10KSB 1996 [FORM]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10–Q

ý		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2002
		OR

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

		Commission file number: 0-17973

I-LINK INCORPORATED
(Exact name of registrant as specified in its charter)

FLORIDA		59-2291344
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020
(Address of principal executive offices)

(801) 576-5000
(Registrant’s telephone number)

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 and Exchange Act of 1934 during the preceding 12 months (or for such shorter time 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 ý No o

As of May 7, 2002, the registrant had outstanding 116,549,547 shares of $0.007 par value common stock.

PART I — FINANCIAL INFORMATION

I-LINK INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	March 31, 2002 (Unaudited)			December 31, 2001

ASSETS
Current assets:
Cash and cash equivalents	$	4,535,458		$	4,662,532
Accounts receivable, less allowance for doubtful accounts of $1,696,573 and $1,862,992 as of March 31, 2002 and December 31, 2001, respectively	15,394,236			16,009,386
Other current assets	1,705,331			2,632,629
Total current assets	21,635,025			23,304,547

Furniture, fixtures, equipment and software, net	19,651,085			21,023,696

Other assets:
Intangible assets, net	887,089			1,330,839
Other assets	900,655			1,121,067
Total assets	$	43,073,854		$	46,780,149

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	4,699,355		$	7,719,595
Accrued liabilities	13,435,334			12,270,231
Unearned revenue	805,952			1,986,675
Revolving credit facility and other current debt	10,476,444			10,004,862
Notes payable to related parties	21,846,889			17,540,140
Current portion of obligations under capital leases	3,080,420			3,034,293
Total current liabilities	54,344,394			52,555,796

Notes payable	1,083,340			1,147,364
Notes payable — related party	23,938,903			23,088,535
Obligations under capital leases	6,307,898			6,986,308
Total liabilities	85,674,535			83,778,003

Contingencies (Note 6)

Stockholders’ deficit:
Preferred stock, $10 par value, authorized 10,000,000 shares, issued and outstanding 769 at March 31, 2002 and December 31, 2001, liquidation preference of $761,310 (unaudited) at March 31, 2002	7,690			7,690

Common stock, $.007 par value, authorized 300,000,000 shares, issued and outstanding 116,549,547 at March 31, 2002 and December 31, 2001	815,849			815,849

Additional paid-in capital	128,942,389			128,942,389
Accumulated deficit	(172,366,609		)	(166,763,782		)
Total stockholders’ deficit	(42,600,681		)	(36,997,854		)

Total liabilities and stockholders’ deficit	$	43,073,854		$	46,780,149

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

I-LINK INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended March 31, 2002 and 2001

(Unaudited)

	2002			2001
Revenues:
Telecommunication services	$	24,373,864		$	4,420,983
Technology licensing and development	1,580,712			1,436,899
Other	388,621			666,583
Total revenues	26,343,197			6,524,465

Operating costs and expenses:
Telecommunication network expense	15,706,242			6,309,706
Selling, general and administrative	9,907,771			3,738,381
Provision for doubtful accounts	1,492,852			108,359
Depreciation and amortization	2,297,760			1,650,985
Research and development	382,492			1,066,758
Total operating costs and expenses	29,787,117			12,874,189

Operating loss	(3,443,920		)	(6,349,724		)

Other income (expense):
Interest expense	(2,172,554		)	(347,841		)
Interest and other income	13,647			28,071
Total other income (expense)	(2,158,907		)	(319,770		)

Net loss	$	(5,602,827	)	$	(6,669,494	)

Calculation of net income (loss) per common share:

Net loss	$	(5,602,827	)	$	(6,669,494	)
Cumulative preferred stock dividends not paid in current period	—			(10,947		)
Dividends accrued and paid on Class M redeemable preferred stock	—			(269,027		)
Net effect on retained earnings of redemption and reissuance of Class M and N preferred stock, including beneficial conversion features	—			15,512,473

Income (loss) applicable to common stock	$	(5,602,827	)	$	8,563,005

Basic and diluted weighted average shares outstanding	116,549,547			53,091,903

Net income (loss) per common share — basic and diluted	$	(0.05	)	$	0.16

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

I-LINK INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	2002			2001
Cash flows from operating activities:
Net loss	$	(5,602,827	)	$	(6,669,494	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,297,760			1,650,985
Provision for doubtful accounts	1,492,852			108,359
Amortization of discount and debt issuance costs on notes payable	677,651			29,822
Increase (decrease) from changes in operating assets and liabilities:
Accounts receivable	(877,703		)	1,203,503
Other assets	1,147,710			(39,383		)
Unearned revenue	(1,180,723		)	(51		)
Accounts payable, accrued liabilities and interest	(1,244,897		)	(912,456		)
Net cash used in operating activities	(3,290,177		)	(4,628,715		)

Cash flows from investing activities:
Purchases of furniture, fixtures, equipment and software	(481,399		)	(140,154		)
Cash received from purchase of WebToTel	—			233,787
Net cash provided by (used in) investing activities	(481,399		)	93,633

Cash flows from financing activities:
Proceeds from revolving credit facility, net	470,518			—
Proceeds from notes payable to related party	3,816,603			5,400,000
Payment of long-term debt	(10,336		)	(9,136		)
Payment of capital lease obligations	(632,283		)	(61,228		)
Net cash provided by financing activities	3,644,502			5,329,636

Increase (decrease) in cash and cash equivalents	(127,074		)	794,554

Cash and cash equivalents at beginning of period	4,662,532			2,155,628

Cash and cash equivalents at end of period	$	4,535,458		$	2,950,182

Supplemental schedule of non-cash investing and financing activities:

Conversion of notes payable to a related party and associated accrued interest to Class M redeemable preferred stock	—			$	10,305,072
Reclassification of Class M redeemable preferred stock from mezzanine	—			$	22,039,892

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

I-LINK INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 — Description of Business and Principles of Consolidation

The consolidated financial statements include the accounts of I-Link Incorporated and its subsidiaries (I-Link or the Company). The Company’s principal operations are two fold. First, for the past five years the Company has developed and marketed enhanced communications products and services utilizing its own private intranet and both owned and leased network switching and transmission facilities. The communications solutions are delivered through the Company’s proprietary technologies. Enhanced communications products and services are marketed through master agent and wholesale distributor arrangements with I-Link Communications Inc., a wholly owned subsidiary of the Company that is an FCC licensed long-distance carrier. The Company develops and licenses communications applications products and software that support multimedia communications (voice, fax and audio) over the public switched network, local area networks and the Internet. The second principal operation began on June 4, 2001, when I-Link’s subsidiary, WorldxChange Corporation (WorldxChange) began operations. WorldxChange is a facilities-based telecommunications carrier that provides international and domestic long-distance service to retail customers. Telecommunication services provided by WorldxChange consist primarily of a dial-around product that allows a customer to make a call from any phone by dialing a 10-10-XXX prefix. Marketing of the dial-around product is primarily done through independent marketing agents that receive a commission. WorldxChange’s retail base is comprised of residential and commercial customers located throughout the United States.

