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 June 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)
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: 2,966,696 shares outstanding
as of 8/7/97, par value $.01 per share.
Transitional Small Business Disclosure Format (check one); YES [ ] NO [X]
<PAGE>
OneLink Communications, Inc.
Form 10-QSB
Quarter Ended June 30, 1997
Table of Contents
PART I Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheets at December 31, 1996 and
June 30, 1997 3
Statements of Operations for the three and six month
periods ended June 30, 1997 and 1996 4
Statements of Cash Flows for the three month
periods ended June 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>
June 30,
1997 December 31,
(unaudited) 1996
-----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $95,973 $709,026
Trade accounts receivable, net of allowance for
doubtful accounts of $60,000 in 1996 and $14,766 in 1997 264,711 114,601
Minimum lease payments receivable 34,200 34,200
Computer parts and supplies, net of reserve for
obsolescence of $12,000 in 1996 and $11,986 1997 40,671 40,969
Prepaid expenses 45,463 40,254
--------------- --------------
Total current assets 481,018 939,050
Property and equipment:
Furniture and equipment 1,142,535 951,848
Equipment leased to others 318,140 315,745
--------------- --------------
1,460,675 1,267,593
Accumulated depreciation (715,444) (563,054)
--------------- --------------
745,231 704,539
Other assets:
Goodwill 532,411 592,542
Investment in sales type 17,100 17,100
leases
Deposits 50,885 285,885
--------------- --------------
600,396 895,527
--------------- --------------
Total Assets 1,826,645 2,539,116
=============== ==============
Liabilities and shareholders' equity
Current liabilities
Accounts payable $278,383 $239,277
Notes Payable and Current maturities of long-term debt 316,425 69,206
Notes Payable - Related Parties 101,537
Customer deposits 47,355 197,175
Deferred revenue 70,127 45,649
Other accrued liabilities 298,936 312,437
--------------- --------------
Total current liabilities 1,112,763 863,744
Long-term debt, related parties 2,211 2,920
Long-term debt, net of current maturities 22,765 49,770
Shareholders' equity:
Common stock, par value $.01 per share, Authorized shares--
50,000,000; Issued and outstanding shares: 1997
and 1996--2,966,696 and 2,943,831, respectively 29,438 29,438
Additional paid-in capital 6,346,663 6,346,663
Accumulated deficit (5,687,195) (4,753,418)
--------------- --------------
Total shareholders' equity 688,906 1,622,683
--------------- --------------
Total liabilities and shareholders' equity $1,826,645 $2,539,116
=============== ==============
See accompanying notes.
</TABLE>
<PAGE>
OneLink
Communications, Inc.
Statements of
Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended June, Six months ended June 30,
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $469,262 $204,813 $916,101 $423,458
Cost of revenues 230,295 90,898 489,164 177,716
-------------------------------------------------------------
Gross profit 238,967 113,915 426,937 245,742
Operating expenses:
Selling 129,175 61,004 306,061 136,324
General and administrative 497,129 452,314 917,748 737,493
Research and development 60,925 157,920 108,653 324,249
-------------------------------------------------------------
Total operating expenses 687,229 671,238 1,332,462 1,198,066
-------------------------------------------------------------
Operating loss (448,262) (557,323) (905,525) (952,324)
Interest income 1,747 25,456 8,731 57,554
Interest expense (7,448) (4,279) (10,976) (9,041)
Other income (16,934) (1,487) (25,604) 14,734
-------------------------------------------------------------
Loss before income taxes (470,897) (537,633) (933,374) (889,077)
Provision for income taxes 0 0 400 0
-------------------------------------------------------------
Net loss $(470,897) $(537,633) $(933,774) $(889,077)
=============================================================
Net loss per share $(0.16) $(0.18) $(.32) $(0.30)
Weighted average number of shares outstanding 2,966,696 2,924,603 2,957,095 2,919,009
</TABLE>
<PAGE>
OneLink Communications, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996
-------------- ---------------
<S> <C> <C>
Operating Activities
Net Loss $(933,775) $(889,077)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of goodwill 212,522 132,002
Write-off of A/P 42,000 11,000
Net gain on sale of property
and equipment (4,634)
Changes in operating assets and liabilities:
Accounts receivable (150,110) (64,451)
Minimum lease pmts 0 17,100
receivable
Computer parts and supplies 298 25,167
Prepaid expenses and deposits 229,529 (34,164)
Other Assets 36 (95,974)
Accounts payable 39,105 28,822
Accrued liabilities (205,323) 90,098
Deferred revenue 24,478 40,890
-------------- ---------------
Net cash used in operating activities (741,240) (743,221)
Investing Activities:
Note Receivable (100,000)
Sale of property and equipment -- 79,685
Purchases of property and equipment (193,082) (107,788)
-------------- ---------------
Net cash used in investing activities (193,082) (128,103)
Financing activities:
Proceeds from short-term financing 350,000
Payments on short-term and long-term notes payable (28,958) (16,605)
-------------- ---------------
Net cash (used) provided by financing activities 321,042 (16,605)
-------------- ---------------
Decrease in cash and cash (613,280) (887,929)
equivalents
Cash and cash equivalents at beginning of period 709,253 2,720,771
-------------- ---------------
Cash and cash equivalents at end of period $95,973 $1,832,842
============== ===============
See accompanying notes.
