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, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
Commission file number 1-11784
COMPLINK, LTD.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2824578
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
175 Community Drive, Great Neck, New York 11021
(Address of Principal executive officers)
(516) 829-1883
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
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 practicable date: As of May 15, 1996, there were
3,197,608 shares of common stock outstanding.
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Financial Statements
Form 10-QSB
March 31, 1996
(1)
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statement of Operations - Three Months ended
March 31, 1996 and March 31, 1995 4
Consolidated Statement of Cash Flows - Three Months ended
March 31, 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations 8
Part II Other Information
Item 1-6 Other Information 11
Signatures 12
(2)
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,426,087 1,270,573
Accounts receivable, less allowance for doubtful accounts
of $46,000 and $85,000 278,349 492,032
Note receivable 112,121 145,071
Amounts advanced in contemplation of merger 250,000 250,000
Prepaid expenses and other current assets 42,982 69,556
--------------- --------------
Total current assets 2,109,539 2,227,232
Furniture, fixtures and equipment, net 353,637 348,676
Loans receivable from officers 18,850 18,850
Other assets 46,770 46,770
Excess cost over net assets acquired, net of accumulated
amortization of $246,728 and $220,757 272,721 298,692
--------------- --------------
Total assets $ 2,801,517 2,940,220
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 714,579 414,526
Deferred revenue 35,400 68,042
Obligations under capital leases 20,099 31,738
--------------- --------------
Total current liabilities 770,078 514,306
--------------- --------------
Stockholders' equity:
Preferred stock, par value $.01 per share; 2,000,000 shares
authorized; none issued - -
Common stock, par value $.01 per share; 10,000,000 shares
authorized; 3,197,608 shares issued and outstanding 31,976 31,976
Additional paid-in capital 11,854,549 11,854,549
Accumulated deficit (9,855,086) (9,460,611)
--------------- --------------
Total stockholders' equity 2,031,439 2,425,914
--------------- --------------
Total liabilities and stockholders' equity $ 2,801,517 2,940,220
=============== ==============
</TABLE>
(3)
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
Revenues $ 655,378 55,042
Cost of sales 12,457 30,843
--------------- --------------
Gross profit 642,921 24,199
--------------- --------------
Expenses:
Research and development 30,343 197,357
Selling and marketing 150,356 205,920
General and administrative 867,202 462,539
--------------- --------------
1,047,901 865,816
--------------- --------------
Operating loss (404,980) (841,617)
--------------- --------------
Other income (expense):
Interest income 10,505 68,272
Interest expense - (2,608)
Other - (4,891)
--------------- --------------
Loss before income taxes (394,475) (780,844)
--------------- --------------
Provision for income taxes - -
--------------- --------------
Net loss $ (394,475) (780,844)
=============== ==============
Net loss per share $ (0.12) (0.24)
=============== ==============
Weighted average number of common
shares outstanding 3,197,608 3,197,608
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Consolidated Statement of Cash Flow
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
--------------
<S> <C>
Operating activities:
Net loss $ (394,475)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 34,916
Provision for doubtful accounts (26,750)
Change in assets and liabilities:
Accounts receivable 240,433
Prepaid expenses and other current assets 26,574
Accounts payable and accrued expenses 300,053
Deferred revenue (32,642)
------------------
Net cash generated in operating activities 148,109
------------------
Investing activities:
Purchases of fixed assets (13,906)
Payments on note receivable 32,950
------------------
Net cash provided in investing activities 19,044
------------------
Financing activities:
Principal payments on capital lease obligations (11,639)
------------------
Net cash used in financing activities (11,639)
------------------
Increase in cash and cash equivalents 155,514
Cash and cash equivalents at beginning of year 1,270,573
------------------
Cash and cash equivalents at end of period $ 1,426,087
==================
SUPPLEMENTAL INFORMATION
------------------------
Cash paid during the period for interest $ -
==================
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
<PAGE>
COMPLINK, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996
(1) BUSINESS AND BASIS OF PRESENTATION
BUSINESS
CompLink, Ltd. (the Company) was incorporated in August 1986 to engage in
the design, development and sale of computer software products primarily
for communications and database environments.
