitive hardware and
software and permits Linkon to market software replacement and upgrades as new
products are developed.
The Company's R&D strategy is to have strong in-house design and engineering
capability, but also to utilize state-of-the-art technology houses to develop
long lead-time leading edge technology. Some examples are arrangements with
Designer Labs for SS7 signaling solutions.
TECHNOLOGY RELATIONSHIPS
The Company's strong technology and quality product design have led to
several technology relationships over the last few years. The more significant
relationships are outlined below. Given its limited size and resources,
PacketPort.com has relied upon these and other third parties to develop
technology necessary for the Company's products.
NATURAL MICROSYSTEMS
Natural MicroSystems (NASDAQ; NMSS), based in Framingham, Massachusetts, is
the technology leader enabling the world's premier networking and communication
equipment suppliers to create and accelerate New Network infrastructure and
services. The company designs, develops and supplies network-quality hardware
and software components and provides design and customization services.
As IP telephony gains increasing market acceptance, the requirement emerges
for a new class of platform. New VoIP protocols such as the Media Gateway
Control Protocol (MGCP) and the Session initiation Protocol (SIP) help define a
standard environment for applications such as VoIP gateways and IP media
servers, which demand connectivity, flexibility, and performance.
Fusion/Convergence Generation-TM- (CG) 6000C is a scalable, high-performance
development platform for IP telephony solutions. This product has been developed
from the ground up to address packet-intensive, convergence applications and is
integrated as an important building block of the PacketPort.com gateway.
AUDIOCODES LTD.
AudioCodes designs, develops and markets enabling technologies and products
for voice over packet networks. AudioCodes' product line includes a selection of
signal processors, VoIP communication boards, communications software and custom
modules for OEM customers. AudioCodes is a voice compression leader and the key
originator of the ITU G.723.1 standard for IP Telephony.
Packetport.com Utilizes the AudioCodes' TP200 which provides VoIP packet
streaming for 60 Independent ports in a single PCI slot. The TP200 supports
industry standard algorithms for voice compression, silence suppression, echo
cancellation, fax relay, modem relay, tone relay and jitter buffer management.
Standard TDM bus interfaces, such as MVIP or SCSA are available for
integration with other CTI Products. An on-board NIC interfaces the IP network
based on standard RTP/RTCP media streaming
6
<PAGE>
protocol. An optional dual E1/T1 interface can be used to connect to the PSTN,
with on-board signalling support.
DESIGNER LABS
Designer Labs is a telecommunications software company based in New
Hampshire that specializes in intelligent network, or Signaling System 7
("SS7"), solutions for switched circuit and IP-based services. SS7 is
essentially a data network that runs parallel to the network of switches that
carry voice traffic over the public switched telephony network. The SS7 network
provides for a "signaling layer" that carries information about line and phone
status conditions (busy, out of service, etc.) between switches in the network
thereby helping to make the network more efficient and intelligent. SS7 also
uses specialized databases that contain call routing information, making it
possible, for example, for a telephone switch to route a call to a secondary
phone number if the primary number is unavailable. Designer Labs has partnered
with Linkon to develop SS7 signaling services that allow SS7 to be harnessed as
a signaling mechanism for the transport of voice over IP networks. This allows
Linkon's LinkNet Gateway to offer the same intelligent network services for IP
Telephony network applications.
OPUS/ MOCKINGBIRD
PacketPort.com, Inc. and Opus/ Mockingbird Networks signed a joint agreement
to merge their technologies and is in development of a next-generation high
density hybrid IP/telephony platform technology for the carrier market. The
relationship provides for the ability to significantly improve enhanced
messaging services and increasing port densities, to expanding system
scalability and lowering costs.
MARKETING
To date the Company has marketed its products via sales to independent
distributors, original equipment manufacturers ("OEM") and value added resellers
("VAR"). In addition, the Company's marketing program consists of advertising in
the trade press, exhibiting at trade shows, speaking engagements and
presentations by Linkon personnel at leading industry conferences and seminars,
demonstrations of Linkon technology with companies who are key prospects for
strategic relationships, and direct mail campaigns.
Although the Company's products have received wide recognition, commercial
success with previous generations has been moderate because of the high price
point (on a per port basis) for voice-only applications. Pricing issues have
been addressed with the Maestro-TM- System series products. The Company's
product design and feature set were ahead of the market trend towards more
complex multimedia applications and larger systems. As the market for systems
has become more competitive, and differentiation is increasingly feature based,
demand is rapidly rising for high port count and multi-feature systems which the
Company's product line addresses.
SALES
Through the Company's sales force, and its analysis of the sales volume,
market specialization and financial status of potential customers, the Company
predetermines potential customers deemed qualified for its products and makes
direct telephone or written contact with the appropriate representatives
thereof. The Company is directly targeting the Call Center market for sales of
the ESCAPE-TM- IVR platform. The primary sales targets for the Company's
component level products are VARs, Systems Integrators ("SI"), OEMs and
telephone companies.
7
<PAGE>
DISTRIBUTORS
The Company is seeking to develop relationships with independent firms to
carry the Company's products both domestically and internationally. The Company
currently has relationships with customers in the United States, Philippines,
Australia and throughout Europe.
OEM SALES
The Company seeks to establish agreements with OEM companies with large
customer bases which intend to modify the Company's hardware, operating systems
and/or utilities for marketing by the OEM under its own name. It is contemplated
that these arrangements will usually involve training, volume discounts and
minimum purchase commitments. As of the date hereof, the Company sells to
several OEMs, the largest agreement for which is with OPUS Systems/Mockingbird
Networks.
DIRECT SALES
The company presently sells directly to a number of accounts. As awareness
of the technological advantages of the company's LinkNet-TM- Flexible Packet
Gateway and IVR Platform System products grow in the market, it is expected that
the percentage of direct sales will grow.
INTERNATIONAL SALES
PacketPort.Com, Inc is in the process of negotiating distribution agreements
for the Philippines and China.
KEY CUSTOMERS
Four of the Company's customers accounted for approximately 76% of revenues
for the year ended January 31, 2000. Management believes that future sales will
come from:
1. Sales of the LinkNet-TM- Flexible Packet Gateway Server to customers such as
competitive local exchange carriers, next generation telecom companies,
ISP's and prepaid calling card companies.
2. VARs, Sis and OEMs who will develop or private label their own platforms
using our technology, and in essence, will resell the Company's products to
end users.
3. Low cost scaleable small to high density Internet appliances for VoDSL and
VoCable.
4. Sales of the ESCAPE-TM- IVR Platform into various vertical markets.
TELIC.NET, INC.
In fiscal 2000, telic.net purchased approximately $391,700 of LinkNet
Flexible Packet Gateways. Linkon's LinkNetwork deployed gateways were purchased
by telic.net in July 1999. The company since then has been expanding their
worldwide IP network. Their Partner program accommodates other companies that
wish to joint the network.
OPUS SYSTEMS/MOCKINGBIRD NETWORKS
In fiscal 200, Opus Systems/Mockingbird Networks purchased approximately
$120,500 of LinkNet software licenses. Opus Systems/Mockingbird Networks is an
OEM offering a range of IP telephony products, from turnkey solutions to
advanced signaling gateway for IP telephony manufactures.
MAGENTA TECHNOLOGIES, PTY LTD
In fiscal 2000, Magenta Technologies purchased and deployed approximately
$102,600 of Maestro products. Magenta is a Value Added Reseller (VAR) of the
Maestro Communications board. The
8
<PAGE>
company has developed a proprietary application using the Maestro Direct Driver
Interface, which they resell to companies in Australia and New Zealand.
BACKLOG
As of February 1, 2000 the Company had a backlog of approximately $151,000,
all of which was shipped in the first quarter of fiscal 2001. As of June 16,
2000, the Company had a backlog of approximately $250,000 to be shipped during
the second quarter of fiscal 2000.
CUSTOMER SUPPORT AND WARRANTY
The Company offers a two year warranty on all products and services.
Customers are entitled to receive telephone hotline access, field support and
periodic software updates. Customers return defective product for repair to
Linkon. Costs incurred as a result of "In Warranty" repairs and returns have not
been material in the past.
COMPETITION
The Company's markets are extremely competitive. Competitors to the
Company's various product lines include:
For the Maestro-TM- System products, Dialogic Corporation, Rhetorex, a
division of the Octel Division of Lucent, Brooktrout Technology, Inc. and
Natural Microsystems, Inc., among others, are substantial hardware competitors
of the Company.
For the Escape-TM- Platform products, Conversant, a division of Lucent
Technologies, Brite Voice, Intervoice, Periphonics, and Syntellect manufacture
IVR systems.
For the LinkNet Flexible Packet Gateway (server) products: Lucent, Nu-Era,
Vocaltec, Sonus, Cisco, Netrix, Inter-Tel, Vienna Systems and other companies as
well as several proprietary products companies have built competing IP Telephony
gateway products that utilize components from one or more of the companies
listed above.
For the Internet Appliances: TollBridge, Jetstream and CoperCom have
introducted competing hardware/software devices.
Management believes that its products possess certain competitive
advantages. The Company's products are able to run all functionality on a single
board, compared to multiple boards for the Company's competitors. The Company's
products can run compression software in conjunction with other modalities. The
Company's software is scalable to a high density. In addition, the Company's
LinkNet-TM- product is at present the only Sun Microsystems's SPARC and
Solaris-based IP Telephony Gateway on the market--a factor that provides Linkon
with a distinct competitive advantage in the telecommunications and Internet
services marketplace. However, given the competitive nature of the industry, no
assurance can be given that the Company can achieve a commercially successful
market for its products or that its competitors will not develop similar or
better products than the Company's present line in the future. The Company does
not presently possess a meaningful market share in the voice processing industry
and many of the Company's competitors have greater financial and other resources
and more substantial marketing capabilities than the Company.