All significant intercompany accounts and transactions have been eliminated in consolidation.

The interim financial data are unaudited; however, in the opinion of the management of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of (a) the results of operations for the three-month periods ended March 31, 2002 and 2001, (b) the financial position at March 31, 2002, and (c) cash flows for the three-month periods ended March 31, 2002 and 2001. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2001.

The results of operations for the three-month period ended March 31, 2002 are not necessarily indicative of those to be expected for the entire year.

Note 2 — Summary of Significant Accounting Policies

Net income (loss) per share

Basic earnings per share is computed based on the weighted average number of I-Link common shares outstanding during the period. Options, warrants, convertible preferred stock and convertible debt are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. As the Company had either a net loss or no dilutive potential common shares outstanding for the three-month periods ended March 31, 2002 and 2001, basic and diluted income (loss) per share are the same. The basic earnings per share for the three months ended March 31, 2001 has been increased by the equivalent number of I-Link shares (8,447,937) issuable by I-Link for WebToTel, Inc. (WebToTel) shares outstanding on March 31, 2001 as if the merger and related stock issuance had occurred on March 1, 2001.

The net income per common share basic and diluted for the three-months ended March 31, 2001 includes a net gain to retained earnings of $30,292,319 attributed to the redemption on March 1, 2001 of the Class M redeemable preferred stock and all Class N preferred stock owned by Winter Harbor, LLC including redemption of the beneficial conversion feature related to such preferred stock. In addition, there was a charge to retained earnings of $9,779,846, representing a contingent beneficial conversion feature on the Class N preferred stock resulting from the reset of the conversion price. The net income per common share basic and diluted also reflects a $5,000,000 charge to retained earnings for the beneficial conversion feature related to the reissuance on March 1, 2001 of the Class M and Class N preferred stock to Counsel Communications, LLC (Counsel Communications).

Note 3 — Restatement of Form 10-Q for the Period Ended March 31, 2001

The amounts reflected herein for the three months ended March 31, 2001 differ from those reported in the Company’s March 31, 2001 Form 10-Q. The differences are due to results of operations for WebToTel for the month of March 2001 which was not included in the reported results of operations as originally reported. Because I-Link and WebToTel were under common control of Counsel Communications at the time of the merger (April 17, 2001), the acquisition of WebToTel has been accounted for similar to a pooling-of-interests using Counsel Communications’ book values of the WebToTel assets and liabilities. The impact of the consolidation of the WebToTel financial statements for the period from March 1 to March 31, 2001 are included herein as adjustments to the originally reported results of operations for the quarter ended March 31, 2001 as follows:

	As Originally
	Reported			Adjustments			As Adjusted
Revenues	$	(6,231,338	)	$	(293,127	)	$	(6,524,465	)
Operating loss	$	(5,680,258	)	$	(669,466	)	$	(6,349,724	)
Net loss	$	(5,916,658	)	$	(752,836	)	$	(6,669,494	)
Basic and diluted weighted shares outstanding	47,079,855			6,012,048			53,091,903
Net income per common share-basic and diluted	$	0.20		$	(0.04	)	$	0.16

Note 4 — Note Payable to Related Party

On June 6, 2001, I-Link and Counsel Corporation entered into a Loan and Security Agreement (Loan Agreement). Any monies advanced to I-Link between June 6, 2001 and April 15, 2002, (in the amount not to exceed $10,000,000) will be governed by the Loan Agreement. In connection with the Loan Agreement, I-Link executed a note payable to Counsel, due June 6, 2002. The loan is secured by all of the assets of I-Link. Outstanding balances (including any accrued and unpaid interest) under the loan bear interest at 10% per annum, which interest is payable quarterly in arrears following the last business day of each quarter. However, Counsel may (and has elected to do so through March 31, 2002) at its sole election allow interest to accrue and become payable at the end of the term. The full amount of the agreement ($10,000,000) was advanced to I-Link during 2001. During 2001 and the three-months ended March 31, 2002, Counsel had also advanced $7,070,320 and $3,816,603, respectively, to I-Link for which the conditions and terms of repayment are anticipated (as there are no written agreements) to be similar to the $10,000,000 Loan Agreement dated June 6, 2001.

Note 5 — Income Taxes

The Company recognized no income tax benefit from the losses generated in 2002 and 2001 because of the uncertainty of the realization of the related deferred tax asset.

Note 6 — Legal Proceedings

On January 18, 2001, I-Link filed action against Red Cube, International AG and Red Cube, Inc. (Red Cube) in federal court in Utah seeking damages against Red Cube, for an alleged default on an agreement to provide approximately $60,000,000 in equity funding to I-Link, and instituting a scheme to drive I-Link out of business and obtain control of I-Link’s proprietary technology, telecommunications network, key employees and customers. I-Link obtained a temporary restraining order against Red Cube preventing Red Cube from interfering with I-Link’s employees, vendors and customers. Red Cube subsequently filed a motion to dismiss the action and compel arbitration based upon a mandatory arbitration provision in the May 2000 Cooperation and Framework Agreement by and between Red Cube and I-Link. The court found that I-Link’s claims were “related to” the Cooperation and Framework Agreement and granted Red Cube’s motion to dismiss for lack of subject matter jurisdiction. The dismissal resulted in this issue being submitted for AAA arbitration pursuant to the Cooperation and Framework Agreement.

