UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 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 Number: 0-25909
Multi-Tech International, Corp.
----------------------------------------------------
(Exact name of Small Business Issuer in its Charter)
Nevada 86-0931332
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
760 Killian Road, Akron, OH 44319
------------------------------------------------------
(Address of principal executive offices)
(216)849-4934
--------------------------
(Issuer's telephone number
Check whether the issuer: (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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding for each of the issuer's
classes of Common Stock as of the last practical date:
Common Stock, $0.001 par value per share, 40,257,934 outstanding as of May 19
2003 Preferred Non-Voting Stock, $0.001 par value per share, one outstanding
as of May 19, 2003.
Transactional Small Business Disclosure Format
Yes [ ] No [ X ]
Multi-Tech International, Corp.
TABLE OF CONTENTS
Item 1. Financial Statements
Balance Sheet (unaudited)............................ 3- 4
Statements of Operations (unaudited)................. 5
Statements of Cash Flows (unaudited)................. 6
Statements of Changes in stockholder's Equity -1..... 7
Statements of Changes in stockholder's Equity -2..... 8
Statements of Changes in stockholder's Equity -3..... 9
Statements of Changes in stockholder's Equity -4..... 10
Notes to Financial Statements........................ 11-17
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 18-26
Item 3. Controls and Procedures............................... ..26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 26
Item 2. Changes in Securities ............................... 26
Item 3. Defaults upon Senior Securities...................... 26
Item 4. Submission of Matters to a Vote
of Security Holders................................. 26
Item 5. Other Information.................................... 26
Item 6. Exhibits and Reports on Form 8-K..................... 26
Signatures..................................................... 26
Page Two
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the three
months ended March 31, 2003, follow. The financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented.
MULTI-TECH INTERNATIONAL, CORP.
(DEVELOPMENT STAGE COMPANY)
INTERIM BALANCE SHEET
AS AT MARCH 31, 2003
----------------------------------------------------------------------------
(UNAUDITED)
MARCH 31, 2003 DECEMBER 31, 2002
(UNAUDITED) (AUDITED)
----------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 94 $ 0
Marketable securities 36,100 36,100
Prepaid assets and sundry assets 50,000 55,348
----------------------------------------------------------------------------
Total Current Assets 86,194 91,448
----------------------------------------------------------------------------
FIXED
Equipment 31,387 33,479
Office furniture 5,418 5,619
Leasehold improvements 0 5,959
Vehicle 0 1,328
----------------------------------------------------------------------------
TOTAL FIXED ASSETS 36,805 46,385
----------------------------------------------------------------------------
OTHER
Patents 4,207,744 4,204,744
----------------------------------------------------------------------------
TOTAL OTHER ASSETS 4,207,744 4,207,744
----------------------------------------------------------------------------
$ 4,327,743 $ 4,342,577
----------------------------------------------------------------------------
Page Three
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
INTERIM BALANCE SHEET
AS AT MARCH 31, 2003
----------------------------------------------------------------------------
(UNAUDITED)
MARCH 31, 2003 DECEMBER 31, 2002
----------------------------------------------------------------------------
(UNAUDITED) (AUDITED)
LIABILITIES
CURRENT
Accounts payable 18,434 18,434
Loans payable 11,002 10,826
Loan from a director 0 0
Note payable 4,297,248 4,301,776
----------------------------------------------------------------------------
4,326,684 4,331,036
----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Prefered stock, authorized 5,000,000
shares par value 0.001
-issued and outstanding - none - -
Common stock, authorized 1,00,000,000
shares, par value 0.001
issued and outstanding 40,257,934 40,258 40,908
(2002 - 40,907,934)
Additional Paid in Capital 9,947,116 9,947,766
Donated Capital 818,871 818,871
Deficit accumulated
during development stage (10,805,186) (10,796,004)
----------------------------------------------------------------------------
Total Stockholders' Equity 1,059 11,541
----------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 4,327,743 $ 4,342,577
----------------------------------------------------------------------------
Page Four
MULTI-TECH INTERNATIONAL, CORP.
(DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF OPERATIONS
----------------------------------------------------------------------------
(UNAUDITED)
FROM
INCEPTION
SEPTEMBER
YEAR 21, 1998
ENDED TO
THREE MONTHS ENDED MARCH 31 DECEMBER MARCH
2003 2002 31, 2002 31, 2003
-----------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
REVENUE $ 4,280 $ 0 $ 197 $ 4,477
-----------------------------------------------------------------------------------------------
EXPENSES
Selling, general
and Administrative
expenses 13,462 177,207 213,164 11,109,663
-----------------------------------------------------------------------------------------------
Total Operating Expenses 13,462 177,207 216,164 11,109,663
-----------------------------------------------------------------------------------------------
NET LOSS BEFORE UNDERNOTED
ITEM (9,182) (177,207) (212,967) (11,105,186)
GAIN ON SETTLEMENT OF DEBT 0 0 300,000 300,000
-----------------------------------------------------------------------------------------------
NET INCOME (LOSS) FROM
OPERATOINS $ (9,182) $ (177,207) $ 87,033 $(10,805,186)
-----------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 40,366,267 87,816,920 10,565,237
-----------------------------------------------
-----------------------------------------------
Net incom(loss) per share
Basic $ - $ - $ 0.01
-----------------------------------------------
-----------------------------------------------
Net income(loss per share
Fully Diluted $ - $ - $ 0.01
-----------------------------------------------
-----------------------------------------------
Page Five
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF CASH FLOWS
----------------------------------------------------------------------------
(UNAUDITED)
FROM
INCEPTION
SEPTEMBER
21, 1998
TO
THREE MONTHS ENDED MARCH 31 MARCH
2003 2002 31, 2003
-------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash Flow From Operating
Activities
Net loss $ (9,182) (177,207) (10,805,186)
-------------------------------------------------------------------------------
Adjustments to reconcile net
loss to net cash used in
operating activities:
Stock issued for services (1,300) 176,330 9,739,979
Depreciation and
amortization 2,293 621 6,118
Change in assets and liabilities
(Increase) Decrease in prepaid
expenses 5,348 0 (50,000)
Increase in accounts payable 0 0 18,434
-------------------------------------------------------------------------------
6,341 176,951 9,714,531
-------------------------------------------------------------------------------
Cash Used In Operating
Activities (2,841) (256) (1,090,655)
-------------------------------------------------------------------------------
Cash Flow From Financing
Activities
Increase in loans payable 176 0 11,002
