Electronically transmitted to the Securities and Exchange Commission
on April 21, 1999
Registration No. 333-___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ONELINK COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1675041
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10340 Viking Drive, Suite 150
Eden Prairie, MN 55344
(612) 996-9000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Paul F. Lidsky
President and Chief Executive Officer
OneLink Communications, Inc.
10340 Viking Drive, Suite 150
Eden Prairie, MN 55344
(612) 996-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William K. Sjostrom, Jr., Esq.
Stuart L. Sorenson, Esq.
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
(612) 347-7170
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions and other factors.
If any of the securities being offered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act check
the following box. [ X ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box: [ ]
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ---------------------------------- -------------------- ----------------------- ------------------------- -------------------------
Title of each class of securities Amount Proposed maximum Proposed maximum Amount of registration
to be Registered to be registered offering price per aggregate offering fee
unit(1) price(1)
- ---------------------------------- -------------------- ----------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Common stock to be offered by the 3,840,000 $2.00 $7,680,000 $2,135.04
Selling Stockholders
- ---------------------------------- -------------------- ----------------------- ------------------------- -------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
The registrant amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to completion, dated April 21, 1999
ONELINK COMMUNICATIONS, INC.
3,840,000 shares of common stock
Offering Price......... The shares will be offered for sale from time to time
at market or negotiated prices.
Selling Stockholders... The stockholders of OneLink identified on page 6 of
this prospectus, not OneLink itself, are offering all
of the shares to be sold in the offering. The selling
stockholders are acting individually, not as a group.
OneLink will not receive any proceeds from sales of
shares by these selling stockholders.
Trading Market......... OneLink common stock is traded on the OTC Bulletin
Board under the symbol "ONEL".
-----------------------
There are risks involved with investing in OneLink. An investor should
carefully read the risk factor section of this prospectus beginning on page 3.
-----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these shares or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ____________________, 1999
<PAGE>
TABLE OF CONTENTS
Page
ABOUT ONELINK.................................................................3
RISK FACTORS..................................................................3
USE OF PROCEEDS...............................................................6
SELLING STOCKHOLDERS..........................................................6
PLAN OF DISTRIBUTION..........................................................8
DESCRIPTION OF CAPITAL STOCK..................................................9
WHERE YOU CAN FIND MORE INFORMATION..........................................11
<PAGE>
ABOUT ONELINK
We specialize in transforming raw telecommunications data into reports,
containing information pertaining to caller location, frequency of calls,
unanswered calls, busy calls, etc., referred to in the industry as "business
intelligence" that enables management to make better informed and more accurate
decisions. We market our TeleSmartTM Data Services solutions to
telecommunications providers who provide these services to their customers as
value-added enhancements to strengthen customer relationships and increase
customer satisfaction, loyalty and retention.
Accompanying this prospectus is a copy of our annual report to
stockholders for 1998. Our annual report contains important information about us
that you should consider in connection with deciding whether or not to invest in
our common stock. You should read both our annual report and this document
carefully and in their entirety.
RISK FACTORS
Investing in our common stock is very risky. You should not invest any
money you cannot afford to lose. You should carefully consider the following
risk factors, together with the other information in this document and our
annual report for 1998, in evaluating whether to invest in our common stock.
Some of the statements in this document and our annual report are not historical
facts but are forward-looking statements. These forward-looking statements may
be identified by the use of terminology like "anticipate," "believe,"
"estimate," "expect," "intend," "may," "plans," "project" and similar
expressions. These statements involve risks and uncertainties and should be
evaluated in light of the following risk factors. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
Historical losses. We incurred net losses of $923,671 in 1998 and
$2,506,875 in 1997 and expect to incur additional losses in 1999. In March 1999
we raised $1.9 million through the sale of 1,900,000 shares of our common stock
at $1.00 per share in part to accelerate the development of our products and
fund continuing operations. Receiving these funds also enabled us to avoid
getting a "going concern" qualification on our auditors' report for our 1998
financial statements. Our auditors' report for our 1997 financial statements did
contain a "going concern" qualification which means our auditors questioned
whether we could continue in business.