On January 24, 2001, Red Cube International AG delivered a written demand for arbitration and commenced an arbitration proceeding in New York alleging that I-Link breached the Cooperation and Framework Agreement by (i) threatening a shut-down of I-Link’s IP telecommunications network, (ii) the resignation of certain employees, and (iii) I-Link’s alleged failure to update the escrowed copy of its source code to the current version of the source code employed to maintain the IP telecommunications network. I-Link denied these allegations. I-Link filed a counterclaim against Red Cube International AG and filed a third-party claim against Red Cube Inc., seeking compensatory and/or punitive damages including damages for Red Cube International AG’s breach of the Cooperation and Framework Agreement and the June 2000 Revenue Sharing Agreement, Red Cube’s default under a subsequent agreement to provide approximately $60,000,000 in equity funding to I-Link, and engaging in a scheme to drive I-Link out of business and obtain control of I-Link’s proprietary technology, telecommunications network, key employees and customers. An evidentiary arbitration hearing is currently scheduled to begin in July 2002.

On November 9, 2000 D/Vit, Inc (Dvit) filed an action against I-Link in federal court in Texas alleging that I-Link’s use of the “V-Link” trademark infringed upon Dvit’s intellectual property rights in the mark “V Linc”. Dvit’s complaint sought damages and an injunction enjoining I-Link’s use of the mark “V-Link”. On August 22, 2001 the court issued a preliminary injunction enjoining I-Link’s use of the “V-Link” mark. I-Link had already elected to change the name of its product to “I-Link One Number”. On February 14, 2002 I-Link filed a motion for summary judgment asking the court to rule as a matter of law that I-Link’s past use of the “V-Link” mark did not constitute an infringement upon Dvit’s intellectual property rights in the “V Linc” mark. Also on February 14, 2002, Dvit filed a motion for partial summary judgment asking the court to determine as a matter of law that I-Link’s prior use of the “V-Link” mark infringed upon Dvit’s rights in the “V Linc” mark. On May 8, 2002 the court issued a Memorandum and Order (Order) denying I-Link’s motion for summary judgment and granting Dvit’s partial motion for summary judgment. The court’s Order did not address possible damages. No trial date has been set and discovery continues. A pre-trial conference is scheduled for May 20, 2002 to discuss what issues remain in the lawsuit. While the Company cannot predicted the ultimate outcome of any legal proceeding, in the opinion of the Company, damages, if any, will not have a material adverse effect on the Company’s financial position or results of operations.

The Company is involved in litigation relating to other claims arising out of its operations in the normal course of business.

The litigation and arbitration referred to above is not expected, individually or in the aggregate, to have a material adverse affect on the Company.

Note 7 — Intangible Assets

Intangible assets consisted of the following at March 31, 2002 and December 31, 2001:

	March 31, 2002			December 31, 2001
Intangible assets subject to amortization:
Acquired technology	$	8,875,000		$	8,875,000
Accumulated amortization	(8,431,250		)	(7,987,500		)
Net intangible asset	443,750			887,500

Intangible assets not subject to amortization:
Goodwill	173,334			173,334
Other intangible assets	270,000			270,000
	443,334			443,334
Total intangible assets	$	887,089		$	1,330,839

Aggregate amortization expense for the quarter ended March 31, 2002 was $443,750. The intangible assets subject to amortization will be fully amortized in the quarter ending June 30, 2002.

The following represents what the net loss for the three months ended March 31, 2001 would have been exclusive of amortization expense recognized in that period related to goodwill and intangible assets that are no longer being amortized.

	For the Three
	Months Ended
	March 31, 2001
Reported net loss	$	(6,669,494	)
Add back: goodwill amortization	272,798
Add back: other intangible assets not subject to amortization	13,500
Adjusted net loss	$	(6,383,196	)

The following represents what the net income applicable to common stock per share for the three months ended March 31, 2001 would have been exclusive of amortization expense recognized in that period related to goodwill and intangible assets that are no longer being amortized.

	For the Three
	Months Ended
	March 31, 2001
Net income per share	$	0.16
Goodwill amortization	0.01
Other intangibles amortization	0.00
Adjusted net income per share	$	0.17

Note 8 — Segment of Business Reporting

Segment of business reporting is based upon the “management” approach as defined in Statement of Financial Accounting Standards (SFAS) No. 131. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. Based on the management approach, the Company’s three reportable segments are as follows:

• Telecommunications services — includes long-distance toll services and enhanced calling features such as One-Number. The telecommunications services products are marketed primarily to residential and small business customers.

• Dial-around telecommunication services — includes operations of WorldxChange that offers a dial-around telecommunications product through independent marketing agents. This segment and business was entered into effective June 4, 2001 with the Company’s purchase of certain assets and liabilities of WorldxChange Communications, Inc.

• Technology licensing and development — provides research and development to enhance the Company’s product and technology offerings. Products developed by this segment include One-Number and other proprietary technology. The Company licenses certain developed technology to third party users.

There are no intersegment revenues. The Company’s business is conducted principally in the U.S.; foreign operations are not material. The table below presents information about revenues from external customers and net loss for the three-month periods ended March 31, 2002 and 2001.

	For the Three			For the Three
	Months Ended			Months Ended
	March 31, 2002			March 31, 2001
Revenues from external customers:

Telecommunications services	$	2,156,000		$	5,088,000
Dial-around	22,606,000			—
Technology licensing and development	1,581,000			1,437,000

Total revenues from external customers for reportable segments	$	26,343,000		$	6,525,000

Segment income (loss):

Telecommunications services	$	(2,861,000	)	$	(2,856,000	)
Dial-around	(1,413,000		)	—
Technology licensing and development	919,000			(28,000		)

Total segment income (loss) for reportable segments	(3,355,000		)	(2,884,000		)

Unallocated non-cash amounts in consolidated net loss:
Amortization of discount on notes payable	(135,000		)	(30,000		)
Amortization of intangible assets	(148,000		)	(548,000		)
Other corporate expenses	(1,965,000		)	(3,207,000		)
Consolidated net loss	$	(5,603,000	)	$	(6,669,000	)

Item 2- Management’s Discussion and Analysis and Results of Operations

The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management’s Discussion and Analysis set forth in the Company’s Form 10-K for the year ended December 31, 2001.

Forward Looking Information

This report contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and information relating to I-Link that are based on management’s exercise of business judgment as well as assumptions made by and information currently available to management. When used in this document, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements.

Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward-looking statements. Several of these factors include, without limitation:

• our ability to finance and manage expected rapid growth;

• the impact of competitive services and pricing;

• our ongoing relationship with our long distance carriers and vendors;

• our ability to meet our usage commitments with carriers;

• our dependence upon key personnel;

• subscriber attrition;

• the adoption of new, or changes in, accounting principles;

• legal proceedings;

• federal and state governmental regulation of the long distance telecommunications and

internet industries;

• our ability to maintain, operate and upgrade our information systems network;

• our success in deploying our Communication Engine network in internet telephony;

• the demand for and acceptance of our products and services (including but not

limited to dial-around service and One-Number service (formerly V-Link);

• our ability to efficiently integrate our recent acquisitions;

• the ability of I-Link to refinance its existing debt and to fund its operating deficit; and

• other risks referenced from time to time in our filings with the SEC.

We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to these forward–looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.

Operations

Our principal operations are two fold. First, for the past five years we have developed and marketed enhanced communications products and services utilizing our own private intranet and both owned and leased network switching and transmission facilities. The communications solutions are delivered through our proprietary technologies. Enhanced communications products and services are marketed through master agent and wholesale distributor arrangements with I-Link Communications Inc., our wholly owned subsidiary that is an FCC licensed long-distance carrier. We develop and license communications applications products and software that support multimedia communications (voice, fax and audio) over the public switched network, local area networks and the Internet. The second principal operation began on June 4, 2001, when our

subsidiary, WorldxChange Corporation (WorldxChange) began operations. WorldxChange is a facilities-based telecommunications carrier that provides international and domestic long-distance service to retail customers. Telecommunication services provided by WorldxChange consist primarily of a dial-around product that allows a customer to make a call from any phone by dialing a 10-10-XXX prefix. Marketing of the dial-around product is primarily done through independent marketing agents that receive a commission and our advertising campaigns. WorldxChange’s retail base is comprised of residential and commercial customers located throughout the United States.

Liquidity and Capital Resources

Cash and cash equivalents as of March 31, 2002 were $4,535,458 and the working capital (current assets less current liabilities) deficit was $32,709,369. Cash used by operating activities during the three-month period ended March 31, 2002 was $3,290,177 as compared to $4,628,715 during the same period ended March 31, 2001. The net decrease in cash used in 2002 was primarily due to: (1) a decrease of $3,745,764 in our net loss after allowance for non-cash expenses, offset by (2) an increase in cash used of $2,407,226 associated with timing of collections and payments related to accounts receivable, other assets, accounts payable and accrued liabilities.

Net cash used in investing activities in the three-month period ended March 31, 2002 was $481,399 as compared to net cash provided of $93,633 in the same period ended March 31, 2001. In the first three months of 2002, cash used by investing activities was attributable to the purchase of furniture, fixtures, equipment and software. Cash provided by investing activities in 2001 was due to cash of $233,787 acquired in the merger with WebToTel that was offset by the purchase of furniture, fixtures, equipment and software of $140,154.

Financing activities provided net cash of $3,644,502 in the first three months of 2002 as compared to cash provided of $5,329,636 in the same period of 2001. Cash provided in 2002 included proceeds of $3,816,603 from notes payable to a related party and net borrowings of $470,518 on the WorldxChange revolving credit facility. Repayments of $642,619 on long-term debt and capital lease obligations offset these proceeds. Cash provided in 2001 included $5,400,000 in proceeds from notes to a related party which were offset by repayments of long-term debt and capital lease obligations of $70,364.

We incurred a net loss from operations of $5,602,827 for the three-months ended March 31, 2002 and as of March 31, 2002 had an accumulated deficit of $172,366,609. We anticipate that revenues generated from operations will not be sufficient during the remainder of 2002 and into 2003 to fund our operations or continued expansion of our private telecommunications network facilities and anticipated growth in subscriber base. We continue to be dependent upon funding from our majority stockholder, Counsel Springwell Communications LLC (formerly Counsel Communications LLC), and its parent Counsel Corporation (collectively Counsel) to fund our operational cash needs (see discussion below).

Current Position/Future Requirements

Our current business plan of continued market penetration and deployment of our products and services anticipates needed financial resources at lower levels than those experienced in 2001. The decrease is primarily a result of our determination in late 2001 that it was not economically justifiable to continue to maintain a significant part of our fixed network, specifically, leased lines for origination and termination from our backbone network. Instead of using these leased lines for origination and termination, we determined that given current revenue levels, it would be more economical to originate and terminate traffic on our subsidiary’s (WorldxChange) network, which we began to do in late 2001. This transition (effectively completed in April 2002) has resulted in significant cost savings (see discussion of telecommunication expenses below). Additionally, as of March 31, 2002, we have future payments due to us of $5,000,000 from foreign customers over the next four years (assuming that scheduled periodic payments are made per the contract terms) relating to technology licensing agreements in place. However, payments under one contract with future payments of $2,400,000 were in default as of March 31, 2002.

Our operational cash needs continue to be funded through our agreement with Counsel wherein Counsel committed to fund, through long-term inter-company advances or equity contribution, all capital investment, working capital or other operational cash requirements through April 15, 2003. On June 6, 2001, we entered into a Loan and Security Agreement with Counsel, pursuant to which Counsel agreed to advance up to $10 million. While we no longer have any availability under that

facility, during 2001 and the three-months ended March 31, 2002, Counsel has advanced $7,070,320 and $3,816,603, respectively, to us for which the conditions and terms of repayment are anticipated (as there are no written agreements) to be similar to the $10,000,000 Loan Agreement dated June 6, 2001. There can be no assurance that Counsel will continue to provide funding after April 15, 2003. We anticipate that additional funds will be necessary after such time to fund our operations and finance the planned expansion of our business communications services, product development and manufacturing, and to discharge our financial obligations. The availability of such funds will depend on prevailing market conditions, interest rates, our financial position and results of our operations. There can be no assurance that such funds will be available or if available that they will be on terms and conditions favorable to I-Link.

