10KSB/A 1 v06062_10ksba.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________________________________ FORM 10-KSB/A Amendment No. 1 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________ COMMISSION FILE NO. 000-31507 PLANETLINK COMMUNICATIONS, INC. (Exact name of issuer as specified in its charter) GEORGIA 58-2466623 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1415 BOOKHOUT DRIVE, CUMMING, GEORGIA 30041 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (678) 455-7075 Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $0.001 PER SHARE (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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: $ 678,955. State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of March 31, 2004: $0.088 per share. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of March 31, 2004: 117,458,108 shares. Documents incorporated by reference: None. THIS AMENDMENT TO OUR ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, FILED WITH THE COMMISSION ON APRIL 14, 2004, IS BEING FILED BECAUSE OUR FINANCIAL STATEMENTS AND NOTES HAVE BEEN RE-AUDITED BY OUR ACCOUNTANTS. EXCEPT FOR THE RE-AUDITED FINANCIAL STATEMENTS AND NOTES, AND THE CURRENT DATES, NO OTHER CHANGES HAVE BEEN MADE TO OUR ANNUAL REPORT ON FORM 10-KSB FILED WITH THE COMMISSION ON APRIL 14, 2004. TABLE OF CONTENTS Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Item 2. Description of Property.. . . . . . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . 21 Item 4. Submission of Matters to a Vote of Security Holders.. . . . . . . . 21 Item 5. Market for Common Equity and Related Stockholder Matters. . . . . . 22 Item 6. Management's Discussion and Analysis or Plan of Operation.. . . . . 23 Item 7. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 25 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 25 Item 8A. Controls and Procedures.. . . . . . . . . . . . . . . . . . . . . . 25 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.. . . . . . . . . 25 Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . 25 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . 25 Item 12. Certain Relationships and Related Transactions. . . . . . . . . . . 25 Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 25 Item 14. Principal Accountant Fees and Services. . . . . . . . . . . . . . . 25 Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .F-2 PART I ITEM 1. BUSINESS. PlanetLink Communications, Inc. was incorporated in May 1999 for the purpose of providing international telecommunications and wireless services principally in Georgia. Prior to the end of fiscal 2001, we directed our efforts toward satellite television services and products rather than through the sale of telecommunications services. Virtually all of our 2002 and 2003 revenues were generated by providing television services and consumer two-way satellite based Internet service through our dealership agreement with EchoStar Communications. After several years of retail operation and an evolving business strategy, we have moved away from store retailing to focus on developing satellite-enabled products based on Global Positioning Systems (GPS) technology. San Antonio, Texas-based Karta Technologies Inc. is leading the Research and Development effort for our satellite-enabled products. Karta Technologies is an industry leader in IT, engineering, training and program management services. The vehicle tracking system has been developed to be as simple as possible, utilizing the unique features of the General Packet Radio Service (GPRS), allowing the vehicle tracking device to be a simple data-reporting unit with all of the functionality of the service being built into the server-side. This architecture has enabled us to quickly bring the service to market, and with the least amount of risk. The design of the system also facilitates the ability to rollout new features and services to vehicle tracking devices that are already in service. The result of this effort has established the technical foundation on which an integrated portfolio of personal and asset tracking products and services may be based. TransTRAK, a vehicle tracking service, is the first of our satellite-enabled products and is on schedule to launch in April 2004. The TransTRAK vehicle unit uses a highly accurate GPS receiver and state-of-the-art communications technology to provide for real-time tracking, speed calculations, and distance monitoring. Monitoring data is available from any internet capable device, and a primary feature of the TransTRAK system is the ability for each subscriber to define events that will result in a real-time notification. For example, a car owner whose car is normally parked in the parking lot at work during the day might like to receive a notification if his vehicle moves from that location between the hours of 9 AM and 4 PM. Each subscriber can enter an unlimited number of these types of events for each vehicle and can change them as frequently as desired. Notifications can be sent to any email address, which includes most pagers, and cell phones. This feature makes the TransTRAKS service highly customizable to the unique needs of each individual. Our strategy is to minimize upfront costs and to charge a reasonable monthly monitoring fee for our consumer customers, and to customize our product offering based upon the unique business requirements of our commercial customers who utilize our products to improve their operations, including management of medium to large size fleets. Our consumer offering is 100% web-based. A consumer can order TransTRAK on line with monthly credit card billing and full on-line support. The TransTRAK consumer application is also an affordable alternative for commercial customers who have the need to track and monitor small to medium size fleets. The consumer vehicle tracking system provides the technical foundation on which an integrated portfolio of personal and asset tracking products and services may be based. OUR ORGANIZATION We are a Georgia corporation incorporated in May 1999 under the name PlanetLink Communications, Inc. Our corporate offices are located in Cumming, Georgia, and our operational headquarters are in San Antonio, Texas. Our operations depend largely upon strategic alliances with outsource providers who provide Service Delivery, Customer Service, and Technical Support services to our customers, and upon Karta Technologies Inc. who is leading the R&D effort for our satellite-enabled products. In this Form 10-K Annual Report, references to "us" refer to PlanetLink Communications, Inc. unless the context indicates otherwise. 1 PlanetLink Communications, Inc., a development stage company, was incorporated in May 1999 for the purpose of providing international telecommunications and wireless services principally in Georgia. Prior to the end of fiscal 2001, we determined to direct our efforts at satellite television services and products rather than through the sale of telecommunications services. At present, we generate substantially all of our revenues by providing television services through our satellite EchoStar dealer operations and related products and services. The related products and services available from our provider include StarBand, which we believe is the country's first consumer two-way satellite based Internet service. On October 1, 1999, we entered into an exclusive agreement with DirecTV, a division of Hughes Electronics, to provide digital satellite television service in the nine southeastern territories of BellSouth. The agreement provided for promotional support from DirecTV as well as co-op dollars to support advertisement campaigns. We launched our DirecTV operations in March 2000, and we believed DirecTV had the potential competitive advantages to be a significant provider of the products and services for our customers. We started expanding our DirecTV sales operation across the Southeastern United States. In March 2000, we conducted test sales in the Nashville, Tennessee area which indicated a strong demand and the potential effectiveness of our marketing of DirecTV units through independent sales associates. We began recruitment initiatives for sales and marketing associates across the Southeastern United States for our DirecTV satellite service. In October 2000, in an effort to increase our gross profit margins, we decided to terminate our contract with DirecTV, and we entered into a new distribution agreement with EchoStar Satellite Corporation ("EchoStar"). EchoStar also provides Broadband Internet access through its Satellite systems, which we also offer to our customers. Our marketing plan provides for adding retail Communication Centers in major malls and high traffic areas throughout the Southeastern United States. PlanetLink's distribution agreement with EchoStar is exclusive for the Southeast region of the United States. See "Description of Properties" below. In April 2000, we entered into agreement with Eagle Research, a division of Cox Enterprise, to conduct a market research study in an effort to develop a marketing strategy to market our range of products and services. During the third quarter of 2001, we received the study from Eagle Research and as a result of this market research study, we adjusted our business strategy to focus more on the distribution of satellite related products and services, which industry we believe is at the beginning of its life cycle and therefore provides for high profit margins. STATUS OF RECENT DEVELOPMENTS AND PUBLIC ANNOUNCEMENTS At present, we operate six retail stores marketing our EchoStar products and services and during 2003 we plan to open an additional six to twelve retail stores including our retail kiosks in the metropolitan area of Atlanta and Southeast of the United States. Based upon the market research study from Eagle Research, we identified the technology of the Global Positioning System (GPS) as an emerging consumer category that we could commercially enter. As a result, during 2002 and continuing in fiscal 2003, our business strategy was to also focus on new products using GPS and satellite-enabled technology. In January 2003, we announced that the cornerstone of our new strategy is the development of proprietary products based upon GPS technology including personal tracking devices, child safety devices and other satellite-enabled security systems. In the same announcement, we stated that it intended to expand its retail operations through the implementation of a franchising model and expects to open stores in major retain shopping malls in Georgia, Tennessee, Alabama, North Carolina and South Carolina. Our retail stores presently offer our satellite television systems and satellite high-speed Internet access. We also plan on adding GPS related products under the trade name PlanetTRAKS, which products shall include the following: - Kidangel: This personal tracking system will help parents locate a child within minutes; - Parentrak: This is designed to permit users to know the location of aging adults/parents; 2 - Autotrak: This device will enable parents and others know the speed at which their children are driving and the location of their vehicle. This same device also is valuable for businesses to locate their vehicles and employees and know the speed of their vehicles; - Guardian: For business executives and others traveling to know their location; and - Protector: This location device is designed to deliver panic signal, identify the location, and includes a 2-way audio track to listen to the nature of any danger. We also plan on establishing a commercial sales division in connection with EchoStar's release of several new products that will enhance the installation and delivery of satellite television to commercial customers such as hotel chains, condominium associations and other small businesses. INDUSTRY OVERVIEW The business we operate and from which we have derived substantially all of our revenues during the past two years is the satellite television industry and related products and services. Our management expects the market for satellite television products and services and satellite based high-speed Internet service will continue to grow. However, there can be no assurances regarding the size of such demand or that PlanetLink will be able to benefit from anticipated increased demand. Satellite Television Market. The home entertainment and video programming industry continues to develop competitive alternatives and consumer choices. The major choices in the industry are: television cable systems, direct-to-home satellite service (including EchoStar), wireless cable systems, and broadcast television. There are other competitors in the field, such as Internet video providers, home video sales and rentals, and even local telephone companies that provide cable access. The cable system providers have continued to grow and dominate this industry in terms of subscriber penetration, the number of programming services available, audience ratings and expenditures on programming. However, for non-cable systems, direct broadcast satellite, such as EchoStar and DirecTV, among other providers, dominates the delivery of multi-channel video programming distribution systems. Technological advances are rapidly occurring that permit all of these various system providers to increase both - quantity of service (i.e., an increased number of channels using the same amount of bandwidth or spectrum space), and - types of offering (i.e., interactive services). In addition, operators and distributors are developing and deploying advanced technologies, especially digital compression, in order to deliver additional video options and other services, such as Internet access and telephony to their customers. The North American direct broadcast satellite market represents a large niche market for potential customers. The satellite delivered digital television market in the United States was lead by Hughes Electronics' DirecTV subsidiary in 1994 with the launch of high-powered Digital Broadcast Satellites ("DBS"), which brought hundreds of channels of digital television programming to subscribers by use of a mini-satellite dish and a set top box. Since then, EchoStar and its DISH Network system and DirecTV compete in the US satellite television market. We believe that an increasing number of U.S. homes are subscribing to satellite television services. Our goal is to become a leading regional provider of satellite television products and services and related services including high-speed Internet access and GPS based tracking products. We believe that today's direct-to-home satellite market offers us a very good business opportunity based on the following reasons: - Advances in communications and information technology have created a large demand for new state-of-the-art services such as digital satellite television, - Regulatory changes in the United States authorizing the provision of digital satellite television services has given television viewers the opportunity to choose the provider of their television programming based on quality of signal, cost and variety of programming, 3 - Our marketing program focuses on that choice and the benefits of using satellite television programming over cable programming, - There exists a significant percentage of households that are not served or are under-served by either cable television providers or digital satellite television program providers, and - To date, digital satellite television program providers have focused primarily on the single family residence market because of the lower cost of deployment and fewer technical difficulties than those incurred in multi-dwelling unit properties. High-speed satellite based Internet access is and enhanced feature available subscribers of satellite based television service and is one of the fastest growing markets in the telecommunications industry. Data communication capabilities provided by the Internet allow medium-sized and small businesses to streamline e-commerce and communications among employees, customers and suppliers. To fully take advantage of the efficiency provided by the Internet's capabilities, we believe that businesses will increase their Internet connectivity. We also expect the demand for Internet access to increase as an increasing number of individuals and business work in remote offices or from their homes. In addition, we expect increasing consumer demand for higher access speeds to the Internet. Traditionally, individuals and business have relied primarily on low-speed Internet access using existing telephone lines. Most telephone networks today are fiber optic, capable of high-capacity and high-speed transporting of data. However, the portion of the networks that ultimately connects to the customer homes and businesses, commonly referred to as the "local loop" or "last mile," generally is narrowband copper wire with service speeds limited to 56- 128 Kbps. This limitation currently constrains the capacity and speed of the Internet to most users. High-speed Internet access is poised to become an area of high growth. Interactive broadband services are the key to unleashing the full power of the Internet and delivering multimedia content. As a result, we believe that users are seeking affordable higher-speed Internet access alternatives. In 2001, we started to offer EchoStar's satellite based high-speed Internet access, StarBand, to our customers. We believe we are well positioned to meet the needs of our residential and business customers in our Southeastern U.S. market. Management believes that the satellite television market described above is continuing to grow and in order for us to continue to experience necessary growth, we must be able to deliver our products and services and customer care in the most cost effective manner possible and to focus our capital resources on acquiring new customers to enable the company to generate positive cash flow. We intend to capture market share through strategic acquisitions of existing competitors, internal growth and other strategic business relationships. See Business Objective and Strategy below. BUSINESS OBJECTIVE AND STRATEGY Business Objective. Our primary business objective is to become a leading reseller of satellite based consumer products and services including EchoStar television satellite systems and related products and services including StarBand, EchoStar's enhanced high-speed satellite based Internet access. Our business strategy is to distinguish our products and services from other competitors such as cable providers, terrestrial television networks