Stock issued on account of
purchase of assets 0 0 30,321
Note payable on account of
purchase of assets (4,528) 0 4,297,248
Issuance of common stock for
cash 0 0 216,374
Donated capital 0 0 818,871
-------------------------------------------------------------------------------
Cash Provided by Financing
Activities (4,352) 0 5,373,816
-------------------------------------------------------------------------------
Cash Flow From Investing
Activities
Purchase of fixed assets 0 0 (49,510)
Disposal of fixed assets 7,287 0 7,287
Acquisition of marketable
securities 0 0 (36,100)
Acquisition of patents 0 0 (4,204,744)
-------------------------------------------------------------------------------
Cash Used In Investing
Activities (7,287) 0 (4,283,067)
-------------------------------------------------------------------------------
Increase (Decrease) In Cash 94 (256) 94
Cash and Cash Equivalents
Beginning of Period 0 368 0
-------------------------------------------------------------------------------
Cash and Cash Equivalents
End of Period $ 94 $ 112 $ 0
-------------------------------------------------------------------------------
Page Six
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 1
FROM INCEPTION (SEPTEMBER 21, 1998) TO MARCH 31, 2003
----------------------------------------------------------------------------
UNAUDITED
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING TOTAL
STOCK PAID IN DONATED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL CAPITAL STAGE EQUITY
September 21, 1998-
issued for cash 3,000,000 $ 3,000 $ 5,016 $ 0 $ 0 $ 8,016
-------------------------------------------------------------------------------------------------------------------
Net loss for year ended
December 31, 1998 0 0 0 0 (6,841) (6,841)
-------------------------------------------------------------------------------------------------------------------
Balances as at
December 31, 1998 3,000,000 3,000 5,016 0 (6,841) 1,175
February 28, 1999 - issued
from sale of public
offering 767,000 767 37,591 0 0 38,358
Net loss for year ended
December 31, 1999 0 0 0 0 (28,815) (28,815)
-------------------------------------------------------------------------------------------------------------------
Balances as at
December 31, 1999 3,767,000 3,767 42,607 0 (35,656) 10,718
-------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page Seven
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 2
FROM INCEPTION (SEPTEMBER 21, 1998) TO MARCH 31, 2003
----------------------------------------------------------------------------
UNAUDITED
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING TOTAL
STOCK PAID IN DONATED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL CAPITAL STAGE EQUITY
FORWARD 3,767,000 3,767 42,607 0 (35,656) 10,718
March 10, 2000 -
issued for cash 3,000,000 3,000 27,000 0 0 30,000
March 26, 2000 -
issued for services 1,675,000 1,675 2,929,575 0 0 2,931,250
April 24, 2000 - issued for
advertising services 1,000,000 1,000 1,199,000 0 0 1,200,000
June 5, 2000 - issued for
services 200,000 200 119,800 0 0 120,000
June 15, 2000 - issued for
services 944,220 944 376,744 0 0 377,688
July 21, 2000 - issued for
services 500,000 500 134,500 0 0 135,000
July 21, 2000 - issued for
services 2,000,000 2,000 538,000 0 0 540,000
July 14, 2000 - issued for
services 575,000 575 154,675 0 0 155,250
August 7, 2000 - issued for
services 660,000 660 184,140 0 0 184,800
September 13, 2000 - issued
for services 760,000 760 212,040 0 0 212,800
November 9, 2000 - issued
for services 5,000,000 5,000 1,395,000 0 0 1,400,000
December 22, 2000 - issued
for services 5,720,500 5,720 1,596,020 0 0 1,601,740
Shareholder donated capital 0 0 0 730,936 0 730,936
-------------------------------------------------------------------------------------------------------------------
SUBTOTAL 25,801,720 25,801 8,909,101 730,936 (35,656) 9,630,182
-------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page Eight
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 3
FROM INCEPTION (SEPTEMBER 21, 1998) TO MARCH 31, 2003
----------------------------------------------------------------------------
UNAUDITED
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING TOTAL
STOCK PAID IN DONATED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL CAPITAL STAGE EQUITY
FORWARD 25,801,720 25,801 8,909,101 730,936 (35,656) 9,630,182
Net Loss for year ended
December 31, 2000 0 0 0 0 (4,391,448) (4,391,448)
-------------------------------------------------------------------------------------------------------------------
Balances as at
December 31, 2000 25,801,720 25,801 8,909,101 730,936 (4,427,104) 5,238,734
March 2, 2001 - issued for
services 10,890,000 10,890 479,160 0 0 490,050
April 11, 2001 - issued for
services 22,625,000 22,625 181,000 0 0 203,625
April 11, 2001 - sold shares
to qualified investor 12,500,000 12,500 57,500 0 0 70,000
May 15, 2001 - sold shares
to qualified investor 12,500,000 12,500 57,500 0 0 70,000
June 1, 2001 - issued for
services 3,500,000 3,500 171,500 0 0 175,000
Shareholder paid expenses
of business 0 0 0 87,935 0 87,935
2001 - issued restricted
shares 6,601,633 6,602 0 0 0 6,602
Net Loss for year ended
December 31, 2001 0 0 0 0 (6,455,933) (6,455,933)
-------------------------------------------------------------------------------------------------------------------
Balances as at
December 31, 2001 94,418,353 94,418 9,855,761 818,871 (10,833,037) (113,987)
-------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page Nine
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 4
FROM INCEPTION (SEPTEMBER 21, 1998) TO MARCH 31, 2003
----------------------------------------------------------------------------
UNAUDITED
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING TOTAL
STOCK PAID IN DONATED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL CAPITAL STAGE EQUITY
FORWARD 94,418,353 94,418 9,855,761 818,871 (10,833,037) (113,987)
November 15, 2002 - Reverse
Stock Split (14.525:1) (87,917,971) (87,918) 87,918 0 0 0
--------------------------------------------------------------------------------------------------------------------
Balances - post stock split 6,500,382 6,500 9,943,679 818,871 (10,833,037) (113,987)
December 9, 2002 - issued
for asset purchase 30,320,522 30,321 0 0 0 30,321
December 9, 2002 - issued
for services 4,087,000 4,087 4,087 0 0 8,174
Net Income for year ended
December 31, 2002 0 0 0 0 87,033 87,033
--------------------------------------------------------------------------------------------------------------------
Balances as at
December 31, 2002 40,907,934 $ 40,908 $9,947,766 $ 818,871 $(10,796,004) $ 11,541
--------------------------------------------------------------------------------------------------------------------
January 15, 2003 - cancelled
consulting services of
GCD Investments, LLC (500,000) (500) (500) 0 0 (1,000)
January 15, 2003 - cancelled
consulting services of
Rodney R. Schoemann (150,000) (150) (150) 0 0 (300)
Net Loss - three months
ended March 31, 2003 0 0 0 0 (9,182) (9,182)
--------------------------------------------------------------------------------------------------------------------
Balances as at
March 31, 2003 40,257,934 $ 40,258 $9,947,116 $ 818,871 $(10,805,186) $ 1,059
--------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page Ten
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Nature of Business
Multi-Tech International, Corp. (the "Company") was incorporated on
September 21, 1998 under the laws of the State of Nevada. The
Company was originally incorporated under the name of Oleramma Inc.