PATENTS, TRADEMARKS & COPYRIGHTS
The Company's computer board design and code are proprietary and a trade
secret. The Company has obtained no patents or registered any copyrights for any
of its products.
9
<PAGE>
The Company has obtained a registration for its
TERAVOX-Registered Trademark- trademark from the U.S. Patent and Trademark
Office and intends to seek source code copyright protection on its future
operating systems and utilities.
On February 10, 1998 the Company entered into a TXG-NX Field Deployable
Software License Agreement, TXG-NX Lab Deployable Software License Agreement and
a USP Library Software License Agreement with Designer Labs, LLC. Each of such
license agreements are non-exclusive and permit the Company to use and sell
certain computer software in connection with the development and sale of the
Company's products. The terms of the licenses vary from approximately one year
to perpetual unless terminated by the Company or, in the event of a breach by
the Company of any the terms of the applicable license agreement, by Designer
Labs, LLC.
The Company has also entered into a world-wide, non-exclusive license
agreement to use or incorporate in products sold by the Company certain computer
software, patents, trademarks and copyrights owned by Aumtech Limited related to
applications generation and service creation for use in voice processing
systems. This license is for a two-year term ending December 1999 and is
renewable for successive one-year terms upon mutual written consent of the
parties.
EMPLOYEES
On May 10, 1999, Linkon laid off all but one employee (an administrative
employee) because it did not have the cash on hand to meet further payrolls.
Subsequent to the restructuring which occurred during the fourth quarter of
fiscal year ended January 31, 2000, the Company has reemployed two prior
directors in an engineering and product development capacity and two prior
technical support personnel to assist product enhancement and customer service.
The Company also has two administrative employees, a national sales manager and
three executive officers for a total of ten employees as of April 16, 2000. The
Company anticipates hiring additional engineers and technical support personnel
commensurate with revenue growth and product enhancement.
ITEM 2. PROPERTIES
The Company moved to 587 Connecticut Ave, Norwalk, CT in November 1999, in
conjunction with the restructuring, and leases approximately 2,000 square feet
for $4,000 on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS
By complaint dated January 4, 1999, Syrinx Speech Systems Pty. Limited
commenced a civil action against Linkon in the Connecticut Superior Court,
Syrinx Speech Systems Pty. Ltd. v. Linkon Corp., CV-99-0358989-S, alleging
payment due and owing on invoices for services performed. In conjunction with
and based upon the complaint, Syrinx applied for a prejudgment attachment
against Linkon in the amount of $1 million. Following negotiations, including
with respect to the quality and nature of services performed and to be performed
by Syrinx, Linkon and Syrinx entered into a settlement agreement dated April 5,
1999. Under the terms of the settlement agreement, Linkon agreed to have
judgment entered against it in the amount of $802,500.00, and judgment in that
amount had been entered against Linkon. As part of the settlement agreement,
Syrinx agreed that it will not execute upon the judgment until June 1, 1999,
provided that Linkon remains in compliance with the conditions of the settlement
agreement, which include that Linkon make an installment payment of $30,000 by
May 1, 1999 (which was paid) and pay to Syrinx an adjustable percentage of new
equity investment toward satisfaction of the judgment. Pursuant to the plan of
restructuring, as approved by the shareholders on November 26, 1999; this
judgment was assumed by PackPort, Inc. and satisfied prior to January 31, 2000.
In a separate matter, Linkon has entered into a settlement agreement with
Devendra Bhagat ("Bhagat"). In response to a demand for payment on a Convertible
Subordinated Debenture previously
10
<PAGE>
issued to Bhagat by Linkon in the amount of $100,000.00, Linkon agreed to make
payment on the debenture. By agreement dated December 22, 1998, Linkon agreed to
pay Bhagat $106,335.62 in principal and interest in four (4) installments, the
last installment to be paid no later than May 17, 1999. Linkon had paid the
first three (3) installments in the aggregate amount of $78,616.44, leaving a
balance of $25,219.18. Subsequent to the restructuring, the Company satisfied
this obligation prior to January 31, 2000.
The Securities and Exchange Commission has initiated an investigation
relating to fluctuations in the price of the Company's common stock subsequent
to the change in name from Linkon Corporation to PacketPort.com, Inc. on
December 9, 1999. The Company intends on providing full cooporation to the
Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 26, 1999, at a special meeting of the Shareholder's voted on and
approved the following:
(1) The Shareholder's approved the Plan of Restructuring, whereby Packet Port,
Inc. assumed certain Debts in exchange for 4,500,000 of common stock @ $.05
per share and 1,500,000 options @ $.10 per share.
(2) The Shareholder's elected a new Board of Directors.
(3) The Shareholder's ratified the appointment of Radin, Glass & Co., LLP as the
Company's auditors.
(4) The Shareholder's approved a 1 for 3 reverse split of the Company's common
shares.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's shares are listed on the National Quotations Bureau "Bulletin
Board". Its stock symbol is "LKON" until December 8, 1999. On December 9, 1999
the Company changed its name to PacketPort.com, Inc. and changed its symbol to
"PKPT". On December 9, 1999 the reverse split of 1 new share for each 3 shares
held on October 25, 1999 was effected.
The following table sets forth, for the periods indicated, the quarterly
high and low representative bid quotations for the Company's Common Stock as
reported by the National Quotations Bureau. Quotations reflect inter-dealer
prices, without retail mark-ups, mark-downs, or commissions, and may not
necessarily represent actual transactions. These figures have been adjusted to
reflect the 1 for 3 reverse stock split on December 9, 1999.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING JANUARY 31,
-----------------------------------------
1999 2000
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1st quarter............................. $10.968 $ 1.35 $ 6.00 $2.625
2nd quarter............................. $ 8.625 $4.125 $ 2.8125 $ .52
3rd quarter............................. $ 4.968 $ 1.50 $ 1.44 $ .5625
4th quarter............................. $ 5.718 $1.218 $19.508 $ .84
</TABLE>
As of June 16, 2000, there were 894 shareholders of record of the Common
Stock of the Company. The Company estimates, based on prior shareholder
mailings, that holdings in "street name" represent approximately 5,400
additional beneficial shareholders.
The Company has not declared any dividends since its inception and, due to
its anticipated need for all revenue generated by the Company's operations to be
used to operate the Company's business, has no intention of paying any cash
dividends in the immediate future.
Effective June 21, 2000, the Company is delisted from the OTC Bulletin board
due to failure to comply with the eligibility rule. The Company anticipates
reactivation with this instant filing.
ISSUANCES OF THE COMPANY'S SECURITIES DURING FISCAL 2000
The following is a description of transactions in which the Company issued
its securities during the fiscal year ended January 31, 2000.
Between February 1, 1999 and December 8, 1999:
(1) The Company issued warrants to purchase 60,000 pre-split shares of the
Company's stock for services to a consultant with prices ranging from
$.5625 to $1.125.
(2) The Company issued 71,804 shares of common stock for services valued at
$60,000. We issued 124,900 shares of the Company's common stock, which
represented the exercise of certain options and warrants which were
outstanding at January 31, 1999.
On December 8, 1999 the Company recorded a reverse split of 1 share for each
3 shares held by stockholders of record on October 25, 1999.
Subsequent to December 8, 1999 and prior to January 31, 2000:
(1) The Company issued an option to purchase 1,500,000 post-split common
shares for an option price of $.10 per share valued at $535,000; in
connection with the plan of restructuring approved by the shareholders on
November 26, 1999.
12
<PAGE>
(2) We also issued 4,500,000 shares with a purchase price of $.05 per share
valued at $2,700,000 based upon the measurement date of September 8,
1999, the date on which the creditors, the prior board of directors and
the current board of directors agreed to the proposed restructuring.
(3) The Company issued 6,000,000 shares of its common stock for $.13 per
share generating gross proceeds of $780,000, net of offering costs of
$32,109, generated net proceeds of $747,891. This offering was to
accredited investors pursuant to Rule 505 of the United States Securities
and Exchange Commission and are generally restricted for one year,
commencing in December 1999. Certain of the shares were sold to the
employees of the company and employees of affiliates.
(4) The Company issued 385,194 shares of the Company's common stock, which
represented the exercise of certain options and warrants which were
outstanding at January 31, 1999; adjusted for the reverse stock split of
December 8, 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements, as well as information relating to the plans of the Company's
current management.
RESULTS OF OPERATIONS
Twelve months ended January 31, 2000 vs. January 31, 1999:
NET LOSS
The Company reported a net loss of $3,247,087 for fiscal 2000 as compared to
a net loss of $2,686,779 for the prior fiscal year. This increase in the net
loss reported by the Company was primarily due to the following factors:
For the year ended January 31, 2000, revenues decreased by approximately
$3,314,914 from the year ended January 31, 1999, from $4,243,996 to $929,082.
This is discussed more fully under the section entitled "Revenues" below.
Gross Margin decreased from 42% in fiscal year 1999 to (88)% in fiscal year
2000. This is more fully discussed under the section entitled "Cost of Goods
Sold" below.
The Company recorded $298,471 loss on settlement of Debts which included
$476,036 settlement loss in connection with stock and warrants exchanged for the
assumption of Notes and $177,565 of gain from cash settlements.
REVENUES
For the year ended January 31, 2000, revenues decreased approximately
$3,314,914 from the year ended January 31, 1999, from $4,243,996 to $929,082, a
decrease of 78%. This decrease was due to a) a loss of sales activity from AT&T
and Sequel, which combined provided approximately 69% of the Company's revenues
in Fiscal 1999, and b) the Company's then severely constrained cash position
which resulted in a lay off of all but one employee on May 11, 1999, including
the sales force.
