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 March 31, 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: 4,991,696 shares outstanding
as of 4/30/98, par value $.01 per share.
Transitional Small Business Disclosure Format (check one); YES [ ] NO [X]
<PAGE>
OneLink Communications, Inc.
Form 10-QSB
Quarter Ended March 31, 1998
Table of Contents
PART I Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheets at December 31, 1997 and
March 31, 1998 3
Statements of Operations for the three month
period ended March 31, 1998 and 1997 4
Statements of Cash Flows for the three month
period ended March 31, 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 9
Item 1. Legal Proceedings 9
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
Exhibit Index 11
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
OneLink Communications, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(unaudited) 1997
-----------------------------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $620,910 $1,074,556
Trade accounts receivable, net of allowance for
doubtful accounts of $53,023 in 1997 and $13,537 in 1998 248,544 113,089
Minimum lease payments receivable 0 17,100
Computer parts and supplies, net of reserve for
obsolescence of $0 in 1998 and $12,000 1997 16,132 4,032
Prepaid expenses 69,161 52,794
--------------- --------------
Total current assets 954,747 1,261,571
Property and equipment:
Furniture and equipment 784,219 785,696
Equipment leased to others 276,018 273,608
--------------- --------------
1,060,237 1,059,304
Accumulated depreciation (596,829) (508,975)
--------------- --------------
463,408 550,329
Other assets:
Deposits 45,885 45,885
--------------- --------------
45,885 45,885
--------------- --------------
Total Assets 1,464,040 1,857,785
=============== ==============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $28,127 $74,125
Current maturities of long-term debt 26,870 33,773
Customer deposits 47,643 100,000
Deferred revenue 59,535 44,036
Other accrued liabilities 383,195 343,366
--------------- --------------
Total current liabilities 545,370 595,300
Long-term debt, net of current maturities 3,138 5,735
Shareholders' equity:
Common stock, par value $.01 per share, Authorized shares--
50,000,000; Issued and outstanding shares: 1998
and 1997--4,991,696 and 4,991,696, respectively 49,917 49,917
Additional paid-in capital 8,467,125 8,467,125
Accumulated deficit (7,601,509) (7,260,292)
--------------- --------------
Total shareholders' equity 915,533 1,256,750
--------------- --------------
Total liabilities and shareholders' equity $1,464,040 $1,857,785
=============== ==============
</TABLE>
See accompanying notes.
<PAGE>
OneLink Communications, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
----------------------------
<S> <C> <C>
Revenues $518,415 $446,840
Cost of revenues 313,442 300,919
----------------------------
Gross profit 204,973 145,921
Operating expenses:
Selling 121,526 162,505
General and administrative 415,754 369,350
Research and development 0 47,728
Goodwill amortization 0 32,573
----------------------------
Total operating expenses 537,280 612,156
----------------------------
Operating loss (332,307) (466,235)
Interest income 10,980 6,984
Interest expense (926) (3,528)
Other expense (18,964) (98)
----------------------------
Net loss $(341,217) $(462,877)
============================
Net loss per share (Basic and Diluted) $(0.07) $(0.16)
Weighted average number of shares outstanding (Basic and Diluted) 4,991,696 2,947,388
</TABLE>
<PAGE>
OneLink Communications, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
-------------- ---------------
Operating Activities:
<S> <C> <C>
Net Loss $(341,217) $(462,877)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of goodwill 88,029 99,842
Write-off of A/P 0 24,000
Net gain on sale of property
and (811) 0
equipment
Changes in operating assets and liabilities:
Accounts receivable (135,455) (213,105)
Minimum lease pmts 17,100 0
receivable
Computer parts and supplies (12,100) (1,110)
Prepaid expenses and deposits (16,367) 209,736
Accounts payable (45,998) (44,103)
Accrued liabilities (12,528) (144,238)
Deferred revenue 15,499 73,765
-------------- ---------------
Net cash used in operating activities (443,848) (458,090)
Investing Activities:
Sale of property and equipment 2,000 --
Purchases of property and equipment (2,298) (64,476)
-------------- ---------------
Net cash used in investing activities (298) (64,476)
Financing activities:
Payments on short-term and long-term notes payable (9,500) (14,083)
-------------- ---------------
Net cash (used) provided by financing activities (9,500) (14,083)
-------------- ---------------
Decrease in cash and cash equivalents (453,646) (536,651)
Cash and cash equivalents at beginning of period 1,074,556 709,253
-------------- ---------------
Cash and cash equivalents at end of period $620,910 $172,602
============== ===============
</TABLE>
See accompanying notes.
<PAGE>
OneLink Communications, Inc.
Notes to Financial Statements
March 31, 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 three months ended March 31, 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.
First First
Quarter 1998 Quarter 1997
----------------- ------------------
Revenues 100.0% 100.0%
Cost of revenues 60.5 67.3
Gross profit 39.5 32.7
Operating expense:
Selling 23.4 36.4
General & administrative 80.2 82.7
Research & development 0.0 10.7
Goodwill amortization 0.0 7.3
Total other income (expense) (1.7) .8
Net loss (65.8)% (103.6)%
<PAGE>
Revenues
The Company's revenues of $518,415 increased $71,575 or 16% for the three months
ended March 31, 1998 compared to $446,840 for the three months ended March 31,
1997. The increase in revenue was attributed to the Company's new line of
business TeleSmartTM Data Services and its mapping services. In 1998, the
Company recognized approximately $210,000 in revenue from its TeleSmartTM
business line and an increase in revenue of approximately $30,000 in mapping
services. These revenues were offset by a decrease of $156,000 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 March
31, 1998. Revenues for the three months ended March 31, 1998, excluding the
access card revenue in 1997 increased $227,798 or 78%.