On April 28, 1999, the Company changed its name to BuckTV,Com, Inc.
on the basis that the Company would market consumer products
through an Interactive Web site. The Company's primary business
operations are to engage in any lawful activity. The Company again
changed its name in November 2002 to Multi-Tech International, Corp
to more accurately describe the direction in which the Company has
taken which is more accurately described below reflecting the
acquisition made on November 15, 2002 as set out in Note 8 below.
The Company trades on OTCBB as MLTI.
On November 15, 2002, the Company acquired all the assets of
AlphaCom, Inc., setting a new strategic direction for the Company.
The Company's principal business is now in the field of spectrum
technologies for communications.
The Company is focused on developing and promoting spectrum
technologies for broad-based applications worldwide. The spectrum
technologies product(s) MLTI has developed provides far more
efficient use of bandwidth. Through the use of narrow band
frequencies and patented algorithms, MLTI spectrum technologies
will use existing infrastructure with efficiencies exponentially
greater than conventional technologies.
Referred to as "MLTI spectrum technology", it solves the power and
noise problem through the use of filtration techniques and patented
modulation algorithms. The result is a signal that can be carried
over greater distances and with less power.
The Company's fiscal year end is December 31.
Development Stage Enterprise
The Company has no revenues and has just commenced operations. The
Company's activities are accounted for as those of a "Development
Stage Enterprise" as set forth in Financial Accounting Standards
Board Statement No. 7 ("SFAS 7"). Among the disclosures required
by SFAS 7 are that the Company's financial statements be identified
as those of a development stage company, and that the statements of
operations, stockholders' equity(deficit) and cash flows disclose
activity since the date of the Company's inception.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
These financial statements are presented on the accrual method of
accounting in accordance with generally accepted accounting
principles accepted in the United States. In the opinion of
management, these interim financial statements include all
adjustments necessary in order to make them not misleading..
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results may differ from those estimates.
Page Eleven
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and
investments, purchased with an original maturity date of three
months or less, to be cash equivalents.
Fixed Assets
All fixed assets are recorded at their acquisition price. Since
these assets were acquired on November 15, 2002, management has
determined that as of the balance sheet date these assets have not
been put to use and therefore the Company has not taken any
depreciation on these assets as of March 31, 2002.
Income Taxes
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this method, deferred assets and liabilities are
measured based on differences between financial reporting and tax
bases of assets and liabilities measured using enacted tax rates
and laws that are expected to be in effect when differences are
expected to reverse.
Net earnings (loss) per share
Basic and diluted net loss per share information is presented under
the requirements of SFAS No. 128, Earnings per Share. Basic net
loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding for the
period, less shares subject to repurchase. Diluted net loss per
share reflects the potential dilution of securities by adding other
common stock equivalents, including stock options, shares subject
to repurchase, warrants and convertible preferred stock, in the
weighted-average number of common shares outstanding for a period,
if dilutive. All potentially dilutive securities have been
excluded from this computation, as their effect is anti-dilutive.
Fair Value of Financial Instruments
The carrying amount of cash, marketable securities, prepaid
expenses and sundry assets, accounts payable, loans payable, and
notes payable are considered to be representative of their
respective fair values because of the short-term nature of
these financial instruments
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets" effective for fiscal years beginning after March
15, 2001. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after
June 30, 2001 and also specifies the criteria for the recognition
of intangible assets separately from goodwill. Under the new rules,
goodwill will no longer be amortized but will be subject to an
impairment test at least annually. Separately identified and
recognized intangible assets resulting from business combinations
completed before July 1, 2001 that do not meet the new criteria for
separate recognition of intangible assets will be subsumed in
Page Twelve
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Standards (continued)
goodwill upon adoption. Other intangible assets that meet the new
criteria will continue to be amortized over their useful lives. The
Company adopted the new rules on accounting for goodwill and other
intangible assets on January 1, 2002. The adoption of SFAS Nos. 141
and 142 had no impact on the Company's financial statements at
transition.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144
supersedes SFAS No.121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of." The
primary objectives of SFAS No. 144 are to develop one accounting
model based on the framework established in SFAS No. 121 for long-
lived assets to be disposed of by sale, and to address significant
implementation issues. The Company's adoption of SFAS No. 144 on
January 1, 2002 had no material impact on our financial position
and results of operations.
In November 2002, the FASB issued Interpretation, or FIN, No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantees of Indebtedness of Others." FIN 45
elaborates on the existing disclosure requirements for most
guarantees, including residual value guarantees issued in
conjunction with operating lease agreements. It also clarifies that
at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value of the obligation
it assumes under the guarantee and must disclose that information
in its interim and annual financial statements. The initial
recognition and measurement provisions apply on a prospective basis
to guarantees issued or modified after December 31, 2002 The
disclosure requirements are effective for the financial statements
of interim or annual periods ending after December 15, 2002. Our
adoption of FIN 45 will not have a material impact on our results
of operations and financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." This
statement amends SFAS 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 SFAS 123 to require prominent
disclosures in both annual and interim financial statements about
the method of accounting for stock-based accounting for employee
compensation and the effect of the method used on reported results.
The Company is currently evaluating whether to adopt the fair
value based method.
In January 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 requires that
unconsolidated variable interest entities be consolidated by their
primary beneficiaries. A primary beneficiary is the party that
absorbs a majority of the entity's expected losses or residual
benefits. FIN No. 46 applies immediately to variable interest
entities created after January 31, 2003 and to existing variable
interest entities in the periods beginning after June 15, 2003. Our
adoption of FIN No. 46 will not have a material impact on our
results of operations and financial position.
Page Thirteen
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED
3. MARKETABLE SECURITIES
Management determines the appropriate classification of
investments in debt and equity securities at the time of purchase
and re-evaluates such designation as of each subsequent balance
sheet date. Securities for which the Company has the ability and
intent to hold to maturity are classified as "held to maturity".
Securities classified as "trading securities" are recorded at fair
value. Gains and losses on trading securities, realized and
unrealized, are included in earnings and are calculated using the
specific identification method. Any other securities are classified
as "available for sale." At March 31, 2003 all securities were
classified as trading securities.