COST OF GOODS SOLD
Cost of goods sold for products, consisting of parts, supplies and
manufacturing costs for the Company's hardware and software products, including
software amortization were $1,748,096 and
13
<PAGE>
$2,853,592 for the years ended January 31, 2000 and 1999 respectively. This
constituted approximately 188% and 67% of revenues for the years ended
January 31, 2000 and 1999, respectively. Excluding software amortization, cost
of goods sold for products, consisting of parts, supplies and manufacturing
costs for the Company's hardware and software products were $1,070,143 and
$2,469,113, or 115% and 58% of revenues, for the years ended January 31, 2000
and 1999 respectively.
The cost of goods sold varies with each product line, with software having
less material cost than hardware. The primary costs incurred by the Company are
for materials and equipment relating to its hardware products.
Management attributes the increase in cost of goods sold for fiscal year
2000, as compared to fiscal year 1999, as a percentage of revenues, to the
following:
1) Inventory write down of $200,308 associated with obsolete hardware
technology was charged against cost of goods sold.
2) Software amortization was increased by an additional $293,473 as a
result of accelerated software amortization associated with the
capitalized software account.
3) The effect of the fixed amount of software amortization on a much
smaller amount of sales.
Software amortization costs for the years ended January 31, 2000 and 1999,
were $677,953 and $384,480 respectively. These amounts were 73% and 9% of
revenues for the years ended January 31, 2000 and 1999, respectively, and are
included in the Cost of Goods Sold total percentage of 188% and 67% for the
above periods being presented.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended
January 31, 2000 and 1999 were $1,728,886 and $3,638,681 respectively. This
constituted approximately 186% and 86% of revenues for the fiscal years ended
January 31, 2000 and 1999, respectively. This decrease was due to a lay off of
all but one employee on May 11, 1999. The Company expects selling, general and
administrative expenses will be increased going forward.
RESEARCH, DEVELOPMENT AND SOFTWARE
The Company incurred research, development and software costs of
approximately approximately $321,989 and $692,573 for the fiscal years ended
January 31, 2000 and 1999 respectively.
It is the policy of the Company to capitalize research and development costs
that are incurred subsequent to the establishment of technological feasibility
to produce the finished product. For the fiscal year ended January 31, 2000 and
1999 the amounts capitalized were $76,581 and $291,600 respectively. These
amounts consist of internal salaries, outside consulting services, equipment and
fixed overhead costs.
The decrease in research and development costs was primarily due to a lay
off of all but one employee on May 11, 1999. The Company expects to increase
Research and Development costs going forward.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2000 the Company had working capital of $1,313,017 as
compared to a deficit of $1,074,473 at January 31, 1999.
The marked improvement in the Company's working capital primarily results
from the restructuring which occurred during the fourth fiscal quarter for the
year ended, and resulted in an over $3,000,000 increase in equity.
14
<PAGE>
During the year ended January 31, 2000 we raised additional capital of
approximately $2,376,819 through the issuance of common stock and the exercise
of options and warrants which were outstanding from last year as well as the
issuance of restricted shares to sophisticated investors in transactions exempt
from registration pursuant to Rule 505 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933. We also
plan on raising approximately $2,000,000 in private offering in our second
fiscal quarter. As a result of these private offerings, we anticipate having
sufficient working capital through the end of the current fiscal year. We do
expect that, in connection with the anticipated growth of the Company's
products, we will raise significant additional funds through a public or private
offering of our common stock or otherwise. However, there can be no assurance
that the Company's efforts to attain profitability, that the Company will
generate sufficient revenue to provide positive cash flows from operations or
that sufficient capital will be available, when required, to permit the company
to realize its plans.
RISK FACTORS WHICH MAY EFFECT OUR BUSINESS
WE EXPECT TO INCUR SUBSTANTIAL NET LOSSES FOR THE FORESEEABLE FUTURE.
We expect operating losses and negative cash flow for the foreseeable future
as we must invest in marketing and promotional activities, acquisitions,
technology and operating systems. We cannot be certain when and if we will
achieve sufficient revenues in relation to expenses to become profitable. We
believe that increasing our revenues will depend in large part on our ability
to:
- offer programs and products that are attractive to telephonic consumers;
- increase consumer awareness of our product utility and develop effective
marketing and other promotional activities to drive our volume to
profitable levels;
- provide our customers with superior Vodel & Vocable experiences; and
- develop strategic relationships.
Our future profitability depends on generating and sustaining high revenue
growth while maintaining reasonable expense levels. Slower revenue growth than
we anticipate or operating expenses that exceed our expectations would harm our
business. If we achieve profitability, we cannot be certain that we would be
able to sustain or increase profitability in the future.
WE MAY NEED ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS IF WE DO NOT GENERATE
ENOUGH REVENUE.
We require substantial working capital to fund our business and may need
more in the future. We will likely experience negative cash flow from operations
for the foreseeable future. If we need to raise additional funds through the
issuance of equity, equity-related or debt securities, your rights may be
subordinate to other investors and your stock ownership percentage may be
diluted. We cannot be certain that additional financing will be available to us.
OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
Our revenues and operating results may vary significantly from quarter to
quarter due to a number or ability to produce quality programming of factors.
Many of these factors are outside our control and include:
- our ability to produce quality products with competitive features;
- fluctuations in consumer purchasing patterns and advertising spending;
- changes in the growth rate of Internet usage and online user traffic
levels including IP Telephony;
15
<PAGE>
- actions of our competitors;
- the timing and amount of costs relating to the expansion of our operations
and acquisitions of technology or businesses; and
- general economic and market conditions.
Because we have a limited operating history, our future revenues are
difficult to forecast. A shortfall in revenues will damage our business and
would likely affect the market price of our common stock. Our limited operating
history and the new and rapidly evolving Internet market make it difficult to
ascertain the effects of seasonality on our business. If seasonal and cyclical
patterns emerge in Internet purchasing, our results of operations from quarter
to quarter may vary greatly and may cause our business to suffer.
WE NEED TO EFFECTIVELY MANAGE GROWTH OF OUR OPERATIONS.
Our success depends upon effective planning and growth management. Excluding
part-time employees, at December 31, 1999 we had a total of six employees. We
intend to continue to increase the scope of our operations and the number of our
employees. We also face challenges associated with upgrading and maintaining our
information systems and internal controls, particularly those related to our
purchase and receipt of inventory. If we do not successfully implement and
integrate these new systems or fail to scale these systems with our growth, we
may not have adequate, accurate and timely forecasting and financial
information.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD BURDEN OUR BUSINESS.
The adoption or modification of laws or regulations applicable to the
Internet could harm our business. The U.S. Congress recently passed laws
regarding online children's privacy, copyrights and taxation. The law governing
the Internet, however, remains largely unsettled. New laws may impose burdens on
companies conducting business over the Internet. It may take years to determine
whether and how existing laws governing intellectual property, privacy, libel
and taxation apply to the Internet and online advertising. In addition, the
growth and development of online commerce may prompt calls for more stringent
consumer protection laws, both in the United States and abroad. We also may be
subject to regulation not specifically related to the Internet, including laws
affecting direct marketers.
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE, AS IS TYPICAL OF TELEPHONIC AND
INTERNET-RELATED COMPANIES.
Our stock price has been volatile and is likely to continue to be volatile.
The stock market has experienced significant price and volume fluctuations, and
the market prices of securities of technology companies, particularly
Internet-related companies, have been highly volatile.
The market price for PacketPort.com common stock is likely to be highly
volatile and subject to wide fluctuations in response to the following factors:
- actual or anticipated variations in our quarterly operating results;
- announcements of technological innovations or new products or services by
us or our competitors;
- changes in financial estimated by securities analysts;
- conditions or trends in telephonic and e-commerce;
- announcements by us or our competitors of significant acquisitions,
strategic partnership, joint ventures or capital commitments;
- additions or departures of key personnel;
16
<PAGE>
- release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock; and
- potential litigation.
FORWARD-LOOKING INFORMATION
The statements in this Annual Report on Form 10-KSB that are not statements
of historical fact constitute "forward-looking statements." Said forward-looking
statements involve risks and uncertainties which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performances or achievements, expressly predicted or implied by
such forward-looking statements. These forward-looking statements are identified
by their use of forms of such terms and phrases as "expects," "intends,"
"goals," "estimates," "projects," "plans," "anticipates," "should," "future,"
"believes," and "scheduled."
The important factors which may cause actual results to differ from the
forward-looking statements contained herein include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain key management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements are included herein commencing on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no changes in, or disagreements with, the Company's certified
public accountants during the fiscal years ended January 31, 2000 and 1999.
17
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND OFFICERS. The following schedule sets forth the name of each
director and officer of the Company and the nature of all positions and offices
with the Company presently held by them.
CURRENT DIRECTORS:
1. MR. RONALD A. DURANDO, Age 42. Mr. Durando is a co-founder of mPhase, a
small public technology company, and has served as its President and Chief
Executive Officer since its inception in October 1996. Prior to joining mPhase
Technologies, Inc., Mr. Durando was President and Chief Executive Officer of
Nutley Securities, Inc., a registered broker-dealer. In addition, Mr. Durando is
concurrently employed as the Chief Operating Officer of Microphase Corporation,
a leading developer of telecommunications technology. He is also Chairman of the
Board of Janifast Ltd., a U.S. Holding Corp. for operational and manufacturing
companies in Hong Kong and China. On November 26, 1999 Mr. Durando became the
Company's Chairman, Chief Executive Officer and President. He is the 100% owner
of PacketPort, Inc.
2. MR. GUSTAVE T. DOTOLI, Age 62. Gustave T. Dotoli has served as the Chief
Operating Officer of mPhase since October 1996. In addition, Mr. Dotoli is
concurrently employed as the Vice President of Corporate Development of
Microphase Corporation. He is formerly the President and Chief Executive Officer
of the following corporations: Imperial Electro-Plating, Inc., World Imports
USA, Industrial Chemical Supply, Inc., SISCO Beverage, Inc. and Met Pack, Inc.
