Securities & Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-25764
OneLink Communications, Inc.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1675041
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
10340 Viking Drive, Suite 150
Eden Prairie, MN 55344
(Address of principal executive offices)
612-996-9000
(Issuer's telephone number)
MarketLink, Inc.
(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 [ ]
APPLICABLE TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,966,696 shares outstanding
as of 10/28/97, par value $.01 per share.
Transitional Small Business Disclosure Format (check one); YES [ ] NO [X]
<PAGE>
OneLink Communications, Inc.
Form 10-QSB
Quarter Ended September 30, 1997
Table of Contents
PART I Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheets at December 31, 1996 and
September 30, 1997 3
Statements of Operations for the three and nine month
periods ended September 30, 1997 and 1996 4
Statements of Cash Flows for the nine month
periods ended September 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II Other Information 9
Item 1. Legal Proceedings 10
Item 5. Other Matters - Management Changes 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Exhibit Index 13
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
OneLink Communications, Inc.
Balance Sheets
<TABLE>
<CAPTION>
September
30,
1997 December 31,
(unaudited) 1996
-----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $1,558,530 $709,026
Trade accounts receivable, net of allowance for
doubtful accounts of $60,000 in 1996 and $12,067 in 1997 192,129 114,601
Minimum lease payments receivable 25,650 34,200
Computer parts and supplies, net of reserve for
obsolescence of $12,000 in 1996 and $11,986 1997 23,196 40,969
Prepaid Expenses 25,756 40,254
Other Current Assets 71,913
--------------- --------------
Total current assets 1,897,174 939,050
Property and equipment:
Furniture and equipment 1,172,713 951,848
Equipment leased to others 292,338 315,745
--------------- --------------
1,465,051 1,267,593
Accumulated depreciation (767,625) (563,054)
--------------- --------------
697,426 704,539
Other assets:
Goodwill 0 592,542
Investment in sales type 0 17,100
leases
Deposits 262,506 285,885
--------------- --------------
262,506 895,527
--------------- --------------
Total Assets 2,857,106 2,539,116
=============== ==============
Liabilities and shareholders' equity
Current liabilities
Accounts payable $164,770 $239,277
Notes Payable and Current maturities of long-term debt 35,832 69,206
Customer deposits 600,000 197,175
Deferred revenue 75,012 45,649
Other accrued liabilities 294,516 312,437
--------------- --------------
Total current liabilities 1,170,130 863,744
Long-term debt, net of current maturities 12,787 52,690
Shareholders' equity:
Common stock, par value $.01 per share, Authorized shares--
50,000,000; Issued and outstanding shares: 1997
and 1996--4,966,696 and 2,943,831, respectively 49,438 29,438
Additional paid-in capital 8,231,163 6,346,663
Accumulated deficit (6,606,412) (4,753,418)
--------------- --------------
Total shareholders' equity 1,674,189 1,622,683
--------------- --------------
Total liabilities and shareholders' equity $2,857,106 $2,539,116
=============== ==============
See accompanying notes.