Three-Month Period Ended March 31, 2002 Compared to Three-Month Period Ended March 31, 2001

In order to more fully understand the comparison of the three months ended March 31, 2002 as compared to the same three months in 2001, you must understand the significance of our subsidiary, WorldxChange, which purchased certain assets and liabilities of WorldxChange Communication, Inc. and began operations on June 4, 2001. WorldxChange offers a dial-around telecommunications product. We did not offer a comparable product prior to June 4, 2001.

Revenues

Telecommunications services revenue increased $19,952,881 to $24,373,864 in the first quarter of 2002 as compared to $4,420,983 in the first quarter of 2001. The primary reason for the increase related to WorldxChange revenues of $22,606,193 in 2002 for which there was no similar revenue in the first quarter of 2001. This increase was offset by revenue decreases primarily from three sources namely:

(1) revenues of approximately $1,383,000 from wholesale relationships with a few customers which we ceased to offer in the fourth quarter of 2001 when we reduced our leased lines used for origination and termination associated with our network backbone (see discussion of network costs below);

(2) revenues from our largest wholesale customer of approximately $900,000 primarily related to a reduction in the number of subscribers; and

(3) revenues of approximately $293,000 from Nexbell’s METS product for the month of March 2001, that did not recur in 2002 as we ceased offering this product in the fourth quarter of 2001.

Technology licensing and development revenue increased $143,813 to $1,580,712 in the first quarter of 2002 as compared to $1,436,899 in the first quarter of 2001. During the first quarter of 2002, we recorded $1,250,000 in licensing revenue from the licensing agreement we entered into with Red Cube International AG in May 2000. Revenues from that licensing agreement will cease in May 2002. Revenue from this segment will vary from quarter to quarter based on timing of technology licensing and development projects. As of March 31, 2002, we have future payments due to us of $5,000,000 relating to technology licensing agreements in place. Revenues related to these contracts will be recorded in our financial statements over the next four years (depending on the respective contract terms) assuming that scheduled periodic payments are made per the agreements.

Other revenues in the first quarter of 2002 of $388,621 represent revenues relating to customer care, billing and accounts receivable services performed primarily for our largest wholesale customer. Other revenues in the first quarter of 2001 from this same customer were $666,583. The decrease was primarily due to a reduction in services to our largest wholesale customer. Revenues from these types of services vary from period to period based upon services requested. We anticipate that revenues from this source will decrease slightly during the remainder of 2002.

Operating costs and expenses

Telecommunications expenses increased $9,396,536 in the first quarter of 2002 to $15,706,242 as compared to $6,309,706 for the same quarter of 2001. These expenses include the costs related to the continuing development and deployment of our communication network and expenses related to the generation of telecommunication service revenue.

The primary increase was related to inclusion of network expense of approximately $13,057,000 related to the WorldxChange dial-around business in 2002 that did not exist in the first quarter of 2001. This increase was primarily offset by:

(1) decreased network fixed and variable costs of approximately $2,935,000 as a result of our decision in late 2001 when we determined it was not economically justifiable to continue to maintain a significant part of our fixed network, specifically, leased lines for origination and termination from our backbone network. Instead of using these leased lines for origination and termination, it was determined that given current revenue levels, it would be more economical to originate and terminate traffic on our subsidiary’s (WorldxChange) network which we began to do in late 2001 which transition was effectively completed in April 2002; and

(2) decreased expenses of approximately $581,000 in the first quarter of 2001 related to Nexbell which did not recur in 2002;

Selling, general and administrative expense increased $6,169,390 to $9,907,771 in the first quarter of 2002 as compared to $3,738,381 in the first quarter of 2001. The primary component of the net increase was additional selling, general and administrative cost of approximately $7,470,672 in the first quarter of 2002, related to the WorldxChange dial-around business that did not exist in the first quarter of 2001. This increase was offset by expenses of approximately $158,000 in the first quarter of 2001 related to Nexbell that did not recur in 2002. The increase was further offset by cost savings related to the workforce reductions in May and December of 2001 which included reduction in facilities, materials, etc. and other cost cutting measures instituted by management.

The provision for doubtful accounts increased $1,384,493 to $1,492,852 in the first quarter of 2002 as compared to $108,359 in the same quarter of 2001. The increase is primarily due to reserves of $1,356,372 related to our dial-around business that did not exist in the first quarter of 2001.

Depreciation and amortization increased $646,775 to $2,297,760 in the first quarter of 2002 as compared to $1,650,985 in the first quarter of 2001. The increase was primarily due to depreciation and amortization of $979,810 related to assets and capital leases associated with WorldxChange which did not exist in the first quarter of 2001. This increase was offset primarily by:

(1) goodwill amortization of approximately $152,000 related to the WebToTel merger in 2001 that did not recur in 2002; and

(2) goodwill amortization of approximately $90,000 in the first quarter of 2001 that did not recur in the first quarter of 2002 due to the adoption of SFAS No. 142 effective January 1, 2002 which eliminated the periodic amortization of goodwill.

Research and development expense decreased $684,266 to $382,492 in the first quarter of 2002 as compared to $1,066,758 in 2001. The decrease was primarily a result of our decision to consolidate our research operations in Draper, Utah and to curtail research and development activities in order to concentrate our financial resources on sales and marketing of existing products. Research and development is expected to continue at approximately the same level through the remainder of 2002 as we continue to focus our financial resources on sales and marketing of existing products.

Other income (expense)

Interest expense increased $1,824,713 to $2,172,554 in the first quarter of 2002 as compared to $347,841 in the same quarter of 2001. The increase was primarily due to increased interest of approximately:

(1) $903,000 related to increased debt to our parent company (Counsel);

(2) $111,000 on WorldxChange’s revolving credit facility;

(3) $166,000 on capital leases (primarily related to equipment of WorldxChange); and

(4) $639,000 (non-cash) related to the amortization of a beneficial conversion feature on convertible debt with Counsel and amortization of the discount related to the value of warrants issued to Counsel.

Interest and other income decreased $14,424 to $13,647 in the first quarter of 2002 as compared to $28,071 in the same quarter of 2001. The decrease was primarily due to a decrease in the average balance of cash on hand during 2002 as compared to 2001.