and other Internet providers to emphasize the superior quality of our products and services which we can provide at competitive pricing to our customers. Our marketing strategy will target both small business and residential customers. With a direct marketing strategy through regional managers as well as through kiosk locations in major malls, we hope to achieve continued growth with direct access to our potential consumer and continue to provide customized services to the end user of our products and services. We developed a retail concept with a unique design of our retail kiosk units through which we sell our products and services. We filed a patent for the retail design concept with the United States Patent and Trademark Office. We believe that our EchoStar's satellite service has the potential to play a significant role in enhancing our competitive position for all of the products and services we offer to our consumers. We plan to expand our EchoStar sales operation in the Southeastern United States during 2003. We will focus on positioning ourselves to become a dominant retailer of other satellite technology products including our introduction of GPS tracking products under our PlanetTRAKS trade name. 4 Achieve Significant Operating Efficiencies. We believe we can continue to achieve operating efficiencies resulting in enhanced revenue opportunities, cost savings and improved cash flow through: - Cross-selling our products and services across broader distribution channels and customer network that we have developed or will develop through acquisitions; - Consolidating our operating costs and achieving purchasing economies of scale; - Improving our customer acquisition operations; and - Lowering working capital requirements by optimizing our accounts receivable collection period. Increasing Customer Base. We are pursuing our goal of increasing our customer base and attracting new customers by: - Providing products and services to our customers at very competitive prices; and - Offering our customer a wide variety of support services typical of other providers of television and Internet service. See the discussions under "Pricing of our Products and Services" below. During 2004, we intend to continue to develop a franchise program for our retail stores to increase our customer base. Pursue Strategic Acquisition. Consolidation trends in the markets in which we operate may present us with opportunities for strategic acquisitions. We have no acquisitions planned at the present. Our criteria for strategic acquisitions will be to pursue well-run, established telecommunications retailers, installation companies, long-distance telephone service providers with capacities to accommodate growth, that complement our existing operations, and that are able to achieve an acceptable return on our investment. We will also commit our capital resources as we deem appropriate to increase the efficiency and productivity of our business operations. Potential acquisition candidates are evaluated based upon our ability to: - Expand our customer base and improving our customer relationships; - Market new products and services through new or expanded distribution channels; - Increase utilization of our existing distribution capacity; - Generate cost savings; - Add to our technology portfolio; and - Open new market opportunities. Implement an Integrated Internet Strategy. We are focused on providing satellite based Internet access as an enhanced feature of our satellite television package of services. Increasing demand for Internet services presents opportunities to market our Internet-related services such as Internet application services. We plan to expand our Internet access services by offering our customer a package of satellite service and Internet access service trough satellite. We believe that our ability to provide this service package to our customers at competitive prices differentiates us from our competitors. 5 SOURCES AND AVAILABILITY OF OUR PRODUCTS AND SERVICES OFFERED AND NAMES OF OUR PRINCIPAL SUPPLIERS Satellite Television Service. We provide digital satellite television services to residential customers within our market in Georgia and the Southeastern United States. In October 2000, we entered into an agreement with EchoStar which allows us to market up to 185 channels of its Direct Broadcast Satellite programming to our subscribers. We are paid a commission by EchoStar for each subscriber that purchases this satellite programming package and we also receive equipment and marketing subsidies. We believe these subsidies materially reduce our customer acquisition costs. We have been providing our digital satellite television services in the United States since November 1999. As of December 31, 2003, we had approximately 5,673 subscribers for our satellite television services in our market area. Satellite Internet Access. We provide digital satellite based Internet access through StarBand, a subsidiary of EchoStar, to residential and business customers. In August 2001, we entered into an agreement with StarBand which allows us to market their satellite based Internet access to our customers throughout the Southeastern United States. As of December 31, 2003, we had approximately 189 subscribers for StarBand in Georgia and the Southeastern United States. CUSTOMER BASE AND PRINCIPAL MARKETS, DEPENDENCE ON ONE OR FEW MAJOR CUSTOMERS EchoStar Customers. As of December 31, 2003, we had 5,673 EchoStar satellite television customers which is an increase of 12.25 percent from the customer base of 4,986 at December 31, 2002. We are not dependent upon any single customer, and for the year ended December 31, 2003, no customer accounted for more than one percent of our sales. We have a service agreement for resale of EchoStar products and services. EchoStar does not require any minimum purchase requirements by dollar or amount and category of products and services. Under our agreement with EchoStar, which commenced in October 2000, we may not market and sell other satellite broadcast services of any other direct broadcasting satellite provider. Consequently, we are dependent on EchoStar as our provider for satellite equipment and services. We cannot control events at EchoStar, and there are events that could adversely affect us. The satellite communications and programming industry is regulated and regulations may be enacted that could have an adverse effect on our products and services. Termination of our contract with EchoStar would have a material adverse effect on us. Reference is made to the discussion under "Risk Factors" below. INTERNET ACCESS CUSTOMERS. As of December 31, 2003, we had 189 satellite broadband Internet customers. We have no major customer on which we depend. Our customer base, we believe, is broad and provides us with a base to increase sales and expand customer relationships, which we believe shall serve to reduce any potential exposure to any particular customer. We are not dependent upon any single customer, and for the year ended December 31, 2003, no customer accounted for more than 10 percent of our sales. COMPETITIVE BUSINESS CONDITIONS AND OUR POSITION IN THE INDUSTRY Competition in the Direct Broadcasting Satellite Market. Satellite television faces competition from several sources, such as traditional terrestrial television broadcast and cable companies, traditional satellite receivers, direct broadcast satellites, wireless cable, and other alternative methods of distributing and receiving television transmissions. Further, premium movie services offered by cable and satellite television systems have encountered significant competition from the home VCR and DVD industry. In areas where terrestrial air broadcast signals can be received without cable access, cable television systems have also experienced competition from the availability of broadcast signals generally and have found market penetration more difficult. We do not have significant market share in our market in Georgia and the Southeastern United States. Our competitors in each of our existing and future markets may provide bundled packages of communication services such as cable services, including local, long distance and digital subscriber line services that compete directly with the services we now offer or may offer in the future. 6 The resale of satellite television services is highly competitive, and we expect competition to intensify in the future. The subscription television business is also highly competitive, and many of our competitors have significantly greater resources than we have. Our primary competition in the subscription television market is from cable television provided by such major operators as Comcast, formerly AT&T Broadband & Internet Services and Time Warner Entertainment. Cable companies generally are well established and known to our potential customers and have significantly greater financial and other resources than we have. In addition, these competitors are also bundling additional services with their cable TV services, such as high-speed Internet access and content, to enhance their products and services. Direct Broadcast Satellite ("DBS") service is available from DirecTV and EchoStar Communications. We compete with many retail distributors of DirecTV. In November 1999, Congress enacted legislation allowing DBS providers to offer local television stations. We do not expect DBS providers to offer local stations into a majority of our existing local markets for some time, if at all, because of the size of these markets. However, the growth of DBS service has been significant since it was first launched, and we expect that the DBS service providers will continue to be significant competitors for subscription television customers. Competition in the Internet Access Market. The Internet access market is highly competitive. We face competition from many Internet access and Internet service providers ("ISP") with significantly greater financial resources, well-established brand names and large, existing customer bases. ISPs provide Internet access as well as content to residential and business customers. These companies can provide Internet access over local exchange carriers (LEC) networks at or below ISDN speeds, offer digital subscriber line ("DSL") using their own DSL services, or DSL services offered by LECs and others. ISPs have significant and sometimes nationwide marketing presence which they combine with strategic or commercial alliances. Significant ISPs include America Online ("AOL"), Microsoft-MSN, EarthLink and PSINet. All of those competitors may enter into the business of offering satellite based Internet access, which we offer. METHODS OF COMPETITION We believe we have the competitive advantages discussed below. Established Position in Attractive Niche Market. We enjoy a strong position in our niche market in the metropolitan area of Atlanta, Georgia. We believe that urban consumers represent a unique and powerful market segment critical to our success and will represent the cornerstone for our market penetration. Based upon demographic developments, indicating a growing urban population in Georgia, and the cities in the Southeastern United States, we believe that the middle-income segment of this population will represent a main targeted market for our products and services. We intend to continue to aggressively pursue our marketing and sales efforts in the urban middle-income population in urban areas that we believe have not been the focus of our competitors. We believe our strong position, technological expertise and strong customer relationships provide us with certain advantages in the development of our target markets. Building a PlanetLink Brand Identity and Awareness. We intend to build brand identity through the quality, convenience and value of our products and services we offer. We also intend to aggressively market our services through direct marketing in our target communities, promotions and advertising, as a means to further establish brand-name recognition. We plan to develop a franchise program for our retail stores, for which design we filed a patent with the United States Patent and Trademark office, which is pending. Branding Strategy. Part of our strategy is to provide our customer with the opportunity to enjoy live product demonstration during their buying process, which includes the demonstration of the features of our products and services. This method has been proven to be effective in demonstrating the technical superiority of satellite enabled products and services. Provide a Superior Customer and Technical Services. We are committed to providing our customers with a superior experience in all aspects of our services. Our customer support and services operate a on a 24-7 basis and designed to ensure our customers satisfaction within our urban markets in Atlanta, Georgia and the Southeastern United States. 7 Expand Existing Market and Enter New Geographic Markets. We plan to increase revenues and realize economies of scale by aggressively expanding into new metropolitan markets and increasing penetration in our existing markets. We believe that we can achieve competitive cost advantages in our target markets through the combination of competitive pricing and superior customer service. As of December 31, 2003, we have and had approximately 37 small business customers and approximately 6,004 residential customers for our products and services. We expect to have increasing customer growth during 2004. Strong Customer Relationships. Our service teams work closely with our customers to satisfy current and anticipated future needs. Our relationships with our customers resulted in a reputation for quality. We have been doing business for over three years and have on-going relationships with customers since our inception. Broad Product Offerings and Diverse Customer Base. Our products and services include direct broadcast satellite television service and satellite based Internet access. We offer our services as a package and separately so that our customers have alternatives based upon their needs with the option to expand the products and services that we provide. We also plan to introduce during 2003 GPS tracking products that we will market through our existing locations and by direct marketing. EMPLOYEE We believe that relations with our 13 full-time employees are excellent. We also have 18 part-time employees. We are not a party to any collective bargaining agreements, nor are we aware of any pending union petitions related to our employees. With our plan to open 6 to 12 additional retail locations which we anticipate during 2003, we plan to increase our staff. We will be dependent upon our ability to hire and retain qualified persons for sales and marketing and operational personnel for each of our locations. GOVERNMENT REGULATION The products and services we offer are subject to varying degrees of federal, state and local regulation. Future regulations and legislation may be less favorable to us and our business operations than current regulation and legislation. In addition, we may expend significant financial and managerial resources to participate in proceedings setting rules at either the federal or state level, without achieving a favorable result. Communications Regulation. The Telecommunications Act of 1996 substantially departed from prior legislation applicable to the telecommunications industry by establishing local telecommunications competition as a national policy. The Telecommunications Act removed state regulatory barriers to competition and overruled state and local laws restricting competition for telecommunications services. In general, by accelerating competitive entry into the telecommunications market, including Internet access such as DSL services offered by competitive carriers, the Telecommunications Act established a market structure in which the network infrastructure and services we purchase are now available from a variety of providers in addition to incumbent telephone companies. As a result, individual and business telecommunication options and choice of vendors, along with the quality and price of services purchased from telecommunications carriers, are becoming more favorable and yet are substantially dependent on successful implementation of the Telecommunications Act by the FCC and other regulatory agencies. We are no longer offering long-distance telephone service because the margins were not sufficient for us to compete successfully in this market. For several years, traditional telecommunications carriers have argued that the FCC should repeal rules treating Internet service providers as unregulated providers of enhanced information services. Under this regulatory paradigm, Internet service providers have been subject to a lesser degree of regulation and taxation than traditional telephone service providers which is favorable to us. The FCC has to date resisted all efforts to modify the unregulated treatment of Internet service providers. However, there may be increased legal and political pressure on the FCC to modify these policies. While there is no indication that a major change in the FCC's policies is imminent, the imposition on Internet service providers of access charges, universal service fees and other elements of traditional telecommunications regulation would require us to review and possibly change our financial and business models. 