U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT
For the transition period from ___________________ to ________________
Commission File No. 0-28138
SPANLINK COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1618845
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7125 Northland Terrace, Minneapolis, MN
(Address of principal executive offices)
(612) 971-2000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.
At May 9, 1997, there were 5,080,500 shares of the issuer's no par value, Common
Stock, outstanding.
Check whether this is a transitional small business disclosure format:
Yes ___ No _X_
SPANLINK COMMUNICATIONS, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheet as of 3
March 31, 1997 and December 31, 1996
Condensed Statement of Operations 4
for the three month periods ended
March 31, 1997 and 1996
Condensed Statement of Cash Flows 5
for the three month periods ended
March 31, 1997 and 1996
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 8
SIGNATURES 9
SPANLINK COMMUNICATIONS, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS (UNAUDITED) (AUDITED)
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,277,835 $ 2,284,952
Marketable securities 1,994,732 2,092,553
Accounts receivable, net of allowances 1,187,694 1,993,667
Costs and estimated earnings in excess of billings 289,081 61,641
Other current assets 751,631 364,399
----------- -----------
Total current assets 5,500,973 6,797,212
Property and equipment, net 1,171,112 837,488
----------- -----------
Total assets $ 6,672,085 $ 7,634,700
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion capital lease obligation $ 46,284
Accounts payable 669,855 $ 924,590
Accrued expenses 638,790 802,421
Other current liabilities 764,048 730,656
----------- -----------
Total current liabilities 2,118,977 2,457,667
Capital lease obligation 233,500
----------- -----------
Total liabilities 2,352,477 2,457,667
----------- -----------
Shareholders' equity:
Common stock 8,193,663 8,193,663
Accumulated deficit (3,874,055) (3,016,630)
----------- -----------
Total shareholders' equity 4,319,608 5,177,033
----------- -----------
Total liabilities and shareholders' equity $ 6,672,085 $ 7,634,700
=========== ===========
</TABLE>
See accompanying notes to financial statements.
SPANLINK COMMUNICATIONS, INC.
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31
<TABLE>
<CAPTION>
(Unaudited)
Three Months
------------
%
1997 1996 Change
---- ---- ------
<S> <C> <C> <C>
Revenues $ 1,527,635 $ 1,034,293 47.7
Cost of revenues 688,306 468,725 46.8
----------- -----------
Gross profit 839,329 565,568 48.4
Gross profit as a percentage of revenues 54.9% 54.7%
Operating expenses:
Sales, general and administrative 1,300,328 1,032,490 25.9
Research and product development 443,401 82,848 435.2
----------- -----------
1,743,729 1,115,338 56.3
----------- -----------
Loss from operations (904,400) (549,770) 64.5
Interest income (expense) 46,975 (27,442) 271.2
----------- -----------
Loss before income taxes (857,425) (577,212) 48.5
Provision for income taxes 0 0 --
----------- -----------
Net loss $ (857,425) $ (577,212) 48.5
=========== ===========
Net loss per common share $ (0.17) $ (0.21) (19.0)
Weighted average common shares 5,080,500 2,725,566
Supplementary data:
Supplemental net loss per common and
common equivalent share $ (0.19)
Supplemental weighted average common
and common equivalent shares 2,838,653
</TABLE>
See accompanying notes to financial statements.
SPANLINK COMMUNICATIONS, INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (857,425) $ (577,212)
Reconciliation of net loss to net cash (used) provided by
operating activities:
Depreciation and amortization 94,250 35,287
Common stock grant recognized as compensation expense 246,750
Amortization of original issue discount recognized as
interest expense 16,000
Changes in current assets and current liabilities (193,673) 318,309
----------- -----------
Net cash (used) provided by operating activities (956,848) 39,134
----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (1,402,179)
Maturities of marketable securities 1,500,000
Additions to property and equipment (127,474) (93,841)
----------- -----------
Net cash used by investing activities (29,653) (93,841)
----------- -----------
Cash flows from financing activities:
Payment of dividends accrued in prior years (38,708)
Repayments on capital lease obligation (20,616)
Repayments on note payable - bank (230,531)
Repayments on note payable - other (97,998)
Net proceeds from issuance of notes payable and warrants 347,732
----------- -----------
Net cash used by financing activities (20,616) (19,505)
----------- -----------
Net decrease in cash and cash equivalents (1,007,117) (74,212)
Cash and cash equivalents at beginning of period 2,284,952 344,689
----------- -----------
Cash and cash equivalents at end of period $ 1,277,835 $ 270,477
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 6,348 $ 13,352
=========== ===========
Cash paid during the period for income taxes $ 75,000
===========
Supplemental schedule of non-cash investing and financing activities:
Capital lease obligation incurred $ 300,400
===========
</TABLE>
See accompanying notes to financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1- CONDENSED FINANCIAL STATEMENTS
The unaudited condensed financial information contained in this report
reflects all adjustments (consisting of normal recurring adjustments) considered
necessary, in the opinion of management, for a fair presentation of results of
the interim periods presented of Spanlink Communications, Inc. (the "Company").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the most recent audited financial statements and notes thereto
included in the Company's Form 10-KSB for the fiscal year ended December 31,
1996. The results of operations of the periods ended March 31 are not
necessarily indicative of the results of operations for a full year.