</TABLE>
<PAGE>
OneLink Communications, Inc.
Notes to Financial Statements
June 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 six months ended June 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.
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>
Six Six
Second Second Months Months
Quarter Quarter Ended Ended
1997 1996 1997 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 49.1 44.4 53.4 42.0
Gross profit 50.9 55.6 46.6 58.0
Operating expense:
Selling 27.5 29.8 33.4 32.2
General & administrative 105.9 220.8 100.2 174.2
Research & development 13.0 77.1 11.9 76.6
Total other income (4.8) 9.6 (3.0) 14.9
(expense)
Net loss (100.3)% (262.5)% (101.9)% (210.0)%
</TABLE>
Revenues
The Company's revenues for the three months ended June 30, 1997 were $469,262,
an increase of $264,449 or 129.1% compared to $204,813 for the three months
ended June 30, 1996. The Company's revenues for the six month period ending June
30, 1997 were $916,101, an increase of $492,643 from the same period in 1996.
The increase in the second quarter revenue of 1997 in comparison to the second
quarter of 1996 is attributable to the sale of an IVR (interactive voice
response) system, increased revenue from the existing IVR systems, revenue from
the Company's access card operation, and increased mapping and development
revenue. The Company recognized approximately $65,000 for the sale of the IVR
system, $40,000 increased revenue from existing systems, $53,000 for the sale of
access cards, and a $97,000 increase in mapping and development revenue.
Cost of Revenues
The Company's costs of revenues for the three months ended June 30, 1997 was
$230,295 an increase of $139,397 or 153.4% compared to $90,898 for the three
months ended June 30, 1996. For the six month period ending June 30, 1997, the
Company's cost of revenues increased to $489,164 compared to $177,716 for the
same period ending June 30, 1996. A large portion of the increase is a result of
the cost of sale for the IVR system, $40,000 in costs for the access card
operation and increased costs in the mapping and development of $71,000.
Selling
The Company's selling expenses for the three months ended June 30, 1997 were
$129,175, an increase of $68,171 or 111.7% compared to $61,004 for the three
months ended June 30, 1996. For the six month period ending June 30, 1997, the
Company's selling expenses increased to $306,061 compared to $136,324 for the
same period ending June 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
June 30, 1997 were $497,129, an increase of $44,815 or 9.9% compared to $452,314
for the three months ended June 30, 1996. General and administrative expenses
for the six months ended June 30, 1997, were $917,748 compared to $737,493 for
the six months ended June 30, 1996. The increase for the three months ended June
30, 1997 in general and administrative expenses are primarily related to the
transfer of GIS personnel to general and administrative from research and
development, which accounted for approximately $93,000 of the increase. The
Company's legal expenses were approximately $45,000 lower in the second quarter
of 1997 than in the same period for 1996.