8 The Effects of New Federal Satellite Television Legislation on Our Business Is Unclear. On November 29, 1999 the Satellite Home Viewer Improvement Act of 1999 became law. The Act contains provisions that will be phased in over time. In addition, the FCC and other federal agencies have undertaken rulemaking and studies in connection with this legislation. Therefore, we cannot predict the effect of this new law on our business at this time. The Act resolves many of the issues involved in years of litigation between the networks and the direct broadcast satellite industry regarding retransmission of network programming to direct broadcast satellite subscribers. Generally, it also preserves the industry's right to retransmit network programming to subscribers in "unserved" areas. It also extends through December 31, 2004 the statutory right, for a copyright royalty fee, of the industry to retransmit independent programming (so-called superstations) to subscribers as "distant" signals. Further, satellite carriers will be required to deliver signals only to households that cannot clearly receive over-the-air network signals with a rooftop antenna. Among other things, the Act directs the FCC to take actions to prescribe the picture quality standard that the FCC uses to predict what households do not receive a strong enough network broadcast signal over-the-air and therefore are eligible to receive distant network signals. The FCC has initiated a rulemaking proceeding to consider this standard. The effect on our business of these FCC actions and other studies and rulemaking that the FCC will undertake cannot be predicted at this time. Internet Content Regulation. Government regulation of communications and commerce on the Internet varies greatly from country to country. The United States has not adopted many laws and regulations applicable to online communications and commerce. However, it is possible that a number of laws and regulations may be adopted covering issues such as user privacy, freedom of expression, pricing, content and quality of products and services, taxation, advertising, gaming, intellectual property rights, enforceability of contracts and information security. Recently, sections of the Communications Decency Act of 1996 (the "CDA") that proposed criminal penalties for distributing indecent material to minors over the Internet were held to be unconstitutional. Other provisions of the CDA remain in effect, however, and Congress has since passed the Child Online Protection Act ("COPA") in an effort to remedy the deficiencies the Supreme Court identified in the CDA. It is unclear whether COPA will survive constitutional challenges that have been raised. However, indecency legislation and other government efforts to regulate Internet content could subject us or our customers to potential liability, which in turn could affect our business. The adoption of any such laws or regulations might also decrease the rate of growth of Internet use, which in turn could decrease the demand for our services or increase the cost of doing business or in some other manner have a material adverse effect on our business, results of operations, and financial condition. Likewise, the applicability to the Internet of traditional property ownership, copyright, taxation, libel and obscenity law is uncertain. Likewise, the impact of ongoing discussions of privacy issues and the Internet remains uncertain. Several states have proposed, and the European Union has adopted, limitations on the use of personal information gathered online. Pursuant to negotiations with the European Union and the United States, the United States may decide to adopt restrictive laws on the subject of privacy. The Federal Trade Commission (the "FTC") has initiated action and obtained a consent decree against at least one online service provider regarding the manner in which personal information is collected from users and provided to third parties. In 1998, Congress enacted the Child Online Privacy Protection Act ("COPPA") protecting the privacy of children on the Internet and limiting the information that can be collected from and disseminated to children over the Internet without parental consent. The FTC promulgated broad new rules implementing COPPA in late 1999. Changes to existing laws or the passage of new laws intended to address online privacy and related issues may create uncertainty in the marketplace or could affect the manner in which we do business. We may also be subject to claims for defamation, negligence, copyright or trademark infringement (including contributory infringement) based upon information available through our Internet sites, including content created by third parties. Although recent federal legislation protects online services from some claims, the law in this area remains in flux and varies by jurisdiction. It is not possible to develop a business plan that can definitively protect us against liability for our Internet content, including content on our sites that we have not written or created. This uncertainty is likely to prevail for some time, as the laws continue to develop. 9 FORWARD-LOOKING STATEMENTS Statements in this Form 10-KSB Annual Report may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Form 10-KSB Annual Report, including the risks described under "Risk Factors" and "Management's Discussion and Analysis or Plan of Operation" and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect the internet and software industries, market and customer acceptance, competition, future government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-KSB Annual Report. RISK FACTORS BECAUSE OF OUR FINANCIAL CONDITION, WE MAY HAVE DIFFICULTY GENERATING BUSINESS IN A HIGHLY COMPETITIVE INDUSTRY The convergence of satellite-based position location technologies with the widespread availability and use of wireless data communications is creating opportunities for a variety of new products and services. Currently there are a number of products offering vehicle position location and tracking capabilities, but they are limited by the high cost of the individual vehicle Mobile Locator Unit and by the relatively high-cost of transmitting data over these types of low data-rate networks. However, the new data communications network that is emerging in the United States offers coverage for the major metropolitan areas and allows for the affordable transmission of large amounts of data. The competition is quickly emerging, their objective being to present their products to their niche market early on, so they can win market share in what will ultimately be a highly competitive market. As the wireless communications industry drives the integration of highly sensitive GPS modules with GPRS data communications elements, the ability to inexpensively monitor the locations of vehicles, people and mobile assets will allow for a host of new Location Based Service offerings to the business and consumer markets. The company that has developed the infrastructure to provide these services and has name-recognition in the marketplace will be positioned to profit from these important new business opportunities. Our weak financial position and reliance on factors for financing our cash flow requirements creates an obstacle to building this infrastructure, establishing name-recognition, and securing market share. WE ARE DEPENDENT UPON OUR MANAGEMENT Our business is dependent upon our senior executive officers, principally, M. Dewey Bain, our president and Sharon Cooper, our head of operations. Although we have an employment agreement with Mr. Bain and with Ms. Cooper, the agreements do not guarantee continued employment with us. Our business may be adversely affected if any of our key officers left our employ. WE ARE DEPENDENT UPON STRATEGIC ALLIANCES WITH OUTSOURCE PROVIDERS We are dependent upon strategic alliances with outsource providers who provide Service Delivery, Customer Service, and Technical Support services to our customers. This prevents us from having complete control over our operational costs and impedes our ability to manage these areas of our business. 10 WE INCURRED LOSSES DURING EACH OF THE PAST THREE YEARS, AND OUR LOSSES ARE CONTINUING We sustained a loss of $2,603,465, or $0.6004 per share (basic and diluted) for 2001, $6,021,946, or $0.5924 per share (basic and diluted) for 2002, and $552,482, or $0.0102 per share (basic and diluted) for 2003. We cannot assure you that we will be able to generate profits in the future. Our failure to generate profits could affect our ability to continue our operations. THE POSSIBLE IMPACT ON TAKEOVER ATTEMPTS COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK The rights of the holders of our common stock may be impaired by the potential issuance of preferred stock. Our certificate of incorporation gives our board of directors the right to create series of preferred stock. As a result, the board of directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights, which could adversely affect the voting power and equity interest of the holders of our common stock. The preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our common stock. OUR COMMON STOCK IS SUBJECT TO THE SEC'S PENNY-STOCK RULES Our common stock is subject to the SEC's penny-stock rules, which impose additional sales practice requirements on broker-dealers which sell our stock to persons other than established customers and institutional accredited investors. These rules may affect the ability of broker-dealers to sell our common stock and may affect the ability of our stockholders to sell any common stock they may own. INDUSTRY RISK COMPETITION; THE COMPETITIVE LANDSCAPE CHANGES CONSTANTLY. We operate in a very competitive business environment involving the telecommunications industry. Competition in telecommunications may affect our ability to increase our customer base and generate revenues. The barriers to entry in the markets in which we operate, direct broadcasting satellite television service, and Internet access, are relatively low in that the initial capital investment required to enter these markets is minimal. Therefore, there are a large number of small businesses, many of them local, who resell DBS and Internet access services to consumers. These small businesses typically focus on a single city or relatively limited area. Although the geographic range of these types of competitors is limited, many of these companies are fiercely competitive with us in their fees for services and some of these companies have greater financial resources and longer operating history than we do. Our direct broadcast satellite business faces competition from other current or potential multi-channel programming distributors, including other direct broadcast satellite operators, direct-to-home distributors, cable operators, wireless cable operators and Internet which may be able to offer more competitive packages or pricing than we or EchoStar can provide. In addition, the direct broadcast satellite industry is still evolving and recent or future competitive developments could adversely affect us. REGULATIONS COULD ADVERSELY AFFECT US. As a distributor for direct broadcast satellite service including enhanced high-speed satellite based Internet access, we are not directly subject to rate regulation or certification requirements by the Federal Communications Commission ("FCC") or state public utility commissions because we are not engaged in the provision of common carrier services. However, the communications service providers for whom we act as a sales agent are subject to varying degrees of federal, state and local regulation. Many aspects of regulation at the federal, state and local levels currently are subject to judicial review or are the subject of administrative or legislative proposals to modify, repeal, or adopt new laws and administrative regulations and policies, the results of which we are unable to predict. The United States Congress and the FCC have in the past, and may in the future, adopt new laws, regulations and 11 policies regarding a wide variety of matters, including rulemaking to implement provisions of the Telecommunications Act of 1996, that could, directly or indirectly, affect the operation of our business. Our business prospects could be materially adversely effected by: - The application of current FCC rules or policies in a manner leading to a change in the regulatory status of our satellite television and telecommunications operations, - The adoption of new laws, policies or regulations, - Changes in existing laws, policies or regulations, including changes to their interpretations or applications, that modify the present regulatory environment, or - The failure of certain rules or policies to change in the manner anticipated by us. RAPID TECHNOLOGICAL CHANGE, RISKS ASSOCIATED WITH NEW PRODUCTS AND SERVICES. The industry in which we operate is characterized by rapidly changing technology. We are required to continually improve our products and services in order to meet the growing demand by our customers for new features and capabilities. Our future success will partly depend upon our ability to introduce new telecommunication products and services and to add new features and enhancements to our products and services that keep pace with technological and market developments. The development of new products and services and the enhancement of existing services and products entail significant technical risks as well as costs. There can be no assurance that we will be successful in - Maintaining and improving our customer base, computer systems and web site; - Effectively identifying and using new technologies in the DBS business; - Adapting our products and services to emerging industry standards; or - Developing, introducing and marketing products and service enhancements or new products and services including our plan for new GPS tracking products. Furthermore there can be no assurance that we will not experience difficulties that could delay or prevent the successful development, introduction or marketing of these products and services, or that our new product and service enhancements will adequately meet the requirements of the marketplace and achieve market acceptance. If we are unable, for technical or other reasons, to develop our DBS resale and Internet access business activities and introduce new products and services or the enhancement of our existing products and services in a timely manner in response to changing market conditions or customer requirements, or if potential new products and services do not achieve market acceptance, our business, results of operations or financial condition could be materially and adversely affected. COMPETITION IN THE DIRECT BROADCASTING SATELLITE MARKET IS INTENSE AND GROWING; WE MAY BE UNABLE TO COMPETE EFFECTIVELY. The DBS market is highly competitive, and we expect competition to intensify in the future. DBS television systems face competition from several sources, such as traditional hard-wire cable companies, wireless cable, and other alternative methods of distributing and receiving television transmissions. In areas where terrestrial air broadcast signals can be received without cable television, cable television systems have also experienced competition from the availability of broadcast signals generally and have found market penetration more difficult. We do not have significant market share in any of our markets. Our competitors in each of our existing and future markets have greater financial, technical, marketing and other resources, including brand or corporate name recognition, than we do. In addition, a continuing trend towards business combinations and alliances in this industry may create significant new competitors for us. Many of these combined entities will have resources far greater than ours. These combined entities may provide bundled packages of communications video programming or cable 12 services, including local, long distance and digital subscriber line services that compete directly with the services we now offer or may offer in the future. These entities may also offer services sooner and at more competitive rates than we do. No assurance can be given that we will compete successfully with hard-wire cable and other pay television systems, or other companies engaged in providing services provided by us. REGULATION AND PRIVACY ISSUES IN THE INTERNET ACCESS MARKET. The Internet access market is relatively new and rapidly changing, and federal and state regulation relating to the Internet and online services is evolving. We are aware of certain industry requests of the Federal Communications Commission to review the impact of Internet usage on U.S. telecommunications service providers, in particular, the generally lower cost structure for data transmission versus voice transmission. FCC regulatory review and rulemaking could result in new regulation of the Internet and online industry changes in current rules governing telecommunications or both. In turn, this could result in increased telecommunications costs for the Internet and online industry. These or other regulatory initiatives could have a material adverse effect on our Internet Access business, results of operation or financial condition, especially our efforts to build a significant Internet customer base. There has been a growing concern about privacy and the collection, distribution and use of information about individuals and businesses, and we may be subject to various federal and state regulations concerning such activities. Although our compliance with such federal and state regulations has not had a material adverse effect on us, no assurance can be given that additional federal or state laws or regulations (including antitrust and consumer privacy laws) will not be enacted or applied to us or certain of our customers, in particular, users of e-commerce and online services. Any such guidelines, laws or regulations could adversely affect our ability to use customer information, or could otherwise have a material adverse effect on our Internet Access business, results of operations or financial condition. We have adopted policies to address certain privacy concerns, including restricting access to our database, limiting the type of information that we provide to third parties, requiring each employee to sign a nondisclosure and confidentiality agreement, and implementing data security systems on our computers and server. However, there can be no assurance that such policies and arrangements will be effective, and to the extent that they are not effective, our Internet access business, results of operations or financial condition could be materially and adversely affected. COMPANY RISK LIMITED DOCUMENTATION OF PAST CORPORATE ACTIONS. During the period from our inception until mid-year 2001, as a private non-reporting company, we did not necessarily have in place proper internal corporate control procedures or mechanisms and those internal corporate control procedures which were in place may not have been complete. Our corporate actions may not have been properly and adequately documented in all material respects. As a result, we may be unaware of corporate acts which may have a material adverse effect on our business, financial condition or results of operations. It is our intention to take any remedial action that may be necessary to keep and maintain proper corporate records. Additionally, we have made a written request to our former secretary to provide copies of all records in her possession or control related to us. LIMITED OPERATING HISTORY. We have a limited operating history from which you can evaluate our business and prospects. Since our incorporation in May 1999 until December 31, 2003, we have incurred operating losses of $9,850,519 and we cannot assure you that we will be profitable in the future. You must evaluate our business prospects in light of the uncertainties encountered by companies in the early stages of development. Some of the uncertainties we face include uncertainties about our ability to: - Increase the efficiency and function of our products and services; - Respond effectively to the increasingly competitive environment; 13 - Respond effectively to our increasing portfolio of customers; and - Develop appropriate strategic alliances with our agents. FAILURE TO IMPLEMENT BUSINESS STRATEGY. Failure to implement our business strategy could adversely affect our operations, our financial position and our results of operations and possibly our ability to generate sufficient cash to pay current and long-term liabilities. Our ability to execute our business strategy depends on our ability to: - Manage our indebtedness and raise sufficient capital to pursue our business plan; - Expand our market share; - Identify and target new markets for our products and services; - Increase our product availability; - Automate our operations; - Advertise in an effective yet cost efficient manner; - Retain our key employees; and - Manage growth successfully. THE EFFECTS OF NEW FEDERAL SATELLITE TELEVISION LEGISLATION ON OUR BUSINESS IS UNCLEAR. On November 29, 1999, the President signed the Satellite Home Viewer Improvement Act of 1999. The Act contains provisions that will be phased in over time. In addition, the FCC and other federal agencies have undertaken rulemaking and studies in connection with this legislation. Therefore, we cannot predict the effect of this new law on our business at this time. The Act resolves many of the issues involved in years of litigation between the networks and the direct broadcast satellite industry regarding retransmission of network programming to direct broadcast satellite subscribers. Generally, it also preserves the industry's right to retransmit distant network programming to subscribers in "unserved" areas. It also extends through December 31, 2004 the statutory right, for a copyright royalty fee, of the industry to retransmit independent programming -so-called superstations - to subscribers as "distant" signals. Further, satellite carriers will be required to deliver signals only to households that cannot clearly receive over-the-air network signals with a rooftop antenna. Among other things, the Act directs the FCC to take actions to prescribe the picture quality standard that the FCC uses to predict what households do not receive a strong enough network broadcast signal over-the-air and therefore are eligible to receive distant network signals. The FCC has initiated a rulemaking proceeding to consider this standard. The effect on our business of these FCC actions and other studies and rulemaking that the FCC will undertake cannot be predicted at this time. PROGRAMMING COSTS MAY INCREASE, WHICH COULD ADVERSELY AFFECT OUR DIRECT BROADCAST SATELLITE BUSINESS. Programmers could increase the rates that EchoStar pays for programming. As a result, our costs would increase. This could cause us to increase our rates and lose either customers or revenues. The law requires programming suppliers that are affiliated with cable companies to provide programming to all multi-channel distributors - including EchoStar - on nondiscriminatory terms. These programmers could increase EchoStar's rates, and therefore ours. If we increase our rates, we may lose customers. If we do not increase our rates, our costs, revenues and financial performance could be adversely affected. 14 WE MAY LOSE OUR ECHOSTAR RIGHTS AFTER THE INITIAL TERM OF OUR AGREEMENTS. We may or may not be able to continue in the EchoStar business after the current EchoStar satellites are replaced. If we can continue, we cannot predict what it will cost us to do so. Our revenues and financial performance would be adversely affected if we are not able to continue in the EchoStar business for the reasons described above. SATELLITE AND DIRECT BROADCAST SATELLITE TECHNOLOGY COULD FAIL OR BE IMPAIRED. If any of the EchoStar satellites are damaged or stop working partially or completely for any of a number of reasons, EchoStar customers would lose programming. We would in turn likely lose customers, which could materially and adversely affect our operations, financial performance and the trading price of our common stock. Direct broadcast satellite technology is highly complex and is still evolving. As with any high-tech product or system, it might not function as expected. WE DEPEND SIGNIFICANTLY ON OUR STRATEGIC RELATIONSHIPS WITH ECHOSTAR. Under our agreements with EchoStar, we may not maintain DBS distribution systems or market direct-to-home satellite broadcast services for others in the US or Canada. Consequently, we are totally dependent on EchoStar as our sole supplier of DBS units. Events which we cannot control at EchoStar, as our DBS unit provider, could adversely affect us. Moreover, the satellite communications and programming industry is regulated and regulations may be enacted that could have an adverse effect on our DBS providers. We also depend on our agreement with StarBand to provide satellite based Internet access. Termination of our distribution contracts would have a material adverse effect on us. In addition, we are relying on these third parties. If our distribution agreements with EchoStar and other third parties are not successful, we may be unable to successfully maintain and further develop a market for our products and services. We have entered into an agreement with EchoStar to distribute their DBS service. We have no minimum volume commitments from EchoStar. EchoStar may be subject to delays and unforeseen problems such as shortages of critical components and other supply problems, manufacturing defects and cost overruns. Moreover, EchoStar and any other manufacturer may require substantial lead times to manufacture anticipated quantities of the satellite units we and other distributors resell. EchoStar may have very little time to remedy unforeseen delays or problems that may arise. Such delays and other problems could impair our sales and marketing and make it difficult for us to attract and retain subscribers. In addition, any discontinuation or disruption of our relationship with EchoStar would require us to identify and contract with alternative sources of DBS service. We previously terminated our business relationship with DirecTV, which at present is the only other DBS operator and therefore we may be unable to continue our DBS business. DIRECT BROADCAST SATELLITE EQUIPMENT SHORTAGES COULD ADVERSELY AFFECT OUR DIRECT BROADCAST BUSINESS. There have been periodic shortages of direct broadcast satellite equipment and there may be such shortages in the future. During such periods, we may be unable to accept new subscribers and, as a result, potential revenue could be lost. If we are unable to obtain direct broadcast satellite equipment in the future, or if we cannot obtain such equipment on favorable terms, our subscriber base and revenues could be adversely affected. DIRECT BROADCAST SATELLITE SERVICES FACE COMPETITION FROM CABLE OPERATORS. One of the competitive advantages of direct broadcast satellite systems is their ability to provide customers with more channels and better-quality digital signal than traditional analog cable television systems. Many cable television operators are making significant investments to upgrade their systems from analog to digital. This upgrade will significantly increase the number of channels that cable television operators can provide to their customers and the quality of the transmission. In addition, many cable television operators are upgrading their systems to provide their customers with high-speed Internet access. These upgrades could make cable television a more attractive alternative for consumers, which could have an adverse effect on our direct broadcast satellite business. 15 WE COULD LOSE MONEY BECAUSE OF SIGNAL THEFT. If signal theft becomes widespread, our revenues would suffer. Signal theft has long been a problem in the cable and direct broadcast satellite industries. EchoStar uses encryption technology to prevent people from receiving programming without paying for it. The technology is not foolproof and there have been published reports that it has been compromised. LACK OF PROFITABILITY. We may not achieve profitability in the near term, if at all. During the year ended December 31, 2003, we incurred an operating loss of $552,482. Since our inception, we have incurred operating losses and have had negative operating cash flows each fiscal year. In addition, our financial condition may be materially adversely affected as a result of aggregated liabilities as a result of the issuance of the notes and other debt obligations. We may be dependent upon the willingness of third parties including private investors and vendors to accept our shares or our other debt or equity securities in order to fund our operating expenses. LIQUIDITY AND FINANCING REQUIREMENTS; GOING CONCERN RISK. In order to continue to pursue our business strategy and growth plans, we may require significant amounts of capital. Currently, we do not have any arrangements to finance future growth and capital expenditures. We cannot assure you that financing will be available at all or on terms acceptable to us. In addition, we plan to finance the repayment of our debt and any negative cash flow from operations through the issuance of our shares and our other debt and equity securities. We cannot predict the impact of such issuance on our liquidity and financial condition. Our inability to raise capital and meet our financing requirements at terms acceptable to us would have a material adverse effect on our business, financial condition and future prospects. As described by our independent auditors in our financial statements, there is substantial doubt as to our ability to continue as a going concern. Our management believes that its ongoing efforts to increase revenue and raise additional capital through the sale of equity securities and debt instruments will provide additional cash flows. However, there is no assurance that we will be able to obtain additional funding. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. ABILITY TO RETAIN KEY PERSONNEL. Our success is largely dependent upon our ability to retain our key personnel including our President, M. Dewey Bain. We do not have "key man" life insurance for Mr. Bain. The loss of the service of Mr. Bain or one or more of our key personnel could have a material adverse effect on our business. We have not entered into employment agreements or non-compete agreements with any of our key personnel. Such employees may terminate their employment with us at any time. If one or more of our key employees resign to join a competitor or to form a competing company, the loss of such personnel and any resulting loss of existing or potential customers to any such competitor could have a material adverse effect on our business, financial condition and results of operations. If we lose any such personnel, we cannot assure you that we would be able to prevent the unauthorized disclosure or use of our technical knowledge, practices or procedures by such personnel. RISK OF SYSTEM DISRUPTION. Our information and computer systems including our Internet server could be vulnerable to, among other factors, disruptions caused by system failures, power losses, communication problems or natural disasters. In addition, our services may be vulnerable to break-ins and similar disruptive problems. Further, weaknesses in communications media, such as the Internet, may compromise the security of confidential electronic information exchanged with other businesses. Disruptions of service or security breaches could cause losses to us reduce customer satisfaction in our products and services or otherwise have a material adverse effect on our business, results of operations or financial condition. To date, we have not experienced material disruptions of services or security breaches. However, there can be no assurance that such problems will not occur in the future. 16 OUR FUTURE PROFITABILITY MAY BE DEPENDENT ON THE INTRODUCTION AND ACCEPTANCE OF OUR BROADBAND AND RELATED SERVICES. A portion of our revenue is dependent on satellite based Internet access and other Internet services. Demand and market acceptance for these recently introduced services and products over the Internet are subject to a high level of uncertainty. Critical issues concerning the use of the Internet, such as ease of access, security, reliability, cost and quality of service, remain unresolved and may affect the growth of Internet use or the attractiveness of conducting commerce online. In addition, the Internet and online services may not be accepted as a viable marketplace for a number of reasons, including potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. To the extent that the Internet and online services continue to experience significant growth, there can be no assurance that the infrastructure of the Internet and online services will prove adequate to support increased user demands. In addition, the Internet or online services could lose their viability due to delays 'in the development or adoption of new standards and protocols required to handle 'increased levels of Internet or online service activity. Changes in or insufficient availability of telecommunications services to support the Internet or online services also could result in slower response times and adversely affect usage of the Internet and online services generally and us in particular. If use of the Internet and online services does not continue to grow or grows more slowly than expected, if the infrastructure for the Internet and online services does not effectively support growth that may occur, or if the Internet and online services do not become a viable commercial marketplace, we would be materially adversely affected. PENDING OR THREATENED LEGAL PROCEEDINGS. During the last quarter of fiscal 2002, we received a subpoena by the Office of the Secretary of State, State of Georgia, Assistant Commissioner of Securities, relating to an investigation being conducted under the Georgia Security Act of 1973. The investigation relates to the offer or sale of investment opportunities or our securities in or from Georgia and related matters by our former chairman/chief executive officer or other persons. We responded to the subpoena prior to the end of 2002. The matter is ongoing and we intend to use reasonable efforts to resolve the matter. This matter was resolved during the third quarter of 2003 at no cost to us. Risks Relating to Our Stock Absence of dividends. We have never declared or paid cash dividends on our shares and we do not anticipate paying any cash dividends in the foreseeable future on any of our capital stock. Our projections are based on assumptions that may change and therefore are not necessarily indicative of future performance. Any projections included herein are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control, and reflect future business decisions, which are subject to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect our results. Consequently, actual results will vary from the projections and these variations may be material. Prospective investors are cautioned not to place reliance on projections. We do not intend to update or otherwise revise any projections to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The projections were not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public accountants or generally accepted accounting principles and have not been examined, reviewed or compiled by independent auditors. 17 Significant fluctuations in quarterly operating results. We may experience significant fluctuations in future quarterly operating results from a number of factors, including: - The timing and nature of expansion efforts in both new and existing markets; - The introduction of new products or services and the market response to those introductions; - The timing and nature of sales transactions for online services and other products and services; - Relationships with our customers; - Seasonal trends; - Changes in pricing policies or service offerings; - Changes in the level of marketing and other operating expenses to support future growth; - Competitive factors; and - General economic conditions. Consequently, quarterly revenues and operating results may fluctuate significantly, and we believe that period-to-period comparisons of results will not necessarily be meaningful and should not be relied upon as an indication of future performance. Acquisition strategy. Partly in response to changes in the resale telecommunication industry discussed above, we may pursue a strategy of growth through acquisitions in the telecommunication markets we conduct business, both within our existing Georgia and Southeastern US market and beyond. We intend to pursue strategic acquisition opportunities in both our existing and new geographic markets. In pursuing an acquisition strategy, we face risks commonly encountered with growth through acquisitions, including completed acquisitions. These risks include, but are not limited to, incurring significantly higher than anticipated capital expenditures and operating expenses, failing to assimilate the operations and personnel of acquired businesses, failing to install and integrate all necessary systems and controls, loss of customers because of declines in quality of service, entering markets in which we have no or only limited experience, disrupting our ongoing business and straining our management resources. Realization of the anticipated benefits of a strategic acquisition may take several years or may not occur at all. Our acquisition strategy may place a significant strain on our management, operational, financial and other resources. The success of the our acquisition strategy will depend on many factors, including our ability to - Identify suitable acquisition opportunities; - Successfully negotiate acquisitions at valuations that will provide satisfactory returns on invested capital; - Successfully integrate acquired operations quickly and effectively in order to realize operating synergies; and - Obtain necessary financing and/or utilize our securities, if necessary, on satisfactory terms. There can be no assurance that we will be able to successfully execute and manage our acquisition strategy, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations. 