UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
AMENDMENT NO. 1
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004
|_| 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 1-13725
ILINC COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0545043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, ARIZONA 85018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 952-1200
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 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 |_|
Indicate by check mark whether the registrant is an accelerated file (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
The number of shares outstanding of each of the registrant's classes of
Common Stock, as of January 31, 2005 was approximately 24,145,938, net of shares
held in treasury.
EXPLANATORY NOTE
Form 10-Q/A (this "Amendment") amends the Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2004, filed on February 17, 2005 (the
"Original Filing"). iLinc Communications, Inc. ("the Company" or "iLinc") has
filed this Amendment to revise Item 4 which revisions iLinc deems necessary to
clarify language used in Item 4 of the Original Filing. Pursuant to Rule 12b-15
under the Securities Exchange Act of 1934, as amended, the complete text of Item
4 as amended is set forth below. The remainder of the Original Filing is
unchanged and is not reproduced in this Amendment. This Amendment speaks as of
the filing date of the Original Filing and reflects only the changes discussed
above. No other information included in the Original Filing, including the
Company's financial statements and the footnotes thereto, has been modified or
updated in any way. This Amendment should be read together with other documents
that iLinc has filed with the Securities and Exchange Commission subsequent to
the filing of the Original Filing.
ITEM 4. CONTROLS AND PROCEDURES
We evaluated the design and operation of our disclosure controls and
procedures as of December 31, 2004 to determine whether they are effective in
ensuring that we disclose the required information in a timely manner and in
accordance with the Securities Exchange Act of 1934, as amended, or the Exchange
Act, and the rules and forms of the Securities and Exchange Commission.
Management, including our principal executive officer and principal financial
officer, supervised and participated in the evaluation. The principal executive
officer and principal financial officer concluded, based on their review, that
our disclosure controls and procedures, as defined by Exchange Act Rules
13a-15(e) and 15d-15(e), are effective and ensure that (i) we disclose the
required information in reports that we file under the Exchange Act and that the
filings are recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms and (ii)
information required to be disclosed in reports that we file under the Exchange
Act is accumulated and communicated to the Company's management, including our
principal executive officer and principal financial officer to allow timely
decisions regarding disclosure. Our internal controls were modified during the
quarter ended December 31, 2004 as outlined below in response to notification of
a material weakness. Except as outlined below, no significant changes were made
to our internal controls or other factors that materially affected or were
reasonably likely to materially affect these controls subsequent to the date of
their evaluation.
The Company's disclosure and control systems are designed to provide
reasonable assurance of achieving their objectives, and the Company's principal
executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures provide reasonable assurance of
achieving their objectives. However, because of the inherent limitations in all
control systems no evaluation of controls can provide absolute assurance that
all control issues if any, within a company have been detected.
On November 12, 2004, the Company's independent registered public
accountants orally notified the Company's Audit Committee that they had
identified a material weakness regarding the Company's internal controls. The
identified material weakness noted was a lack of sufficient control over the
sales order and revenue recognition process related to failure to communicate
changes on standard forms of customer contracts. In response to this
notification, during the period between November 12, 2004 and December 31, 2004,
the Company implemented steps to prevent failure to communicate changes in
standard forms of customer contracts in the future and strengthen the Company's
internal controls related to contract management and its impact on revenue
recognition. The Company has put procedures into place to prevent modification
of its standard form of software license agreements without due and proper
notice to all parties, including the Company's accounting group. Those steps to
correct and prevent this in the future include:
o New controls over the modification of electronic contracts adding
limited password protection;
o The electronic receipt of contracts from customers directly to both
the sales and accounting groups simultaneously;
o The numbering of contracts and order forms to provide a stronger audit
trail;
o The electronic storage of all customers' contracts providing real-time
access;
o The notification of the accounting department by the sales or legal
departments should modification occur; and
o Remedial training of the sales group on the impact of changes to the
software license agreement.
A further segregation of duties was also implemented to better control
contract workflow as follows:
o A supervisor from the sales team must approve all sales orders before
they are accepted by the sales department, and a supervisor from the
accounting group must approve all orders that exceed $10,000 in amount
before they are accepted as a valid sale of the company.
o An order processing clerk verifies that the appropriate Customer and
Company authorizations have been obtained;
o The approved sales order is transmitted to the customer service
department for order fulfillment;
o Notification of fulfillment of the order is sent to both the sales and
accounting departments; and
o Before revenue is recognized on any sales order, the controller
verifies that the sales order was properly approved by the customer
and the Company, verifies that changes, if any, to the standard
license agreement have been properly documented in writing and in the
customer's electronic file and thereafter records revenue based upon
the approved and verified documentation.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 12, 2005 iLINC COMMUNICATIONS, INC.
By: /s/ James M. Powers, Jr.
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James M. Powers, Jr., Chairman of the Board of
Directors, Chief Executive Officer and President
By: /s/ David J. Iannini
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David J. Iannini, Senior Vice President and
Chief Financial Officer