<PAGE>
U.S. 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, 1999
[ ] 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: 6,955,482 shares of common
stock outstanding as of 5/13/99, 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, 1999
Table of Contents
<TABLE>
<CAPTION>
PART I Financial Information Page No.
<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets at December 31, 1998 and
March 31, 1999 3
Statements of Operations for the three months
ended March 31, 1999 and 1998 4
Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 6
PART II Other Information 10
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Exhibit Index 12
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ONELINK COMMUNICATIONS, INC.
Balance Sheets
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(unaudited) 1998
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,634,675 $ 420,600
Trade accounts receivable, net of allowance for doubtful
accounts of $10,276 and $10,000 in 1999 and 1998,
respectively 510,364 203,798
Computer parts and supplies, net of reserve for obsolescence
of $1,500 and $0 in 1999 and 1998, respectively 10,394 12,751
Prepaid expenses 61,498 14,190
-----------------------------
Total current assets 2,216,931 651,339
Property and equipment:
Furniture and equipment 766,295 628,475
Accumulated depreciation (398,205) (359,334)
-----------------------------
368,090 269,141
Other assets:
Deposits 11,466 14,916
-----------------------------
Total assets $ 2,596,487 $ 935,396
-----------------------------
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 0 $ 3,414
Accounts payable 236,939 149,047
Accrued expenses 366,623 422,157
Deferred revenue 7,830 2,700
-----------------------------
Total current liabilities 611,392 577,318
Shareholders' equity:
Common stock, par value $.01 per share, Authorized shares--
50,000,000; Issued and outstanding shares: 1999
and 1998--6,923,607 and 5,015,607, respectively 69,236 50,156
Additional paid-in capital 10,352,806 8,491,886
Accumulated deficit (8,436,947) (8,183,964)
-----------------------------
Total shareholders' equity 1,985,095 358,078
-----------------------------
Total liabilities and shareholders' equity $ 2,596,487 $ 935,396
-----------------------------
-----------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
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ONELINK COMMUNICATIONS, INC.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Revenues $ 477,544 $ 277,168
Cost of revenues 284,845 190,238
----------------------------
Gross profit 192,699 86,930
Operating expenses:
Selling 102,064 121,526
General and administrative 315,805 317,790
Research and development 32,050 0
----------------------------
Total operating expenses 449,919 439,317
----------------------------
Operating loss from continuing operations (257,221) (352,387)
Interest income 4,259 10,668
Interest expense (21) (926)
Other expense 0 (20,075)
----------------------------
Loss from continuing operations (252,983) (362,721)
Discontinued Operations:
Discontinued operations income 0 20,692
Gain on disposal of assets from discontinued
operations 0 811
Net loss $ (252,983) $(341,217)
----------------------------
----------------------------
Net loss from continuing operations per common share:
----------------------------
----------------------------
Basic and Diluted $ (0.05) $ (0.07)
----------------------------
----------------------------
Net loss per common share:
Basic and Diluted $ (0.05) $ (0.07)
----------------------------
----------------------------
Weighted average number of shares outstanding (Basic and
Diluted 5,318,451 4,991,696
----------------------------
----------------------------
</TABLE>
4
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ONELINK COMMUNICATIONS, INC.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (252,983) $ (341,217)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of goodwill 38,871 88,029
Net gain on sale of property and equipment (811)
Changes in operating assets and liabilities:
Accounts receivable, net (81,566) (135,455)
Minimum lease payments receivable 0 17,100
Computer parts and supplies, net 2,357 (12,100)
Prepaid expenses and deposits (43,858) (16,367)
Accounts payable and accrued expenses 30,884 (6,169)
Deferred revenue 5,130 (36,858)
------------------------------
Net cash used in operating activities (301,165) (443,848)
INVESTING ACTIVITIES:
Proceeds from the sale of property and equipment 0 2,000
Purchases of property and equipment (137,820) (2,298)
------------------------------
Net cash used in investing activities (137,820) (298)
FINANCING ACTIVITIES:
Proceeds from issuance of stock options 8,000
Payments on contingent notes payable (28,000)
Proceeds from warrants excercised 1,675,000
Payments on short-term and long-term notes payable (1,940) (9,500)
------------------------------
Net cash (used) provided by financing activities 1,653,060 (9,500)
------------------------------
Increase (Decrease) in cash and cash equivalents 1,214,075 (453,646)
Cash and cash equivalents at beginning of period 420,600 1,074,556
------------------------------
Cash and cash equivalents at end of period $ 1,634,675 $ 620,910
------------------------------
------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 21 $ 926
Cash paid during the period for taxes $ 0 $ 0
Noncash financing activity:
Increase in accounts receivable for warrants exercised $ 225,000 $ 0
</TABLE>
SEE ACCOMPANYING NOTES.