Research and Development
The Company's research and development expenses for the three months ended June
30, 1997 were $60,925 a decrease of $96,995 or 61.4% compared to $157,920 for
the three months ended June 30, 1996. The research and development expenses for
the six months ended June 30, 1997 were $108,653 compared to $324,249 for the
six months ended June 30, 1996. The decline in research and development expenses
is attributable to the completion of the development phase of the UNIX system in
1996 and the transfer of GIS personnel to general and administrative in 1997.
Other Income and Expense
Interest income declined to $1,747 from $25,456 for the three months ended June
30, 1997 compared to the three months ended June 30, 1996. Interest income for
the six months ended June 30, 1997 was $8,731 compared to $57,554 for the six
months ended June 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
six month periods ended June 30, 1997. Cash and cash equivalents on June 30,
1997 were $95,973 compared to $1,832,842 on June 30, 1996.
The Company had other expense of $16,934 for the three months ended June 30,
1997 compared to other expense of $1,487 for three months ended June 30, 1996.
For the six months ended June 30, 1997 other expense was $25,604, whereas for
the six months ended June 30, 1996 had other income of $14,734. The Company
ceased the pursuit of its N11 service in 1995 and is in the process of writing
off accounts payable balances associated with the N11 service. In the three
months ended June 30, 1997, the Company recognized amortization expenses of
$32,573 related to the acquisition of Provident Worldwide Communications, Inc.
offset by the $18,000 accounts payable write-off for N11 service.
Net Loss
The Company incurred a net loss of $470,897 for the three months ended June 30,
1997 compared to a net loss of $537,633 for the three months ended June 30,
1996. Net losses for the six months ending June 30, 1997 and 1996 were $933,774
and $889,077 respectively.
<PAGE>
Liquidity and Capital Resources
Cash and Cash Equivalents. The Company had cash of $95,973 and negative working
capital of ($631,745) at June 30, 1997. Cash used in operating activities during
the six month period ended June 30, 1997 was $741,243. Cash used for investing
activities was $193,082, primarily used for the purchase of property and
equipment.
Additional Capital Resources. In the second quarter of 1997, the Company raised
$350,000 in short term capital by selling units consisting of unsecured
convertible notes (the "Notes") and common stock warrants (the "Warrants") to
accredited investors. Interest on the Notes will be paid at an annual rate of 9%
per annum quarterly and the principal is due nine months from the date of
issuance unless extended by the Company. The Notes are convertible prior to
maturity into equity of the Company on the same terms of the Company's next
equity offering. The Warrants are exercisable at $1.75, the fair market value of
the Company's Common Stock on date of issuance, or any five day trading average
of the Company's common stock during the term of the note, whichever is lower,
and expires three years from the date of issuance.
The Company is in the process of converting the unsecured notes into equity of
the Company and raising approximately $1,500,000 to $2,000,000 by selling units
(the "Stock Units"), each Stock Unit consisting of 50,000 shares of Common Stock
and 50,000 Common Stock Purchase Warrants (the "Stock Warrants") to accredited
investors for $50,000 per Stock Unit. Each Stock Warrant will entitle the holder
to purchase one share of the Company's Common Stock at an exercise price of
$1.50 per share. The Stock Warrants may be exercised immediately after closing
of the offering and expire three years from the date of issuance. The Company
retains a call option on the Stock Warrants to redeem the Stock Warrants,
provided that the closing bid price of the Common Stock exceeds $2.50 per share
for any five consecutive trading days.
The Company's ability to continue its operations is dependent on closing the
sale of the Stock Units. Management believes that revenues to be generated from
operations combined with the proceeds of at least $1,500,000, excluding
conversion of the Notes, from the Stock Units 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; (ii) avoiding any significant increase
in expenses and (iii) obtaining approximately $1,500,000 in capital through the
Stock Unit offering. 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.
<PAGE>
Nasdaq Notice Concerning Listing Qualifications. The Company's common stock is
traded on the Nasdaq SmallCap Market. Nasdaq requires that a listing company
maintain: (i) a minimum of $2,000,000 in total assets; (ii) $1,000,000 in
capital and surplus; (iii) a public float of at least 100,000 shares; (iv) a
market value of such float of at least $200,000; (v) two market makers; (vi) a
minimum bid of $1 per share; and (vii) at least 300 shareholders.