Mr. Dotoli received a B.S. degree in Industrial Engineering from Fairleigh
Dickinson University in 1959. On November 26, 1999 he was elected to the Board
of Directors and became the Company's Vice President, and Chief Operating
Officer.
3. ROBERT H. JAFFE, ESQ, Age 63. Mr. Jaffe is an attorney at law in the
State of New Jersey, and the principal officer of a professional association of
attorneys known as Robert H. Jaffe & Associates, P.A. He graduated in 1957 from
Harvard College in Cambridge, Massachusetts, where he received a Bachelor of
Arts degree. Mr. Jaffe did post-graduate work at Columbia University in New
York, where he received a Masters in Business Administration in 1961. Mr. Jaffe
was commissioned as a certified public accountant in New Jersey during the year
1964. Thereafter, while employed as an executive for a water and sewer utility
holding company, Mr. Jaffe attended Seton Hall University Law School in Newark,
New Jersey, where he received a Juris Doctor degree in 1969. After becoming a
member of the Bar of the State of New Jersey in 1970, Mr. Jaffe has specialized
in securities litigation and employment discrimination cases, and, in connection
with these specialties, has practiced before the United States Supreme Court,
the Washington State Supreme Court, the New Jersey Supreme Court and various
federal and state appellate and trial courts throughout the United States. On
November 26, 1999 Mr. Jaffe became an interim director of the Company.
OTHER OFFICERS AND PRIOR DIRECTORS:
MR. LEE HILL, Age 55. Presently an executive consultant to the Company.
Prior to November 26, 1999 Mr. Hill was the Chief Executive Officer, President
and a member of the Board of Directors since 1993.
MR. JAMES LINLEY, Age 46. Presently a Technical Engineer for the Company.
Prior to November 26, 1999 Mr. Linley was Vice President of Engineering, since
March of 1991.
18
<PAGE>
MR. CHARLES A. CASTELLI, Age 55. Presently engaged as an engineer for the
Company. Prior to November 26, 1999 Mr. Castelli was the Chairman of the Board
of Directors and the Chief Technology Officer and served in those capacities
since June of 1990.
MR. THOMAS CERABONA, Age 48. Presently an executive consultant to the
Company. Prior to November 26, 1999, he was the Company's Senior Vice President
of Operations since March, 1996.
JOAO M. CARVALHO, Age 58. Mr. Carvalho served as a director of the Company
since June, 1990. On November 26, 1999 he resigned.
DANIEL ZWIREN, Age 43. Mr. Zwiren served as a director of the Company since
June, 1996. On November 26, 1999 he resigned.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the compensation for the years ended
January 31, 2000, 1999, 1998 paid to the Company's Chief Executive Officer and
the other named executive officers whose compensation is required to be
disclosed pursuant to Item 402(a)(2) of Regulation S-B promulgated under the
Securities Exchange Act of 1934, as amended:
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION (1) AWARDS
---------------------- ---------------------------
NAME AND UNDERLYING FISCAL SALARY OTHER ANNUAL SHARES
PRINCIPAL POSITION YEAR ($) BONUS ($) COMPENSATION ($) OPTIONS
--------------------------------- -------- -------- --------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Lee, W. Hill..................... 2000 $ 77,710 -- $ 25,000(5) -0-
President and 1999 $166,499 $45,000 $ 8,400(2) 150,000
Chief Executive Officer 1998 $150,000 $45,000 $ 8,040(2) 50,000
Charles Castelli................. 2000 $106,750 -- -0-
Chairman, Chief 1999 $140,750 $54,000 $ 8,400(3) 100,000
Technology Officer 1998 $ 96,000 $19,000 $ 8,640(3) 7,000
Thomas V. Cerabona............... 2000 $ 65,104 40,000(5) -0-
Vice President of Operations 1999 $122,474 $36,500 $ 6,000(4) 75,000
1998 $102,000 $34,500 $ 6,000(4) 30,000
</TABLE>
------------------------
(1) Columns entitled "Restricted Stock Award(s)", "LTIP Payouts", and "All Other
Compensation" have been excluded because they are not applicable to any
fiscal year covered by this table.
(2) Mr. Hill has received an automobile allowance from the Company of $670 and
$612 per year for fiscal years 1999 and 1998 respectively.
(3) Mr. Castelli has received an automobile allowance from the Company of $700
and $720 per month for fiscal years 1999 and 1998 respectively.
(4) Mr. Cerabona has received an automobile allowance from the Company for the
last three fiscal years of $500 per month.
(5) Consulting fees paid since November 26, 1999.
None of the officers received options during fiscal 2000.
Directors Zwiren and Carvalho received 28,402 shares of common stock each,
valued at $18,750 for past and current directors fees.
19
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference to
the sections entitled "Proposal No. 1--Election of Directors--Executive Officers
of the Company" and "--Section 16(a) Beneficial Ownership Reporting Compliance"
of the Company's Definitive Proxy Statement to be filed with the Commission.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference to
the sections entitled "Proposal No. 1--Election of Directors--Executive Officers
of the Company" and "--Section 16(a) Beneficial Ownership Reporting Compliance"
of the Company's Definitive Proxy Statement to be filed with the Commission.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS.
The following financial statements are included in Part II, Item 7:
<TABLE>
<S> <C>
Index to Financial Statements and Schedules................. F-1
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets--January 31, 2000 and 1999................... F-3
Statements of Operations--Two years ended January 31, 2000
and 1999.................................................. F-4
Statements of Cash Flows--Two years ended January 31, 2000
and 1999.................................................. F-5
Statements of Stockholders' Equity--Two years ended January
31, 2000 and 1999......................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
(b) REPORTS ON FORM 8-K
TWO NOTICES OF OTHER EVENTS; DATED DECEMBER 9, 1999 AND DATED MAY 26,
2000.
(c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
3.1 Restated Articles of Incorporation (incorporated by
reference to Exhibit A to the Company's Proxy Statement,
dated February 4, 1997).
3.2 By-laws (Incorporated by reference to Exhibit 8 to the
Company's Registration Statement on Form S-18 (File Number
33-22054-NY) which became effective on December 14, 1990, as
amended by Exhibit 3.1 to the Company's Form 10-QSB for the
quarter ended April 30, 1998).
4.1 Linkon Corporation 1996 Stock Option and Performance
Incentive Plan (Incorporated by reference to Exhibit B to
the Company's proxy statement, dated February 24, 1997).
4.2 Promissory Note, dated April 6, 1998, by the Company in
favor of RG Capital Fund LLC, in the principal amount of
$1,100,000 (incorporated by reference to the Company's Form
10KSB for the fiscal year ended January 31, 1998).
4.3 Warrant Certificate, dated April 6, 1998, by the Company in
favor of Roberts & Green, Inc. (incorporated by reference to
the Company's Form 10KSB for the fiscal year ended January
31, 1998).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
4.4 Promissory Note, dated November 17, 1998, by the Company in
favor of James Scibelli, in the principal amount of $200,000
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
4.5 Promissory Note, dated December 9, 1998, by the Company in
favor of Woodland Partners, in the principal amount of
$300,000 (incorporated by reference to the Company's
Form 10KSB for the fiscal year ended January 31, 1999).
4.6 Warrant Certificate, dated December 9, 1998, by the Company
in favor of James Scibelli (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
4.7 Warrant Certificate, dated December 9, 1998, by the Company
in favor of Woodland Partners (incorporated by reference to
the Company's Form 10KSB for the fiscal year ended
January 31, 1999).
10.1 Placement Agent Agreement, dated January 14, 1994, between
the Company and Sloan Securities Corp., including forms of
the Company's Warrant Certificates, issued on January 28,
1994, February 28, 1994 and April 30, 1994 and the October
27, 1994 agreement between said parties amending the same.
(Incorporated by reference to Exhibit 4.3 to the Company's
Form 10KSB for the fiscal year ended January 31, 1995).
10.2 Subscription Agreement, dated April 6, 1998, between the
Company and RG Capital Fund LLC (incorporated by reference
to the Company's Form 10KSB for the fiscal year ended
January 31, 1998).
10.3 Form of Subscription Agreement, dated April 14, 1998,
between the Company and each of the investors party thereto
that was designated by RG Capital Fund LLC (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.4 Warrant Agreement, dated April 6, 1998, between the Company
and Roberts & Green, Inc. (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1998).
10.5 Registration Rights Agreement, dated April 6, 1998, among
the Company, RG Capital Fund LLC and Roberts & Green, Inc.
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.6 Investment Banking and Financial Advisory Services
Agreement, dated April 6, 1998, between the Company and
Roberts & Green, Inc. (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1998).
10.7 Release and Termination Agreement, dated April 6, 1998,
between the Company and IBJS Capital Corporation.
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.8 Agreement for Purchase of Receivables, dated March 19, 1998,
between the Company and Imperial Bank (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.9 Purchase Order Addendum to Agreement for Purchase of
Receivables, dated March 26, 1998, between the Company and
Imperial Bank (incorporated by reference to the Company's
Form 10KSB for the fiscal year ended January 31, 1998).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
10.10 Commercial Lease, dated June 17, 1997, by and between 140
Sherman Street, LLC and the Company (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.11 Form of Incentive Stock Option Agreement under the Company's
1996 Stock Option and Performance Incentive Plan
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.12 Form of Non-Qualified Stock Option Agreement under the
Company's 1996 Stock Option and Performance Incentive Plan
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
10.13 Commercial Lease Amendment, dated May 11, 1998, by and
between 140 Sherman Street, LLC and the Company
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
10.14 Employment Agreement dated May 19, 1998 between the Company
and Mr, Lee W. Hill (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
10.15 Employment Agreement dated May 19, 1998 between the Company
and Mr. Charles Castelli (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
10.16 Employment Agreement dated March 19, 1998 between the
Company and Mr. Thomas V. Cerabona (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1999).