5
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OneLink Communications, Inc.
Notes to Financial Statements
March 31, 1999
(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 and pursuant to the
rules and regulations of the Securities and Exchange Commission 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, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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, 1998, included in the Company's Form 10-KSB for the year
ended December 31, 1998 and the Company's 1998 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 1999
presentation. The reclassifications had no effect on net loss or
shareholders' equity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The accompanying management's discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results
of Operations and the audited financial statements of the Company, and notes
thereto, for the fiscal year ended December 31, 1998, included in the
Company's Form 10-KSB for the year ended December 31, 1998 and the Company's
1998 Annual Report to Shareholders.
6
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RESULTS OF OPERATIONS
The following table sets forth certain Statements of Operations data as a
percentage of revenues.
<TABLE>
<CAPTION>
FIRST FIRST
QUARTER QUARTER
1999 1998
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of revenues 59.6 68.6
Gross profit 40.4 31.4
Operating expense:
Selling 21.4 43.8
General & administrative 66.1 114.7
Research & development 6.7 0.0
Total operating expenses 94.2 158.5
Other income (expense) 0.9 (3.7)
Loss from continuing operations (52.9) (130.9)
Discontinued operations income 0.0 7.5
Gain on disposal of assets from discontinued
operations 0.0 0.3
Net loss (52.9)% (123.1)%
</TABLE>
REVENUES FROM CONTINUING OPERATIONS
The Company's revenues from continuing operations of $477,544 increased
$200,376 or 72% for the three months ended March 31, 1999 compared to
$277,168 for the three months ended March 31, 1998. The increase in revenue
is attributed to increased volumes in the Company's TeleSmart-TM- Data
Services ("TeleSmart"). In the first quarter of 1999, the Company's TeleSmart
service bureau revenues increased by approximately $240,000 compared to the
first quarter of 1998. Consulting revenues increased approximately $30,000
for the three months ended March 31, 1999 compared to the same period in
1998. The increased revenues in the first quarter of 1999 do not contain any
one-time revenues, unlike the first quarter of 1998, which reflect one-time
revenues of approximately $80,000.
COST OF REVENUES FROM CONTINUING OPERATIONS
The Company's cost of revenues from continuing operations of $284,845
increased $94,607 or 50% for the three months ended March 31, 1999 compared
to $190,238 for the three months ended March 31, 1998. This increase in cost
of revenues was related to the increased operation of TeleSmart Data Services
and development of a new version of the Call Graphics Software. The Company's
gross margin of 40.4% increased 9% for the three months ended March 31, 1999
compared to 31.4% for the three months ended March 31, 1998. The increase in
the gross margin is due to higher margins in the Company's TeleSmart service
bureau business line.
SELLING EXPENSES FROM CONTINUING OPERATIONS
The Company's selling expenses from continuing operations of $102,064
decreased $19,462 or 16% for the three months ended March 31, 1999 compared
to $121,526 for the three months ended March 31, 1998. This decrease was
largely due to a reduction of personnel costs by approximately $46,000, which
was offset by an increase in marketing expenses of approximately $20,000.
7
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GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS
The Company's general and administrative expenses from continuing operations
of $315,805 decreased $1,985 or .6% for the three months ended March 31, 1999
compared to $317,790 for the three months ended March 31, 1998. The general
and administrative expenses for the three months ended March 31, 1999 were
consistent with the same period in 1998.
RESEARCH AND DEVELOPMENT EXPENSES FROM CONTINUING OPERATIONS
The Company incurred research and development expenses from continuing
operations of $32,050 for the three months ended March 31, 1999, and incurred
no research and development expenses for the three months ended March 31,
1998. The research and development costs incurred for the three months ended
March 31, 1999 were mainly personnel costs associated with the development of
new products. In the first six months of fiscal year 1998, the Company was
not 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.
OTHER INCOME AND EXPENSE FROM CONTINUING OPERATIONS
Interest income from continuing operations of $4,259 decreased $6,409 or 60%
for the three months ended March 31, 1999 compared $10,668 for the three
months ended March 31, 1998. The decrease is a result of less cash and cash
equivalents held by the Company during the three-month period ended March 31,
1999.
The Company had no other non-interest expenses from continuing operations for
the three months ended March 31, 1999 compared to $20,075 for three months
ended March 31, 1998. In the first quarter of 1998, the Company negotiated an
out of court settlement of $20,000 for a lawsuit that began in 1996.