Concentration of customers. We currently have only two customers for
our TeleSmartTM Data Services, U.S. West Communications, Inc. and Cincinnati
Bell Telephone. Revenues from U.S. West represented 66% of our 1998 revenues for
continuing operations, and revenues from Cincinnati Bell represented 17% of our
1998 revenues for continuing operations. Our ability to survive is dependent on
retaining and generating more revenue from these two customers or gaining
additional customers for our TeleSmartTM Data Services. If we are unable to
generate more revenue from our two customers or gain new customers, we will
likely have to cease operations.
Dependence on TeleSmartTM Data Services. Since we no longer offer
interactive voice response systems, our survival is almost entirely dependent on
the success of our TeleSmartTM Data Services. Thus, anything negatively
impacting our TeleSmartTM Data Services, like performance problems,
technological or regulatory changes, or the introduction of competing services,
would adversely impact OneLink and may lead to our demise.
Potential need for more capital. If our revenues do not increase as we
expect or our spending increases, we will likely need to raise additional
capital. If our revenues and spending remain at their current levels, we will
<PAGE>
likely run out of money in two years. Because of our financial condition, we
expect that it will be difficult for us to raise more capital. Any capital we
are able to obtain would likely be on unfavorable terms and result in reducing
the percentage ownership of OneLink by our stockholders. If we require more
capital and are unable to raise it before we run out of money, we will likely
have to cease operations.
Year 2000 problems may adversely affect us. The year 2000 problem
involves programs designed and developed without addressing the impact of the
upcoming change in the century. While we believe that our software and internal
operations are year 2000 compliant, year 2000 problems at customers and
prospects could cause interruptions in telephone services or delay new product
launches. These interruptions or delays could materially and adversely affect
our results of operations, liquidity and financial condition.
Technology changes may render TeleSmartTM Data Services obsolete.
Technological changes in the telecommunications industry happen rapidly. If we
do not quickly and efficiently modify or enhance our TeleSmartTM Data Services
in response to these changes, TeleSmartTM may become obsolete.
Dependence on intellectual property rights. We rely on internally
developed software and other technology to offer our TeleSmartTM Data Services.
We have applied for patents on the software and our technology for formatting
and mapping the origin of raw telecommunications data but have not yet been
granted them. We may not get these patents or even if we do they may not
sufficiently protect our rights in the technology. The patents would not provide
protection outside of the United States. Even if the patents are granted, they
may be challenged, and we may have to spend a significant amount of money to
defend them.
Patent infringement litigation is common for software and related
technology. If we are accused, rightly or wrongly, of violating another
company's intellectual property rights, we may have to spend significant amounts
of money defending ourselves.
We consider the name TeleSmartTM an important asset. We have applied
for a copyright on the name to protect it, but there can be no assurance that
the copyright will be granted.
Dependence on key personnel. Our ability to continue operations is
dependent on the efforts of senior management including Paul Lidsky, our
President and CEO, Greg Mohn, our Vice President of Business Development, and
Kirk Danzl, our Chief Technology Officer. If any of these key personnel
departed, we would lose valuable knowledge and expertise.
Potential competitors have significant resources. Although we are not
aware of any current competitor that provides a product or service materially
similar to TeleSmartTM Data Services, companies with significant financial
resources, application development expertise and telecommunications experience
may offer a competing product in the future.
Government regulation may increase. Our operations are currently
subject to limited regulation both on the federal and state level by the Federal
Communications Commission and various state public utilities commissions. There
can be no assurance that the current regulatory environment will not change
significantly, and that a change will not adversely affect OneLink. Regulations
may be adopted in the future that restrict the use of telecommunications data.
<PAGE>
Delisting of common stock from Nasdaq; adverse effect on trading
market. On February 26, 1998 our common stock was delisted from the Nasdaq Small
Cap Market. Since that time, our common stock has been traded in the non-Nasdaq
over-the-counter market. Trading has been sporadic, and since there is only a
small market for our common stock, it may be difficult for you to sell your
shares.
Difficulty of selling a "penny stock." Since our common stock trades at
less than $5.00 a share, it is considered a "penny stock." It is relatively
difficult for an investor to sell shares of a penny stock.
Any stock which falls below a $5.00 per share selling price in the
public market is called a penny stock. Our common stock has traded below $5.00
per share for several years. It is much more difficult to sell a penny stock
than other shares that trade on a national market or stock exchange because of
the extra steps a broker must take before selling the stock. A sale of a penny
stock does not usually take place as quickly as a sale of shares that trade on a
national market or stock exchange. Because of the difficulty in dealing in penny
stocks, many brokers are unwilling to participate in buying and selling our
shares.
