10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☐

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2008

OR

☐

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: 000-28562

VERILINK CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

94-2857548

(State of incorporation)

(I.R.S. Employer

Identification No.)

501 S. Johnstone Ave

Suite 501

Bartlesville, OK 74003

(Address of principal executive offices, including zip code)

(918) 336-1773

(Registrant's telephone number, including area code)

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 ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☐

The number of shares outstanding of the issuer's common stock as of July 18, 2008 was 26,104,000 shares.  The shares are restated to reflect reverse stock split 1-for-2581 as of June 30, 2008 and the issuance of shares pursuant to the Bankruptcy Order.

1

INDEX

VERILINK CORPORATION

FORM 10-Q

PART I.

FINANCIAL INFORMATION

Page

Item 1.

Financial Statements (unaudited):

Consolidated Statements of Operations for the three and nine months ended
March 28, 2008 and March 30, 2007

3

Consolidated Balance Sheets as of March 28, 2008 and June 29, 2007

4

Consolidated Statements of Cash Flows for the nine months ended
March 28, 2008 and March 30, 2007

5

Notes to Consolidated Financial Statements

6

Item 2.

Management's Discussion and Analysis

8

Item 3

Quantitative and Qualitative Disclosures About Market Risk……………………………………………..8

Item 4.

Controls and Procedures

8

PART II.

OTHER INFORMATION

Item 1

Legal Proceedings

8

Item 1A

Risk Factors

9

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

9

Item 3.

Defaults Upon Senior Securities

9

Item 4.

Submission of Matters to a Vote of Securities Holders

9

Item 5.

Other Information

9

Item 6.

Exhibits

9

SIGNATURE

9

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERILINK CORPORATION

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three months ended		Nine months ended
	March 28, 2008	March 30, 2007	March 28, 2008	March 30, 2007
Loss from discontinued operations	--	(116)	--	(578)
Gain on settlement of pre-petition liabilities in bankruptcy	--	-	--	55
Gain on debt discharge…………………………………..	_______--	____8,768	_______--	____8,768
Net income from discontinued operations	$ --	$ 8,652	$ --	$ 8,245
Net income per share – basic and diluted	$ --	$ 865.20	$ --	$ 824.50
Shares used in per share calculation – basic and diluted Basic	10	10	10	10

The accompanying notes are an integral part of these consolidated financial statements.

3

VERILINK CORPORATION

(Debtor-in-Possession)

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share data)

	March 28, 2008	June 29, 2007
ASSETS
Total assets	$ —	$ —
LIABILITIES AND STOCKHOLDERS’ EQUITY
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000 shares authorized; no shares issued and outstanding	$ —	$ —
Common Stock, $0.01 par value; 40,000 shares authorized; 10 shares issued and outstanding	-	-
Additional paid-in capital	91,059	91,059
Accumulated other comprehensive loss	(63)	(63)
Accumulated deficit	(90,996)	(90,996)
Total stockholders' deficit	—	—
Total liabilities and stockholders’ deficit	$ —	$ —

The accompanying notes are an integral part of these consolidated financial statements.

4

VERILINK CORPORATION

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Nine Months Ended
	March 28, 2008	March 30, 2007
Cash flows from operating activities:
Net income from discontinued operations	$ --	$ 8,245
Adjustments to reconcile net income from discontinued operations to net cash used in operating activities:
Gain on debt discharge……………………………………………………………	--	(8,768)
Gain on settlement of pre-petition liabilities	--	(55)
Changes in assets and liabilities:               Other assets	--	123
Accounts payable	--	(74)
Accrued expenses and other current	--	(867)
Other non-current liabilities	--	(266)
Net cash used in operating activities	--	(1,662)
Cash flows from investing activities:
Decrease in restricted cash	--	333
Net cash provided by investing activities	--	333
Net decrease in cash and cash equivalents	--	(1,329)
Cash and cash equivalents at beginning of period	--	1,329
Cash and cash equivalents at end of period	$ --	$ --

The accompanying notes are an integral part of these consolidated financial statements.

5

VERILINK CORPORATION

(Debtor-in-Possession)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1-

Basis of Presentation

The accompanying unaudited interim financial statements of Verilink Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Verilink’s Annual Report filed with the SEC on form 10K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the fiscal 2007 as reported in the form 10K have been omitted.

Note 2 -

Going Concern

The accompanying financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business and do not reflect adjustments that might result if we were not to continue as a going concern. The company does not have any operations and is which raise substantial doubt about Verlink’s ability to continue as a going concern. Verilink filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Northern District of Alabama on April 9, 2006.

Note 3 – Subsequent Events

On January 31, 2007, the Bankruptcy Court ordered the Company to implement a reverse stock split to lower the outstanding shares of the Company to 10,000 shares. The effect of the reverse split is that one (1) share of stock issued prior to the Confirmation Order is now equal to 1/2581 share. The Court authorized the Board of Directors to file an Amendment to the Articles of Incorporation to implement the Reverse Stock. On May 2, 2008, the Company filed the Amendment to the Articles of Incorporation to implement the Reverse Stock Split. The reverse stock split became effective on June 30, 2008. The par value of the common stock was not affected by the reverse stock split. All shares and per share amounts have been restated in the consolidated financial statements and in the notes to the consolidated financial statements for all periods presented to reflect the reverse stock split as if it occurred on the first day of the first period presented.

Following the reverse stock split, the Company issued the following shares on June 30, 2008:

1.