As part of the purchase price of the assets of Alphacom, Inc as
more particularly described in Note , the Company received 277,698
shares of American Millenium Corporation trading on OTCBB under the
symbol of AMCI. This Company has approximately 45 million shares
outstanding to date. The current market value of the stock is $
0.13 per share or $ 36,100.
4. CAPITAL STOCK TRANSACTIONS
On September 22, 1998, the Company issued 3,000,000 shares of its
$0.001 par value common stock for cash of $8,016.
On February 28, 1999, the Company completed a public offering that
was registered with the State of Nevada pursuant to N.R.S. 90.490
and was exempt from federal registration pursuant to Regulation D,
Rule 504 of the Securities Act of 1933 as amended. The Company
sold 767,000 shares of Common Stock at a price of $0.05 per share
for a total amount raised of $38,360.
On March 10, 2000, the Company issued 3,000,000 shares of its
$0.001 par value common stock for cash of $30,000.
On March 28, 2000, the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional
1,675,000 shares of its $0.001 par value common stock for services
to the Company for a total consideration of $ 2,931,250.
On April 24, 2000, by Board Resolution the company issued 1,000,000
restricted 144 shares to BuckBuilders.com, Inc., for advertising
the Company's website and auction partners plan for a total
consideration of $ 1,200,000.
On June 5, 2000, by Board Resolution the Company issued 200,000
restricted 144 shares to OTC Live, Inc for services for a total
consideration of $ 120,000.
On June 15, 2000, by Board Resolution the Company issued 944,220
restricted 144 shares to Myfreestore.com for services rendered for
a total consideration of $ 377,688.
On July 14, 2000, the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional 575,000
shares of its $0.001 par value common stock for services to the
Company for a total consideration of $ 155,250.
On July 21, 2000, by Board Resolution the company issued 500,000
restricted 144 shares to Rodney Schoemann, Sr. for services
rendered for a total consideration of $ 135,000.
Page Fourteen
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED)
4. CAPITAL STOCK TRANSACTIONS (CONTINUED)
On July 21, 2000, by Board Resolution the company issued 2,000,000
restricted shares to BuckBuilders.com, Inc. for services rendered
for a total consideration of $ 540,000.
On August 17, 2000 the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional 660,000
shares of its $0.001 par value common stock for services to the
Company for a total consideration of $ 184,800.
On September 13, 2000, by Board Resolution, the Company issued
760,000 restricted 144 shares to Washington Hamilton Group, for
services to the Company for a total consideration $ 212,800.
On November 9, 2000, by Board Resolution, the Company issued
5,000,000 shares of restricted 144 shares to Bry Behrmann and Larry
E Hunter for services rendered for a total consideration of
$1,400,000.
On December 22, 2000, the Company issued 5,720,500 shares of
restricted 144 shares to Stephen Bishop for services rendered for a
total consideration of $ 1,601,740.
On March 2, 2001, the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional
10,890,000 shares of its $0.001 par value common stock for services
to the Company.
On April 11, 2001, the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional
22,625,000 shares of its $0.001 par value common stock for services
to the Company.
On April 11, 2001 the Company issued 12,500,000 shares of its
$0.001 par value common stock for $70,000 cash, to a qualified
investor.
On May 15, 2001 the Company issued 12,500,000 shares of its $0.001
par value common stock for $70,000 cash, to a qualified investor.
On June 1, 2001, the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued an additional
3,500,000 shares of its $0.001 par value common stock for services
to the Company for a total consideration of $ 175,000.
During various times of the year 2001, the Company issued a total
of 6,601,633 shares of its $0.001 par value common stock for
services to the Company.
On November 20, 2002 the Company filed Form 8-K with the U.S.
Securities and Exchange Commission indicating that at a Board Of
Directors' meeting held on October 25, 2002 the Board announced a
14.525 to 1 reverse stock split, after which there were six million
five hundred thousand and three hundred and eighty-two (6,500,382)
common shares outstanding.
On November 20, 2002 the Company filed Form 8-K with the U.S.
Securities and Exchange Commission indicating that the Company had
acquired all of the assets of AlphaCom, Inc. in exchange for
30,320,552 of its $0.001 par value of common stock and a note for
$4,319,000.
Page Fifteen
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED)
4. CAPITAL STOCK TRANSACTIONS (CONTINUED)
On December 9, 2002 the Company issued 3,087,000 of its $0.001 par
value common stock in exchange for services to the Company for a
total consideration of $6,174.
On December 12, 2002 the Company filed Form S-8 with the U.S.
Securities and Exchange Commission and issued one million
(1,000,000) of its $0.001 par value common stock in exchange for
services to the Company.
On January 15, 2003, certain consulting agreements were cancelled
which resulted in the cancellation of 650,000 shares of common
stock.
5. GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
The future success of the Company is likely dependent on its
ability to attain additional capital to develop its proposed
technologies and ultimately, upon its ability to attain future
profitable operations. There can be no assurance that the
Company will be successful in obtaining financing, or that it will
attain positive cash flow from operations.
6. INCOME TAXES
There has been no provision for U.S. federal, state, or foreign
income taxes for any period because the Company has incurred losses
in all periods and for all jurisdictions.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax assets are as
follows:
Deferred tax assets
Net operating loss carry forwards $10,796,004
Valuation allowance for deferred tax assets (10,796,004)
------------
Net deferred tax assets $-
------------
------------
Realization of deferred tax assets is dependent upon future
earnings, if any, the timing and amount of which are uncertain.
Accordingly, the net deferred tax assets have been fully offset by
a valuation allowance. As of March 31, 2003, the Company had net
operating loss carry forwards of approximately $10,796,004 for
federal and state income tax purposes. These carry forwards, if
not utilized to offset taxable income begin to expire in 2013.
Utilization of the net operating loss may be subject to substantial
annual limitation due to the ownership change limitations provided
by the Internal Revenue Code and similar state provisions. The
annual limitation could result in the expiration of the net
operating loss before utilization.
Page Sixteen
MULTI-TECH INTERNATIONAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT MARCH 31, 2003
(UNAUDITED)
7. COMMITMENTS
Contracts
On the purchase of assets from Alphacom, Inc. as set out in Note 8
the Company has the following licenses and/or joint venture
agreements in place.
UNT, INC.
The Company has entered into a licensing agreement with UNT, Inc.,
a Pennsylvania company on July 29, 2002 which supercedes the
original agreement entered into by Alphacom, Inc. in March 1999.