A penny stock is subject to special rules issued by the Securities and
Exchange Commission that regulate how an investor can purchase the shares.
Although there are exceptions to the rules for certain institutional or high net
worth individuals, usually, the broker must take the following steps: (1)
determine the suitability of the purchase for the particular investor; (2)
provide a first time investor in penny stocks with a document disclosing the
risks of investing in this type of stock; and (3) have the purchase approved by
a compliance officer of the brokerage firm.
Because of the time required to comply with these requirements it may be
difficult for you to sell an investment in OneLink. You may want to sell your
shares of OneLink at a time when you can show a profit, however, by the time a
sale of your shares is approved, the stock price may have declined to the point
where you will have a loss on your investment.
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of any of the shares
offered hereby.
SELLING STOCKHOLDERS
The following table sets forth as of March 31, 1999: (1) the name of
each stockholder offering shares through this prospectus, (2) the number of
shares of common stock owned, (3) the number of shares issuable on the exercise
of currently exercisable options or warrants, (4) the number of shares of common
stock offered, (5) the number of shares of common stock beneficially owned after
the offering if all shares that are offered are sold, and (6) the percentage of
outstanding common stock to be beneficially owned after the offering if all of
the shares offered by the selling stockholders are sold. Ownership percentages
of less than 1% are marked with an asterisk. Material relationships of selling
stockholders with OneLink are listed following the table.
<TABLE>
<CAPTION>
Option/ Shares Owned % Owned
Warrant Shares After After
Name Shares Shares Offered Offering Offering
- ----------------------------------------------- ------------- ----------- ------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
Pyramid Partners, L.P. 560,000 -- 560,000 -- --
Wyncrest Capital 500,000 30,000 500,000 30,000 *
Ron Eibensteiner 428,000 200,000 400,000 228,000 3.31%
Industricorp & Co FBO 1561000091
Twin Cities Carpenters 235,000 -- 200,000 35,000 *
Dale Ragan IRA 80,000 -- 80,000 -- --
Wayne W. Mills 475,000 80,545 400,000 155,545 2.29%
Wayne W. Mills, IRA 100,000 -- 100,000 -- --
Thomas H. Healey 60,000 -- 60,000 -- --
Robert G. Allison 115,000 -- 100,000 15,000 *
Perkins and Partners Profit Sharing
Plan and Trust 100,000 -- 100,000 -- --
Martin J. O'Dowd 50,000 -- 50,000 -- --
Dawn Lockwood 100,000 -- 100,000 -- --
Daniel S. and Patrice Perkins 100,000 -- 100,000 -- --
Craig C. Avery 100,000 -- 100,000 -- --
Steven James Harmon 35,000 35,000 70,000 -- --
Walter Sembrowich 50,000 -- 50,000 -- --
Thomas Kieffer 25,000 45,000 50,000 20,000 *
Strickland Family Limited Partnership 50,000 -- 50,000 -- --
Shawn P. Weinard 25,000 25,000 50,000 -- --
Scott F. Strickland 25,000 25,000 50,000 -- --
Piper Jaffray as Custodian IRA FBO
Richard C. Perkins 50,000 -- 50,000 -- --
Richard C. Perkins 50,000 -- 50,000 -- --
Perkins Capitial Mangement, Inc.
Profit Sharing 70,000 -- 50,000 20,000 *
Pamela L. Brown 55,000 -- 50,000 5,000 *
James F. Lyons 50,000 -- 50,000 -- --
Jack Kohler -- 25,000 25,000 -- --
John E. Feltle 50,000 -- 50,000 -- --
Gary Kohler 25,000 -- 25,000 -- --
David Westrum Revocable Living
Trust 50,000 -- 50,000 -- --
Piper Jaffray as Custodian for David H.