10.17 Engagement Agreement, dated February 12, 1999, between the
Company and Morgen Evan and Co. (incorporated by reference
to the Company's Form 10KSB for the fiscal year ended
January 31, 1999).
10.18* Consultant Agreement, dated November 1, 1999, between the
Company and Lee W. Hill
10.19* Consultant Agreement, dated November 1, 1999, between the
Company and Thomas Cerabona.
27.1* Financial Data Schedule.
</TABLE>
------------------------
* filed herewith
22
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
executed on this 16th day of June , 2000.
<TABLE>
<S> <C> <C>
PACKETPORT.COM, INC.
BY: /S/ RONALD A. DURANDO
-----------------------------------------
Ronald A. Durando
CHAIRMAN, CHIEF EXECUTIVE OFFICER,
PRESIDENT
</TABLE>
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RONALD A. DURANDO Chairman, Chief Executive
------------------------------------------- Officer, President June 19, 2000
Ronald A. Durando
/s/ GUSTAVE T. DOTOLI Director, Chief Operating
------------------------------------------- Officer June 19, 2000
Gustave T. Dotoli
/s/ ROBERT H. JAFFE Interim Director
------------------------------------------- June 19, 2000
Robert H. Jaffe
</TABLE>
23
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Index to Financial Statements and Schedules................. F-1
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets--January 31, 2000 and 1999................... F-3
Statements of Operations--Two years ended January 31, 2000
and 1999.................................................. F-4
Statements of Cash Flows--Two years ended January 31, 2000
and 1999.................................................. F-5
Statements of Stockholders' Equity--Two years ended January
31, 2000 and 1999......................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
PacketPort.com, Inc. (formerly Linkon Corporation)
Norwalk, Connecticut
We have audited the accompanying balance sheets of PacketPort.com, Inc.
(formerly Linkon Corporation) as of January 31, 2000 and 1999 and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the years then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PacketPort.com, Inc.
(formerly Linkon Corporation) as of January 31, 2000 and 1999 and the results of
operations and its cash flows for each of the years then ended in conformity
with generally accepted accounting principles.
/s/ RADIN, GLASS & CO., LLP
Certified Public Accountants
New York, New York
June 14, 2000
F-2
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents (NOTE 3):....................... $ 1,452,851 $ 376,596
Stock Subscription Receivable, collected by June 14,
2000.................................................... 208,000 --
Accounts Receivable (NOTE 3):............................. 156,632 191,358
Inventory (NOTE 3):....................................... 155,976 879,366
Prepaid Expenses and Other Current Assets................. 162,493 20,496
------------ ------------
Total Current Assets................................ 2,135,952 1,467,816
Machinery & equipment (NOTE 3):.............................
Machinery & Equipment, at cost............................ 574,637 1,629,018
Less: Accumulated Depreciation............................ (332,294) (1,227,467)
------------ ------------
Machinery & Equipment, net................................ 242,343 401,551
Other Assets
Software--Net (NOTE 3):................................. 293,473 894,845
Investments, at cost.................................... -- 25,000
Prepaid Financing Costs................................. -- 7,843
Security Deposits....................................... -- 18,563
------------ ------------
Total Other Assets.................................. 293,473 946,251
------------ ------------
Total Assets........................................ $ 2,671,768 $ 2,815,618
============ ============
Liabilities and Stockholders' Equity (Deficit)
Accounts Payable............................................ $ 605,538 $ 1,341,743
Taxes Payable (NOTES 5 AND 9):.............................. 1,000 1,000
Interest Payable (NOTE 7, 8 AND 9):......................... -- 54,245
Deferred Revenue............................................ 26,330 216,128
Accrued Expenses............................................ 190,067 369,495
Notes Payable............................................... -- 559,678
------------ ------------
Total Current Liabilities........................... 822,935 2,542,289
Long-term Liabilities
Notes Payable (NOTE 8):..................................... -- 1,020,094
Stockholders' equity (deficit) (note 4):
Common Stock. $.003 Par Value, 24,900,000 shares authorized,
15,458,372 shares issued and outstanding (2000), 4,507,193
shares issued and outstanding (1999)...................... 46,375 13,522
Preferred Stock, $.001 Par Value 1,000,000 shares
authorized, none issued and outstanding................... -- --
Capital in Excess of Par Value.............................. 17,794,310 11,717,549
Stock Subscription.......................................... (266,929) --
Accumulated Deficit......................................... (15,724,923) (12,477,836)
------------ ------------
Total Stockholders' Equity (Deficit)................ 1,848,833 (746,765)
------------ ------------
Total Liabilities and Stockholders' Equity
(Deficit)......................................... $ 2,671,768 $ 2,815,618
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues (NOTE 3)........................................... $ 929,082 $ 4,243,996
----------- -----------
Cost of Goods Sold:
Product................................................... 1,070,143 2,469,113
Software Amortization (NOTE 4)............................ 677,953 384,480
----------- -----------
Gross Margin On Sales....................................... (819,014) 1,390,403
Selling, General and Administrative Expenses................ 1,728,886 3,638,681
Research and Development.................................... 249,089 370,448
Provision for Doubtful Accounts............................. (37,790) 40,563
----------- -----------
1,940,185 4,049,692
----------- -----------
Operating Loss.............................................. (2,759,199) (2,659,289)
OTHER INCOME (EXPENSE):
Interest Income........................................... 2,023 9,722
Interest Expense.......................................... (190,440) (146,126)
----------- -----------
(188,417) (136,404)
----------- -----------
Loss Before Income Taxes.................................... (2,947,616) (2,795,693)
Income Taxes................................................ (1,000) (1,000)
----------- -----------
Loss Before Extraordinary Item.............................. (2,948,616) (2,796,693)
Extraordinary item--gain (loss) on settlement of debt (NOTE
8)........................................................ (298,471) 109,914
----------- -----------
Net Loss.................................................... $(3,247,087) $(2,686,779)
=========== ===========
Loss Per Share (NOTE 4):
Continuing Operations..................................... $ (.50) $ (0.65)
=========== ===========
Extraordinary Item........................................ $ (.06) $ 0.03
=========== ===========
Net loss per share........................................ $ (.56) $ (0.62)
=========== ===========
Weighted Average Number of Shares Outstanding............... 5,845,848 4,325,890
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss.................................................... $(3,247,087) $(2,686,779)
Add: Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
Depreciation & Amortization............................. 891,660 659,719
Common stock and Warrants issued for services........... 108,820 32,852
Book value of assets disposed........................... 31,381 --
Write off of unamortized loan discount.................. 95,226
Loss from induced conversion of convertible debt........ -- 83,000
Extraordinary item--(gain) loss on settlement of debt... 298,471 (109,914)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) Decrease in Accounts Receivable.................. 34,726 (154,223)
(Increase) Decrease in Other Receivables.................... -- 1,972
(Increase) Decrease in Inventory............................ 723,390 (478,741)
(Increase) Decrease Prepaid Expenses and other current
assets.................................................... (132,997) (3,723)
(Increase) Decrease in Software............................. (76,581) (322,125)
(Increase) Decrease in Investments.......................... 25,000 --
(Increase) Decrease in Security Deposits.................... 18,563 (7,875)
Decrease in Prepaid Financing Costs......................... 7,843 10,457
Increase (Decrease) in Accounts Payable..................... 224,483 750,205
Increase (Decrease) in Interest Payable..................... 126,719 (180,620)
Increase (Decrease) in Taxes Payable........................ -- (377)
Increase (Decrease) in Customer Deposits.................... (189,798) 61,449
Increase (Decrease) in Accrued Expenses..................... (179,428) (81,753)
----------- -----------
Net Cash Used in Operating Activities................. (1,239,609) (2,426,476)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Paid to Purchase Equipment........................... (107,428) (198,465)
Investment in Non-Marketable Securities................... -- (25,000)
----------- -----------
Net Cash Used in Investing Activities................. (107,428) (223,465)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from Sale of Common Stock.................... 2,103,064 1,789,576
Net Proceeds from Long Term Debt.......................... -- 1,100,000
Net Proceeds from Short Term Debt......................... 582,847 500,000
Principal Payments on Debt................................ (262,619) (875,000)
----------- -----------
Net Cash Provided by (Used in) Financing Activities... 2,423,292 2,514,576
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents........ 1,076,255 (135,365)
----------- -----------
Cash and Cash Equivalents at Beginning of Year.............. 376,596 511,961
----------- -----------
Cash and Cash Equivalents at End of Period.................. $ 1,452,851 $ 376,596
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- CAPITAL IN
EXCESS OF STOCK ACCUMULATED
SHARES AMOUNT PAR VALUE SUBSCRIPTION DEFICIT TOTALS
---------- -------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances February 1,
1998................ 10,896,252 $10,897 $ 9,404,266 $ -- $ (9,791,057) $ (375,894)
Issuance of warrants
for services........ -- -- 32,852 -- -- 32,852
Issuance of warrants
with debt........... -- -- 160,481 -- -- 160,481
Issuance of common
stock, net of
expenses............ 2,625,326 2,625 2,119,950 -- -- 2,122,575
Net loss.............. -- -- -- -- (2,686,779) (2,686,779)
---------- ------- ----------- --------- ------------ -----------
Balances January 31,
1999................ 13,521,578 13,522 11,717,549 -- (12,477,836) $ (746,765)
Issuance of warrants
for services........ -- -- 48,120 -- -- 48,120
Issuance of common
stock for
services............ 71,804 72 59,928 -- -- 60,000
Issuance of common
stock, net of
expenses............ 124,900 125 80,050 -- -- 80,175
Reverse split;
effective
December 8, 1999;
1 share for each 3
shares held; par
value to $.003...... (9,145,104) -- -- -- -- --
Issuance of warrants
in connection with
restructuring....... -- -- 844,500 -- -- 844,500
Issuance of common
stock in connection
with
restructuring....... 4,500,000 13,500 2,686,500 -- -- 2,700,000
Issuance of common
stock, net of
expenses............ 6,385,194 19,156 2,357,663 -- -- 2,376,819
Stock subscription.... -- -- -- (266,929) -- (266,929)
Net Loss.............. -- -- -- -- (3,247,087) (3,247,087)
---------- ------- ----------- --------- ------------ -----------
Balances, January 31,
2000................ 15,458,372 $46,375 $17,794,310 $(266,929) $(15,724,923) $ 1,848,833
========== ======= =========== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 1--BUSINESS DESCRIPTION
ParketPort.com, Inc. (the "Company") is engaged in the business of
manufacturing and marketing computer peripheral hardware and software products
for the automated voice response, telecommunications, computer and multimedia
communications industries. On December 9, 1999, the Company changed its name
from Linkon Corporation to PacketPort.com, Inc.
