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, 1998
[ ] 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: 4,995,607 shares outstanding
as of 7/15/98, 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, 1998
Table of Contents
Page No.
PART I Financial Information 3
Item 1. Financial Statements (Unaudited)
Balance Sheets at December 31, 1997 and
June 30, 1998 3
Statements of Operations for the three and six month
periods ended June 30, 1998 and 1997 4
Statements of Cash Flows for the six month
period ended June 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Exhibit Index 12
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
OneLink Communications, Inc.
Balance Sheets
<TABLE>
<CAPTION>
<S> <C>
June 30, <C>
1998 December 31,
(unaudited) 1997
----------------------------------
Assets
Current assets:
Cash and cash equivalents $518,577 $1,074,556
Trade accounts receivable, net of allowance for
doubtful accounts of $53,023 in 1997 and $25,148 in 1998 335,460 113,089
Minimum lease payments receivable 0 17,100
Computer parts and supplies, net of reserve for
obsolescence of $0 in 1998 and $12,000 1997 44,217 4,032
Prepaid expenses 104,389 52,794
------------- ---------------
Total current assets 1,002,643 1,261,571
Property and equipment:
Furniture and equipment 587,440 785,696
Equipment leased to others 132,691 273,608
------------- ---------------
720,131 1,059,304
Accumulated depreciation (415,642) (508,975)
------------- ---------------
304,489 550,329
Other assets:
Deposits 22,040 45,885
------------- ---------------
22,040 45,885
------------- ---------------
Total Assets 1,329,172 1,857,785
============= ===============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $67,312 $74,125
Current maturities of long-term debt 17,803 33,773
Customer deposits 81,443 100,000
Deferred revenue 46,502 44,036
Other accrued liabilities 447,042 343,366
------------- ---------------
Total current liabilities 660,102 595,300
Long-term debt, net of current maturities 2,447 5,735
Shareholders' equity:
Common stock, par value $.01 per share, Authorized shares--
50,000,000; Issued and outstanding shares: 1998
and 1997--4,995,607 and 4,991,696, respectively 49,956 49,917
Additional paid-in capital 8,467,086 8,467,125
Accumulated deficit (7,850,419) (7,260,292)
============= ===============
Total shareholders' equity 666,623 1,256,750
------------- ---------------
Total liabilities and shareholders' equity $1,329,172 $1,857,785
============= ===============
</TABLE>
See accompanying notes.
<PAGE>
OneLink Communications, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Six months ended June
June 30, 30,
1998 1997 1998 1997
--------------------------------------------------------
Revenues $760,130 $469,262 $1,278,545 $916,101
Cost of revenues 481,994 265,548 795,436 566,467
--------------------------------------------------------
Gross profit 278,136 203,713 483,109 349,634
Operating expenses:
Selling 112,099 125,298 233,626 287,803
General and administrative 410,952 447,754 826,705 817,104
Research and development 0 60,925 0 108,653
Goodwill amortization 0 32,574 0 65,147
--------------------------------------------------------
Total operating expenses 523,051 666,551 1,060,331 1,278,707
--------------------------------------------------------
Operating loss (244,915) (462,838) (577,222) (929,073)
Interest income 6,443 1,747 17,423 8,731
Interest expense (669) (7,448) (1,595) (10,976)
Other expense (9,768) (2,360) (28,732) (2,458)
--------------------------------------------------------
Net loss $(248,910) $(470,899) $(590,126) $(933,776)
========================================================
Net loss per share (Basic and Diluted) $(0.05) $(0.16) $(0.12) $(0.32)
Weighted average number of shares outstanding (Basic and 4,993,454 2,966,696 4,992,580 2,957,095
Diluted)
</TABLE>
<PAGE>
OneLink Communications, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended June 30,
1998 1997
-------------- ---------------
Operating Activities:
Net Loss $(590,126) $(933,775)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of goodwill 135,813 212,522
Write-off of A/P -- 42,000
Net gain on sale of property
and 72 --
equipment
Changes in operating assets and liabilities:
Accounts receivable (222,371) (150,110)
Minimum lease pmts 17,100 --
receivable
Computer parts and supplies (40,185) 298
Prepaid expenses and deposits (27,750) 229,529
Other Assets -- 36
Accounts payable (6,813) 39,105
Accrued liabilities 85,119 (205,323)
Deferred revenue 2,466 24,478
-------------- ---------------
Net cash used in operating activities (646,675) (741,240)
Investing Activities:
Sale of property and equipment 124,000 --
Purchases of property and equipment (14,045) (193,082)
-------------- ---------------
Net cash used in investing activities 109,955 (193,082)
Financing activities:
Proceeds from short-term financing -- 350,000
Proceeds from issuance of stock options 2,500 --
Payments on contingent notes payable (2,500) --
Payments on short-term and long-term notes payable (19,258) (28,958)
-------------- ---------------
Net cash (used) provided by financing activities (19,258) 321,042
-------------- ---------------
Decrease in cash and cash (555,978) (613,280)
equivalents
Cash and cash equivalents at beginning of period 1,074,556 709,253
-------------- ---------------
Cash and cash equivalents at end of period $518,578 $95,973
============== ===============
</TABLE>
See accompanying notes.