Potter IRA Rollover 50,000 -- 50,000 -- --
Robert F. Olson -- 25,000 25,000 -- --
Robert J. Dodlinger 40,000 -- 40,000 -- --
Paul F. Lidsky 37,000 50,000 37,000 50,000 *
Michael J. Ryan 15,000 43,875 15,000 43,875 *
Kirk C. Danzl 3,000 43,000 3,000 43,000 *
Gulfstream Financial Partners, LLC 100,000 -- 100,000 -- --
============= =========== ============= =================== ==============
TOTAL 3,633,000 852,420 3,840,000 645,420 8.55%
============= =========== ============= =================== ==============
</TABLE>
Material relationships of selling stockholders with OneLink are as follows:
o Ron Eibensteiner is OneLink's Chairman of the Board and Secretary.
o The President of Wyncrest Capital is Ron Eibensteiner.
o Paul Lidsky is OneLink's President and Chief Executive Officer.
o Thomas Kieffer is a director of OneLink.
o Kirk Danzl is OneLink's Chief Technology Officer.
o Michael Ryan was OneLink's Chief Financial Officer through April 19, 1999.
o Perkins Capital Management, Inc., the beneficial owner of 28.51% of
OneLink common stock, has the power to dispose of or direct the
disposition of the shares held by Pyramid Partners, L.P.; Industricorp
& Co. FBO 1561000091 Twin Cities Carpenters; Robert G. Allison; Perkins
and Partners Profit Sharing Plan; Daniel S. and Patrice Perkins,
Strickland Family Limited Partnership; Shawn P. Weinard; Scott F.
Strickland; Piper Jaffray as Custodian IRA FBO Richard C. Perkins;
Richard C. Perkins; Perkins Capital Management, Inc. Profit Sharing
Plan; Pamela L. Brown; James F. Lyons; David Westrum Revocable Living
Trust; and Piper Jaffray as Custodian for David H. Potter IRA Rollover.
<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be sold from time to time by
the selling stockholders named in the above table or persons receiving shares
from the selling stockholders as gifts or pledges after the date of this
prospectus. If we are notified that a recipient of shares as a gift or pledge
intends to sell more than 500 shares, we will file a supplement to this
prospectus with the SEC. We will bear all costs, expenses and fees incurred in
connection with the registration of the shares offered by this prospectus.
Selling stockholders will bear brokerage commissions and similar selling
expenses, if any, attributable to the sale of their shares.
Selling stockholder may sell shares from time to time in one or more
types of transactions, including block transactions, in the over-the-counter
markets, in negotiated transactions, through put or call options on the shares
and through short sales of shares. Shares may be sold at market prices
prevailing at the time of sale or at negotiated prices. Selling stockholders may
sell shares directly to purchasers or to or through broker-dealers as principals
or agents. These broker-dealers may be compensated through discounts,
concessions or commissions from the selling stockholders and/or the purchasers
of the shares. The selling stockholders have advised us that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
The selling stockholders and any broker-dealers that act in connection
with the sale of shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. We have agreed to indemnify each selling
stockholder against particular liabilities, including liabilities arising under
the Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against particular liabilities, including liabilities arising under the
Securities Act.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders
will be subject to the prospectus delivery requirements of the Securities Act.
We have informed the selling stockholders that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to their sales in
the market.
Selling stockholders also may resell all or a portion of the shares
under this prospectus in open market transactions in reliance upon Rule 144
under the Securities Act, provided they meet the criteria and conform to the
requirements of Rule 144.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is qualified in its
entirety by reference to our articles of incorporation, our bylaws, and
Minnesota law.
General
Our authorized capital stock consists of 50,000,000 shares, $0.01 per
share par value, of which 40,000,000 shares are common stock and 10,000,000
shares are undesignated as to series or class.
Common Stock
As of March 22, 1999, we had approximately 900 stockholders of record
holding 6,698,607 shares of common stock. No share of common stock is entitled
to preference over any other share of common stock. Each outstanding share of
common stock is entitled to one vote except as may be otherwise required by
Minnesota law. There is no cumulative voting for the election of directors and
holders of our common stock are not entitled to preemptive rights.
All outstanding shares of common stock are fully paid and
non-assessable. Holders of common stock are entitled to receive dividends as may
be declared by the board of directors out of funds legally available therefor,
and to share pro rata in any distributions to holders of common stock upon
liquidation or otherwise. However, we have not paid cash dividends on our common
stock, and do not expect to pay dividends in the foreseeable future.
Undesignated Stock
Under Minnesota law and our articles of incorporation, no action by our
stockholders is necessary, and only action of our board of directors is
required, to authorize the issuance of any of the undesignated stock. The board
of directors is authorized to establish from the undesignated shares one or more
classes or series of shares, to designate each class or series and to fix the
terms of each class or series, including terms with respect to redemption,
sinking fund, dividend, liquidation, preemptive, conversion and voting rights
and preferences. Accordingly, the board of directors, without stockholder
approval, may issue preferred stock having rights, preferences, privileges or
restrictions, including voting rights, that may be greater than the rights of
holders of common stock.