Net income (loss) per share

The net income per common share basic and diluted for the three-months ending March 31, 2001 includes a net gain to retained earnings for $15,512,473 attributed to the redemption and reissuance on March 1, 2001 of the Class M redeemable preferred stock and all Class N preferred stock owned by Winter Harbor as discussed in Note 2 to the financial statements for the quarter ended March 31, 2002. This adjustment to retained earnings represents the net effect on retained earnings of the redemption of the Class M and N preferred stock including the associated beneficial conversion features related to the original issuance of the preferred stock. The adjustment also reflects a charge to retained earnings for the beneficial conversion features related to the reissuance on March 1, 2001 of that Class M and N preferred stock to Counsel Communications, LLC.

Item 3- Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk is primarily limited to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Our cash equivalents are invested with high quality issuers which limits the amount of credit exposure to any one issuer. Due to the short-term nature of the cash equivalents, we believe that we are not subject to any material interest rate risk. We did not have any foreign currency hedges or other derivative financial instruments as of March 31, 2002.

We do not enter into financial instruments for trading or speculative purposes and do not currently utilize derivative financial instruments. Our operations are conducted primarily in the United States and as such are not subject to material foreign currency exchange rate risk.

PART II - OTHER INFORMATION

Item 1 — Legal Proceedings

There have been no material changes in other legal proceedings reported in our Annual Report on Form 10-K for the year ended December 31, 2001.

We are involved in litigation relating to claims arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse affect to us.

Item 4 — Submission of Matters to a Vote of Security Holders

None

Item 5 — Other Information

None

Item 6(a) — Exhibits

10.1Amended and restated employment agreement with Helen Seltzer dated January 3, 2002

Item 6(b) — Reports on Form 8-K

None

• 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 thereunder duly authorized.

				I-Link Incorporated
				(Registrant)

Date:	May 15 , 2002	By:	/s/ Helen Seltzer
			Helen Seltzer
			President and Chief Executive Officer

		By:	/s/ James A. Giauque, III
			James A. Giauque III, CPA
			Chief Accounting Officer and acting chief financial officer

EXHIBIT 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made as of January 3, 2002 (the “Effective Date”), among Springwell Capital Corporation, a Delaware corporation (the “Company”), I-Link Incorporated, a Florida corporation (“I-Link”), and Helen Seltzer (“Executive”).

Springwell Capital Partners, LLC (the “LLC”) owns a majority of the issued and outstanding shares of capital stock of I-Link and all of the issued and outstanding shares of capital stock of the Company.

The Company assists the LLC in connection with the management of the business and affairs of the Subsidiaries of the LLC, including I-Link.

The Company, I-Link and Executive, among others, entered into an Employment Agreement dated as of January 3, 2002 (the “Employment Agreement”) and now wish to amend and restate the terms of the Employment Agreement. Certain definitions are set forth in Section 9 of this Agreement.

The parties hereto agree that the Employment Agreement is hereby amended and restated in its entirety to read as follows:

Section 1. Employment.

(a) Employment Period. The Company agrees to employ Executive and Executive accepts such employment for the period (the “Employment Period”) beginning as of the Effective Date and ending upon (a) the fourth anniversary of the Effective Date or (b) such earlier date upon which the employment of the Executive shall terminate in accordance with Section 2 herein (the date of termination being hereinafter called the “Termination Date”). The Employment Period may be extended by written agreement of the parties hereto.

(b) Position and Duties.

(i) During the Employment Period, Executive shall serve as the Chief Executive Officer of I-Link and shall report to the Board. Executive shall act as the chief executive officer of I-Link and shall be responsible for the general management and control of the business and affairs of I-Link and shall perform all duties and shall have all powers which are commonly incident to the office of the chief executive as well as all powers that are delegated to Executive by the Board.

(ii) Executive shall devote her best efforts and her full business time and attention to the business and affairs of I-Link and its Subsidiaries, except for permitted vacation periods in accordance with I-Link’s policy, periods of illness or other incapacity, reasonable time spent with respect to civic and charitable activities.

(i) During the Employment Period, I-Link will pay Executive a base salary of $275,000 per annum (the “Annual Base Salary”). The Annual Base Salary shall be paid in such installments as is the policy of I-Link with respect to executive officers of the Company, but in no event less frequently than bi-weekly.

(ii) Commencing with the fiscal year ending December 31, 2002, Executive shall be eligible for a discretionary annual bonus of up to one hundred percent (100%) of Executive’s Annual Base Salary (the “Bonus”). The amount of any Bonus to be awarded shall be determined by the Board, based on performance criteria established at the beginning of each fiscal year, and the timing of such award and the payment of any such Bonus shall be consistent with the

past practice of I-Link. Notwithstanding the foregoing, Executive’s Bonus for the fiscal year ending on December 31, 2002 shall be in an amount equal to at least fifty percent (50%) of Executive’s Annual Base Salary.

(iii) Executive shall be entitled to participate in all employee pension and welfare benefit plans, programs and practices maintained by I-Link for its employees generally in accordance with the terms of such plans, programs and practices as in effect from time to time, and in any other insurance, pension, retirement or welfare benefit plans, programs and practices which I-Link provides to its executives from time to time.

(d) Expenses.

(i) I-Link shall pay, or reimburse the Executive (at I-Link’s option), in accordance with policies established by the Company, for all reasonable and necessary expenses and other disbursements incurred by the Executive for or on behalf of I-Link in the performance of her duties hereunder, including, without limitation, travel on behalf of or in connection with her services for I-Link in a manner customary for I-Link’s senior executives, including food and lodging expenses while the Executive is away from home performing services for I-Link.

(ii) I-Link shall pay (or reimburse Executive for) the following expenses, up to a maximum of $50,000.00:

(A) reasonable moving expenses incurred by the Executive to relocate to the Salt Lake City metropolitan area;

(B) the reasonable cost of maintaining an apartment or house for the Executive and her husband in the Salt Lake City metropolitan area for up to six (6) months following the Effective Date; and

(C) the reasonable expenses (including airfare and hotel accommodations) for a reasonable number of trips between Salt Lake City and New York City during the six (6) month period following the Effective Date.

(e) Workplace and Work Schedule. Executive’s workplace shall be I-Link’s office in Draper, Utah. Executive shall be entitled to such holidays as are established by the policies of I-Link. Executive shall be entitled to three (3) weeks of vacation per year, which may be taken in various periods, subject to I-Link’s needs.

Section 2. Termination Of Employment.