<PAGE>
OneLink Communications, Inc.
Notes to Financial Statements
June 30, 1998
(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, 1998 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. 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, 1997, included in the Company's
Form 10-KSB for the year ended December 31, 1997 and the Company's 1997 Annual
Report to Shareholders.
The financial information furnished 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 1998
presentation.
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>
<S> <C> <C> <C> <C>
Six Six
Second Second Months Months
Quarter Quarter Ended Ended
1998 1997 1998 1997
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 63.4 56.6 62.2 61.8
Gross profit 36.6 43.4 37.8 38.2
Operating expense:
Selling 14.7 26.7 18.3 31.4
General & administrative 54.1 95.4 64.7 89.2
Research & development 0.0 13.0 0.0 11.9
Goodwill amortization 0.0 6.9 0.0 7.1
Total other income (expense) (0.5) (1.7) (1.0) (.5)
Net loss (32.7)% (100.3)% (46.2)% (101.9)%
</TABLE>
<PAGE>
Revenues
The Company's revenues of $760,130 increased $290,868 or 62% for the three
months ended June 30, 1998 compared to $469,262 for the three months ended June
30, 1997. The Company's revenues for the six month period ending June 30, 1998
were $1,278,545, an increase of $362,444 or 40% from the same period in 1997.
The increase in revenue is primarily attributed to the Company's new line of
business, TeleSmartTM Data Services. In the second quarter of 1998, the Company
recognized approximately $358,000 in revenue from its TeleSmart(TM) business
line. Revenues in IVR sales for the three months ended June 30, 1998 increased
approximately $20,000 from the same period in 1997. These revenues were offset
by a decrease of approximately $30,000 in mapping revenue and $53,000 in sales
of access cards compared to the same period in 1997. The Company discontinued
its access card operation in September, 1997 because it could not generate
reasonable cash flow or profits in the foreseeable future, and did not fit the
new strategic direction of the Company. As a result, the Company did not have
comparable revenues from sales of access cards for the three months ended June
30, 1998. Revenues for the three months ended June 30, 1998, excluding the
access card revenue in 1997 increased $343,944 or 83%.
Cost of Revenues
The Company's cost of revenues of $481,994 increased $216,446 or 82% for the
three months ended June 30, 1998 compared to $265,548 for the three months ended
June 30, 1997. For the six month period ending June 30, 1998, the Company's cost
of revenues of $795,436 increased $228,969 or 40% compared to $566,467 for the
six months ended June 30, 1997. The increase in cost of sales for the second
quarter is primarily attributed to operating expenses for the Company's new line
of business, TeleSmartTM Data Services. In the second quarter of 1998, the
Company recognized approximately $215,000 in costs from its TeleSmart(TM)
business line. IVR cost of sales for the three months ended June 30, 1998
increased approximately $64,000 from the same period in 1997. These costs were
offset by a decrease of approximately $40,000 in costs associated with access
cards compared to the same period in 1997.
The Company's gross margin for the three months ended June 30, 1998 decreased to
37% compared to 43% for the same period in 1997. The decrease in gross margin is
the result of the Company renegotiating, during the second quarter of 1998, a
more favorable contract with an IVR customer under which the Company sold
systems with a book value of approximately $122,000 at cost in return for a nine
month maintenance and development contract. Excluding the sale of the IVR
systems at cost, the Company's gross margin would be 44% for the three month
period ending June 30, 1998.