</TABLE>
<PAGE>
OneLink Communications, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $320,429 $319,917 $1,236,530 $743,375
Cost of revenues 116,848 156,621 606,012 334,337
-------------------------------------------------------------
Gross profit 203,581 163,296 630,518 409,036
Operating expenses:
Selling 59,012 60,607 365,073 196,931
General and administrative 465,108 396,346 1,382,141 1,133,839
Research and development 63,986 125,382 173,353 449,631
-------------------------------------------------------------
Total operating expenses 588,106 582,335 1,920,567 1,780,401
-------------------------------------------------------------
Operating loss (384,525) (419,039) (1,290,050) (1,371,363)
Interest income 4,892 26,644 13,623 84,198
Interest expense (10,651) (5,761) (21,628) (14,802)
Other income (expense) (528,125) -- (553,729) 14,734
-------------------------------------------------------------
Loss before income taxes (918,409) (398,156) (1,851,784) (1,287,233)
Provision for income taxes 809 0 1,209 0
-------------------------------------------------------------
Net loss $(919,218) $(398,156) $(1,852,993) $(1,287,233)
=============================================================
Net loss per share $(0.28) $(0.14) $(.60) $(0.44)
Weighted average number of shares outstanding 3,292,783 2,925,831 3,070,221 2,921,300
</TABLE>
<PAGE>
OneLink Communications, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
-------------- ---------------
<S> <C> <C>
Operating Activities
Net Loss $(1,852,993) $(1,287,233)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 217,848 211,320
Amortization of goodwill 86,863 10,860
Write-off of A/P 60,000 11,000
Net gain on sale of assets (4,634)
(17,330)
Changes in operating assets and liabilities:
Accounts receivable (118,908) (107,936)
Minimum lease pmts 25,650 25,650
receivable
Computer parts and supplies 10,034 66,353
Prepaid expenses and deposits 26,463 (9,439)
Other Assets (82,413) (86,338)
Accounts payable (7,190) 78,151
Accrued liabilities 330,020 94,449
Deferred revenue 29,363 5,190
-------------- ---------------
Net cash used in operating activities (1,292,594) (992,607)
Investing Activities:
Investment in Subsidiary 265,645
Increase/Decrease in goodwill 510,696 (651,451)
Sale of assets 35,500 79,685
Capital expenditures (258,456) (282,215)
-------------- ---------------
Net cash used in investing activities 287,740 (588,336)
Financing activities:
Net proceeds from issuance of common stock 1,904,500
Increase in capital leases -- 23,163
Payments on short-term and long-term notes payable (50,142) (41,240)
-------------- ---------------
Net cash (used) provided by financing activities 1,854,358 (18,077)
-------------- ---------------
Increase in cash and cash 849,504 (1,599,020)
equivalents
Cash and cash equivalents at beginning of period 709,026 2,720,771
-------------- ---------------
Cash and cash equivalents at end of period $1,558,530 $1,121,751
============== ===============
See accompanying notes.
</TABLE>
<PAGE>
OneLink Communications, Inc.
Notes to Financial Statements
September 30, 1997
(Unaudited)
Note. 1. Summary of Significant Accounting Policies.
Interim Financial Information
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. Operating
results for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. The accompanying financial statements and related notes should be read in
conjunction with the audited financial statements of the Company, and notes
thereto, for the fiscal year ended December 31, 1996, included in the Company's
Form 10-KSB for the year ended December 31, 1996 and the Company's 1996 Annual
Report to Shareholders.
The furnished financial information reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of the interim periods presented.
Write-Down and Sale of Assets
In September, the Company recorded a goodwill write-down of $510,696. The
write-down eliminates all remaining goodwill of the Company related to the
acquisition of Provident Worldwide Communications, Inc. The asset of goodwill
was determined to have been impaired because of the losses related to Provident
and its inability to generate future operating income without substantial sales
volume increases. Anticipated future cash flows of the asset was not reasonably
assured. Prior to September, goodwill was amortized using the straight-line
method over five years. The Company then sold the remaining assets of the card
operations. The assets were sold for approximately $35,500. The total effect of
the write-down of goodwill and the sale of the assets resulted in a loss of
approximately $500,000.
Reclassifications
Certain prior year items have been reclassified to conform with the 1997
presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth certain Statement of Operations data as a
percentage of revenues.
<TABLE>
<CAPTION>
Nine Nine
Third Third Months Months
Quarter Quarter Ended Ended
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 36.5 49.0 49.0 45.0
Gross profit 63.5 51.0 51.0 55.0
Operating expense:
Selling 18.4 18.9 29.5 26.5
General & administrative 145.2 123.9 111.8 152.5
Research & development 20.0 39.2 14.0 60.5
Total other income (166.6) 6.5 (45.4) 11.3
(expense)
Net loss (286.9)% (124.5)% (149.9)% (173.2)%
</TABLE>
Revenues
The Company's revenues for the three months ended September 30, 1997 were
$320,429, an increase of $512 or .2% compared to $319,917 for the three months
ended September 30, 1996. The Company's revenues for the nine month period
ending September 30, 1997 were $1,236,530, an increase of $493,155 from the same
period in 1996. Excluding the revenue from Provident Worldwide which was
purchased in August of 1996, the revenue for the third quarter of 1997 increased
by approximately $71,000 from the third quarter of 1996. The increase in the
third quarter revenue of 1997, in comparison to the third quarter of 1996, is
attributable to the sale of an IVR (interactive voice response) system and
increased revenue from the existing IVR systems. The Company recognized
approximately $56,000 from the sale of the IVR system and $20,000 increased
revenue from existing systems.