(a) Death or Disability. The Company may terminate the Executive’s employment hereunder due to the Executive’s death or Disability. If the Executive dies during the Employment Period, the Termination Date shall be deemed to be the date of the Executive’s death.

(b) Cause. The Company may terminate the employment of Executive hereunder at any time for Cause (such termination being referred to herein as a “Termination for Cause”) by giving the Executive written notice of such termination, with such termination to take effect upon the receipt of such notice. Notwithstanding any provisions contained herein to the contrary, in no event shall the Company terminate the employment of the Executive pursuant to this Section 2(b) without a prior hearing on at least thirty (30) days’ notice to the Executive and approval of such Termination for Cause by a majority of the entire Board.

(c) Without Cause. The Company may terminate the employment of the Executive at any time during the Employment Period without Cause.

(d) Good Reason. The Executive may terminate her employment hereunder for Good Reason by providing written notice to the Company within 45 days of her knowledge of the event constituting Good Reason. Notwithstanding the foregoing provisions to the contrary, in no event shall the Executive terminate her employment hereunder for Good Reason without providing the Company with at least fifteen (15) days’ prior written Notice of Termination given by the Executive to the Company and an opportunity for the Company to cure within that fifteen (15) day period the Good

Reason which the Executive believes provides her with grounds to terminate her employment.

(e) Notice of Termination. Any purported termination pursuant to this Section 2 shall be communicated to the Executive or the Board, as applicable, by Notice of Termination.

Section 3. Effect Of Termination Of Employment.

(a) Death, Disability or Cause. Upon the termination of the Executive’s employment hereunder due to death or Disability pursuant to Section 2(a) or Termination for Cause pursuant to Section 2(b), neither the Executive nor her beneficiary or estate shall have any further rights or claims against the Company or I-Link under this Agreement, except the right to receive (i) the unpaid portion, if any, of the Annual Base Salary provided for in Section 1 (and, if the termination occurs prior to December 31, 2002, Executive’s guaranteed Bonus for the 2002 fiscal year), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over a year of 365 or 366 days, as applicable) and (ii) reimbursement for any expenses for which the Executive shall not have been reimbursed as provided for in Section 1 (such amounts being collectively referred to as “Accrued Compensation”).

(b) Without Cause. Upon a termination of the Executive’s employment hereunder by the Company without Cause pursuant to Section 2(c), neither the Executive nor her beneficiary or estate shall have any further rights or claims against the Company or I-Link under this Agreement, except the right to receive

(i) any Accrued Compensation;

(ii) 100% of the Annual Base Salary, payable in accordance with Section 1(c)(i), for the one-year period following the Termination Date.

(c) Good Reason. Upon a termination of the Executive’s employment hereunder by the Executive for Good Reason pursuant to Section 2(d), neither the Executive nor her beneficiary or estate shall have any further rights or claims against the Company or I-Link under this Agreement, except the right to receive

(i) any Accrued Compensation;

(ii) 100% of the Annual Base Salary, payable in accordance with Section 1(c)(i), for the six-month period following the Termination Date.

(d) Mititgation. Notwithstanding the foregoing, the Executive shall be required to mitigate the amount of any payment provided for in Sections 3(b)(ii) and 3(c)(ii) by seeking other employment at a comparable level to the Executive’s position hereunder and subject to the limitations on competition hereunder, and the amount of such payment by the Company provided for in Section 3(b)(ii) or Section 3(c)(ii), as the case may be, shall be reduced by any compensation earned by the Executive from a source other than the Company during the period such payment is to be made by the Company.

Section 4. Inventions.

(a) The Executive hereby assigns to I-Link the entire right, title and interest of the Executive in and to all work, inventions, ideas, disclosures and improvements, whether or not patented or patentable, made, conceived or reduced to practice by the Executive, solely or with others, in whole or in part, at any time during the Employment Period, which in any way relate to the Business. During the Employment Period, the Executive shall communicate promptly and disclose to I-Link all information, details and data pertaining to such work, inventions, ideas, disclosures and improvements. The Executive shall, at any time (including any time after the expiration of the Employment Period), execute and deliver to I-Link such formal transfers and assignments and such other papers and documents as may be required of the Executive to perfect I-Link’s rights hereunder and to permit I-Link to file and prosecute patent applications. Any work, invention, idea, disclosure or improvement by the Executive relating to the Business within six (6) months following the expiration of the Employment Period shall be deemed to fall within the provisions of this Section 4 unless proved by the Executive to have been first conceived and made following such expiration.

(b) Nothing in this Section 4 shall abrogate or reduce any other restrictions on the Executive under applicable law.

Section 5. Noncompetition Covenant With Respect To The Business.

(a) The Executive shall not, at any time prior to the Termination Date or during the period thereafter ending on the later of (x) the sixth monthly anniversary of the Termination Date, and (y) the end of the period that the Company is to pay severance to the Executive under Section 3(b)(ii) hereunder even if severance is reduced or eliminated during such period by other compensation earned by the Executive (such period being referred to herein as the “Stipulated Period”), (i) engage in the Territory in any business or activity, whether or not for profit, which is competitive with the Business, or (ii) intentionally disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company, I-Link or any of their respective Subsidiaries and any third party, including, but not limited to, any customer, supplier or employee of any of them. The Executive shall be deemed to have violated the provisions of the foregoing sentence if she shall (A) solicit or directly or indirectly for herself or any third party hire or otherwise retain the services of any individual who shall have been an employee of the Company, I-Link or any of their respective Subsidiaries within the immediately preceding six (6) month period, (B) be an employee, officer or director of, consultant to, or owner of an equity interest in any Person engaged or intending to engage in any activity which would violate the provisions of the foregoing sentence if engaged in by the Executive; provided, however, that (x) the Executive may own up to, but not more than, a 1% equity interest in any public company with a market capitalization in excess of $100,000,000, and (y) the Executive may engage in a business or activity which derives less than 25% of its revenues from the Business for the twelve (12) month period preceding the Executive’s first engaging therein and which has projected less than 25% of its revenues from the Business for the twelve (12) month period following the Executive first engaging therein, and (z) the Executive may be employed by a Person deriving 25% or more of its revenue from the Business so long as her activities for such a Person are in areas unrelated to the Business.