18 Developing market, future reliance on the internet. The telecommunication industry and in particularly the Internet access market is rapidly evolving. As is typical for new and rapidly evolving industries, demand and market acceptance for recently introduced products and services offered are subject to a high level of uncertainty. Our success will also depend on the willingness of consumers to increase their use of online services. The Internet has experienced, and is expected to continue to experience, substantial growth in the number of users and amount of traffic, resulting in some cases in substantial delays for users. The Internet could lose its viability due to delays in the development or adoption of new standards and protocols to handle increased levels of Internet activity, or due to increased governmental regulation. There can be no assurance that the infrastructure (e.g., reliable network backbone) or complementary services (e.g., secure transaction processing) necessary to make the Internet a viable commercial marketplace will develop, or, if developed, that the Internet will become a viable commercial marketplace. If the necessary infrastructure or complementary services are not developed, or if the Internet does not become a viable commercial marketplace, our business and our results of operations or financial condition could be materially and adversely affected. Need for additional capital. We may need to procure additional financing from time-to-time, the amount and timing of which will depend on a number of factors including the pace of our acquisition strategy, expansion of our markets and customer base, the nature of the services offered, future introduction of new products and services, new sales and marketing efforts and the cash flow generated by our operations. We cannot predict the extent to which it will require additional financing and we cannot predict the acceptance of our securities in the market. There can be no assurance regarding the availability or terms of additional financing, whether debt or equity, we may be able to procure over time. Any future debt financing or the authorization and issuance of preferred stock by us would be senior to the rights of the holders of our presently issued and outstanding shares, and any future issuance of our additional shares would result in the dilution of the then existing shareholders' proportionate equity interests and could adversely effect the market, if any, in our shares. Our shares will be concentrated among management. Our president owns 21.54 percent of our outstanding shares and our officers and directors own 26.21 percent of our outstanding shares. Shares eligible for future sale. As a reporting company under the Exchange Act, sales of a substantial number of unregistered shares in the public market after certain holding periods could adversely affect the market price of our shares. Upon the expiration of such holding periods, pursuant to Rule 144 under the Securities Act of 1933, such holders of restricted shares may sell such shares without registration, subject to certain limitations, including limitations on volume of sales, and the requirement to file Form 144 under the Act, and subject to us remaining current in our reporting obligations under the Exchange Act. After a two-year holding period, persons who are not "affiliates" as that term is defined under the Securities Act, may sell restricted our shares without regard to the volume limitations or filing requirements of Rule 144 and without the requirement that we are be current under the Exchange Act . If holders of restricted shares sell or otherwise dispose of a substantial number of our shares in the public market, the market price for our shares could be adversely affected. Issuance of future shares may dilutive investors share value. Our certificate of incorporation, as amended authorizes a total of 800,000,000 shares. We anticipate that we will authorize additional shares, which may be issued from time to time. The future issuance of all or part of our remaining authorized shares may result in substantial dilution in the percentage of our shares held by our then existing shareholders. Moreover, while we anticipate that a trading market will commence in our shares, the issuance of additional shares in the future may impact the trading price in our shares. We also may issue restricted 19 shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by investors, and might have an adverse effect on any trading market, should a trading market develop and be sustained in our shares. IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET. Companies trading on the OTC Bulletin Board, such as we, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Inasmuch as that the current bid and ask price of common stock is less than $5.00 per share, our shares are classified as "penny stock" under the rules of the SEC. For any transaction involving a penny stock, unless exempt, the rules require: - That a broker or dealer approve a person's account for transactions in penny stocks; and - The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: - Obtain financial information and investment experience objectives of the person; and - Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: - Sets forth the basis on which the broker or dealer made the suitability determination; and - That the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and `remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 20 ITEM 2. DESCRIPTION OF PROPERTY. We lease 3,500 square feet of corporate office space at 5040 Roswell Road, Suite 250, Suite 104, Atlanta Georgia 30342 at a monthly rental of $5,794. Our lease expires in February 2004. In addition to our office space, we currently lease six retail locations. The following table set forth is a summary of the information regarding each of our retail locations: During the second quarter of 2003, we moved our offices to premises owned and controlled by our president. As of the date of this report, the terms for use of the space had not been agreed upon by both parties. In addition, during the second quarter, we closed our suburban mall store locations. ITEM 3. LEGAL PROCEEDINGS. From time to time, we may be involved in litigation that arises in the normal course of our business operations. There are various other legal proceedings against us. While it is not feasible to predict or determine the outcome of any of these proceedings, it is our opinion that their outcome will have no material adverse effect on our financial position. During the last quarter of fiscal 2002, we received a subpoena by the Office of the Secretary of State, State of Georgia, Assistant Commissioner of Securities, relating to an investigation being conducted under the Georgia Security Act of 1973. The investigation relates to the offer or sale of investment opportunities or securities of PlanetLink in or from Georgia and related matters by our former chairman/chief executive officer or other persons. We responded to the subpoena prior to the end of 2002. The matter is ongoing and we intend to use reasonable efforts to resolve the matter. We are unable to determine or predict the outcome of the matter or the impact, if any, from this investigation. If we are unable to resolve the matter with the State of Georgia and if any further investigation or subsequent proceeding results, there could be a determination adverse to us that could materially adversely affect us and our financial condition. However, at the date of this annual report, we are unable to predict the outcome of this matter or any impact that it may have upon us. We learned on or about March 13, 2003 that our former chairman and chief executive officer had been subject to a criminal proceeding not related to our business or operations. The former chairman and chief executive officer entered a guilty plea to possession of fraudulently obtained securities (financial instruments) in the United States District Court-Northern District of Georgia/Atlanta Division, U.S. v. Kayodye Aladesuyi. The former executive officer/director was sentenced to 11 months imprisonment and ordered to make restitution of $68,500 to five individuals. We were not a party to this proceeding and have not received any claim nor have we been threatened with any action with respect to this proceeding. As a result, we do not believe that we will be materially adversely effected by the legal proceeding or the order or restitution. We received the written resignation from Mr. Aladesuyi on March 25, 2003. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 21 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our common stock is quoted on the OTC Bulletin Board under the symbol "PLKC." Our stock was not actively traded until August 2002, and the following table sets forth, for the fiscal quarters indicated, the high and low sales prices. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission, and may not represent actual transactions.
CALENDAR YEAR 2002 HIGH LOW First Quarter $ N/A N/A Second Quarter $ N/A N/A Third Quarter $3.50 $1.25 Fourth Quarter $2.25 $0.51 CALENDAR YEAR 2003 HIGH LOW First Quarter $1.00 $0.10 Second Quarter $0.120 $0.006 Third Quarter $0.074 $0.008 Fourth Quarter $0.030 $0.010 CALENDAR YEAR 2004 HIGH LOW First Quarter $0.1039 $0.014
We currently have 117,458,108 shares of our common stock outstanding. Our shares of common stock are held by approximately 83 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS None. RECENT SALES OF UNREGISTERED SECURITIES None. SECTION 15(G) OF THE EXCHANGE ACT The shares of our common stock are covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 promulgated thereunder, which impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors. Rule 15g-2 declares unlawful any broker-dealer transactions in "penny stocks" unless the broker-dealer has first provided to the customer a standardized disclosure document. Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a "penny stock" transaction unless the broker-dealer first discloses and subsequently confirms to the customer the current quotation prices or similar market information concerning the penny stock in question. Rule 15g-4 prohibits broker-dealers from completing "penny stock" transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction. 22 Rule 15g-5 requires that a broker-dealer executing a "penny stock" transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales person's compensation. Our common stock may be subject to the foregoing rules. The application of the "penny stock" rules may affect our stockholders' ability to sell their shares because some broker-dealers may not be willing to make a market in our common stock because of the burdens imposed upon them by the "penny stock" rules. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Statements included in this Management' Discussion and Analysis or Plan of Operation, and in future filings by us with the Securities and Exchange Commission, in our press releases and in oral statements made with the approval of an authorized executive officer which are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect our actual results and could cause our actual financial performance to differ materially from that expressed in any forward-looking statement: (i) the extremely competitive conditions that currently exist in the market for "blank check" companies similar to us, and (ii) lack of resources to maintain our good standing status and requisite filings with the Securities and Exchange Commission. The foregoing list should not be construed as exhaustive and we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. CRITICAL ACCOUNTING POLICIES The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policy involve the most complex, difficult and subjective estimates and judgments. STOCK-BASED COMPENSATION In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS No. 123 - Accounting for Stock-Based Compensation, providing alternative methods of voluntarily transitioning to the fair market value based method of accounting for stock based employee compensation. FAS 148 also requires disclosure of the method used to account for stock-based employee compensation and the effect of the method in both the annual and interim financial statements. The provisions of this statement related to transition methods are effective for fiscal years ending after December 15, 2002, while provisions related to disclosure requirements are effective in financial reports for interim periods beginning after December 31, 2002. We elected to continue to account for stock-based compensation plans using the intrinsic value-based method of accounting prescribed by APB No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Under the provisions of APB No. 25, compensation expense is measured at the grant date for the difference between the fair value of the stock and the exercise price. YEAR 2003 COSTS AND CHANGES IN FINANCIAL CONDITIONS As of the date of this annual report, we have not engaged in any business activities which provide cash flow, and have not recorded any revenues from operations. 23 RESULTS OF OPERATIONS During the year ended December 31, 2003, we incurred an operating loss of $552,482 and no revenues. The loss featured, sales, marketing, general, administrative and interest expenses. Our interest cost remains high as it continues to be advanced operating funds by its principal stockholders. Interest expense was $94,648 in 2003, interest expense in 2002 was $24,993. LIQUIDITY AND CAPITAL RESOURCES As discussed by our accountants in the audited financial statements included in Item 7 of this annual report on Form 10-KSB, our revenue is currently insufficient to cover our costs and expenses. We anticipate that our current financing strategy of private debt and equity offerings will meet its anticipated objectives and business operations for the next 12 months. We continue to evaluate opportunities for corporate development. Subject to our ability to obtain adequate financing at the applicable time, we may enter into definitive agreements on one or more of those opportunities. Our independent auditor's report on our December 31, 2003 financial statements included in this annual report states that our lack of sources of revenues raise substantial doubts about our ability to continue as a going concern. RECENT ACCOUNTING PRONOUNCEMENTS The Company adopted SFAS No. 142. Under the new rules, we will no longer amortize goodwill and other intangible assets with indefinite lives, but such assets will be subject to periodic testing for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs to be included in results from operations may be necessary. SFAS No. 142 also requires us to complete a transitional goodwill impairment test six months from the date of adoption. Any goodwill impairment loss recognized as a result of the transitional goodwill impairment test will be recorded as a cumulative effect of a change in accounting principle no later than the end of fiscal year 2002. The adoption of SFAS No. 142 had no material impact on the Company's consolidated financial statements SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS No. 143 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company plans to adopt SFAS No. 143 effective January 1, 2003. SFAS No. 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 superseded Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no material impact on Company's consolidated financial statements. In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale- leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to 24 sale- leaseback transactions. We do not expect the adoption to have a material impact to our financial position or results of operations. In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. We do not expect the adoption to have a material impact to our financial position or results of operations. In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9," which removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. The requirements relating to acquisitions of financial institutions are effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. The adoption of this statement did not have a material impact to our financial position or results of operations as we have not engaged in either of these activities. In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure," which amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of Statement 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a material impact on our financial position or results of operations as we have not elected to change to the fair value based method of accounting for stock-based employee compensation. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." Interpretation 46 changes the criteria by which one company includes another entity in its consolidated financial statements. Previously, the criteria were based on control through voting interest. Interpretation 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. The consolidation requirements of Interpretation 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. We do not expect the adoption to have a material impact to our financial position or results of operations. In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends SFAS No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires that contracts with similar characteristics be accounted for on a comparable basis. The provisions of SFAS 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have a material impact on our results of operations or financial position. 25 In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS 150 did not have a material impact on our results of operations or financial position. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements. ITEM 7. FINANCIAL STATEMENTS. The financial statements and related notes are included as part of this annual report as indexed in the appendix on page F-1 through F-15. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 8A. CONTROLS AND PROCEDURES. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. Evaluation of disclosure and controls and procedures. As of the end of the period covered by this annual report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in annual reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Changes in internal controls over financial reporting. There was no change in our internal controls, which are included within disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following table furnishes the information concerning our directors and officers.