Cost of Revenues
The Company's costs of revenues for the three months ended September 30, 1997
were $116,848 a decrease of $39,773 or 25.4% compared to $156,621 for the three
months ended September 30, 1996. For the nine month period ending September 30,
1997, the Company's cost of revenues increased to $606,012 compared to $334,337
for the same period ending September 30, 1996. Excluding the cost of revenues
from Provident Worldwide, the cost of revenues for the third quarter of 1997
increased by approximately $23,000 from the third quarter of 1996. A large
portion of the increase is a result of the cost of sale for the IVR system while
mapping cost of revenues decreased slightly.
Selling
The Company's selling expenses for the three months ended September 30, 1997
were $59,012, a decrease of $1,595 compared to $60,607 for the three months
ended September 30, 1996. For the nine month period ending September 30, 1997,
the Company's selling expenses increased to $365,073 compared to $196,931 for
the same period ending September 30, 1996. This increase is largely due to
increased sales staff and additional travel related to new business prospects.
<PAGE>
General and Administrative
The Company's general and administrative expenses for the three months ended
September 30, 1997 were $465,108, an increase of $59,762 or 15.1% compared to
$396,346 for the three months ended September 30, 1996. General and
administrative expenses for the nine months ended September 30, 1997, were
$1,382,141 compared to $1,133,839 for the nine months ended September 30, 1996.
The increase for the three months ended September 30, 1997 in general and
administrative expenses is related to the transfer of GIS personnel to general
and administrative from research and development, which accounted for
approximately $26,000 of the increase. Personnel search costs were approximately
$40,000 higher in the third quarter 1997 compared to the third quarter 1996.
Research and Development
The Company's research and development expenses for the three months ended
September 30, 1997 were $63,986 a decrease of $61,396 or 49% compared to
$125,382 for the three months ended September 30, 1996. The research and
development expenses for the nine months ended September 30, 1997 were $173,353
compared to $449,631 for the nine months ended September 30, 1996. The decline
in research and development expenses is attributable to the transfer of GIS
personnel to general and administrative in 1997 and a reduction in compensation
and benefits.
Other Income and Expense
Interest income declined to $4,892 from $26,644 for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996.
Interest income for the nine months ended September 30, 1997 was $13,623
compared to $84,198 for the nine months ended September 30, 1996. The decline in
interest income is a result of the decrease in cash and cash equivalents held by
the Company during the three and nine month periods ended September 30, 1997.
The Company had other expense of $528,125 for the three months ended September
30, 1997 compared to no other expense for three months ended September 30, 1996.
For the nine months ended September 30, 1997 other expense was $553,729,
compared to $14,734 for the nine months ended September 30, 1996. In the three
months ended September 30, 1997, the Company wrote off the goodwill and sold the
assets associated with Provident Worldwide resulting in a loss of approximately
$500,000.
Net Loss
The Company incurred a net loss of $919,218 for the three months ended September
30, 1997 compared to a net loss of $398,156 for the three months ended September
30, 1996. Net losses for the nine months ending September 30, 1997 and 1996 were
$1,852,993 and $1,287,233 respectively. Excluding the write-down and sale of
assets related to Provident Worldwide, the net loss in the third quarter of 1997
would have been approximately $420,000 and the loss for the nine months ended
September 30, 1997 would have been approximately $1,350,000.
<PAGE>
Liquidity and Capital Resources
Cash and Cash Equivalents. The Company had cash of $1,558,530 and positive
working capital of $764,364 at September 30, 1997. Cash used in operating
activities during the nine month period ended September 30, 1997 was $1,472,303.
Additional Capital Resources. In September 1997, the Company raised $2,000,000
through private placement of Units (the "Units"). Each Unit consisted of 50,000
shares of Common Stock and 50,000 Common Stock Purchase Warrants ("Warrants").