We cannot predict the actual effect of the issuance of any shares of
preferred stock upon the rights of holders of the common stock until the board
of directors determines the specific rights of the holders of the preferred
stock. However, the effects may include, among other things, restricting
dividends on the common stock, diluting the voting power of the common stock,
impairing the liquidation rights of the common stock and delaying or preventing
a change in control of OneLink without further action by the stockholders. We
have has no present plans to issue any shares of preferred stock.
Warrants
We currently have outstanding warrants to purchase approximately 1,000,000
shares of common stock at exercise prices ranging from $1.00 to $4.20 per share
with expiration dates ranging from May 1999 to December 2003.
<PAGE>
Minnesota Law
Provisions of Minnesota law described below could have an anti-takeover
effect on us. These provisions discourage an unsolicited takeover of OneLink, if
our board of directors determines that the takeover is not in our and our
stockholders' best interests. This could result in depriving our stockholders of
opportunities to sell their shares at prices higher than prevailing market
prices.
Section 302A.671 of Minnesota statutes generally applies to any
acquisition of voting stock of a Minnesota corporation, from a person other than
the corporation, and other than in connection with certain mergers and exchanges
to which the corporation is a party, resulting in the beneficial ownership of 20
percent or more of the voting stock then outstanding. Section 302A.671 requires
approval of this type of acquisition by a majority vote of the stockholders of
the corporation prior to its consummation. In general, shares acquired in the
absence of this approval are denied voting rights and are redeemable at their
then fair market value by the corporation within 30 days after the acquiring
person has failed to give a timely information statement to the corporation or
the date the stockholders voted not to grant voting rights to the acquiring
person's shares.
Section 302A.673 of Minnesota statutes generally prohibits any business
combination by a Minnesota corporation, or any subsidiary thereof, with any
stockholder which purchases 10 percent or more of the corporation's voting
shares (an "interested stockholder") within four years following the interested
stockholder's share acquisition date, unless the business combination is
approved by a committee of all of the disinterested members of the board of
directors of such corporation serving before the interested stockholder's share
acquisition date.
Limited Liability and Indemnification Provisions
Our articles of incorporation, limit the personal liability of our
directors. Specifically, our directors will not be personally liable to us or
our stockholders for monetary damages for breach of their fiduciary duties as
directors, except to the extent that the elimination or limitation of liability
is in contravention of Minnesota law. This provision will generally not limit
liability under state or federal securities law.
Section 302A.521 of Minnesota statutes provides that a Minnesota
business corporation shall indemnify any director, officer, employee or agent of
the corporation made or threatened to be made a party to a proceeding, by reason
of the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if particular statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
this right of indemnification.
Article VI of our bylaws provides that we shall indemnify each of our
directors, officers and employees to the fullest extent permissible by
applicable law.
We maintain an insurance policy covering director and officer
liability.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons pursuant
to the foregoing provisions, we have been advised that in the opinion of the SEC
this indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar with respect to our Common Stock is
American Stock Transfer and Trust.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings (File
No. 000-25764) we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:
1. Our Proxy Statement for our 1999 Annual Meeting of
stockholders; and
2. Our Annual Report on Form 10-KSB for our fiscal year ended
December 31, 1998, a copy of which accompanies this
prospectus.
You may request a copy of our filings, at no cost, by writing or
telephoning our Controller at the following address:
Brenda Groff
Controller
OneLink Communications, Inc.
10340 Viking Drive, Suite 150
Eden Prairie, Minnesota 55344
(612) 996-9000
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided or
incorporated by reference in this prospectus. We have authorized no one to
provide information other than that provided or incorporated by reference in
this prospectus. We have authorized no one to provide you with different
information. We are not making an offer of shares in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any document incorporated by reference herein is accurate as of any date
other than the date on the front of the document.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following expenses will be paid by OneLink in connection with the
distribution of the shares registered hereby. OneLink is paying all of the
selling stockholders' expenses related to this offering, except the selling
stockholders will pay any applicable broker's commissions and expenses, transfer
taxes, as well as fees and disbursements of counsel and experts for the selling
stockholders. All of such expenses, except for the SEC Registration Fee, are
estimated.
