Item
1. FINANCIAL STATEMENTS.
RAPID
LINK, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(unaudited)
|
July 31, 2008
|
October 31, 2007
|
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|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 919,881 | $ | 496,306 | ||||
|
Accounts
receivable, net of allowance of $94,625 and $53,584,
respectively
|
1,052,279 | 1,090,954 | ||||||
|
Prepaid
expenses
|
15,964 | 36,537 | ||||||
|
Other
current assets
|
130,570 | 200,809 | ||||||
|
Total
current assets
|
2,118,694 | 1,824,606 | ||||||
|
Property
and equipment, net
|
1,822,894 | 273,390 | ||||||
|
Customer
lists, net
|
2,164,345 | 2,536,400 | ||||||
|
Goodwill
|
5,174,012 | 3,107,062 | ||||||
|
Other
assets
|
367,560 | 98,032 | ||||||
|
Deferred
financing fees, net
|
453,040 | - | ||||||
|
Total
assets
|
$ | 12,100,545 | $ | 7,839,490 | ||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 1,615,766 | $ | 2,319,099 | ||||
|
Accrued
interest
|
124,861 | 227,037 | ||||||
|
Other
accrued liabilities
|
540,655 | 617,454 | ||||||
|
Deferred
revenue
|
211,798 | 66,113 | ||||||
|
Deposits
and other payables
|
77,183 | 77,106 | ||||||
|
Capital
lease obligations, current portion
|
429,914 | - | ||||||
|
Convertible
notes payable, current portion, net of debt discount of $0 and $151,515,
respectively
|
42,500 | 1,690,985 | ||||||
|
Convertible
notes payable to related parties, current portion
|
- | 1,000,000 | ||||||
|
Related
party notes payable, current portion
|
- | 50,000 | ||||||
|
Notes
payable, current portion
|
129,189 | - | ||||||
|
Net
current liabilities from discontinued operations
|
- | 1,162,000 | ||||||
|
Total
current liabilities
|
3,171,866 | 7,209,794 | ||||||
|
Capital
lease obligations, net of current portion
|
314,245 | - | ||||||
|
Convertible
notes payable, net of current portion
|
1,981,277 | 1,201,277 | ||||||
|
Convertible
notes payable to related parties, net of current portion
|
3,240,000 | 2,240,000 | ||||||
|
Notes
payable, net of current portion, net of debt discount of $594,246 and $0,
respectively
|
5,561,005 | - | ||||||
|
Total
liabilities
|
14,268,393 | 10,651,071 | ||||||
|
Commitments
and contingencies
|
||||||||
|
Shareholders’
deficit:
|
||||||||
|
Preferred
stock, $.001 par value; 10,000,000 shares authorized; none issued and
outstanding
|
- | - | ||||||
|
Common
stock, $.001 par value; 175,000,000 shares authorized; 69,847,444 and
65,161,544 shares issued and 69,835,422 and 65,149,522 shares outstanding
at July 31, 2008 and October 31, 2007, respectively
|
69,848 | 65,162 | ||||||
|
Additional
paid-in capital
|
50,089,007 | 48,976,402 | ||||||
|
Accumulated
deficit
|
(52,271,833 | ) | (51,798,275 | ) | ||||
|
Treasury
stock, at cost; 12,022 shares
|
(54,870 | ) | (54,870 | ) | ||||
|
Total
shareholders' deficit
|
(2,167,848 | ) | (2,811,581 | ) | ||||
|
Total
liabilities and shareholders' deficit
|
$ | 12,100,545 | $ | 7,839,490 | ||||
See
accompanying notes to unaudited consolidated financial statements
RAPID
LINK, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
|
Three Months Ended
July 31,
|
Nine Months
Ended July 31,
|
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|
Revenues
|
$ | 4,483,714 | $ | 4,229,804 | $ | 11,947,543 | $ | 12,402,878 | ||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Costs
of revenues
|
3,144,823 | 2,982,544 | 8,183,948 | 8,932,807 | ||||||||||||
|
Sales
and marketing
|
193,693 | 303,410 | 619,986 | 923,326 | ||||||||||||
|
General
and administrative
|
1,316,067 | 828,622 | 3,196,820 | 2,675,877 | ||||||||||||
|
Depreciation
and amortization
|
419,047 | 229,853 | 905,768 | 707,996 | ||||||||||||
|
Gain
on recovery of accrued interest
|
(163,750 | ) | - | (163,750 | ) | - | ||||||||||
|
Loss
on disposal of equipment
|
- | - | - | 10,061 | ||||||||||||
| 4,909,880 | 4,344,429 | 12,742,772 | 13,250,067 | |||||||||||||
|
Operating
loss
|
(426,166 | ) | (114,625 | ) | (795,229 | ) | (847,189 | ) | ||||||||
|
Other
income (expense):
|
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