Each Warrant entitles the holder to purchase one share of the Company's Common
Stock at an exercise price of $1.50 per share. The Warrants may be exercised
immediately and expire on September 15, 2000. The Company retains a call option
on the Warrants to redeem the Warrants provided that the closing bid price of
the Company's Common Stock exceeds $2.50 per share for any five consecutive
trading days.
Management believes that revenues to be generated from operations combined with
the proceeds from the private placement will be sufficient to support the
Company's working capital needs for the foreseeable future, assuming the Company
is able to generate sufficient revenues and control expenses during fiscal year
1998. As a result, the Company's ability to meet its working capital
requirements in fiscal year 1998 will depend upon: (i) generating sales which
exceed the Company's fiscal 1997 sales; and (ii) avoiding any significant
increase in expenses. Failure to meet these projections will have a material
effect on the Company's ability to continue its business. The Company's ability
to obtain additional capital is severely restricted and, if obtainable at all,
would likely result in substantial dilution and would likely be at terms
unfavorable to the Company.
Nasdaq Notice Concerning Listing Qualifications. The Company's common stock is
traded on the Nasdaq SmallCap Market. The Company received notice from Nasdaq
that the Company's common stock was subject to delisting for failure to meet
Nasdaq maintenance requirements. On August 21, 1997 the Company submitted a plan
to the Nasdaq Listing Qualification Panel (the "Panel") to obtain compliance
with Nasdaq listing requirements. This plan was approved by the Panel, subject
to review by the Nasdaq Review Committee, and was implemented by the Company.
On August 22, 1997, Nasdaq announced new listing requirements that require
companies to maintain: (i) a minimum of $2,000,000 in net tangible assets or a
market capitalization of $35 million or net income of $500,000 in the latest
fiscal year or two of the last three years; (ii) a public float of at least
500,000 shares; (iii) a market value of such float of at least $1,000,000; (iv)
two market makers; (v) a minimum bid of $1 per share; and (vi) at least 300
shareholders. Companies not meeting these requirements have until February 22,
1998 to achieve full compliance with the listing requirements.
On September 25, 1997 the Company received notice from the Nasdaq Review
Committee that it has elected to review the decision of the Panel. The Review
Committee will consider whether the Company can maintain long term compliance
with the new Nasdaq listing requirements. Currently, the Company does not meet
the new Net Tangible Asset requirement of $2,000,000 and is in the process of
submitting a plan to the Nasdaq Review Committee on how it plans to meet the new
continued listing requirements that go into effect on February 22, 1998. The
Company anticipates it will need to raise additional capital to comply with the
new rules.
<PAGE>
If the Review Committee does not approve the Company's plan or if the Company is
not successful in meeting the new Nasdaq listing requirements by February 22,
1998, the Company's common stock will on longer be listed on the Nasdaq SmallCap
Market. If the Company's common stock is delisted, the Company's common stock
will be subject to certain rules of the Securities and Exchange Commission
relating to "penny stocks" (the "Penny Stock Rules"). Such rules require
broker-dealers to make a suitability determination for purchasers and to receive
the purchaser's prior written consent for a purchase transaction, thus
restricting the ability of purchasers and broker-dealers to sell the stock in
the open market.
The Company anticipates it will be in full compliance with the new Nasdaq
SmallCap listing requirements prior to February 22, 1998, however, there is no
assurance the Company will be successful in meeting the new Nasdaq requirements.
If the Company is unsuccessful in meeting the new listing requirements by
February 22, 1998, or the Review Committee rejects the Company's plan for
meeting the listing requirements, the Company's common stock will be delisted
from the Nasdaq SmallCap Market.
PART II Other Information
Item 1. Legal Proceedings
On March 8, 1996, Don Lomax, a former employee of the Company, filed suit
against the Company in Hennepin County District Court for the State of
Minnesota. The suit alleges breach of an unsigned employment agreement between
Mr. Lomax and the Company. The terms of the unsigned agreement provide for the
annual payment of salary and for the issuance of a certain number of shares of
Company Common Stock to Mr. Lomax upon the execution of such instrument. Mr.