Selling
The Company's selling expenses of $112,099 decreased $13,199 or 11% for the
three months ended June 30, 1998 compared to $125,298 for the three months ended
June 30, 1997. For the six month period ending June 30, 1998, the Company's
selling expenses of $233,626 decreased $54,177 or 19% compared to $287,803 for
the same period ending June 30, 1997. This decrease was largely due to a
reduction of sales staff in connection with management's adoption of a lower
sales cost model and the realignment of the Company around its TeleSmart(TM)
business.
<PAGE>
General and Administrative
The Company's general and administrative expenses of $410,952 decreased $36,802
or 8% for the three months ended June 30, 1998 compared to $447,754 for the
three months ended June 30, 1997. For the six month period ending June 30, 1998,
the Company's general and administrative expenses of $826,705 increased $9,601
or 1% compared to $817,104 for the same period ending June 30, 1997. The
decrease in general and administrative expenses is related to the reduction of
professional fees by $54,000 and depreciation expense by $21,000. These
decreases were offset by increases in personnel costs of $29,000 and allowance
for doubtful accounts of $24,000. In addition, general and administrative
expenses in the second quarter of 1997 were reduced by $18,000 as a result of
the write-off for accounts payable balances associated with the Company's N11
services that were ceased in 1995.
Research and Development
The Company incurred no research and development expenses for the three months
ended June 30, 1998 compared to $60,925 for the three months ended June 30,
1997. For the six month period ending June 30, 1998, there were no research and
development expenses compared to $108,653 for the same period ending June 30,
1997. In the first six months of fiscal year 1998 the Company has not been
required to make research and development investments to grow the business.
Under the Company's revised business model, development projects and product
enhancements are generally paid by the customer requesting the change.
Goodwill
The Company had no goodwill amortization for the three months ended June 30,
1998 compared to $32,574 for the three months ended June 30, 1997. For the six
month period ending June 30, 1998, there was no goodwill amortization compared
to $65,147 for the same period ending June 30, 1997. In 1997, the Company
amortized goodwill related to the Company's acquisition of its access card
business, Provident Worldwide Communications. In September 1997, the remaining
goodwill related to Provident was written-off. 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 increase.
Other Income and Expense
Interest income of $6,443 increased $4,696 or 269% for the three months ended
June 30, 1998 compared to $1,747 for the three months ended June 30, 1997. For
the six month period ending June 30, 1998, the Company's interest income
increased to $17,423 compared to $8,731 for the same period ending June 30,
1997. The increase is a result of the increase in cash and cash equivalents held
by the Company during the three-month period ended June 30, 1998. Cash and cash
equivalents on June 30, 1998 were $518,577 compared to $95,973 on June 30, 1997.
The increase in cash and cash equivalents is a result of the Company receiving
proceeds of $2,000,000 in a private placement of its stock, completed in
November of 1997 (the "Private Placement").
Interest expense of $669 decreased $6,779 or 91% for the three months ended June
30, 1998 compared to $7,448 for the three months ended June 30, 1997. For the
six month period ending June 30, 1998, the Company's interest expense decreased
to $1,595 compared to $10,976 for the same period ending June 30, 1997. The
decrease is a result of a reduction in the bridge loans outstanding. The Company
had two bridge loans totaling $350,000 outstanding during the second quarter or
1997 that were converted into stock in the Private Placement.
The Company had other expenses of $9,768 for the three months ended June 30,
1998 compared to $2,360 for three months ended June 30, 1997. For the six month
period ending June 30, 1998, the Company's other expenses increased to $28,732
compared to $2,458 for the same period ending June 30, 1997. The increase is
primarily the result of the Company's negotiation, during the first quarter of
1998, of an out of court settlement of $20,000 for a lawsuit that began in 1996.
Net Loss
The Company incurred a net loss of $248,910 for the three months ended June 30,
1998 compared to a net loss of $470,899 for the three months ended June 30,
1997, a decrease of $221,989 or 47%. For the six month period ending June 30,
1998, the Company's net losses were $590,126, a decrease of $343,650 or 37%
compared to a net loss of $933,776 for the same period ending June 30, 1997. The
decline in the Company's net loss was attributed to increased revenues resulting
from sales of the Company's TeleSmartTM Data Services products and management's
decision to streamline the Company's operations resulting in a decline in
operating expenses.