The new agreement covers the territories of Israel and the Ukraine
and calls for UNT, Inc. to remit to Alphacom 50% of any sublicense
fees and to receive an ongoing royalty of $ 2.00 per Subscriber per
month whether such Subscriber is being billed for services or not.
This agreement expires in July 2012.
E:GO SYSTEMS.COM PLC
On March 6, 2000, Alphacom, Inc. entered into an exclusive license
arrangement with E:Go Systems.com PLC which covers most of the
European Union Countries. The initial license fee was $ 500,000
cash and $ 500,000 of equivalent value in the shares of E:Go. The
Company is to receive an ongoing royalty of $2.00 per Subscriber
per month whether such Subscriber is being billed for services or
not. Additional license fees will be payable totaling 50% of such
license fees payable by sublicensees introduced by E:Go, or 70% if
such sublicensees are introduced by the Company.
ITM
There is also an existing Joint Venture Master License agreement
with ITM, Ltd. ("ITM") that covers the countries of Asia, Eastern
Europe and South America. ITM and Alphacom have established a joint
venture under the name of Alphacom International, Ltd. of which
Alphacom owns 5%. The Joint Venture has agreed to pay to Alphacom
50% of any sublicensing fees earned up until such payments equal
$37,500,000 and in addition Alphacom shall receive an ongoing
royalty of $2.00 per Subscriber per month whether such Subscriber
is being billed for services or not. Jack Craciun, President of
the Company is the principal of ITM.
8. ACQUISITION OF ASSETS OF ALPHACOM, INC.
On November 14, 2002, the Company acquired the assets in a non-cash
transaction of AlphaCom, Inc. a Nevada Corporation. The assets
generally consist of physical and intellectual property. The value
of the assets is approximately 4.4 million dollars, based on the
results of an examination of the seller's audited and unaudited
financial statements. The Company believes that this valuation is
the current fair market value of the assets. The Company acquired
the assets in exchange for 30,320,552 shares of its common stock
and a promissory note in the amount of $4,319,000. For the purposes
of this transaction the stock of the Company was valued at
$0.002/share, the company's average market share price for the week
immediately preceding the closing of the transaction. The purchase
price may be adjusted downward in connection with the issuance
common stock to Alphacom if the Company does not secure equity
funding and/or licensed revenue in the amount of $10,000,000 during
the next twelve months. The adjustment would be a based on a
percentage of the amount actually raised to the total agreed upon
of $10,000,000. There is no material relationship between AlphaCom,
Inc., and the registrant or any of its affiliates, any director or
officer of the registrant, or any associate of any such director or
officer. The shares used to accomplish the acquisition were derived
from the Company treasury and are deemed to be restricted, illiquid
shares pursuant to Rule 144 of Regulation D of the Securities Act.
Page Seventeen
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Caution
Certain statements in this Quarterly Report on Form 10-QSB,our audited
financial statements for the fiscal year ended December 31, 2001as filed in
our amended annual report on Form 10-KSB/A, as well as statements made by us
in periodic press releases, oral statements made by our officials to analysts
and shareholders in the course of presentations about ourselves, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties, and other factors that may cause the actual
results, performance or achievements of us to be materially different from
any future results, performance or achievements expressed or implied by the
forward looking statements. Such factors include, among other things,
(1) general economic and equity markets; (4) competition; (5) the
availability and cost of our products; (6) demographic changes;
(7) government regulations particularly those related to automatic vehicle
location industry; (8) required accounting changes; (9) equipment failures,
power outages, or other events that may interrupt Internet communications;
(10) disputes or claims regarding our proprietary rights to our software and
intellectual property; and (11) other factors over which we have little or no
control.
Background and Organization
Multi-Tech International, Corp., a developmental stage company,
Hereinafter referred to as "the Company", "we" or "us", was originally
organized by the filing of Articles of Incorporation with the Secretary of
State of the State of Nevada on September 21, 1998 under the name Oleramma,
Inc. The Articles of Incorporation authorized the issuance of one hundred
fifty million (150,000,000) shares, consisting of one hundred million
(100,000,000) shares of Common Stock at par value of $0.001 per share and
five million (5,000,000) shares of Preferred Stock at par value of $0.001.
As of May 19, 2003, we had 40,257,934 shares of Common Stock outstanding,
no Preferred Stock issued or outstanding, options to purchase 50,000 shares
of Common Stock at $1.00 per share and options to purchase 50,000 shares of
Common Stock at $1.50 per share.
We were a company that hoped to develop a genetically engineered Pima
Cotton seed, with a virus fatal to the bollworm. It was our hope to enter
the marketplace as the first genetically engineered Pima cotton, which is
genetically superior in combating infestations. Unfortunately we were not
able to achieve our original goals and on December 31, 2000 we changed our
name to BUCKTV.COM, Inc. pursued and began a new direction. At this time our
principal business strategy was to market consumer products through an
Interactive Website, and to promote this Website through commercial radio
promotions, and Internet search engines, utilizing the talent and skills of
a famous radio/television personality. However, this was unsuccessful and
we began a search for new opportunities.
On November 15, 2002, pursuant to an Asset Purchase Agreement (the
"Agreement") we acquired all the assets of AlphaCom, Inc. ("Alphacom"),
setting a new strategic direction for the Company, and changed the name of
the Company to Multi-Tech International, Inc. ("Multi-Tech" OTCBB:MLTI) and
new management joined the Company. In connection with this acquisition
our principal business is now in the field of spectrum technologies for broad
based applications worldwide.
Asset Purchase Agreement
Pursuant to the Agreement we issued a total of 30,320,552 shares of
our Common Stock (the "Shares") and a promissory note in the amount of
$4,319,000 payable to Alphacom representing 74.1 percent of our outstanding
shares of Common Stock in exchange for all of the assets of Alphacom
including all business and technologic developments and licensing and
marketing rights to such assets. The Shares are being held in escrow for 12
months pursuant to the terms of the Agreement, and are subject to downward
Page Eighteen
adjustment based upon financial contingencies set forth in the Agreement.
The acquisition has been accounted for under purchase method accounting.
As a condition to the closing we effected a 1-for-14.525 reverse split of
our Common Stock in November 2002.
The material provisions of the Agreement include:
Appointment of the following individuals to positions within the Company:
John J. Craciun III (President and Chairman of the Board), Dr. David
Hostelley (Secretary, Treasurer and member of Board of Directors), Steven
Coutoumanos (Chief Executive Officer and member of Board of Directors),
David Boon (Chief Operating Officer, Mr. Boon subsequently declined to
accept such appointment), Mark P. Wing (member of Board of Directors),
and Lawrence Hartman (who declined the Board of Directors position, but
continues on as corporate counsel).