Issued 25,000,000 restricted shares of the New Common Stock, which are not subject to the reversal, to the IACE Investments Two, Inc.;

2.

Issued 1,000,000 shares of restricted shares of the New Common Stock, which are not subject to the reversal, and 5,000,000 warrants, to the Venture Fund I, Inc., pursuant to the terms under the Debtor in Possession Loan.

3.

Issued 75,000 shares under the Bankruptcy Code to The Bankruptcy Trustee to be distributed according to the Plan.

4.

Issued 100 shares of the New Common Stock to the holder of each Allowed Unsecured Claim in Class 7, held in escrow until the Business Combination occurs.

Stock Warrants

Pursuant to the terms of the Debtor in Possession Loan and Plan, the Board of Directors issued 1,000,000 shares of the New Common Stock and 5,000,000 warrants to Venture Fund I, Inc., for providing the Debtor in Possession Loan. The new equities issued by Verilink in satisfaction of the Debtor in Possession Loan to the Investor, are exempt from registration and the requirements of federal and state securities laws in accordance with Section 1145 of the Bankruptcy Code.  The securities issued to Venture Fund I, Inc. are to be held in trust until the Reorganized Company has filed with the SEC all reports and statements necessary in connection with the Business Combination

The warrants are exercisable by Venture Fund I, Inc. for 5,000,000 non-assessable shares of common stock, $0.001 par value at any time on or prior to November 30, 2016, upon payment by Venture Fund I, Inc., of the purchase price of $25.00 per share. Venture Fund I, Inc. shall have the right to exercise these warrants at any time for the full exercise of $25.00 per share prior to the warrants’ expiration upon delivery of payments to the Reorganized Verilink. The number of shares called or exercised at any given time and the purchase price per share shall be subject to adjustment from time to time by the Board of Directors of the Company.

6

Item 2.

Management’s Discussion and Analysis

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995. Statements contained in this filing that are not based on historical fact, including without limitation statements containing the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar words, constitute "forward-looking statements". These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions in which Verilink Corporation ("we", "Verilink" or “Company”) operates; technol ogy changes; the competition we face; changes in our business strategy or development plans; existing governmental regulations and changes in, or our failure to comply with, governmental regulations; liability and other claims asserted against us; and other factors referenced in our filings with the Securities and Exchange Commission.

Description of Business.

Prior to ceasing operation in June 2006, we were a provider of broadband access products and services. We developed, manufactured, and marketed integrated access devices (“IADs”), Optical Ethernet access products, wireless access devices, and bandwidth aggregation solutions. These products were sold to service providers, enterprise customers, and original equipment manufacturer (OEM) partners, and were deployed worldwide as targeted solutions for applications involving voice over IP (VoIP), voice over ATM (VoATM), voice over DSL (VoDSL), wireless backhaul aggregation, Frame Relay service transport, point-to-point broadband services, service inter-working, and the migration of networks from traditional time-division multiplexing (TDM) based access to IP/Ethernet.

PLAN OF OPERATIONS

Verilink has not transacted any business for the quarter ended March 28, 2008.

LIQUIDITY AND CAPITAL RESOURCES

Verilink had no cash during the quarter ended March 28, 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Verilink not required to provide the information required by this Item.

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report, being March 28, 2008.   This evaluation was carried out under the supervision and with the participation of our company’s sole officer and director.  Based upon that evaluation, our president and sole officer concluded that our company’s disclosure controls and procedures are effective.  There have been no significant changes in our company’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out our evaluation.

There were no changes in our internal control over financial reporting during the period ended March 28, 2008 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Verilink is not currently a party to any legal proceeding other than the Bankruptcy mentioned above.

Item 1A

Risk Factors

There have been no material changes in our risk factors since June 29, 2007. See risk factors at June 29, 2007 within our Form 10-K.

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3

Defaults Upon Senior Securities

None

Item 4

Submission of Matters to a Vote of Securities Holders

None

Item 5

Other Information

None

Item 6

Exhibits

Exhibits Index:

Exhibit Number

Description of Exhibit

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements 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.

VERILINK CORPORATION

Date: July 18,  2008

By:

/s/ James Ditanna

James Ditanna

Sole Director/President

(Principal Financial and Accounting Officer)

7

EX-31

EXHIBIT 31

I, James Ditanna, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of Verilink Corporation.

2.

Based on my knowledge, this 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 report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the smaller reporting company as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the smaller reporting company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the smaller reporting company, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the smaller reporting company’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the smaller reporting company’s internal control over financial reporting that occurred during the smaller reporting company’s most recent fiscal quarter (the smaller reporting company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the smaller reporting company’s internal control over financial reporting; and

5.

I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the smaller reporting company’s auditors and the audit committee of the smaller reporting company’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the smaller reporting company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the smaller reporting company’s internal control over financial reporting.

Date:  July 17, 2008

/s/   James Ditanna

James Ditanna, President, Chief Executive

Officer, Chief Financial Officer (Principal

Executive Officer, Principal Financial and

Accounting Officer), Sole Director

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Verilink Corporation, a Delaware corporation (the “Company”) on Form 10-Q for the period ending March 28, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James Ditanna, hereby, certifies to the best of his knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to James Ditanna, and will be retained by Verilink Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

/s/   James Ditanna

James Ditanna, President, Chief Executive

Officer, Chief Financial Officer (Principal

Executive Officer), Sole Director

Date:  July 17, 2008