Lomax is seeking specific performance of the terms of the unsigned agreement.
The Company has retained legal counsel with respect to such suit and believes
the suit is without merit.
Items 2. through 4. Not Applicable
Items 5. Other Matters - Management Changes. The Company's Board of Directors
determined in 1997 that management changes were necessary to improve the
Company's performance. On June 23, 1997, Nicholas Bluhm resigned as the
Company's President and Chief Executive Officer and on October 7, 1997 he
resigned from the Company's Board. The Board retained a search firm to identify
qualified candidates for the position of President and Chief Executive Officer
of the Company. On August 4, 1997, the Board named Paul Lidsky its President and
Chief Executive Officer and a member of the Company's Board. Mr. Lidsky started
on September 2, 1997.
<PAGE>
Before joining OneLink, Mr. Lidsky served as Executive Vice-President, Strategy
and Business Development for Norstan, Inc., a nationwide integrator of voice,
video and data solutions for medium and large businesses. Mr. Lidsky's
responsibilities included: (i) the ongoing development, implementation and
communication of Norstan's strategy; (ii) identification of acquisition targets
and leadership of an acquisition team; (iii) investor relations; and (iv)
creation of new business units. Prior to becoming Executive Vice President of
Norstan, Mr. Lidsky had operating responsibility for significant business units
of Norstan including improving the operations of under-performing businesses.
Since assuming the duties of President, Mr. Lidsky has evaluated the Company's
strategy and each of the Company's business units to determine the viability of
each unit with respect to the Company's overall strategy and has determined that
it was in the Company's best interest to exit the access card business. The
business did not fit with OneLink's strategy and direction, nor did it
compliment the Company's core strengths or current customer base. Financial
projections for the business through 1999 showed little potential for
profitability and significant negative cash flow, which would threaten other
more strategic lines of business. As a result of this decision, OneLink
Communications has taken a one time write-off of approximately $500,000 in the
third quarter of 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings Per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
1.)On September 5, 1997, the Company filed pro forma
financial statements as of July 31, 1997 on Form 8-K to
reflect additional capital raised.
2.)On September 15, 1997, the Company filed pro forma
financial statements as of July 31, 1997 on Form 8-K to
reflect additional capital raised.
<PAGE>
OneLink Communications, Inc.
SIGNATURES
Pursuant to the registration requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ONELINK COMMUNICATIONS, INC.
(Registrant)
Date: November 7, 1997 BY: /s/ Paul Lidsky
Chief Executive Officer
BY: /s/ Michael J. Ryan
Chief Financial Officer
<PAGE>
Exhibit Index
OneLink Communications, Inc.
Form 10-QSB
Exhibit Number Description
11 Computation of Earnings Per Common Share
27 Financial Data Schedule (filed only in electronic format)
OneLink Communications Inc.
Exhibit 11
Computation of Earnings Per Common Share
Net income (loss) per common share is calculated based on the net income and net
loss for the respective period and the weighted average number of common shares
outstanding during the period. Common Stock equivalents (options and warrants)
and not dilutive and anti-dilutive for the respective three month periods ended
September 30, 1997 and 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,558,530
<SECURITIES> 0
<RECEIVABLES> 204,196
<ALLOWANCES> (12,067)
<INVENTORY> 23,196
<CURRENT-ASSETS> 1,897,174
<PP&E> 1,465,051
<DEPRECIATION> (767,625)
<TOTAL-ASSETS> 2,857,106
<CURRENT-LIABILITIES> 1,170,130
<BONDS> 0
0
0
<COMMON> 49,438
<OTHER-SE> 1,624,751
<TOTAL-LIABILITY-AND-EQUITY> 2,857,106
<SALES> 1,236,530
<TOTAL-REVENUES> 1,236,530
<CGS> 606,012
<TOTAL-COSTS> 606,012
<OTHER-EXPENSES> 1,920,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21,628)
<INCOME-PRETAX> (1,851,784)
<INCOME-TAX> 1,209
<INCOME-CONTINUING> (1,852,993)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,852,993)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