NAME AGE POSITION DIRECTOR SINCE ---------------------- --- ----------------------------------------- -------------- M. Dewey Bain 53 President, Director, Treasurer, and Chief 2002 Executive Officer Harold Jackson, M.D. 42 Chairman 2001 26 Melvin Williams, Ph.D. 50 Director 2001 Jonathan Rosser 59 Director 2001 Darrell Carver 40 Director 2001
We may employ additional management personnel, as our board of directors deems necessary. PlanetLink has not identified or reached an agreement or understanding with any other individuals to serve in management positions, but does not anticipate any problem in employing qualified staff. A description of the business experience during the past several years for each of the directors and executive officers of PlanetLink is set forth below. M. Dewey Bain was appointed president in October 2002 and elected to our board of directors in August 2002. In March 2003 Mr. Bain also was appointed Treasurer. Prior to joining PlanetLink, Mr. Bain was the principal partner of Independent Trust Administrators. Mr. Bain was a trial attorney for the Texas Department of Public Welfare and the City of San Antonio, Texas. Mr. Bain also served in the Judge Advocate General's Corps (J.A.G.) of the United States Army Reserves for 10 years. Mr. Bain graduated from David Lipscomb College in 1971 with a Bachelor of Arts degree and earned his Juris Doctor degree from the University of Texas in 1975. Mr. Bain has not held any position in a reporting public company during the last five years. Harold Jackson, M.D. became chairman of PlanetLink in March 2003. Dr. Jackson is a pulmonary and critical care physician. During the past five years, he has been a partner with Southeastern Lung Care P. C. in Decatur and Conyers, Georgia, where he treats patients suffering from asthma, emphysema and other respiratory ailments. He has hospital affiliations with Dekalb Medical Center, Rockdale Hospital, Decatur Hospital, Newton General Hospital and Emory Northlake Regional Medical Center. He is an independent speaker for Glaxo and various other pharmaceutical companies. In addition to his accomplishments in the medical field, Dr. Jackson was the first winner of the Arabesque Man Cover Model Contest. He was featured on the cover of an Arabesque romance novel and appeared as a guest on BET's network show, "Oh Drama." Jezebel Magazine also chose him as one of the "50 Most Beautiful People in Atlanta." Dr. Jackson is a member of the American College of Chest Physicians and is the founder of the Omicron Chi Chapter of Alpha Phi Alpha Fraternity, based at Wofford College. Mr. Jackson has not held any position in a reporting public company during the last five years. Melvin Williams, Ph.D. graduated with a B.A. degree in psychology from Emory University in 1975 and a M.S.W. degree from Atlanta University School of Social Work in 1979. In 1987, Dr. Williams received his Ph.D. from Florida State University. At present, Dr. Williams serves as the Practice Administrator and Chief Financial Officer for Greater Atlanta Women's Healthcare Associates, a private OB/GYN group practice in Atlanta. Prior to joining Greater Atlanta Women's Healthcare Associates, Dr. Williams served as practice consultant to several private medical practices. He is a faculty member at Clark Atlanta University. He has published several professional articles and holds the rank of Associate Professor at Moore House School of Business. He is the director of the Undergraduate Program in Social Work at Clark Atlanta University. Dr. Williams has and is currently serving on several professional and community advisory boards and is a member of numerous professional organizations. Dr. Williams has not held any position in a reporting public company during the last five years. 27 Jonathan Rosser has been a Georgia realtor for over 18 years and he has been an independent entrepreneur for more than 30 years. He assists numerous private clients with real estate ventures and investments. He services the residential and commercial sectors. His background and experiences have primarily been in retail sales and services, where he has served in numerous capacities. Early in his career, he was appointed by Governor Busbee to serve on the Georgia Board of Barbers. He currently serves as a member of the National Association of Realtors and the Georgia Association of Mortgage Brokers. Mr. Rosser attended Morris Brown College in Atlanta, Georgia. He served in numerous consulting capacities as a businessman and consultant. Mr. Rosser has not held any position in a reporting public company during the last five years. Darrell Carver graduated with a B.B.A. from Tennessee State University in 1985 and a J.D. from Howard University School of Law in 1990. He is currently a trial attorney with Thomas, Means, Gillis & Seay. His areas of concentration are medical malpractice; catastrophic personal injury; nursing home negligence and abuse; class action and mass tort litigation; and general civil litigation. In 1998, he formed Darrell T. Carver, P.C., Stone Mountain, Georgia. His focus areas were civil and criminal litigation, personal injury, medical malpractice, and negligence. He was previously employed as a trial attorney for Sharon W. Ware & Associates. He has served as an Assistant District Attorney for Fulton County, Georgia and an associate attorney with Alston & Bird, LLP. Mr. Carver was admitted to the Georgia Bar, the U.S. Court of Appeals for the Eleventh Circuit, the United States District Court for the Northern District of Georgia, the Georgia Supreme Court, and the Georgia Court of Appeals in 1991. He is currently a member of the American Trial Lawyers Association, the Georgia Trial Lawyers Association, the American Bar Association, the National Bar Association, the DeKalb Bar Association and the DeKalb Lawyers Association. Mr. Carver has not held any position in a reporting public company during the last five years. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the Securities and Exchange Commission. Such persons are also required to furnish us with copies of all forms so filed. Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that during the year ended December 31, 2003, our executive officers, directors and greater than 10 percent beneficial owners complied on a timely basis with all Section 16(a) filing requirements. COMMITTEES OF THE BOARD OF DIRECTORS Compensation Committee. Our board of directors has created a compensation committee. However, no members of the committee have been appointed and the committee has not been formally organized. The compensation committee will make recommendations to the board of directors concerning salaries and compensation for our executive officers and employees. We have adopted a charter for the compensation committee. Audit Committee. Our board of directors has created an audit committee which is directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by us (including resolution of disagreements between our management and the auditor regarding financial disclosure) for 28 the purpose of preparing or issuing an audit report or related work. The audit committee will also review and evaluate our internal control functions. However, no members of the committee have been appointed and the committee has not been formally organized. We have adopted a charter for the audit committee. CODE OF ETHICS We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote: - Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submits to, the SEC and in other public communications made by us; - Compliance with applicable governmental laws, rules and regulations; - The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and - Accountability for adherence to the code. A copy of our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions is attached to this annual report as an exhibit. We have filed with the SEC a copy of the code of ethics attached hereto. We have posted a copy of the code of ethics on our website at www.plcweb.net. We will provide to any person without charge, upon request, a copy of our code of ethics. Any such request should be directed to our corporate secretary at 145 Bookhout Drive, Cumming, Georgia 30041, telephone number (678) 455-7075. ITEM 10. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE The following table provides certain summary information concerning the compensation earned by the named executive officers (determined as of the end of the last fiscal year) for services rendered in all capacities to PlanetLink and our subsidiaries.
SUMMARY COMPENSATION TABLE --------------------------------------------------------- ANNUAL COMPENSATION ------------------------------- OTHER ANNUAL NAME AND PRINCIPAL SALARY BONUS COMPENSATION POSITION YEAR ($) ($) ($) ------------------ ---- -------- ------ ------------- Harold D. Jackson, 2002 -0- -0- -0- Chairman 2003 12,000 -0- -0- M. Dewey Bain, 2002 120,000 -0- -0- President 2003 120,000 -0- -0- ---------------------------------------------------------
29 Before December 31, 2003, we had no long-term incentive compensation plan for our executive officers and employees. We do not award stock appreciation rights or long term incentive plan pay-outs. OPTIONS GRANTED TO EMPLOYEES IN FISCAL 2003 None. COMPENSATION OF DIRECTORS We pay directors who are not also our employees a fee of $250 per regular board meeting, $250 per emergency board meeting, $250 per telephonic board meeting with quorum, $250 per committee meeting, and $250 per stockholders' meeting. We reimburse all of our directors for expenses incurred in attending board meetings. In the fiscal year ended December 31, 2003, we paid no compensation to our directors for their services as directors. EMPLOYMENT AGREEMENTS None. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The Company, during 2003, sold 25 million shares of stock to M. Dewey Bain, President and Treasurer, to reduce the amount of the note owed by the Company to M. Dewey Bain. The following table sets forth, as of March 28, 2004, information concerning ownership of our securities by: - Each person who owns beneficially more than five percent of the outstanding shares of our common stock; - Each director; - Each named executive officer; and - All directors and officers as a group.
SHARES BENEFICIALLY OWNED (2) ----------------------------- NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT --------------------------------------------------------------- -------------- ------------- M. Dewey Bain. . . . . . . . . . . . . . . . . . . . . . . . . 25,301,000 21.5 Harold Jackson . . . . . . . . . . . . . . . . . . . . . . . . 5,371,429 4.57 Melvin Williams. . . . . . . . . . . . . . . . . . . . . . . . 100,000 0.085 Jonathan Rosser. . . . . . . . . . . . . . . . . . . . . . . . 14,000 0.0119 Darrell Carver . . . . . . . . . . . . . . . . . . . . . . . . 8,000 0.0068 All directors and officers as a group (five persons). . . . . 30,794,429 26.22 _______________ * Less than one percent. (1) Unless otherwise indicated, the address for each of these stockholders is c/o PlanetLink Communications, Inc., 145 Bookhout Drive, Cumming, Georgia 30041. Also, unless otherwise indicated, each person named in the table above has the sole voting and investment power with respect to our shares of common stock which he or she beneficially owns. (2) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. As of the date of this annual report, there were issued and outstanding 117,458,108 shares of our common stock.
30 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) Financial Statements None. (b) Exhibits
EXHIBIT NO. IDENTIFICATION OF EXHIBIT ----------- --------------------------------------------------------------------------------------------------------- 3.1 * By-laws (filed as Exhibit 3(i) to the Company's Registration Statement on Form 10-SB/12g, filed on October 12, 2000 and incorporated herein by reference) 3.2 * Articles of Incorporation (filed as Exhibit 3(ii) to the Company's Registration Statement on Form 10- SB/12g, filed on October 12, 2000 and incorporated herein by reference) 4.1 ** Specimen Stock Certificate (filed as Exhibit 3(ii) to the Company's Registration Statement on Form 10- SB/12g, filed on October 12, 2000 and incorporated herein by reference) 10.1 * Employee Stock Incentive Plan for the Year 2003 (filed as Exhibit 4.1 to our Form S-8, filed on June 10, 2003 and incorporated herein by reference) 10.2 * Employee Stock Incentive Plan for the Year 2003 No. 2 (filed as Exhibit 4.1 to our Form S-8, filed on July 8, 2003 and incorporated herein by reference) 10.3 * Non-Employee Directors and Consultants Retainer Stock Plan for the Year 2003 (filed as Exhibit 4.21 to our Form S-8, filed on July 8, 2003 and incorporated herein by reference) 10.4 * Service Agreement with CR Capital Services, Inc. (filed as Exhibit 10(i) to the Company's Registration Statement on Form 10-SB/12g, filed on October 12, 2000 and incorporated herein by reference) 10.5 * Stock Option Agreement, filed with the predecessor Company's Form 10-KSB for the year ended December 31, 2000 and incorporated by reference herewith 10.6 * Lock-up Agreement (filed as Exhibit 10(ii) to the Company's Registration Statement on Form 10-SB/12g, 31 filed on October 12, 2000 and incorporated herein by reference) 31.1 ** Certification of M. Dewey Bain, President and Chief Executive Officer of PlanetLink Communications, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002. 31.2 ** Certification of M. Dewey Bain, Chief Financial Officer and Treasurer of PlanetLink Communications, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002. 32.1 ** Certification of M. Dewey Bain, President and Chief Executive Officer of PlanetLink Communications, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002. 32.2 ** Certification of M. Dewey Bain, Chief Financial Officer and Treasurer of PlanetLink Communications, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002. _______________ * Previously filed. ** Filed herewith.