NOTE 2--MAJOR CUSTOMERS AND LINE OF BUSINESS
The Company adopted Statement of Financial Accounting Standard (SFAS) No.
131 "Disclosure about Segments of an Enterprise and Related Information," at
December 31, 1998. SFAS 131 establishes annual and interim reporting standards
for an enterprise's operating segments and related disclosures about its
products, services, geographic areas and major customers.
Under SFAS 131, the Company's operations are treated as one operating
segment as it only reports profit and loss information on an aggregate basis to
chief operating decision makers of the Company. Information about the Companies
product sales and major customers are as follows:
<TABLE>
<CAPTION>
PRODUCT SALES 2000 1999
------------- -------- ----------
<S> <C> <C>
HARDWARE.............................................. $712,678 $3,746,606
SOFTWARE.............................................. 61,931 239,541
MAINTENANCE AND OTHER................................. 154,473 257,848
-------- ----------
$929,082 $4,243,995
======== ==========
</TABLE>
Four of the Company's customers accounted for approximately 42%, 13%, 11%
and 10.8% respectively, or approximately $391,700, $120,500, $102,600 and
$100,800 of revenues for the year ended January 31, 2000. Two of the Company's
customers accounted for approximately 58% and 10% or approximately $2,476,000
and $433,000 of revenues for the year ended January 31, 1999.
NOTE 3--SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
METHOD OF ACCOUNTING
The Company utilizes the accrual basis method of accounting for financial
reporting purposes.
CASH AND CASH EQUIVALENTS
The Company considers all short-term debt securities purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents includes $1,360,754 in two escrow accounts held by an attorney of
the Company in connection with the private placement offering as described in
Note 4.
F-7
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 3--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
The Company believes all receivables are collectible unless information to
the contrary is obtained. In the event such information is received the Company
establishes an allowance for uncollectible portions. At January 31, 2000 the
allowance was $0. and at January 31, 1999 the allowance was $40,000.
INVENTORY
Inventory is valued at the lower of cost or market value, using the
first-in, first-out (FIFO) method, and consists of:
<TABLE>
<CAPTION>
YEAR ENDING, JANUARY 31, 2000 1999
------------------------ --------- ---------
<S> <C> <C>
Raw Materials......................................... $ 113,723 $ 516,130
Work in Process....................................... -- 89,460
Finished Goods........................................ 242,253 393,776
Less: Allowance Account............................... (200,000) (120,000)
--------- ---------
$ 155,976 $ 879,366
</TABLE>
MACHINERY AND EQUIPMENT AND CAPITAL LEASES
Machinery and equipment are stated at cost. Property and equipment are
comprised predominantly of computer equipment. Expenditures for maintenance and
repairs are charged to operations as incurred. Depreciation and amortization are
provided for utilizing the straight-line method over the estimated useful lives
of the property and equipment. Depreciation expense for the years ended
January 31, 2000 and 1999 was $213,707 and $207,400 respectively.
CAPITALIZED SOFTWARE COSTS
Costs related to the conceptual formulation and design of licensed programs
are expensed as research and development. Costs incurred subsequent to the
establishment of technological feasibility to produce the finished product are
generally capitalized. The Company has capitalized software costs included in
Other Assets in the Consolidated Balance Sheet. Amounts capitalized were $72,900
and $321,225 for the years ended January 31, 2000 and 1999, respectively.
Amortization of prior years capitalized software costs are included in the Cost
of Goods Sold section of the Consolidated Statement of Operations and amounted
to $677,953 and $384,480 for the years ended January 31, 2000 and 1999,
respectively. The 2000 amount includes an adjustment to amortization of $293,473
for software no longer sold by the Company. The capitalization of such costs and
the related amortization is in accordance with SFAS No. 86.
ADVERTISING COSTS
Advertising costs are expensed as incurred except for direct response
advertising, the costs of which are deferred and amortized over the period the
related sales are recorded. There was no amortization for direct response
advertising costs for the years ended January 31, 2000 and 1999. The Company
incurred no advertising costs and deferred no advertising expenses for the years
ended January 31, 2000 and 1999.
F-8
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 3--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective March 31, 1996, the Company adopted SFAS No. 107 "Disclosures
About Fair Value of Financial Instruments," that requires disclosure of fair
value information about financial instruments whether or not recognized in the
balance sheet. The carrying amounts reported in the balance sheet for cash,
trade receivables, accounts payable and accrued expenses approximate fair value
based on the short-term maturity of these instruments. The Company believes the
carrying amount of borrowings under the Notes approximates fair value.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company reviews long-lived assets, certain identifiable assets and any
goodwill related to those assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recoverable. At January 31, 2000, the Company believes that there has
been no impairment of its long-lived assets.
INCOME TAXES
The Company has adopted Financial Accounting Standards Board Statement
No.109, "Accounting for Income Taxes," which requires an asset and liability
approach to accounting for income taxes. Deferred income taxes are recorded for
temporary differences between taxable income and pretax financial income and the
tax bases of assets or liabilities and their reported amounts in the financial
statements.
LOSS PER SHARE
The Company has adopted SFAS No.128, "Earnings per Share." Earnings per
common share are computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding during the period. The
earnings per common share, assuming dilution, computation gives effect to all
dilutive potential common shares during the period. The computation assumes that
the outstanding stock options and warrants were exercised and that the proceeds
were used to purchase common shares of the Company. Common equivalent shares
have been excluded from the computation of diluted earnings per share since
their effect is antidilutive. In addition, the weighted average number of shares
outstanding and earning per share are restated to give retroactive effect of the
3:1 reverse stock split (See Note 4).
STOCK BASED COMPENSATION
The Company accounts for stock transactions in accordance with APB Opinion
No. 25, "Accounting For Stock Issued To Employees." Accordingly, no compensation
is recorded on the issuance of employee stock options at fair market value.
F-9
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 4--STOCKHOLDERS' EQUITY
STOCK SPLIT
On November 26, 1999, the Board of Directors of the Company authorized a 3:1
reverse split on its common stock, effected December 8, 1999, thereby decreasing
the number of issued and outstanding shares to 4,565,622, and changing its par
value from $.001 to $.003 per share. All prior period financial statements are
restated to give retroactive effect of this reverse stock split.
STOCK TRANSACTIONS
The following is a description of transactions in which the Company issued
its securities during the fiscal year ended January 31, 2000.
Between February 1, 1999 and December 8, 1999:
(1) The Company issued warrants to purchase 60,000 pre-split shares of the
Company's stock for services to a consultant with prices ranging from
$.5625 to $1.125.
(2) The Company issued 71,804 shares of common stock for services valued at
$60,000. We issued 124,900 shares of the Company's common stock, which
represented the exercise of certain options and warrants which were
outstanding at January 31, 1999.
Subsequent to December 8, 1999 and prior to January 31, 2000:
(1) The Company issued an option to purchase 1,500,000 post-split common
shares for an option price of $.10 per share valued at $535,000; in
connection with the plan of restructuring approved by the shareholders on
November 26, 1999.
(2) We also issued 4,500,000 shares with a purchase price of $.05 per share
valued at $2,700,000 based upon the measurement date of September 8,
1999, the date on which the creditors, the prior board of directors and
the current board of directors agreed to the proposed restructuring.
(3) The Company issued 6,000,000 shares of its common stock for $.13 per
share generating gross proceeds of $780,000, net of offering costs of
$32,109, generated net proceeds of $747,891. This offering was to
accredited investors pursuant to Rule 505 of the United States Securities
and Exchange Commission and are generally restricted for one year,
commencing in December 1999. Certain of the shares were sold to the
employees of the company and employees of affiliates.
(4) The Company issued 385,194 shares of the Company's common stock, which
represented the exercise of certain options and warrants which were
outstanding at January 31, 1999; adjusted for the reverse stock split of
December 8, 1999.
ACCOUNTING FOR EMPLOYEE STOCK OPTIONS
During the year ended January 31, 1997, the Board of Directors of the
Company adopted, and the stockholders approved in March 1997, the Linkon
Corporation 1996 Stock Option and Performance Incentive Plan (the "Option
Plan"). This plan provides for awards of up to 1,000,000 options to purchase
Common Stock of the Company to employees of the Company and its subsidiaries
during the
F-10
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 4--STOCKHOLDERS' EQUITY (CONTINUED)
term of the Option Plan. These shares have been reserved by the Board of
Directors from the Company's authorized but unissued shares of Common Stock.