SEC Registration Fee ...............................$2,135
Legal Fees and Expenses ............................12,000
Accountants' Fees and Expenses ......................2,000
Printing Expenses .....................................500
Miscellaneous .........................................461
Total ....................................$17,000
Item 15. Indemnification of Directors and Officers.
Section 302A.521, subd. 2, of Minnesota Statutes requires OneLink to
indemnify a person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of the person with respect to
OneLink, against judgments, penalties, fines, including, without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan, settlements, and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the proceeding with
respect to the same acts or omissions if such person (1) has not been
indemnified by another organization or employee benefit plan for the same
judgments, penalties or fines; (2) acted in good faith; (3) received no improper
personal benefit, and statutory procedure has been followed in the case of any
conflict of interest by a director; (4) in the case of a criminal proceeding,
had no reasonable cause to believe the conduct was unlawful; and (5) in the case
of acts or omissions occurring in the person's performance in the official
capacity of director or, for a person not a director, in the official capacity
of officer, board committee member or employee, reasonably believed that the
conduct was in the best interests of OneLink, or, in the case of performance by
a director, officer or employee of OneLink involving service as a director,
officer, partner, trustee, employee or agent of another organization or employee
benefit plan, reasonably believed that the conduct was not opposed to the best
interests of OneLink. In addition, Section 302A.521, subd. 3, requires payment
by OneLink, upon written request, of reasonable expenses in advance of final
disposition of the proceeding in particular instances. A decision as to required
indemnification is made by a disinterested majority of the board of directors
present at a meeting at which a disinterested quorum is present, or by a
designated committee of the Board, by special legal counsel, by the
stockholders, or by a court.
Provisions regarding indemnification of officers and directors of
OneLink are contained in Article VI of OneLink's bylaws, as amended, which are
incorporated herein by reference.
In addition to providing indemnification as outlined above, OneLink
also purchases individual insurance coverage for its directors and officers.
Subject to the stated conditions, the policy insures the directors and officers
of OneLink against liability arising out of actions taken in their official
capacities. To the extent that such actions cannot be indemnified by OneLink,
the policy provides individual liability insurance protection to the officers
and directors of OneLink.
<PAGE>
As permitted by Section 302A.251 of the Minnesota Statutes, OneLink's
Amended and Restated articles of incorporation, provide that a director shall
not have personal liability to OneLink or its stockholders for breach of his or
her fiduciary duty as a director, to the fullest extent permitted by law.
Item 16. Exhibits
See Exhibit Index on page following signatures.
Item 17. Undertakings.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represents a fundamental change in the
information set forth in the Registration
Statement notwithstanding the foregoing, any
increase or decrease in volume of securities
offered (if the total dollar value of
securities offered would not exceed that
which was registered) and any deviation from
the low or high end of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth
in the "Calculation of Registration Fee"
table in the effective Registration
Statement;
(iii) Include any additional or changed material
information on the plan of distribution;
(2) That, for determining any liability under the
Securities Act of 1933, each post-effective amendment
shall be deemed to be a new registration statement of
the securities offered, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities being registered
which remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the small business issuer pursuant
to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the small business
issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Eden Prairie, State of Minnesota, on April 19, 1999.
ONELINK COMMUNICATIONS, INC.
By /s/ Paul F. Lidsky
Paul F. Lidsky, President and
Chief Executive Officer
POWER OF ATTORNEY
Paul F. Lidsky, Brenda Groff, Ronald E. Eibensteiner, John F.
Stapleton, Thomas M. Kieffer and Vin Weber each hereby constitutes and appoints
any one or both of Paul F. Lidsky and Ronald E. Eibensteiner, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign and perform any acts necessary to file any or all amendments
(including post-effective amendments) to the Registration Statement with all
exhibits thereto, and any and all registration statements, prospectuses,
instruments or other documents as a part of or in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or his substitute may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the date stated.
Signature Title Date
/s/ Paul F. Lidsky President, Chief Executive Officer April 19, 1999
Paul F. Lidsky and Director (principal executive
and financial officer)
/s/ Brenda Groff Controller April 19, 1999
Brenda Groff
/s/ Ronald E. Eibensteiner Chairman of the Board and Director April 19, 1999
Ronald E. Eibensteiner
/s/ John F. Stapleton Director April 19, 1999
John F. Stapleton
/s/ Thomas M. Kieffer Director April 19, 1999
Thomas M. Kieffer
/s/ Vin Weber Director April 19, 1999
Vin Weber
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
EXHIBITS
to
Form S-2 Registration Statement
----------------
OneLink Communications, Inc.