Cost of Revenues
The Company's cost of revenues of $313,442 increased $12,523 or 4% for the three
months ended March 31, 1998 compared to $300,919 for the three months ended
March 31, 1997. Cost of revenues excluding the access card cost of revenues
increased $135,879 or 77%. This increase in cost of revenues was related to the
development and operation of TeleSmartTM Data Services. The Company's gross
margin of 39.5% increased 6.8 percentage points for the three months ended March
31, 1998 compared to 32.7% for the three months ended March 31, 1997. The
increase in the gross margin is due to the change in business mix and higher
margins in the Company's mapping services and TeleSmartTM business line.
Selling
The Company's selling expenses of $121,526 decreased $40,979 or 25% for the
three months ended March 31, 1998 compared to $162,505 for the three months
ended March 31, 1997. This decrease was largely due to a reduction of sales
staff resulting from management's adoption of a lower sales cost model and the
realignment of the Company around its TeleSmartTM business.
General and Administrative
The Company's general and administrative expenses of $415,754 increased $46,404
or 13% for the three months ended March 31, 1998 compared to $369,350 for the
three months ended March 31, 1997. The increase in general and administrative
expenses are primarily related to the transfer of approximately $34,000 of
personnel costs to general and administrative from research and development.
Research and Development
The Company incurred no research and development expenses for the three months
ended March 31, 1998 compared to $47,728 for the three months ended March 31,
1997. In 1998, the Company elected a revised business model that does not
require investment into research and development projects to grow the business.
<PAGE>
Goodwill
The Company had no goodwill amortization for the three months ended March 31,
1998 compared to $32,573 for the three months ended March 31, 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 $10,980 increased $3,996 or 57% for the three months ended
March 31, 1998 compared $6,984 for the three months ended March 31, 1997. The
increase is a result of the increase in cash and cash equivalents held by the
Company during the three-month period ended March 31, 1998. Cash and cash
equivalents on March 31, 1998 were $620,910 compared to $172,602 on March 31,
1997. The increase in cash and cash equivalents is a result of the receipt by
the Company of the proceeds of a private placement of its stock, commenced in
September of 1997, that raised $2,000,000.
The Company had other expenses of $18,964 for the three months ended March 31,
1998 compared to $98 for three months ended March 31, 1997. In the first quarter
of 1998, the Company negotiated an out of court settlement of $20,000 for a
lawsuit that began in 1996.
Net Loss
The Company incurred a net loss of $341,217 for the three months ended March 31,
1998 compared to a net loss of $462,877 for the three months ended March 31,
1997, a decrease of $121,660 or 26%. The decline in the Company's net loss was
attributed to increased revenues and gross profit 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.
Liquidity and Capital Resources
The Company had cash of $620,910 and working capital of $409,377 as of March 31,
1998. Cash used in operating activities during the three-month period ended
March 31, 1998 was $443,848. 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 and scaled back its operations in lines of business such as the
access card business and its interactive voice response business that could not
contribute a profitable cash flow and elected 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.
<PAGE>
In November 1997, the Company signed a three-year agreement with US WEST to
provide enhanced management reports to US WEST's customers through the Company's
TeleSmartTM offering. US WEST is planning to introduce this product to its
customers in the third quarter of 1998. 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, delays in US West's product
launch 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. Should the
Company seek additional financing, there is no assurance that additional capital
will be available to the Company on acceptable terms if at all. In order to
obtain additional capital, the Company may issue equity securities at a price
that would result in dilution to existing shareholders.
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.
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 alleging breach of an unsigned employment contract. Mr.
Lomax sought specific performance of the terms of the contract. The Company
denied Mr. Lomax's claim and counterclaimed for breach of a non-compete
agreement. On March 18, 1998 this suit was settled outside of court with the
Company agreeing to pay Mr. Lomax $20,000.
<PAGE>
Items 2. 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>
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: May 7, 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)
and not dilutive and anti-dilutive for the respective three month periods ended
March 31, 1998 and 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 620,910
<SECURITIES> 0
<RECEIVABLES> 262,081
<ALLOWANCES> (13,537)
<INVENTORY> 16,132
<CURRENT-ASSETS> 954,747
<PP&E> 1,060,237
<DEPRECIATION> (596,829)
<TOTAL-ASSETS> 1,464,040
<CURRENT-LIABILITIES> 545,370
<BONDS> 0
0
0
<COMMON> 49,917
<OTHER-SE> 865,616
<TOTAL-LIABILITY-AND-EQUITY> 1,464,040
<SALES> 518,415
<TOTAL-REVENUES> 518,415
<CGS> 313,442
<TOTAL-COSTS> 313,442
<OTHER-EXPENSES> 537,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (926)
<INCOME-PRETAX> (341,217)
<INCOME-TAX> 0
<INCOME-CONTINUING> (341,217)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341,217)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