We may allocate 75% of the monies received by us from financing
activities or via licensing arrangements to pay the promissory note due
AlphaCom.
Until we have received aggregate gross cash proceeds of not less than
$10,000,000 from (i) a direct equity investment or series of investments
from an outside third party or third parties, and/or (ii) license fees
and/or royalty payments received from the license of the Intellectual
Property to third party licensees we cannot have more than 50,000,000
shares issued and outstanding.
Alphacom maintains anti-dilution rights for the number of shares issued
to it based upon certain contingencies.
For a period of 12 months following the closing of the transaction,
without the prior written consent of a majority of the shareholders of
Alphacom, on a fully-diluted basis, we are not permitted to do any of
the following (subject to the termination provisions of the Agreement):
(i) amend any provisions of our Articles of Incorporation or
its By Laws;
(ii) increase our authorized capital stock;
(iii) create or issue any capital stock except for the issuance
of up to 13,179,045 shares of Common Stock;
(iv) declare any dividend or distribution on any of its capital
stock;
(v) dispose of any Intellectual Property;
(vi) redeem, purchase or otherwise acquire any of our equity
securities;
(vii) voluntarily file for bankruptcy;
(viii) incur or assume any debt except the Note, provided that
the Note shall not be secured by any asset; or
(ix) transfer any asset, tangible or intangible, to any
subsidiary or make any investment (other than in cash
equivalents).
Pursuant to the Agreement we purchased all of the assets of Alphacom. The
assets purchased under the Agreement include: certain accounts receivable,
Alphacom's URL www.networkalpha.com; and certain patents (described below).
The transfer of the patents has not yet been properly perfected.
Currently,We along with Alphacom are investigating this matter to ensure that
All assignments are properly recorded. Alphacom has represented to us that it
had valid, binding and legal right to all of the rights, title and interest
in the patents.
The patents encompass the following: wireless digital transmission and
receiving method combining phase reversal keying with pulse position
modulation; improved binary data communication system employing improved
VPSK encoding procedure (as more fully discussed below); method for the
transmission of "biphase" digital data; communication system transmitting
binary data: and high speed data transfer in small amounts of bandwidth.
Page Nineteen
The VPSK encoding procedure is a modulation algorithm. When applied to
existing data transmission environments, VPSK is able to produce previously
unrealized bandwidth efficiencies. For example, Time Division Multiple
Access (TDMA), one of the leading standards of digital cellular
communications, allows for up to 128 simultaneous conversations per system.
By utilizing VPSK modulation, a TDMA-VPSK system using the same bandwidth
as TDMA will allow for over 4,500 simultaneous conversations, an increase
in excess of 35 times. This means that by incorporating this technology, the
existing infrastructure deployed by cellular carriers today will be able to
support far more revenue-producing subscribers.
Cellular technology is only one of many applications over which VPSK
can be deployed. VPSK can be deployed on most communications platforms
including both wireless and wireline. Not only will the use of VPSK produce
a substantial increase in the revenues of existing markets, the increased
data potential creates numerous new markets.
The assets also include: a five percent interest in AlphaCom
International Ltd. (ACIL) a company registered in Hong Kong (the remaining
ninety five percent is owned by ITM Ltd. (of which our President John J.
Craciun is a majority owner)). ACIL, exclusively owns the AlphaCom, master
technology license, including Manufacturing and Product Distribution Licenses
and all rights to sub-license the same for the following territories: Asia,
Eastern Europe - Romania & Bulgaria and South America - Venezuela and
adjacent islands; International License for Israel; International License
Contract for the European Union Countries; and International License Contract
for Asia.
Plan of Operations
We are focused on developing and promoting spectrum technologies for
broad-based applications worldwide based upon the assets acquired from
Alphacom. The spectrum technologies product(s) Alphacom has developed
provides far more efficient use of bandwidth. Through the use of narrow band
frequencies and patented algorithms, these spectrum technologies will use
existing infrastructure with efficiencies greater than conventional
technologies.
Management believes it solves the power and noise problem through the use
of filtration techniques and patented modulation algorithms. The result is a
signal that can be carried over greater distances and with less power.
Concept and Products
We plan to introduce a technology that makes more efficient use of
bandwidth. Through the use of narrow band frequencies and patented
algorithms, MLTI spectrum technology will travel over existing infrastructure
with efficiencies exponentially greater than conventional technologies. It
is anticipated that this will be done by a comparably small retrofit to
existing wireless and wire-line networks.
The key to this technology is a modulation and filtration technique that
enables more data to be carried, over greater distances, and with less power.
With a relatively small capital investment, service providers will be able to
increase their revenue potential through greater market penetration.
We believe this technology can be carried over virtually any medium,
including: Cable TV, Cable Modem, AM/FM Radio, Analog Cellular, Digital
Mobile, DSL, IP Wire-line Applications, WiFi (802.11b), or Microwave,
Satellite.
Dependence on Outside Suppliers
We anticipate that we will have a relatively low dependence on outside
suppliers or vendors. The primary reason is that the MLTI spectrum technology
represents intellectual property, which will be marketed in the form of a
license or royalty contract. As such, we anticipate that no proprietary
hardware will be required in order to generate a revenue stream.
Page Twenty
Marketing and Advertising
We anticipate building a grass roots awareness campaign across the
following channels:
Trade Advertising - three key vertical markets (content provider, service
provider, and end-user):
Awareness campaigns.
Operations campaigns.
Public Relations:
Press Releases (announcing technology impact, customer success,
product releases and company news).
Case Studies (associated with customer success).
Technology White Papers (Engineering inter industry publications,
educational institutions, think tanks and symposium presentations).
Analyst & Editor Interviews.
Direct Mail/Email:
Awareness Direct Mail to support Advertising.
Tradeshow Support (Pre & Post show direct mail).
Teaser Mailers to promote interest.
Web Seminar notification & follow-up.
Tradeshows:
Three key vertical markets (content provider, service provider, and
end-user).
Collateral:
Overview Brochure.
Product Profile - Content Provider.
Product Profile - Service Provider.
Product Profile - End User.
Seminars - two online Web Seminar series
1. Introduction to Ultra Narrowband Modulation.
2. Ultra Narrowband Modulation Solutions/Demo.
Technology Overview
Before voice, data, or video can be transmitted or received, it must be
encoded onto a carrier signal that will propagate by means of an electronic
wave. This process, called modulation is the science of placing intelligence
on a carrier. Using this principle, a data stream is converted to a waveform
and a carrier transports the data over a radio frequency, sound wave, or beam
of light.