(c) Reports on Form 8-K. We filed Form 8-K on July 11, 2003 to report that on July 2, 2003, our board of directors adopted Articles of Amendment to its Articles of Incorporation, increasing the total number of shares of stock which we are authorized to issue to 800,000,000 shares of common stock, with a par value of $1.00 each, and 100,000,000 shares of preferred stock, with a par value of $1.00 each. Since shareholder approval was not required, the Articles of Amendment were adopted by the board of directors and filed with the Secretary of State of Georgia on July 3, 2003. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES The aggregate fees billed by Kahn Boyd Levychin, Certified Public Accountants for professional services rendered for the audit of our annual financial statements for fiscal year 2002 and 2003 were $26,860. The aggregate fees billed by Kahn Boyd Levychin, Certified Public Accountant for professional services rendered for the audit of our annual financial statements for fiscal year 2003 were $19,610. The aggregate fees billed by Kahn Boyd Levychin, Certified Public Accountant for professional services rendered for the audit of our annual financial statements for fiscal year 2002 were $7,250. AUDIT-RELATED FEES The aggregate fees billed by Kahn Boyd Levychin, Certified Public Accountant for professional services rendered for the audit of our annual financial statements for fiscal year 2003 were $0. The aggregate fees billed by Kahn Boyd Levychin, Certified Public Accountant. for professional services rendered for the audit of our annual financial statements for fiscal year 2002 were $0. ALL OTHER FEES There were no other fees billed by Kahn Boyd Levychin, Certified Public Accountant for professional services rendered, other than as stated under the captions Audit Fees, Audit-Related Fees, and Tax Fees. 32 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. PLANETLINK COMMUNICATIONS, INC. Date: August 23, 2004 By /s/ M. Dewey Bain -------------------------------------- M. Dewey Bain, President, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------------------- ----------------------------------- --------------- /s/ M. Dewey Bain President, Director, Treasurer, and August 23, 2004 --------------------- Chief Executive Officer M. DEWEY BAIN /s/ Harold Jackson Chairman August 23, 2004 --------------------- HAROLD JACKSON /s/ Melvin Williams Director August 23, 2004 --------------------- MELVIN WILLIAMS /s/ Jonathan Rosser Director August 23, 2004 --------------------- JONATHAN ROSSER /s/ Darrell Carver Director August 23, 2004 --------------------- DARRELL CARVER 33 PLANETLINK COMMUNICATIONS, INC. AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 F-1 CONTENTS ================================================================================ AUDITORS' REPORT 1 FINANCIAL STATEMENTS Balance sheets 2-3 Statements of operations 4 Statements of changes in stockholders' deficit 5-6 Statements of cash flows 7-9 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 10-11 NOTES TO THE FINANCIAL STATEMENTS 12-20 F-2 ------------------------------------------ KAHN BOYD LEVYCHIN, LLP ------------------------------------------ CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS AUDITORS' REPORT ================================================================================ To the Board of Directors Planetlink Communications, Inc. Atlanta, Georgia We have audited the accompanying balance sheets of Planetlink Communications, Inc. as of December 31, 2003 and 2002, and the related statements of operations, changes in stockholders' deficit, and cash flows for 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 audits in accordance with generally accepted auditing standards in the Public Company Accounting Oversight Board (United States of America). 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 Planetlink Communications, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the Unites States of America. As discussed in Note 14 to the consolidated financial statements, certain errors were made in the application of accounting principles, resulting in the understatement of the previously reported net loss for the year ended December 31, 2002 of $4,754,075. In addition, these errors in the application of accounting principles also resulted in the understatement of both previously reported accumulated deficit and additional paid-in capital for the year ended December 31, 2002 of $7,033,987. These errors were discovered by the management of the Company in its preparation for the issuance of the financial statements for the year ended December 31, 2003. Accordingly the financial statements for the years ended December 31, 2003, 2002 and 2001 have been restated to correct for these errors. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered recurring losses from operations, and is dependent upon the sale of equity securities to provide sufficient working capital to maintain continuity. These circumstances create substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Kahn Boyd Levychin Kahn Boyd Levychin, Certified Public Accountants May 3, 2004 -------------------------------------------------------------------------------- 48 Wall Street, 11th Floor New York, NY 10005 (212) 843-4100 F-3 PLANETLINK COMMUNICATIONS, INC. BALANCE SHEETS DECEMBER 31, 2003 AND 2002 ================================================================================ 2003 2002 (AS RESTATED, (AS RESTATED, NOTE 14) NOTE 14) -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $195,020 $ -- Accounts receivable -- 22,071 -------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 195,020 22,071 -------------------------------------------------------------------------------- FIXED ASSETS Furniture and equipment 91,176 91,176 -------------------------------------------------------------------------------- 91,176 91,176 Less: accumulated depreciation 57,571 26,890 -------------------------------------------------------------------------------- NET FIXED ASSETS 33,605 64,286 -------------------------------------------------------------------------------- OTHER ASSETS Capitalized software costs 290,592 75,293 Security deposits -- 6,676 -------------------------------------------------------------------------------- TOTAL OTHER ASSETS 290,592 81,969 -------------------------------------------------------------------------------- TOTAL ASSETS $519,217 $168,326 ================================================================================ See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-4 PLANETLINK COMMUNICATIONS, INC. BALANCE SHEETS DECEMBER 31, 2003 AND 2002 ================================================================================
2003 2002 (AS RESTATED, (AS RESTATED, NOTE 14) NOTE 14) ---------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Cash overdraft $ -- $ 14,930 Accounts and accrued expenses payable (Notes 2 and 4) 127,036 276,321 Payroll taxes payable (Note 4) 274,672 235,234 Discontinued line of credit payable (Note 1) 24,000 49,579 Officer's loan payable (Note 2) 570,476 1,037,796 ---------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 996,184 1,613,860 ---------------------------------------------------------------------------------------------------- NON-CURRENT LIABILITIES Discontinued line of credit payable (Note 1) 26,000 ---------------------------------------------------------------------------------------------------- TOTAL NON-CURRENT LIABILITIES 26,000 ---------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,022,184 1,613,860 ---------------------------------------------------------------------------------------------------- STOCKHOLDERS' DEFICIT Common stock (800,000,000 shares $.001 par value authorized, 117,458,108 and 11,427,643 shares issued and outstanding respectively) 117,458 11,428 Additional paid-in capital 9,230,094 7,841,075 Accumulated deficit (9,850,519) (9,298,037) ---------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' DEFICIT (502,967) (1,445,534) ---------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 519,217 $ 168,326 ====================================================================================================
See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-5 PLANETLINK COMMUNICATIONS, INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002 ================================================================================
2003 2002 (AS RESTATED, (AS RESTATED, NOTE 14) NOTE 14) --------------------------------------------------------------------------------------------------- REVENUE Satellite television service $ 759,113 $ 1,026,256 --------------------------------------------------------------------------------------------------- TOTAL REVENUE 759,113 1,026,256 --------------------------------------------------------------------------------------------------- COST OF REVENUE Satellite television service 441,539 669,725 --------------------------------------------------------------------------------------------------- TOTAL COST OF REVENUE 441,539 669,725 --------------------------------------------------------------------------------------------------- GROSS PROFIT 317,574 356,531 Operating expenses, including cost of common stock issued for services of $142,890 in 2003 and $763,075 in 2002 (Note 9) 775,408 2,340,768 --------------------------------------------------------------------------------------------------- LOSS FROM OPERATIONS (457,834) (1,984,237) --------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Miscellaneous income -- 159 Interest expense (Notes 2 and 4) (94,648) (24,993) Loan conversion costs (Note 9) (4,012,875) --------------------------------------------------------------------------------------------------- TOTAL OTHER INCOME (EXPENSE) (94,648) (4,037,709) --------------------------------------------------------------------------------------------------- NET LOSS $ (552,482) $ (6,021,946) =================================================================================================== Loss per weighted average shares of common stock outstanding $ (.0102) $ (.5924) Weighted average number of shares of common stock Outstanding 54,324,593 10,165,517
See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-6 PLANETLINK COMMUNICATIONS, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002 ================================================================================
Additional Total Common paid-in Accumulated stockholders' stock capital deficit deficit ---------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 2003 (AS RESTATED, NOTE 14) Balance, December 31, 2002 $ 11,428 $ 7,841,075 $(9,298,037) $(1,445,534) Common stock issued under employee stock incentive plan 61,285 935,950 997,235 Common stock issued to repay officer's loans 25,025 361,975 387,000 Common stock issued for cash 16,649 28,631 45,280 Common stock issued for services 3,071 39,930 43,001 Officer's loan reclassified to additional paid-in capital 22,533 22,533 Net loss (552,482) (552,482) ---------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2003 $ 117,458 $ 9,230,094 $(9,850,519) $ (502,967) ====================================================================================================================== DECEMBER 31, 2002 (AS RESTATED, NOTE 14) Balance, December 31, 2001 $ 9,255 $ 2,953,899 $(3,276,091) $ (312,937) Common stock issued to repay loans 1,845 4,151,429 4,153,274 Common stock issued for services 328 735,747 736,075 Net loss (6,021,946) (2,009,072) ---------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2002 $ 11,428 $ 7,841,075 $(9,298,037) $(1,445,534) ======================================================================================================================
See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-7 PLANETLINK COMMUNICATIONS, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002 ================================================================================ COMMON STOCK SHARES ISSUED AND OUTSTANDING Balance, December 31, 2001 9,254,643 Common stock shares issued for services 327,200 Common stock shares issued to repay loans 1,845,800 -------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2002 11,427,643 Common stock issued under employee stock incentive plan 61,284,637 Common stock issued to repay officer's loans 25,025,000 Common stock shares issued for cash 16,649,400 Common stock shares issued for services 3,071,428 -------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2003 117,458,108 ================================================================================ See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-8 PLANETLINK COMMUNICATIONS, INC. STATEMENT OF CASH FLOWS (AS RESTATED) FOR THE YEAR ENDED DECEMBER 31, 2003 ================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(552,482) Adjustments to reconcile net loss to net cash used by operating activities Depreciation 30,681 Cost of common stock issued for services 43,001 Cost of common stock issued to employees under stock incentive plan 99,889 Reduction in cost of revenue for write-off of accounts payable that are no longer due and payable (80,158) Reduction in operating expenses for write-off of accounts payable that are no longer due and payable (22,547) Interest expense added to discontinued line of credit payable 421 Changes in operating assets and liabilities Decrease in accounts receivable 22,071 Decrease in security deposits 6,676 Decrease in accounts and accrued expenses payable (46,580) Increase in payroll taxes payable 39,438 -------------------------------------------------------------------------------------------------------- NET CASH USED BY OPERATING ACTIVITIES (459,590) -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capitalized software costs incurred (215,299) -------------------------------------------------------------------------------------------------------- NET CASH USED BY INVESTING ACTIVITIES (215,299) -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from sale of common stock 45,280 Cash proceeds from common stock issued under employee stock incentive plan 897,346 Proceeds from officer's loan 2,213 Repayments of officer's loan (60,000) Decrease in cash overdraft (14,930) -------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 869,909 -------------------------------------------------------------------------------------------------------- DECREASE IN CASH AND CASH AND CASH EQUIVALENTS 195,020 Cash and cash equivalents, beginning of year -- -------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 195,020 ========================================================================================================
See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-9 PLANETLINK COMMUNICATIONS, INC. STATEMENT OF CASH FLOWS (AS RESTATED) FOR THE YEAR ENDED DECEMBER 31, 2003 ================================================================================ SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest expense $ -- Income taxes -- See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-10 PLANETLINK COMMUNICATIONS, INC. STATEMENT OF CASH FLOWS (AS RESTATED) FOR THE YEAR ENDED DECEMBER 31, 2002 ================================================================================ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(6,021,946) Adjustments to reconcile net loss to net cash used by operating activities Depreciation 19,142 Cost of common stock issued for services 736,075 Loan conversion costs 4,012,875 Changes in operating assets and liabilities Increase in accounts receivable (10,650) Increase in security deposits (6,102) Increase in accounts and accrued expenses payable 52,510 Increase in payroll taxes payable 142,868 -------------------------------------------------------------------------------- NET CASH USED BY OPERATING ACTIVITIES (1,075,228) -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of office equipment (42,276) Capitalized software costs incurred (75,293) -------------------------------------------------------------------------------- NET CASH USED BY INVESTING ACTIVITIES (117,569) -------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Officer's loans subsequently contributed as additional paid-in capital (Note 10) 140,400 Increase in officers' loan payable 1,037,796 Cash overdraft 14,601 -------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,192,797 -------------------------------------------------------------------------------- DECREASE IN CASH AND CASH AND CASH EQUIVALENTS -- Cash and cash equivalents, beginning of year -- -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ -- ================================================================================ SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest expense $ -- Income taxes -- See auditors' report, the summary of significant accounting policies, and the accompanying notes to the financial statements. F-11 PLANETLINK COMMUNICATIONS, INC. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ================================================================================ Organization Planetlink Communications, Inc. ("the Company") is in the business of reselling internet, and direct television services. The Company was incorporated in the State of Georgia in May of 1999. Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates market value. Accounting basis and revenue recognition The Company uses the accrual basis of accounting for financial statement and income tax reporting. Expenses are realized when the obligation is incurred. Revenue from satellite television service comes from two sources: activation fees and sales revenue. Revenue from activation fees are recognized on the date that the customer's account has been activated. Activation fees are non refundable. Sales revenue is recognized after installation of the satellite, and is recorded weekly. Revenue from local and long distance telephone service is recognized after the customer signs up, and is billed and recognized monthly. Because of the current review by the Georgia Public Service Commission of the rules and regulations regarding Competitive Local Exchange Carriers (CLEC) in the telecommunications market, the Company is opting not to offer local and long distance telephone services until the regulatory environment makes it more profitable to compete. The Company is still licensed and capable of offering telephone service in the 9 Southeastern states. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results may differ from these estimates. See auditors' report and the accompanying notes to the financial statements. F-12 PLANETLINK COMMUNICATIONS, INC. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ================================================================================ Fixed assets Fixed assets are stated at cost. Depreciation is computed using accelerated methods over the following estimated useful lives: Estimated Description useful life -------------------------------------------------------------------------------- Furniture and fixtures 7 years Equipment 5 years Capitalized software costs Capitalized software costs are recorded at cost and represent amounts incurred for the development of a tracking device for a GPS tracking system. Amortization will be computed using the straight-line method over 5 years once the total costs have been incurred, and the asset has been placed in service. Income taxes The Company accounts for income taxes using the asset and liability method as required by Statement of Financial Accounting Standards No. 109, under which deferred tax assets and liabilities are determined based upon the differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred taxes also are recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. See auditors' report and the accompanying notes to the financial statements. F-13 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 1 - DISCONTINUED LINE OF CREDIT PAYABLE The Company had a line of credit with Citizens Trust Bank. The line of credit accrued interest at 7.5% per annum. The Company defaulted on the line of credit because of non-payment. The Company entered into a consent order with Citizens Trust Bank for resolution and settlement that provides for the company to make 25 monthly payments in the amount of $2,000 each for a total of $50,000. Payments were to begin December 1, 2003. However, the Company missed the December payment, but made two payments in January of 2004. NOTE 2 - OFFICERS' LOAN PAYABLE Officers' loans payable is as follows: 2003 2002 -------------------------------------------------------------------------------- Demand note dated December 31, 2002 due to the Company's President that accrues interest at 10% per annum, starting January 1, 2003. The note is due on demand $ 570,476 $ 990,264 Other advances from Company's President -- 25,000 Demand note due to the Company's former CEO that was non-interest bearing -- 22,532 -------------------------------------------------------------------------------- $ 570,476 $1,037,796 ================================================================================ Interest expense incurred on officers' loans was $77,446 in 2003 and $0 in 2002. As of December 31, 2003 accounts and accrued expenses include $77,446 of interest expense due to officers. NOTE 3 - INCOME TAXES Temporary differences between the recognition of certain expense items for income tax purposes and financial reporting purposes are as follows: 2003 2002 -------------------------------------------------------------------------------- Net operating loss to be carried forward $2,462,630 $2,324,509 Less: valuation allowance 2,462,630 2,324,509 -------------------------------------------------------------------------------- NET DEFERRED TAX ASSET $ -- $ -- ================================================================================ The Company incurred no Georgia state income tax expense for the years ended December 31, 2003 and 2002, and utilized no tax carryforward losses. See auditors' report and the summary of significant accounting policies. F-14 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 3 - INCOME TAXES (CONTINUED) The Company has net operating loss carryovers of $9,850,519 to offset future income tax. The net operating losses expire as follows: December 31, 2019 $ 112,829 2020 559,797 2021 2,603,465 2022 6,021,946 2023 552,482 NOTE 4 - PAYROLL TAXES PAYABLE The Company is currently negotiating with the United States Treasury Department, Internal Revenue Service ("IRS"), with respect to unpaid payroll taxes. The Company intends to make an Offer in Compromise to the IRS and seek to have certain penalties and related interest expense abated. Accounts and accrued expenses payable include $40,000 in 2003 and $20,000 in 2002 of interest and penalties due to the IRS for late filing and payment of payroll taxes. Interest expense includes $20,000 in 2003 and 2002 related to the aforementioned payroll taxes payable. NOTE 5 - OPERATING FACILITIES The Company maintained its offices under an operating lease that expired in February 2002. In March 2002 the company signed a new operating lease for three years expiring on February 2005. During the second quarter of 2003 the company moved its offices to premises owned and controlled by the Company's President. As of the date of this report the terms for use of the space had not been agreed upon by both parties. In addition during the second quarter the Company closed its suburban mall store locations. The leases on these facilities were scheduled to expire between March and August of 2003. Total rent expense for all facilities were $134,806 and $297,417 respectively for 2003 and 2002. There were no expenses incurred during the year ended December 31, 2003 associated with exiting the leased offices and mall facilities. See auditors' report and the summary of significant accounting policies. F-15 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 6 - LITIGATION State of Georgia In 2002 the Company received a subpoena by the Office of the Secretary of State, State of Georgia, Assistant Commissioner of Securities, relating to an investigation being conducted under the Georgia Security Act of 1973. The investigation related to the offer or sale of investment opportunities or securities of the Company in or from Georgia and related matters. The Company was able to resolve the matter with the State of Georgia without incurring any monetary penalties or damages, or penalties or awards. Aladesuyi Family Kayode Aladesuyi, the former CEO of the Company, and various members of the Aladesuyi family have demanded in written correspondence dated February 2004 that Kayode Aladesuyi be paid $1.6 million plus interest, for unpaid salaries, bonuses, and unpaid loans, and that the Company remove all restrictive legends from 6,722,286 shares of stock in the Company allegedly issued to and owned by the Aladesuyi family. Upon removal of all restrictive legends from such stock, said shares should be freely tradable in the public markets. Through its legal counsel the Company has responded to counsel for the Aladesuyi family denying that the Company is indebted to the Aladesuyi family in any amount, questioning the proprietary and validity of the Aladesuyi's claims to shares and compensation, raising the defenses of offset and recoupment, and asserting that certain actions and inactions by the Aladesuyis constitute breaches of their fiduciary duties to the Company as officers and directors which caused substantial damages to the Company. The Company intends to contest vigorously the claims made by the Aladesuyis. It is impossible to evaluate the likelihood of an unfavorable outcome or provide an estimate of the range of potential loss. Other There are various other legal proceedings against the Company. While it is not feasible to predict or determine the outcome of any of these cases, it is the opinion of management that their outcome will have no material adverse effect on the financial position of the Company. See auditors' report and the summary of significant accounting policies. F-16 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 7 -MERGER WITH FIFTH AVENUE ACQUISITION I CORPORATION On July 11, 2001, pursuant to an agreement and plan of merger, the Company issued 462,732 of common stock to the shareholders of Fifth Avenue Acquisition I Corporation in exchange for each of the 1,000,000 issued and outstanding shares of Fifth Avenue Acquisition I Corporation. The plan called for Fifth Avenue Acquisition I Corporation to merge into the Company, with the Company remaining as the successor reporting company. The merger was done pursuant to a plan for the Company to go public, which occurred in the third quarter of 2002. For accounting purposes the acquisition was treated as a recapitalization of the shares of the Company with the Company as the acquirer (reverse acquisition). The Company had a total of 8,791,910 shares of $.20 par value common stock after giving effect to a 5 for 1 stock split that were recapitalized to $.001 par value common. The Company's $.001 par value common shares outstanding at December 31, 2001 totaled 9,254,642 shares, including the shares issued to the shareholders of Fifth Avenue Acquisition I Corporation. NOTE 8 - EMPLOYEE STOCK INCENTIVE PLAN During the second quarter of 2003 the Company established am employee stock incentive plan (the "Plan"). The Plan is intended to provide employees who make significant and extraordinary contributions to the long-term growth and performance of the Company, with equity-based compensation incentives. The purchase price of shares of common stock subject to each stock option issued under the plan are not to be less than 85 percent of the fair market value of the common stock on the date of issuance. The Company applies APB No. 25 and related interpretations in accounting for its plans and outstanding options granted under stock option agreements. Accordingly, compensation cost for options issued to employees is only for options that are granted with exercise prices that are less than the fair value of the underlying stock at the time of issuance. Employees who received common stock upon the exercise of stock options were immediately sold their shares in cashless exercise transactions. Such stock options contained exercises prices ranging from 90% to 95% of the fair market value of the underlying common stock. During the year ended December 31, 2003 the Company issued an aggregate of 70,691,000 stock options to its employees and recorded a $99,889 charge to operations for the amount of their intrinsic value. The difference between the intrinsic value and the fair market value was not material. See auditors' report and the summary of significant accounting policies. F-17 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 9- EQUITY TRANSACTIONS During 2002 the Company issued 2,173,000 shares of its $.001 par value common stock principally to a member of its Board of Directors and other key employees, of which 327,200 shares were issued for services. The Company has reflected a charge to operating expenses of $736,075 for the year ended December 31, 2002 to record the issuance of these shares for services. The Company also issued 1,845,800 shares in satisfaction of loans received during 2002. The Company has reflected a charge within other income (expense) of $4,012,875 for the year ended December 31, 2002 to record "debt conversion costs" associated with the issuance of the shares issued in satisfaction of loans. During 2003 the Company issued 106,030,645 shares of common stock, of which 61,284,637 shares were issued as part of the Company's Employee Stock Incentive Plan and recorded as an expense of $99,889. In addition, 16,649,400 shares were issued for $45,280 in cash. Finally, 3,071,428 shares were issued to the Company's President for $43,001, the fair value of the stock, while 25,025,000 shares were issued to him at their fair value to repay $387,000 of a $990,263 note that was payable to him (see Note 2). In July of 2003 the Company increased the total number of shares of authorized common stock to 800,000,000 with a par of $.001, and authorized 100,000,000 shares of preferred stock with a par value of $.001. Below is a summary of common stock issued during the year ended December 31, 2003:
Loans Amount contributed Recipient Additional charged to to pay for Shares issued of shares Common stock paid-in capital expense stock ---------------------------------------------------------------------------------------------------------- Employee stock incentive 61,284,637 plan $ 61,285 $ 935,951 $ 99,889(C) $ President of the 25,025,000 Company 25,025 361,975 387,000 3,071,428 President of the Company 3,071 39,930 43,001(A) 16,649,400(D) Other 16,649 28,631 ---------------------------------------------------------------------------------------------------------- 106,030,465 $ 106,030 $ 1,366,486 $ 142,890 $387,000 ==========================================================================================================
See auditors' report and the summary of significant accounting policies. F-18 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 9- EQUITY TRANSACTIONS (CONTINUED) Below is a summary of common stock issued during the year ended December 31, 2002:
Loans Amount contributed Recipient Additional charged to to pay for Shares issued of shares Common stock paid-in capital expense stock ---------------------------------------------------------------------------------------------------------- Member of the 1,800,000 Board $ 1,800 $ 4,048,200 $ 3,948,400(B) $ 101,600 ---------------------------------------------------------------------------------------------------------- 1,800,000 1,800 4,048,200 3,948,400 101,600 ---------------------------------------------------------------------------------------------------------- Former CEO of the 266,000 Company 266 598,234 598,500 61,200 Other 62 137,513 137,575 ---------------------------------------------------------------------------------------------------------- 327,200 328 735,747 736,075(A) ---------------------------------------------------------------------------------------------------------- 45,800 Other 45 103,229 64,475(B) 38,800 ---------------------------------------------------------------------------------------------------------- 2,173,000 $ 2,173 $ 4,887,176 $ 4,748,950 $ 140,400 ==========================================================================================================
A - Common stock issued for services B - Loan conversion costs C - Common stock issued under employee stock incentive plan D - Shares sold directly for cash NOTE 10 - GOING CONCERN These financial statements are presented on the basis that the Company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time. The Company has incurred net losses of $552,482 and $6,021,946 respectively for the years ended December 31, 2003 and 2002, and as of December 31, 2003 had incurred cumulative losses since inception of $9,850,519. The Company's existence in the current and prior periods has been dependent upon operational revenues, advances from related parties and other individuals, and the sale of See auditors' report and the summary of significant accounting policies. F-19 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 10 - GOING CONCERN (CONTINUED) equity securities. The ability of the Company to continue as a going concern is dependent on increasing revenue and obtaining additional capital and financing. The Company's management believes that its ongoing efforts to increase revenue and raise additional capital through the sale of equity securities and debt instruments will provide additional cash flows. However, there is no assurance that the Company will be able to obtain additional funding. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 11- SUSPENSION OF LOCAL AND LONG DISTANCE TELEPHONE SERVICES Because of the current review by the Georgia Public Service Commission of the rules and regulations regarding Competitive Local Exchange Carriers (CLEC) in the telecommunications market, the Company is opting not to offer local and long distance telephone services until the regulatory environment makes it more profitable to compete. The Company is still licensed and capable of offering telephone service in the 9 Southeastern states. NOTE 12 - CONCENTRATIONS OF CREDIT RISK 100% of the Company's revenues were derived from the sale of satellite television service through Dish Network for 2003 and 2002. NOTE 13 - SEGMENT INFORMATION The Company does not measure its operating results, assets, or liabilities by segment. However, the following limited segment information is available: 2003 2002 -------------------------------------------------------------------------------- REVENUE Satellite television service $ 759,113 $1,026,256 See auditors' report and the summary of significant accounting policies. F-20 PLANETLINK COMMUNICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS ================================================================================ NOTE 14 - RESTATEMENT OF PRIOR AND YEAR'S FINANCIAL STATMENTS During the year ended December 31, 2002, 2,173,000 shares of common stock consisting of shares issued for services and shares issued to convert debt into equity were not measured based on fair value, an error resulting in an understatement of net loss of $4,754,075. In addition, additional paid-in capital was also understated by $4,754,075. The financial statements for the years ended December 31, 2003 and 2002 have been revised to correct for these errors. NOTE 15 - PHASE OUT OF SATELLITE TELEVISION SERVICE In the first quarter of 2004 the Company phased out its satellite television service business and has shifted its focus towards the development and marketing of a tracking device for a GPS tracking system. See auditors' report and the summary of significant accounting policies. F-21