DISCONTINUED OPERATIONS INCOME
For the three months ended March 31, 1998, the Company's revenues from
discontinued operations were $241,247, cost of revenues from discontinued
operations were $123,205, general and administrative expenses from
discontinued operations were $97,663, and other income from discontinued
operations was $313. Since the Company had made the decision to exit the IVR
business in early 1998, there were no expenses incurred in 1998 for selling
or research and development. The Company had completely exited the IVR
business by the end of fiscal year 1998.
NET LOSS
The Company incurred a net loss of $252,983 for the three months ended March
31, 1999 compared to a net loss of $341,217 for the three months ended March
31, 1998, a decrease of $88,234 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 TeleSmart-TM- Data Services products and management's decision
to streamline the Company's operations resulting in a decline in operating
expenses.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of $1,634,675 and working capital of $1,605,539 as of
March 31, 1999. Cash used in operating activities during the three-month
period ended March 31, 1999 was $301,165. Cash used in investing activities
was $137,820 for the purchase of property and equipment. During the first
quarter of 1999, the Company called warrants issued as part of the 1997
Private Placement. The calling of the warrants raised approximately
$1,900,000, which will be used for further development of products related to
TeleSmart Data Services and general operations. Management believes that
revenues to be generated from operations, combined with the proceeds from the
warrant call, will be sufficient to support the Company's operating capital
needs for the forseeable future, assuming the Company is able to generate
sufficient revenues and control expenses during the next 12 months.
Management's projections with respect to the Company's ability to meet its
working capital requirements during the next 12 months are based upon: (i)
generating sales that exceed the Company's fiscal 1998 sales; and (ii)
avoiding any significant increase in expenses. Failure to meet either of
these objectives could have a material adverse effect on the Company's
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. In
the event the Company decides to 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.
YEAR 2000 REVIEW
The Company has instituted a Year 2000 project to address the issue of
computer programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000. In the fourth quarter of 1997, the
Company conducted a review of its systems and operations to identify the
impact of the Year 2000 issue. The review concluded that the software created
by the Company and the Company's internal operations will not require Year
2000 modifications. The total cost associated with testing to become Year
2000 compliant was not material to the Company's financial position.
The Company's key customers are the Regional Bell Operating Companies and
Independent Telephone Operating Companies. The Company's Year 2000 readiness
also depends upon Year 2000 compliance of the Company's key customers and
suppliers. The failure on the part of the Company's key customers or
suppliers to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. In addition, Year 2000 issues at key customers and prospects
could slow down the deployment or delay new product launches as they devote
more resources to Year 2000 issues. Such failures or delays could materially
and adversely affect the Company's results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third-party suppliers and customers, the Company is unable to determine at
this time whether the consequences of Year 2000 failures will have a material
impact on the Company's results of operations, liquidity or financial
condition.
9
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Under the "worst case scenarios", the Year 2000 problem may cause
interruptions in telephone services provided by the Company's customers.
Interruptions in telephone services and the information behind the services
could have a material adverse effect on the Company's business. However, the
occurrence and duration of such interruptions is beyond the Company's control
such that no effective contingency plan is available. The Company will
endeavor to have sufficient cash reserves to meet its expenses if a
short-term interruption in telephone services occurs, but there can be no
assurance such reserves will be available or will be sufficient.
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 the Company 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, competitive
strengths, goals, 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 in general. For additional information regarding
these and other factors, see the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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.
10
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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 14, 1999 BY: /s/ Paul F. Lidsky
President, Chief Executive Officer
and Director (Principal Executive and
Financial Officer)
11
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EXHIBIT INDEX
OneLink Communications, Inc.
Form 10-QSB
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
11 Computation of Earnings Per Common Share
27 Financial Data Schedule (filed only in electronic format)
</TABLE>
12
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OneLink Communications Inc.
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
Net income (loss) per common share is calculated based on the net income or
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 anti-dilutive for the three months ended March 31, 1999 and
1998.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,634,675
<SECURITIES> 0
<RECEIVABLES> 520,640
<ALLOWANCES> (10,276)
<INVENTORY> 10,394
<CURRENT-ASSETS> 2,216,931
<PP&E> 766,295
<DEPRECIATION> (398,205)
<TOTAL-ASSETS> 2,596,487
<CURRENT-LIABILITIES> 611,392
<BONDS> 0
0
0
<COMMON> 69,236
<OTHER-SE> 1,915,859
<TOTAL-LIABILITY-AND-EQUITY> 2,596,487
<SALES> 477,544
<TOTAL-REVENUES> 477,544
<CGS> 284,845
<TOTAL-COSTS> 284,845
<OTHER-EXPENSES> 449,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21)
<INCOME-PRETAX> (252,983)
<INCOME-TAX> 0
<INCOME-CONTINUING> (252,983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (252,983)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