The Company has received notice from Nasdaq that the Company's common stock is
subject to delisting for failure to meet Nasdaq maintenance requirements. The
Company believes if it meets its projections under the offering of Stock Units
described above, it will meet the Nasdaq listing requirements. The Nasdaq
reviewing committee has, however, the discretion to consider other aspects of
the Company, in addition to requirements described above. The Company has
scheduled a meeting with Nasdaq for August 21, 1997.
If the Company's common stock is not listed on the Nasdaq SmallCap Market, it
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 suitable 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 to be in full compliance with the Nasdaq SmallCap
listing requirements prior to August 21, 1997. However, there is no assurance
the Company's common stock will continue to be listed on 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 instrument 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 instrument. The
Company has sought legal counsel with respect to such suit. Management of the
Company believes the suit will be resolved in its favor.
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. In May, Scott Sundet was asked to serve as Chief
Operating Officer on an interim basis. The Board retained a search firm to
identify qualified candidates for the position of President and Chief Executive
<PAGE>
Officer of the Company. On June 23, 1997, Nicholas Bluhm resigned as the
Company's President and Chief Executive Officer. He remains a member of the
Company's Board.. Mr. Sundet continued to serve as Chief Operating Officer
pending the Board's selection of Mr. Bluhm's successor. 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 is scheduled to begin in his new position on
September 2, 1997, however, he expects to be able to spend substantial time
working on Company matters before then.
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, where his
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. His operating experience at Norstan includes improving the
operations of under-performing businesses. It is expected that Mr. Lidsky will
evaluate the Company's current strategy and each of the Company's business units
to determine the viability of each unit with respect to the strategy he will
cause the Company to pursue.
On June 23, 1997, Greg Mohn resigned from the Board of Directors and remains
employed by the Company as Vice President of Business Development. On August 4,
1997, the Company's Board elected John F. Stapleton a Director. Mr. Stapleton is
currently Chairman of the Board of Directors of Advanced BioSurfaces, Inc.
("ABS"), a company engaged in the development of certain medical technology.
Prior to joining ABS as its Chief Financial Officer in 1995, Mr. Stapleton
served as Chairman and Chief Executive Officer of Prodea Software Corporation, a
company that develops and markets custom software products and database
management services. Mr. Stapleton also served as Chief Executive Officer and
Chairman of the Board of Directors of Mirror Technologies, Inc., and served as
Chief Executive Officer of Bank Compensation Strategies, Inc., a company that
designs and maintains non-qualified plans for bank executives. Mr. Stapleton has
significant start-up company experience. In 1973, Mr. Stapleton founded
Coordinated Management Systems, Inc. to commercialize a marketing information
system for the consumer package goods industry. Mr. Stapleton sold that company
to A.C. Neilsen Company in 1977 and continued to manage Coordinated Management
Systems, Inc. under contract with A.C. Neilsen Company until 1983. In 1984, Mr.
Stapleton founded Decisions Support Services, Inc. to develop software to enable
consumer marketers to use the Britton-Lee intelligent data base machine to
analyze grocery scanning data. In 1986, Mr. Stapleton sold Decisions Support
Services, Inc. to Metaphor Computer Systems, Inc., and the combined entity was
acquired by IBM in 1990.
<PAGE>
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
None
<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: August 12, 1997 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
March 31, 1997 and 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 95,973
<SECURITIES> 0
<RECEIVABLES> 279,477
<ALLOWANCES> (14,766)
<INVENTORY> 40,671
<CURRENT-ASSETS> 481,018
<PP&E> 1,460,675
<DEPRECIATION> (715,444)
<TOTAL-ASSETS> 1,826,645
<CURRENT-LIABILITIES> 1,112,763
<BONDS> 0
0
0
<COMMON> 29,438
<OTHER-SE> 659,468
<TOTAL-LIABILITY-AND-EQUITY> 1,826,645
<SALES> 916,101
<TOTAL-REVENUES> 916,101
<CGS> 489,164
<TOTAL-COSTS> 489,164
<OTHER-EXPENSES> 1,332,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,976)
<INCOME-PRETAX> (933,374)
<INCOME-TAX> 400
<INCOME-CONTINUING> (933,774)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (933,774)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