The above plan was amended as of May 18, 1998 (with the approval of the
Company's shareholders, at the Company's annual meeting), to increase the number
of shares available for awards from 1,000,000 to 2,500,000.
On May 18, 1998, December 19, 1997, and May 31, 1996 the Company granted
621,500, 191,000 and 682,400 pre-split incentive stock options to employees and
directors. These options are exercisable at $1.50, $0.56 and $0.75 per share at
various dates through April 30, 2007 and will qualify for incentive stock option
treatment under the Internal Revenue Code of 1986. There is no compensation
recorded as a result of the grant of these options as the Company is following
accounting prescribed in APB Opinion #25 and the stock price at the time of the
grant was $1.50, $0.56 and $0.75 per share.
Employee options to purchase 37,000 shares of the Companies common stock
were exercisable at $4.50 per share at January 31, 2000.
Outstanding options and warrants expire at various dates through April 2007.
The Company accounts for its stock option plan under APB Opinion No. 25,
"Accounting for Stock Issued to Employees," under which no compensation expense
is recognized. In fiscal 1997, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation" for disclosure purposes; accordingly, no compensation
expense has been recognized in the results of operations for its stock option
plan as required by APB Opinion No.25.
For disclosure purposes the fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes option- pricing model
with the following weighted-average assumptions used for stock options granted
during the years ended January 31, 1999: annual dividends of $0.00 for expected
volatility of 40.0% and, risk free interest of 5.60%, for years and expected
life of five years for all grants. The weighted-average fair value of the stock
options granted during the years ended January 31, 1999 was $0.23.
If the Company recognized compensation cost for the employee stock option
plan in accordance with SFAS No.123, the Company's pro forma net loss and loss
per share would have been $2,800,000 and $0.22 for year ending January 31, 1999.
The SFAS No.123 method of accounting does not apply to options granted prior to
March 31, 1995 and, accordingly, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The following table summarizes the changes in employee options outstanding
and the related price ranges for shares of the Company's common stock, as
adjusted for the 3:1 reverse stock split:
F-11
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 4--STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGE EXERCISE PRICE
-------------------------------
<S> <C> <C>
Outstanding at:
January 31, 1996........................................ 133,333 $5.52
Granted............................................... 304,683 $2.34
Expired............................................... (20,000) $2.85
Retired............................................... (133,333) $6.00
Outstanding at:
January 31, 1997........................................ 304,683 $2.34
Granted............................................... 62,667 $1.68
Expired............................................... (19,833) $2.25
Outstanding at:
January 31, 1998........................................ 347,517 $2.25
Granted............................................... 210,917 $4.62
Expired............................................... (18,667) $2.43
Outstanding at:
January 31, 1999........................................ 539,767 $3.15
Granted............................................... 0
Exercised............................................. (85,166) $2.28
Expired............................................... (417,601) $3.60
---------
Outstanding at:
January 31, 2000........................................ 37,000
=========
</TABLE>
The following summarizes information about employee stock options
outstanding at January 31, 2000:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
EXERCISE CONTRACTUAL WEIGHTED AVERAGE WEIGHTED AVERAGE
PRICE: NUMBER OUTSTANDING LIFE EXERCISE PRICE NUMBER EXERCISABLE EXERCISE PRICE
--------------------- ------------------ ----------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
$4.50 37,000 3.5 $4.50 37,000 $4.50
</TABLE>
F-12
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 4--STOCKHOLDERS' EQUITY (CONTINUED)
The following summarizes information about non-employee stock options and
warrants, issued pursuant to various financing transactions, as adjusted for the
3:1 reverse split:
<TABLE>
<S> <C>
Outstanding at:
January 31, 1997............................................ 551,544
Granted................................................... 34,333
Exercised................................................. (10,000)
Expired................................................... (130,275)
Outstanding at:
January 31, 1998............................................ 445,603
Granted................................................... 390,828
Exercised................................................. 0
Expired................................................... (28,300)
Expired................................................... (107,791)
Outstanding at:
January 31, 1999............................................ 700,340
Granted................................................... 1,520,000
Exercised................................................. (341,667)
Expired................................................... (299,912)
---------
Outstanding at:
January 31, 2000............................................ 1,578,761
=========
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
RANGE OF EXERCISE CONTRACTUAL WEIGHTED AVERAGE WEIGHTED AVERAGE
PRICES: NUMBER OUTSTANDING LIFE EXERCISE PRICE NUMBER EXERCISABLE EXERCISE PRICE
--------------------- ------------------ ----------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
$.10 1,500,000 4.9 $ .10 1,500,000 $.10
$1.6875-3.375 30,000 4.5 $2.80 1,530,000 $.15
$5.13 48,761 1.2 $5.13 1,578,761 $.30
</TABLE>
NOTE 5--INCOME TAXES
At January 31, 2000 and 1999, the Company had net operating loss
carryforwards of approximately $15,000,000 and $12,000,000, respectively for
book and tax purposes, expiring from 2005 to 2019. As a result of the Tax Reform
Act of 1986, the Company is obligated to pay an alternative minimum tax on its
alternative minimum taxable income, even though it has a loss carryfoward. These
carryforwards are subject to possible limitations on annual utilization if there
are "equity structural shifts" or "owner shifts" involving "5% shareholders" (as
these terms are defined in Section 382 of the Internal Revenue Code), which
result in more than a 50% point change in ownership.
F-13
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 5--INCOME TAXES (CONTINUED)
At this time, the Company does not believe it can reliably predict
profitability beyond the current fiscal year. Accordingly, the deferred tax
asset applicable to operations subsequent to January 31, 2000 has been reduced
in its entirety by the valuation allowance. For the periods ending January 31,
2000 and 1999, the provision for taxes is comprised only of appropriate state
income taxes.
Reconciliation of income taxes shown in the financial statements and amounts
computed by applying the Federal income tax rate of 34% for the years ended
January 31, 1999 and 2000, respectively is as follows:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Loss Before Income Taxes........................... $(2,937,587) $(2,795,693)
Computed expected tax credit....................... 952,765 907,670
Operating loss for which no benefits were
provided......................................... (952,765) (907,670)
State and local tax provision...................... (1,000) (1,000)
Provision for income taxes......................... $ (1,000) $ (1,000)
</TABLE>
NOTE 6--COMMITMENTS AND CONTINGENCIES
SEC INVESTIGATION
The Securities and Exchange Commission has initiated an investigation
relating to fluctuations in the price of the Company's common stock subsequent
to the change in name from Linkon Corporation to PacketPort.com, Inc. on
December 9, 1999. The Company intends on providing full cooperation to the
Commission.
LEASES
The Company was obligated for approximately 6,951 square feet of office
space under a non-cancelable operating lease. The office lease expired August
31, 1999 and in November, 1999 the Company moved to its present location of
approximately 2000 square feet with rent at $4,000 on a month to month basis.
Rent expense charged to operations was $95,273 and $127,009 for the years ending
January 31, 2000 and 1999, respectively.
ROYALTY AGREEMENTS
The Company acquires the rights to certain software algorithms from various
developers under renewable contracts of varying terms. Royalties are based on a
per unit charge based on sales of products utilizing such algorithms.
WARRANTIES
The Company warrants that all equipment manufactured by it will be free from
defects in material and workmanship under normal use for a period of one year
from the date of shipment. The Company's' expenses in connection with such
warranties have been minimal.
F-14
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 6--COMMITMENTS AND CONTINGENCIES (CONTINUED)
EMPLOYMENT AGREEMENTS
In September 1999, the Company entered into two one-year employment
agreements with two officers. The Company provides for salary and benefits.
Total future commitments at January 31, 2000 are approximately $106,000 payable
through September 2000.
OTHER AGREEMENTS
In November 1999, the Company entered into two one-year consultant
agreements with two individuals to provide consulting services related to their
knowledge of the technology and business of the Company. The Company is
obligated to pay each consultant $50,000 per year. Total future commitments at
January 31, 2000 are approximately $75,000 payable through October 2000.
RESEARCH AND DEVELOPMENT AGREEMENT
On February 29, 2000, the Company entered into a research and development
agreement with an unrelated entity to provide research and development services
for certain projects for $500,649 payable monthly in equal installments of
$125,162 through May 10, 2000.
MARKETING AND MANAGEMENT CONSULTING
On March 21, 2000, the Company entered into a one-year agreement with a
consulting firm to provide services for marking, management consulting, business
advisory, shareholder information and public relations. The Company is obligated
to pay the consultant $22,000 per month for the first four months and $18,000
per month thereafter.
CONSULTING AGREEMENT
On March 15, 2000, the Company entered into an agreement with a consulting
firm to provide investor public relations and overall corporate communications
services. The Company is obligated to pay the consultant $4,000 per month
through February 2001 plus options to purchase 10,000 shares of the Company's
common stock at fair value.
NOTE 7--NOTES PAYABLE--SHORT TERM LIABILITIES
During the year ended January 31, 1999 four (4) individuals who held debt
instruments issued by the Company elected, as provided for in the provisions of
the debt instrument, to convert their notes to common stock. A total of $250,000
of notes payable were converted to common stock with 208,334 common stock being
issued. Due to the conversion price being reduced in two of the four
conversions, a loss was recognized in the income statement for $83,000.
Notes payable were also reduced by the Company making a $25,000 payment
against another note payable of $100,000 which matured on October 31, 1998. The
Company has re-negotiated the payment dates for this note. This note was paid in
full prior to January 31, 2000.
During the year ended January 31, 1999 the Company issued two (2) additional
short term notes payable totaling $500,000. Both notes bear an interest rate of
10%, are due six months from the date of the notes, and are unsecured. A total
of 100,000 warrants to purchase the Companies stock were issued
F-15
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 7--NOTES PAYABLE--SHORT TERM LIABILITIES (CONTINUED)
related to the above two (2) notes. These warrants were assigned a value of
$23,500 and this amount was recorded as a discount on the issuance of the two
notes. This discount is being amortized over the life of the notes (six months),
and as at January 31, 1999 the unamortized discount totals $15,322. As of
January 31, 2000 this note was repaid and no amounts remain unamortized.