BASIS OF PRESENTATION
The Company filed a Form 8-K on January 11, 1996 changing its fiscal year
end to December 31, effective December 31, 1995. The accompanying
unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
1996.
(2) NOTE RECEIVABLE
The Company advanced $300,000 to a potential merger candidate for that
company's expenses in conjunction with a proposed merger which was
terminated on January 20, 1995. Approximately $50,000 was non-refundable
and expensed as of July 31, 1995. In accordance with the letter of intent,
the loan is being repaid in 24 equal monthly principal installments plus
interest at 5.42% through January 3, 1997. The outstanding balance of the
advance is $112,121 at March 31, 1996.
(3) PENDING MERGER
On November 20, 1995, the Company entered into an agreement and plan of
reorganization and merger to acquire two companies, The Netplex Group,
Inc. (Netplex) and America's Work Exchange, Inc. (AWE) which is expected
to close in May 1996, subject to shareholder approval for each company and
certain other conditions. The Company will issue 3,250,000 shares of its
common stock, or
(6)
<PAGE>
50.4% of the combined company's outstanding shares, in the transaction.
The agreement also provides for CompLink to assume 1,691,000 outstanding
common stock options of the acquirees.
Netplex is a computer network systems integrator and AWE provides contract
computer professionals to businesses and organizations in need of project
specific staffing and provides business services and other benefits to
contract computer professionals. The merger will be accounted for under
the purchase method of accounting as a reverse merger since the
shareholders of the acquirees, which have common control, are receiving
the larger percentage of the voting rights in the combined entity.
Effective with the signing of the merger agreement, the CEO of Netplex and
AWE commenced functioning as CEO of CompLink pursuant to a consulting
agreement. In November 1995 CompLink advanced $250,000 to Netplex in
contemplation of the merger. This advance is repayable on demand with
interest to be specified if the merger is not effected. Additionally
CompLink changed its fiscal year end to December 31 effective December 31,
1995 to coincide with Netplex and AWE.
(4) SALE OF PRODUCT LINE
In March 1996, the Company sold its NetSwitch product line for $500,000,
which is included in revenues for the three months ended March 31, 1996.
Pursuant to the agreement, the Company will also receive royalties and
license fees for three years from the closing date for future sales
relating to this product line.
(7)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in August 1986 and since that time has concentrated
its efforts on the development of software applications for data communications.
The Company derives and expects to continue to derive its revenues principally
from software product sales, maintenance, consulting services and royalties.
The Company has generated an accumulated deficit of $9,855,086 through March 31,
1996, due to its significant research and development expenses and insufficient
revenues in relation to operating expenses.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Revenues for the three months ended March 31, 1996 were $655,378 compared to
$55,042 for the same period the prior year, the increase was due to the sale of
the NetSwitch product line of $500,000 and the Company's Technology Development
Systems, Inc. (TDS) subsidiary, which was acquired in December 1993, continues
to experience increased WorldLink product sales and service revenues. Gross
profit margins increased to 98.1% for the quarter ended March 31, 1996 compared
to 65.5% for the five months ended December 31, 1995. The increase was primarily
attributable to the one time sale of the NetSwitch product line and related
royalties. Operating expenses were $1,047,901 for the quarter ended March 31,
1996. Included in operating expenses for the quarter is approximately $27,000 as
a provision for doubtful accounts, $325,000 in additional professional fees
related to contemplated acquisitions of The Netplex Group, Inc. (Netplex) and
America's Work Exchange, Inc. (AWE), comprised of legal, accounting and
investment banking costs, and approximately $64,000 in advertising/tradeshow
costs associated with the WorldLink Desk product roll-out. Interest income
totaled $10,505 for the three months ended March 31, 1996 which continues to
decline due to lower average levels of cash on hand as operating losses are
funded. Due to various non-recurring 1996 operating expenses partially offset by
increasing revenues and the non recurring sale of the NetSwitch product line the
net loss for the quarter ended March 31, 1996 totaled $394,475. No provision for
income taxes was required during the current period due to the Company's
incurrence of net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company had 1,339,461 in working capital as of March 31, 1996, compared with
working capital of 1,712,926 as of December 31, 1995 and 3,777,108 as of March
31,
(8)
<PAGE>
1995. This decrease in working capital was primarily due to the funding of
operating losses.