Carrier signals can be fully described by three parameters that can be
mixed and matched:
1. Amplitude Modulation - ex. AM stations on a car radio
2. Frequency Modulation - ex. FM stations on a car radio
3. Phase Modulation - ex. Satellite communications
Each of the three modulation techniques listed above possess tradeoffs in
terms of power, performance, bandwidth efficiency, etc. Phase Modulation
generally uses bandwidth more efficiently than other types of modulation.
However, the improvement in bandwidth efficiency comes at the cost of
decreased power efficiency. The smaller separation between bits of data
means it takes less noise to corrupt the signal and cause the receiver to
make an error. To combat this, more power must be transmitted.
Page Twenty One
Technology Development
Technology development strategies are targeted to address the needs of
telecom and electronic communications bandwidth. Using experience gained from
lab trials, the technology can be deployed on existing infrastructure with
the following planned results (pending further research and development for
each application):
Wireline Applications:
DSL Service
Expand the distance from the CO from 3 miles to 10 miles.
Provide reliable data transmission even with corroded cable.
Increase data rates over standard phone line from 1.5 to 3.0
MBPS.
Cable and Cable Modem
Effectively doubles the number of channels over standard coax.
Increases the cable data throughput by approximately 10X.
Potentially solves the problem of transmitting HDTV signal
over coax.
Access, Edge, and Core Applications
Transform T1 lines into the performance equivalent of two T3
lines.
Increase data throughput of copper ATM, Frame Relay, SS7, etc.
Improve global telecom network performance and efficiency.
Wireless Applications:
GSM / TDMA / CDMA / 3G Wireless
Increase the number of GSM voice users from approximately 240
to over 12,000.
Increase the number of C/TDMA users from approximately 200 to
over 1,200.
Provide 3G networks multiplexed voice/data/video sessions.
Lower monthly operating costs for providers.
Increase data rates from 14,400 BPS to 1,600,000 BPS.
Double transmit/receive range while reducing voltages by 75%.
Analog Wireless
Increase the number of voice users from approximately 16 to
more than 750.
Increase data rates from 14,400 BPS to 1,600,000 BPS.
Lower monthly operating costs for providers.
Double transmit/receive range while reducing voltages by 75%.
Microwave
Enhance a single microwave channel to provide more than 150 T1
lines.
Create a path for dramatically less expensive PSTN or Internet
back-haul.
Reduce the cost of cellular voice and data traffic.
Target Market
We will initially focus on commercializing our territories through the
joint venture and licensing agreements which were obtained pursuant to the
Agreement with Alphacom, while developing support technology to simplify the
implementation of our systems in a variety of applications. Commercialization
will be managed through licenses and strategic partnerships within each of the
targeted markets.
Page Twenty Two
The target audience will initially consist of two key groups:
service/content providers and end users. The messaging for each will be
significantly different:
Service/Content Providers:
Service and content providers are seeking more sophisticated delivery
capabilities in the commercial market. Providers desperately need
communication networks that will integrate voice, data, and video
services over virtually any wire-line or wireless infrastructure at an
affordable price.
End Users:
Users that have already gravitated to existing broadband technology
Have learned to live with some of the downsides. The downsides have
included: difficulties in setting up initial connectivity, high monthly
costs, limitations due to local infrastructure (DSL), and limited
responsiveness during peak usage (Cable). In addition, content delivery
is severely limited to cellular users.
Competition
Competition in the bandwidth communications and/or telecommunications
market segment is extensive. We must take careful measures to ensure that
the intellectual property represented by our spectrum technology is protected.
In addition, competing bandwidth technologies may circumvent any sustainable
competitive advantage and prevent long-term broad acceptance for the spectrum
technology.
The markets for consumer and business Internet services and online
content are extremely competitive and highly fragmented. There are no
significant barriers to market entry. We expect that competition will
intensify in the future. Our direct competition in these markets are ISPs,
national long distance carriers, wireless service providers, OSP's,
cable-based data services and Internet content aggregators. Many of these
competitors are offering (or may soon offer) technologies that
will attempt to compete with some or all of our products and services. Such
technologies include ISDN and XDSL. The basis of competition in these markets
include transmission speed, reliability of service, ease of access,
price/performance, ease-of-use, content quality, quality of presentation,
timeliness of content, customer support, operating experience and revenue
sharing.
Many of our competitors and potential competitors have substantially
larger subscriber bases, longer operating histories, greater name recognition,
and more established relationships with application providers than us. Such
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and devote substantially more resources to
developing Internet services than us. There are no assurances that we will be
able to compete successfully against current or future competitors.
Competitive pressures may materially adversely affect our business, operating
results, or financial condition. Further, as a strategic response to changes
in the competitive environment, we may make certain pricing, service or
marketing decisions or enter into acquisitions or new ventures that could
have a materially adverse effect on our business, operating results or
financial condition.
Government Regulation
The adoption of new laws or the application of existing laws may decrease
the growth of spectrum technologies, which could in turn decrease the demand
for our services, increase our cost of doing business or otherwise have a
material adverse effect on our business, results of operations and financial
condition.
There can be no assurance, however, that Federal, State or local
government will not attempt to impose regulations upon us in the future or
that such imposition will not have a material adverse effect on our business,
results of operations and financial condition.
Page Twenty Three
Federal
We will provide Internet services, in part, through data transmissions
over public telephone lines. These transmissions are governed by regulatory
policies establishing charges and terms for wire line communications. We
currently are not subject to direct regulation by the FCC or other regulatory
agencies as a provider of basic telecommunication services.
The FCC regulates the licensing, construction, operation and acquisition
of wireless telecommunications systems in the U.S. pursuant to the 1934 Act,
as amended, and the rules, regulations, and policies promulgated by the FCC
thereunder. Included in the regulations is the use of the electromagnetic
spectrum in the United States, including the frequency band currently used by
our radio products. Part 15 of the FCC regulation defines frequency bands in
which unlicensed operation of the radio equipment that meets certain
technical and operational requirements is permitted. We will utilize CDPD for
the majority of our wireless transmissions, which is currently under FCC
regulations.
In the international markets there are various categories of government
regulations. In those countries that have accepted certain worldwide
standards, such as the FCC rulings or those from the European
Telecommunications Standards Institute, we are not expecting to experience
significant regulatory issues in bringing our products to market. Approval
in these markets involves retaining local testing agencies to verify specific
product compliance. However, many developing countries, including India and
China, have not fully developed or have no frequency allocation, equipment
certification, or telecommunications regulatory standards. In these types of
markets, we will actively work directly with industry standard bodies to
conform to worldwide standards regulations.