NOTE 8--NOTES PAYABLE--LONG TERM LIABILITIES
During the year ended January 31, 1999, the Company issued a note payable to
RG Capital Fund in the amount of $1,100,000.This promissory note, is unsecured,
bears interest at a rate of 8% per annum, payable quarterly, and is payable in
full in one lump sum payment on April 5, 2000. The promissory note contained
provisions prohibiting, among other things,
(1) issuing securities in reliance on Regulation S of the Securities Act
(2) issuing securities at a price less than 75% of public trading price of
the Company's stock
(3) incurring indebtedness other than in connection with factoring, financed
purchases or leases or existing indebtedness of the Company
(4) guarantying obligations of its affiliates
(5) declaring dividends or redeeming capital stock
(6) selling assets outside the ordinary course of business to pay off the
proceeds of the loan were used to pay off all amounts owed by the Company
to IBJS Capital Corporation which included principal and accrued
interest. Due to IBJS Capital accepting, in full payment of their
$1,000,000 Debenture, a reduced payment of $850,000 the Company had an
extraordinary gain from the pay off of this debt in 1999. The gain, as
noted above, was reduced by $40,086 of deferred financing cost that was
still remaining to be amortized as of the date of the payoff. This net
gain of $109,914 was an addition to net income for the year ending
January 31, 1999. This Note was assumed by PacketPort, Inc. in connection
with the restructuring of the Company approved by the shareholders on
November 26, 1999. Included in loss on settlements is $476,036 of
settlement loss recorded in connection with the assumption of this note.
In addition to the above promissory note, the Company also issued to R&G
Fund warrants to purchase an aggregate of 1,000,000 pre-split shares of Common
Stock at an exercise price of $1.50, terminating in eighteen months. These
warrants were assigned a value of $136,981 and this amount was recorded as a
discount on the $1,100,000 note payable. This discount was being amortized over
the life of the note payable, and was written off in the year ended January 31,
2000.
This note was settled by PacketPort, Inc. pursuant to the plan of
restructuring approved by the shareholder's on November 26, 1999.
NOTE 9--EXTRAORDINARY GAIN (LOSS) ON SETTLEMENT OF DEBT
During the year ended January 31, 2000, the Company recorded a $298,471 loss
on settlement of debt which included $476,036 of settlement of debt in
connection with the notes payable as described in Note 8 and $177,565 of gain on
settlement of other liabilities for cash.
F-16
<PAGE>
PACKETPORT.COM, INC.
(FORMERLY LINKON CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 10--SUPPLEMENTAL CASH FLOWS DISCLOSURES
Cash flows from operating activities for the year ended January 31, 1999
reflects interest paid of $324,160, interest earned of $9,722 and taxes paid of
$2,162. The year ended January 31, 2000 reflectes interest paid of $9,476,
interest earned of $2,023 and taxes paid of $1,000.
Non cash investing and financing activities for the year ended January 31,
2000 include the assumption of $1,900,000 of notes payable, $180,964 accrued
interest thereon and $762,500 of accounts payable by PacketPort, Inc. a company
solely owned by the Company's new president; pursuant to a plan of restructuring
agreed to in principle on September 8, 1999 and approved by the shareholders on
November 26, 1999; whereby the Company issued 4,500,000 shares of common stock
at $.05 per share, valued at $2,700,000 and an option to purchase up to
1,500,000 shares of common stock for $.10 per share, valued at $535,000 using
the Black-Scholes option pricing model.
NOTE 11--RELATED PARTY INFORMATION
The Company leases approximately 2,000 square feet from Microphase
Corporation, for $4,000 per month on a month to month basis, a company which
concurrently employs the Company's president and vice president.
The Company's president is the 100% owner of PacketPort, Inc.
The Company's president and vice president received no compensation for the
fiscal year ended January 31, 2000.
NOTE 12--SUBSEQUENT EVENTS
EXERCISE OF OPTIONS
On March 28, options to purchase 48,761 shares of common stock at an
exercise price of $5.13 were exercised on a cashless basis. As a result,
33,350 shares of common stock were issued.
PRIVATE PLACEMENT
On May 29, the Board of Directors approved a private placement offering of
its common stock to accredited investors pursuant to Rule 505 for up to
2,666,667 units of its securities at $.75 per unit. Each unit consists of one
share of common stock and a warrant to purchase one share of common stock at an
exercise price of $.75. As of June 14, 2000, no units were sold.
F-17
<PAGE>
EXHIBIT INDEX
(a) (1)
Following is a list of exhibits filed as part of this Annual Report on Form
10-KSB. Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
--------------------- ------------------------------------------------------------
<C> <S>
3.1 Restated Articles of Incorporation (incorporated by
reference to Exhibit A to the Company's Proxy Statement,
dated February 4, 1997).
3.2 By-laws (Incorporated by reference to Exhibit 8 to the
Company's Registration Statement on Form S-18 (File Number
33-22054-NY) which became effective on December 14, 1990, as
amended by Exhibit 3.1 to the Company's Form 10-QSB for the
quarter ended April 30, 1998).
4.1 Linkon Corporation 1996 Stock Option and Performance
Incentive Plan (Incorporated by reference to Exhibit B to
the Company's proxy statement, dated February 24, 1997).
4.2 Promissory Note, dated April 6, 1998, by the Company in
favor of RG Capital Fund LLC, in the principal amount of
$1,100,000 (incorporated by reference to the Company's Form
10KSB for the fiscal year ended January 31, 1998).
4.3 Warrant Certificate, dated April 6, 1998, by the Company in
favor of Roberts & Green, Inc. (incorporated by reference to
the Company's Form 10KSB for the fiscal year ended January
31, 1998).
4.4 Promissory Note, dated November 17, 1998, by the Company in
favor of James Scibelli, in the principal amount of $200,000
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
4.5 Promissory Note, dated December 9, 1998, by the Company in
favor of Woodland Partners, in the principal amount of
$300,000 (incorporated by reference to the Company's
Form 10KSB for the fiscal year ended January 31, 1999).
4.6 Warrant Certificate, dated December 9, 1998, by the Company
in favor of James Scibelli (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
4.7 Warrant Certificate, dated December 9, 1998, by the Company
in favor of Woodland Partners (incorporated by reference to
the Company's Form 10KSB for the fiscal year ended
January 31, 1999).
10.1 Placement Agent Agreement, dated January 14, 1994, between
the Company and Sloan Securities Corp., including forms of
the Company's Warrant Certificates, issued on January 28,
1994, February 28, 1994 and April 30, 1994 and the October
27, 1994 agreement between said parties amending the same.
(Incorporated by reference to Exhibit 4.3 to the Company's
Form 10KSB for the fiscal year ended January 31, 1995).
10.2 Subscription Agreement, dated April 6, 1998, between the
Company and RG Capital Fund LLC (incorporated by reference
to the Company's Form 10KSB for the fiscal year ended
January 31, 1998).
10.3 Form of Subscription Agreement, dated April 14, 1998,
between the Company and each of the investors party thereto
that was designated by RG Capital Fund LLC (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.4 Warrant Agreement, dated April 6, 1998, between the Company
and Roberts & Green, Inc. (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1998).
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
--------------------- ------------------------------------------------------------
<C> <S>
10.5 Registration Rights Agreement, dated April 6, 1998, among
the Company, RG Capital Fund LLC and Roberts & Green, Inc.
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.6 Investment Banking and Financial Advisory Services
Agreement, dated April 6, 1998, between the Company and
Roberts & Green, Inc. (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1998).
10.7 Release and Termination Agreement, dated April 6, 1998,
between the Company and IBJS Capital Corporation.
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.8 Agreement for Purchase of Receivables, dated March 19, 1998,
between the Company and Imperial Bank (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.9 Purchase Order Addendum to Agreement for Purchase of
Receivables, dated March 26, 1998, between the Company and
Imperial Bank (incorporated by reference to the Company's
Form 10KSB for the fiscal year ended January 31, 1998).
10.10 Commercial Lease, dated June 17, 1997, by and between 140
Sherman Street, LLC and the Company (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1998).
10.11 Form of Incentive Stock Option Agreement under the Company's
1996 Stock Option and Performance Incentive Plan
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1998).
10.12 Form of Non-Qualified Stock Option Agreement under the
Company's 1996 Stock Option and Performance Incentive Plan
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
10.13 Commercial Lease Amendment, dated May 11, 1998, by and
between 140 Sherman Street, LLC and the Company
(incorporated by reference to the Company's Form 10KSB for
the fiscal year ended January 31, 1999).
10.14 Employment Agreement dated May 19, 1998 between the Company
and Mr, Lee W. Hill (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
10.15 Employment Agreement dated May 19, 1998 between the Company
and Mr. Charles Castelli (incorporated by reference to the
Company's Form 10KSB for the fiscal year ended January 31,
1999).
10.16 Employment Agreement dated March 19, 1998 between the
Company and Mr. Thomas V. Cerabona (incorporated by
reference to the Company's Form 10KSB for the fiscal year
ended January 31, 1999).
10.17 Engagement Agreement, dated February 12, 1999, between the
Company and Morgen Evan and Co. (incorporated by reference
to the Company's Form 10KSB for the fiscal year ended
January 31, 1999).
10.18* Consultant Agreement, dated November 1, 1999, between the
Company and Lee W. Hill
10.19* Consultant Agreement, dated November 1, 1999, between the
Company and Thomas Cerabona.
27.1* Financial Data Schedule.
</TABLE>
------------------------
* Filed herewith.