<PAGE>
Liquidity and Capital Resources
The Company had cash of $518,577 and working capital of $342,541 as of June 30,
1998. Cash used in operating activities during the three and six-month period
ended June 30, 1998 was $202,827 and $646,675, respectively. Management believes
working capital will be sufficient to support the Company's operating capital
needs for the remainder of the current fiscal year, assuming the Company is able
to generate sufficient revenues and control expenses during the remainder of
fiscal year 1998.
The Company reviewed its strategy and various lines of business during fiscal
year 1997 to determine the best course of action to stem ongoing losses and
generate increased revenues in fiscal year 1998. As a result of the review, the
Company exited the access card business that could not contribute a profitable
cash flow and scaled back its operations in the interactive voice response
business to focus on providing its enhanced management reporting services to the
telecommunication industry through its TeleSmartTM Data Services. This service
combines raw telecommunications data with geographic information service
technology to produce enhanced caller reporting for business analysis and
marketing purposes. Management believes it is first to market with this type of
enhanced service and is focusing the Company's efforts on capitalizing on this
opportunity.
In November 1997, the Company signed a three-year agreement with U S WEST to
provide enhanced management reports to U S WEST's customers through the
Company's TeleSmartTM offering. U S WEST launched this product in July 1998 to
its customers. The Company is aggressively marketing its TeleSmartTM Services to
other Regional Bell Operating Companies, Independent Telephone Operating
Companies, new Local Access Carriers, existing InterExchange Carriers and the
Teleservices Industry.
Management's projections with respect to the Company's ability to meet its
working capital requirements in fiscal year 1998 are based upon: (i) generating
sales that exceed the Company's fiscal 1997 sales; and (ii) avoiding any
significant increase in expenses. Furthermore, an unsuccessful product launch by
U S WEST or delays in securing additional customers for the Company's
TeleSmartTM offerings could have a material effect on the Company's projections
and ability to continue its business.
Although the Company believes it can increase its revenues and improve its cash
flow, there are no assurances that it will be successful in doing so. If
management determines that additional financing is desirable, the Company has
the option to redeem two million warrants, sold in the Private Placement, at
$1.50 per share that could provide additional capital of up to $3,000,000. The
Company may also consider issuing additional shares of stock at a price that
would likely result in dilution to existing shareholders. Should the Company
seek additional capital through its redemption option, a stock sale or through
debt financing, there is no assurance that warrant holders will exercise their
warrants, additional shares of the Company's stock could be sold, or that
additional capital will be available to the Company on acceptable terms if at
all.
Forward Looking Statements
This Form 10-QSB contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934. All statements included herein that address
activities, events or developments that OneLink expects, believes or anticipates
will or may occur in the future, including such things as future capital
expenditures (including the amount and nature thereof), business strategy and
measures to implement strategy, expansion and other such matters are
forward-looking statements. Actual events may differ materially from those
anticipated in the forward-looking statements. Important factors that may cause
such a difference include general economic conditions, changes in interest
rates, increased competition in the Company's market area, acceptance by
telecommunications customers and increased regulation of the telecommunications
industry.
<PAGE>
PART II Other Information
Items 1. through 5. Not Applicable
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>
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: July 29, 1998 BY: /s/ Paul F. Lidsky
President and 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)
are not dilutive and anti-dilutive for the respective three and six month
periods ended June 30, 1998 and 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 518,577
<SECURITIES> 0
<RECEIVABLES> 360,608
<ALLOWANCES> (25,148)
<INVENTORY> 44,217
<CURRENT-ASSETS> 1,002,643
<PP&E> 720,131
<DEPRECIATION> (415,642)
<TOTAL-ASSETS> 1,329,172
<CURRENT-LIABILITIES> 660,102
<BONDS> 0
0
0
<COMMON> 49,956
<OTHER-SE> 616,667
<TOTAL-LIABILITY-AND-EQUITY> 1,329,172
<SALES> 1,278,545
<TOTAL-REVENUES> 1,278,545
<CGS> 795,436
<TOTAL-COSTS> 795,436
<OTHER-EXPENSES> 1,060,331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,595)
<INCOME-PRETAX> (590,126)
<INCOME-TAX> 0
<INCOME-CONTINUING> (590,126)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (590,126)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