NOTE 2 - USE OF ESTIMATES
The preparation of condensed interim financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 3 - SHAREHOLDERS' EQUITY
NET LOSS PER SHARE
Net loss per share is computed based on the weighted average number of
common and common equivalent shares outstanding for the period. Common
equivalent shares which include options and warrants using the treasury stock
method have been excluded as their effect would be anti-dilutive.
Supplementary loss per share data reflects certain adjustments for: (i) the
issuance of 71,420 shares of common stock in connection with the repayment of a
note payable from certain net proceeds received from the Company's IPO that
closed on May 2, 1996; (ii) the conversion of the Bridge Notes originally issued
on February 28, 1996 into 125,000 shares of common stock that occurred in
connection with the IPO; and (iii) the decrease of net loss by $39,630 for the
three months ended March 31, 1996 for interest expense, amortization of the
Bridge Notes debt issuance costs, and amortization of original issue discount
related to the issuance of the Bridge Notes. These adjustments were made as
though these items had occurred on January 1, 1996 for (i) and February 28, 1996
for (ii).
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenues increased 47.7% from $1,034,293 for the three month period
ended March 31, 1996 to $1,527,635 for the comparable period ended March 31,
1997 due primarily to increased system sales by the Company's direct sales
force.
COST OF REVENUES
Cost of revenues increased 46.8% from $468,725 for the three month period
ended March 31, 1996 to $688,306 for the three month period ended March 31,
1997. The increase was due primarily to labor and materials related to the
higher sales levels.
GROSS PROFIT
Gross profit increased 48.4% to $839,329 for the three month period ended
March 31, 1997. Gross profit as a percentage of total revenue increased slightly
from 54.7% for the three month period ended March 31, 1996 to 54.9% for the
three month period ended March 31, 1997 due primarily to an increase in sales of
higher margin configurable software.
SALES, GENERAL AND ADMINISTRATIVE
Sales, general and administrative expenses increased 25.9% to $1,300,328
for the three month period ended March 31, 1997 from $1,032,490 for the three
month period ended March 31, 1996. The increase is due primarily to higher
marketing expenditures, increased expenses related to the buildup of the
domestic sales force and sales management. Sales, general and administrative
expenses for the three month period ended March 31, 1996, includes $246,750 of
noncash expense associated with the granting of 70,500 shares of common stock to
the Company's president and outside board of directors.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development expenses increased 435.2% from $82,848 for
the three month period ended March 31, 1996 to $443,401 for the three month
period ended March 31, 1997. The increase is due to the Company's continuing
focus on developing configurable software packages.
INTEREST INCOME (EXPENSE)
The Company recorded net interest income of $46,975 for the three month
period ended March 31, 1997 versus net interest expense of $27,442 for the
comparable period in 1996. The interest income resulted from investment of the
cash proceeds from the public offering completed in the second quarter of 1996.
INCOME TAXES
The Company did not record a tax benefit for the three month periods ended
March 31, 1997 and 1996 as the likelihood of realization of the benefit is
presently not likely.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and marketable securities of
$3,272,567 as of March 31, 1997 resulting from the public offering completed in
the second quarter of 1996. The Company believes that its current cash resources
combined with projected operating cash flow will be sufficient to fund its
operations and capital expenditures through 1997.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts are based on
current expectations. These statements are forward looking in nature and involve
a number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: the availability of sufficient capital to finance the Company's
business plan on terms satisfactory to the Company; competitive factors, such as
the introduction of new products in the same markets; changes in operating costs
including labor and general business and economic conditions; and other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking statements, which statements
are made pursuant to the Private Securities Litigation Reform Act of 1995, and
as such, speak only as of the date made.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
SPANLINK COMMUNICATIONS, INC.
(Registrant)
Date: May 9, 1997 /s/ Brett A. Shockley
Brett A. Shockley
Chief Executive Officer
(Principal Executive Officer)
Date: May 9, 1997 /s/ Patrick P. Irestone
Patrick P. Irestone
President and Chief Operating Officer
Date: May 9, 1997 /s/ Brian P. King
Brian P. King
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,277,835
<SECURITIES> 1,994,732
<RECEIVABLES> 1,187,694
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,500,973
<PP&E> 1,171,112
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,672,085
<CURRENT-LIABILITIES> 2,118,977
<BONDS> 0
0
0
<COMMON> 8,193,663
<OTHER-SE> (3,874,055)
<TOTAL-LIABILITY-AND-EQUITY> 6,672,085
<SALES> 1,527,635
<TOTAL-REVENUES> 1,527,635
<CGS> 688,306
<TOTAL-COSTS> 688,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (857,425)
<INCOME-TAX> 0
<INCOME-CONTINUING> (857,425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (857,425)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