On November 20, 1995, the Company entered into an agreement and plan of
reorganization and merger to acquire two companies, Netplex and AWE which is
expected to close in May 1996, subject to shareholder approval for each company
and certain other conditions. The Company will issue 3,250,000 shares of its
common stock, or 50.4% of the combined company's outstanding shares, in the
transaction. The agreement also provides for CompLink to assume 1,691,000
outstanding common stock options of the acquirees.
Netplex is a computer network systems integrator and AWE provides contract
computer professionals to businesses and organizations in need of project
specific staffing and provides business services and other benefits to contract
computer professionals. The merger will be accounted for under the purchase
method of accounting as a reverse merger since the shareholders of the
acquirees, which have common control, are receiving the larger percentage of the
voting rights in the combined entity. Effective with the signing of the merger
agreement, the CEO of Netplex and AWE commenced functioning as CEO of CompLink
pursuant to a consulting agreement. In November 1995 CompLink advanced $250,000
to Netplex in contemplation of the merger. This advance is repayable on demand
with interest to be specified if the merger is not effected by March 31, 1996.
Additionally, CompLink changed its fiscal year end to December 31 effective
December 31, 1995 to coincide with Netplex and AWE.
Capital expenditures during the three months ended March 31, 1996 were
approximately $10,000. The Company does not have any material commitments for
capital expenditures.
In August 1994, the Company entered into a letter of intent for a merger with
Network Resources Corporation (NRC), which designs, manufactures and markets
networking hardware and software. The merger was terminated on January 20, 1995.
Through December 31, 1995, the Company utilized $300,000 of cash in the proposed
merger, of which $50,000 was non-refundable and $250,000 was advanced to NRC as
a loan for their expenses associated with the proposed merger. The outstanding
balance of the advance at March 31, 1996 was $145,071.
In March 1996, the Company sold its NetSwitch product line for $500,000, which
is included in revenues for the three months ended March 31, 1996. Pursuant to
the agreement, the Company will also receive royalties and license fees for
three years from the closing date for future sales relating to this product
line.
The Company anticipates that the cash on hand will be adequate to meet the
Company's expected cash requirements for at least the next 12 months. There can
be no assurance, however, that the Company's cash requirements during this
period will not exceed the total cash on hand. The Company has no current
arrangement with respect to additional
(9)
<PAGE>
financing and there are no assurances that additional financing will be
available to the Company.
INFLATION
The Company does not expect inflation to have a significant adverse impact on
its operations.
(10)
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to Report
Item 2. Changes in Securities
Nothing to Report
Item 3. Defaults Upon Senior Securities
Nothing to Report
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to Report
Item 5. Other Information
Nothing to Report
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K: None
(11)
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CompLink, Ltd.
Date: May 20, 1996 By:/s/ Neil Luden
--------------------------------
Neil Luden, President
(Principal Executive Officer) and
Director
Date: May 20, 1996 By:/s/ Neil Luden
--------------------------------
Neil Luden, President
(Principal Accounting Officer) and
Director (Principal Financial
Officer)
(12)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,426,087
<SECURITIES> 0
<RECEIVABLES> 324,520
<ALLOWANCES> 46,171
<INVENTORY> 0
<CURRENT-ASSETS> 2,109,539
<PP&E> 789,372
<DEPRECIATION> 435,735
<TOTAL-ASSETS> 2,801,517
<CURRENT-LIABILITIES> 770,078
<BONDS> 0
0
0
<COMMON> 31,976
<OTHER-SE> 1,999,463
<TOTAL-LIABILITY-AND-EQUITY> 2,801,517
<SALES> 655,378
<TOTAL-REVENUES> 655,378
<CGS> 12,457
<TOTAL-COSTS> 12,457
<OTHER-EXPENSES> 1,037,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (394,475)
<INCOME-TAX> 0
<INCOME-CONTINUING> (394,475)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (394,475)
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