(b) During the term of the Executive’s employment and the Stipulated Period, the Executive shall inform all Designated Persons of the existence of this Agreement and the relevant terms of Sections 4, 5 and 6.

Section 6. Unauthorized Disclosure.

The Executive shall not make any Unauthorized Disclosure. For purposes of this Agreement, “Unauthorized Disclosure” means disclosure by the Executive without the consent of the Board to any Person, other than an employee of the Company, I-Link or a Person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of her duties as an executive of I-Link or as may be legally required, of any confidential information about the Company, I-Link or any of their respective Subsidiaries obtained by the Executive while in the employ of the Company (including, but not limited to, any confidential information with respect to any of I-Link’s customers or methods of distribution) the disclosure of which she knows or has reason to believe will be materially injurious to the Company, I-Link or any of their respective Subsidiaries; provided, however, that such term shall not include the use or disclosure by the Executive, without consent, of any information known generally to the public (other than as a result of disclosure by her in violation of this Section 6) or any information not otherwise considered confidential by a reasonable Person engaged in a business similar to that conducted by the Company, I-Link or any of their respective Subsidiaries.

Section 7. Acknowledgments By The Executive.

The Executive understands that the restrictions contained in Sections 4, 5 and 6 herein may limit her ability to earn a livelihood in a competing business, but the Executive nevertheless believes that she has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder, including the significant number of Executive Securities being issued to the Executive, to clearly justify such restrictions which, in any event (given her education, skills and ability), the Executive does not believe would prevent her from earning a livelihood.

Section 8. Tax Withholding.

The Company and I-Link may withhold from any compensation or severance payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 9. Definitions.

“Affiliate” of any particular Person means (i) any other Person controlling, controlled by, or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise, and (ii) if such Person is a partnership, any partner thereof.

“Board” means the Board of Directors of I-Link.

“Business” means the offering of out-sourced, Internet-based unified messaging services for business customers and consumers, including the provision of fax delivery using telephone transmissions delivered through the Internet. “Business” also means any other business activity which is I-Link’s principal Internet-related business activity at the time either Sections 4 or 5 is invoked.

“Cause” means (i) the Executive’s conviction of a crime constituting a felony, or (ii) any of the following performed or caused by the Executive which may reasonably be anticipated to have a Material Adverse Effect and which, if curable, remains uncured for a period of fifteen (15) days after written notice thereof is delivered from the Company to the Executive: (A) the willful and continued failure to substantially perform the duties described in Section 1 (other than any failure resulting from an illness), (B) misappropriation of funds, properties or assets of the I-Link or any of its Subsidiaries, (C) commission of a material tort relating to the Executive’s employment with the Company, and (D) breach of the fiduciary duty owed by the Executive to the Company, I-Link or of their respective Subsidiaries.

“Designated Person” means any person proposing (i) to hire or retain the Executive as an employee, consultant, director, teacher, lecturer or author, or (ii) to make a financial investment (whether equity or debt) in any Person in which the Executive owns or may own an equity interest (other than a public company with a market capitalization in excess of $100,000,000 in which the Executive owns up to, but not more than a 1% equity interest).

“Disability” means a physical or mental infirmity which impairs the Executive’s ability to perform substantially her duties for a total period exceeding six (6) months during the Employment Period or for a period of four (4) consecutive months. Disability shall be determined by a physician acceptable to both the Company and the Executive, or, if the Company and Executive cannot agree upon a physician within 15 days after the Company claims that the Executive is suffering from a Disability, by a physician selected by two physicians, one designated by each of the Company and the Executive. The Executive’s failure to submit to any physical examination by any such physician after such physician has given reasonable notice of time and place of such examination shall be conclusive evidence of the Executive’s inability to perform her duties hereunder.

“Good Reason” means, during the Employment Period and without Executive’s consent:

(i) a material diminution of Executive’s title, reporting structure, position or responsibilities or

(ii) a reduction in, or failure to pay, Executive’s Annual Base Salary or any reduction in the benefits being required to be provided herein or any other material breach of this Agreement.

“Material Adverse Effect” means a material adverse effect on the business, operations, financial condition, results of operations, properties, assets or liabilities of the I-Link and its Subsidiaries taken as a whole.

“Notice of Termination” means a written notice which indicates the Termination Date, the specific termination provision in this Agreement relied upon, and the facts and circumstances, if any, claimed to provide a basis for such termination.

“Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Subsidiary” means any corporation or other entity of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Company either directly or through one or more Subsidiaries.

“Territory” means any of the following geographic areas in which products, processes or services have been manufactured, provided, sold or offered or promoted for sale by I-Link or any of its Subsidiaries or with respect to which I-Link or any of its Subsidiaries has devoted substantial expense in anticipation of launching into such area a portion of the Business: (i) the United States of America, including its territories, (ii) Canada, (iii) Mexico, and (iv) each country in the European Union.

Section 10. Notices.

Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated:

If to Company:

Springwell Capital Corporation.

One Landmark Square

Suite 320

Stamford, Connecticut 06901

Attention: Chairman

with copies to:

Counsel Corporation (US)

280 Park Avenue

28^th Floor West

New York, New York 10017

Attention: Chief Executive Officer

If to I-Link:

I-Link Incorporated

13751 S. Wadsworth Drive

Draper, Utah 84020

If to Executive:

32 North Ridge Way

Sandy, Utah

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail.

Section 11. General Provisions.

(a) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b) Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

(c) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and I-Link and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable.

(e) Choice of Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

(f) Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(g) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, I-Link and Executive.

(h) Insurance. The Company, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that she has no reason to believe that her life is not insurable at rates now prevailing for healthy women of her age.

(i) Termination. This Agreement (except for the provisions of Sections 1(a), (b), (c) and Section 3) shall survive a Separation and shall remain in full force and effect after such Separation.

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Employment Agreement on the date first written above.

		SPRINGWELL CAPITAL CORPORATION

		By:
		Name:
		Its:

		I-LINK INCORPORATED
		By:
		Name:
		Title:

		Helen Seltzer

13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020

Note 5 — Income Taxes

Item 2- Management’s Discussion and Analysis and Results of Operations

Operations

Revenues

Operating costs and expenses

Item 4 — Submission of Matters to a Vote of Security Holders

Item 5 — Other Information

Item 6(a) — Exhibits

Item 6(b) — Reports on Form 8-K