State and Local Regulation
The scope of the regulatory authority covers such matters as the terms
and conditions of interconnection between Local Exchange Carriers ("LECs")
and wireless carriers with respect to intrastate services, customer billing
information and practices, billing disputes, other consumer protection
matters, facilities construction issues, transfers of control, the bundling
of services and equipment and requirements relating to the availability of
capacity on a wholesale basis. In these areas particularly, the terms and
conditions of interconnection between LECs and wireless providers, the FCC
and state regulatory authorities share regulatory responsibilities with
respect to interstate and intrastate issues, respectively.
We may become an active participant in proceedings before the FCC and
before state regulatory authorities. Proceedings with respect to the foregoing
policy issues before the FCC and state regulatory authorities could have
significant impacts on the competitive market structure among wireless
providers and other carriers. We are unable at this point to predict the
scope, pace, or financial impact of policy changes which could be adopted
in these proceedings. To keep us apprised of developments in this area, we
will retain special FCC counsel in the event we deem it necessary.
Industry Conditions and Cyclical Nature
The communications and/or telecommunications industry is an inherently
volatile market segment. Technologies that dominate a market over a
particular period can be made obsolete by newer technologies from competing
companies in a relatively short timeframe. We are attempting to mitigate this
risk by providing open standards and licensing/royalty arrangements, which can
create a new industry standard for bandwidth spectrum.
Lack of Liability Coverage
We do not maintain any liability coverage. In the event of any claim
against us or any of our assets we may not have the resources to defend the
Company which could have a material adverse effect on the future prospects.
Page Twenty Four
Pursuit of Strategic Acquisitions and Alliances
We believe there are numerous opportunities to acquire other businesses
with established bases, compatible operations, experience with additional
synergistic aspects, and experienced management. We believe, that these
acquisitions, if successful, will result in mutually beneficial opportunities,
and could lead to an increase in our revenue and income growth. We intend to
seek opportunities to acquire businesses, services and/or technologies that
we believe will complement our business operations. We plan to seek
opportunistic acquisitions that may provide complementary services, expertise
or access to certain markets. No specific acquisition candidates have been
identified, and no assurance can be given that any transactions will be
effected, or if effected, will be successful.
In addition, we may execute strategic alliances with partners who have
established operations. As part of these joint venture agreements, we may
make investments in or purchase a part ownership in these joint ventures.
We believe that joint venture relationships, if successful, will result in
synergistic opportunities, allowing us to gain additional insight, expertise
and penetration in markets where joint venture partners already operate, and
may increase our revenue and income growth. No specific joint venture
agreements have been signed, and no assurance can be given that any
agreements will be effected, or if effected, will be successful.
At present, the Company is utilizing the resources of its major
shareholders and directors to fund operations. Nominal funds have been
received from miscellaneous revenue during the three months ended March 31,
2003 of $4,477. We are unable to forecast revenues until we prove the
commercial viability of the technology, which we anticipate will occur during
the fourth quarter of 2003.
The Company has not achieved revenues or profitability to date, and the
Company anticipates that it will continue to incur net losses for the
foreseeable future. The extent of these losses will depend, in part, on the
amount of growth in the Company's revenues from licensing of its technology.
As of March 31, 2003,the Company had an accumulated deficit of Ten Million Eight
Hundred and Five Thousand One Hundred and Eighty-Six $10,805,186) dollars.
The Company expects that its operating expenses will increase significantly
during the next several months, especially in the areas of engineering
development and sales and marketing. Thus, the Company will need to generate
increased revenues to achieve profitability. To the extent that increases in
its operating expenses precede or are not subsequently followed by
commensurate increases in revenues, or that the Company is unable to adjust
operating expense levels accordingly, the Company's business, results of
operations and financial condition would be materially and adversely affected.
There can be no assurances that the Company can achieve or sustain
profitability or that the Company's operating losses will not increase in
the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have historically consisted of funding
operations and capital expenditures through the sale of common stock and the
exchange of common stock for services. The Company has no significant revenue
from operations.
Net cash used in operating activities for the three months ended March 31,
2003 was $2,841 compared with cash provided from operating activities for the
year ended December 31, 2002 of $234,623 which included a gain on settlement
of debt of $ 300,000.
The Company's working capital deficiency is currently $4,211,054 compared with
$4,240,328 at the year end. The greatest portion of the deficiency relates to
a note payable in connection with the asset purchase, which may be reduced if
certain conditions relating to the asset purchase as described above.
Page Twenty Five
The ability of the Company to meet its business objectives as described above
depend upon the Company raising the required capital. The Company is
exploring a number of funding opportunities at the moment. Discussions have
been on a verbal basis only to date.
Except for the note payable in connection with the asset purchase, the
Company has no material commitments for capital expenditures nor does it
foresee the need for such expenditures over the next year.
ITEM 3. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report under the supervision and
participation of certain members of the Company's management, including the
President and the Principal Financial Officer, the Company completed an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rules 13a - 14 and 15d - 14c to the
Securities Exchange Act of 1934, as amended). Based on this evaluation, the
Company's President and Principal Financial Officer believe that the
disclosure controls and procedures are effective with respect to timely
communicating to them and other members of management responsible for
preparing periodic reports all material information required to be disclosed
in this report as it relates to the Company.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable.
ITEM 2. Changes in Securities and Use of Proceeds
Not Applicable.
ITEM 3. Defaults upon Senior Securities
Not Applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
ITEM 5. Other Information
Not Applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) 99.1 Certification by Jack Craciun, III, President,
Chairman of the Board, pursuant to Section 18 U. S. C.
Section 1350, 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification by Dr. David F. Hostelley, Principal
Financial Officer, pursuant to 18 U.S.C. Section 1350,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
Form 8-K filed January 8, 2003 reporting Items 2 and 6.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 19, 2003 Multi-Tech International, Corp.
By: /s/ John J. Craciun, III
-----------------------
John J. Craciun, III
President, Chairman of the
Board
Date: May 19, 2003 By: /s/ Dr. David F. Hostelley
-----------------------
Dr. David F. Hostelley
Principal Financial Officer
Twenty Six
May 15, 2003
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, John J. Craciun III, certify that;
1. I have reviewed this quarterly report on Form 10-QSB of Multi-
Tech International Corp.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedure to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes
in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
/s/ John J. Craciun III
---------------------------------------------
John J. Craciun III
Chairman of the Board and President
May 15, 2003
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Dr. David F. Hostelley, certify that;
1. I have reviewed this quarterly report on Form 10-QSB of Multi-
Tech International Corp.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedure to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes
in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
/s/ Dr. David F. Hostelley
---------------------------------------------
Dr. David F. Hostelley
Principal Financial Officer