(Exact name of Registrant as specified in its charter)
----------------
INDEX
Exhibit
4.1 Amended and Restated Articles of Incorporation (a)
4.2 Bylaws, as amended (b)
5.1 Opinion and Consent of Fredrikson & Byron, P.A.
10.1 1994 Stock Option Plan, as amended (b)
10.2 Stock Option Agreement with Ronald E. Eibensteiner effective September
4, 1996 (a)
10.3 Stock Options Agreements with Paul Lidsky dated September 2, 1997 and
November 19, 1997 (c)
10.4 Employment Agreement between Paul Lidsky and OneLink Communications,
Inc. (c)
10.5 Agreement Between US WEST Communications, Inc. and OneLink
Communications, Inc., dated November 11, 1997 [OneLink has received
confidential treatment for portions of this agreement.] (c)
10.6 Agreement Between Cincinnati Bell Telephone Company and OneLink
Communications, Inc., dated September 30, 1998 [OneLink has received
confidential treatment for portions of this agreement.] (d)
11 Statement re: computation of per share earnings
13 Annual Report on Form 10-KSB for fiscal year ended December 31, 1998
23.1 Consent of Ernst & Young LLP
23.2 Consent of Lund Koehler Cox & Arkema, LLP
24 Power of Attorney (Included on signature page)
27 Financial Data Schedule
- ---------------------
(a) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1996 (File No. 0-25764).
(b) Incorporated by reference to the Company's Registration Statement on
Form SB-2 (File No. 33-90084C) filed March 7, 1995
(c) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31, 1998 (File No. 0-25764).
(d) Incorporated by reference to OneLink's Report of Form 10-QSB filed for
the quarterly period ended September 30, 1998 (File No. 0-25674).
April 21, 1999
OneLink Communications, Inc.
10340 Viking Drive, Suite 150
Eden Prairie, MN 55344
Re: EXHIBIT 5.1 to Registration Statement on Form S-2
Ladies/Gentlemen:
We are acting as corporate counsel to OneLink Communications, Inc. (the
"Company") in connection with the preparation and filing of a Registration
Statement on Form S-2 (the "Registration Statement") relating to the
registration under the Securities Act of 1933, as amended (the "Act") of
3,840,000 shares of the Company's common stock (the "Shares") which may be
offered for sale by certain selling stockholders.
In acting as such counsel for the purpose of rendering this opinion, we
have reviewed copies of the following, as presented to us by the Company:
1. The Company's Articles of Incorporation, as amended;
2. The Company's Bylaws, as amended;
3. Certain corporate resolutions of the Company's Board of
Directors pertaining to the issuance by the Company of the
Shares; and
4. The Registration Statement.
In expressing our opinion contained herein, we are expressly assuming
that the Company received the agreed upon consideration for the Shares. As to
various other matters of fact material to this opinion we have relied, without
having made any independent investigation of such facts, upon representations of
the Company or its officers or directors.
Based on, and subject to, the foregoing, it is our opinion as of this
date that:
1. The Shares are validly authorized by the Company's Articles of
Incorporation.
2. The Shares are validly issued and outstanding and are fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
FREDRIKSON & BYRON, P.A.
By /s/ John A. Grimstad
John A. Grimstad, Vice President
Fredrikson & Byron, P.A.
900 Second Ave. S., #1100
Minneapolis, MN 55402
Telephone: (612) 347-7000
Facsimile: (612) 347-7077
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.
Commission file number 0-25764
OneLink Communications, Inc.
Minnesota 41-1675041
State of Incorporation I.R.S. Employer Identification No.
10340 Viking Drive, Suite 150
Eden Prairie, MN 55344
(612) 996-9000
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.01
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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.____
Check if there is no disclosure of delinquent filers in response to
Items 405 of Regulation S-B in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Company's revenues from continuing operations for the fiscal year
ended December 31, 1998 totaled $1,417,131.
The aggregate market value of the common stock held by nonaffiliates
of the registrant as of March 22, 1999 was approximately $4,709,000 based on the
average of the closing bid and ask price of the registrant's Common Stock on
such date. The number of shares outstanding of the registrant's $.01 par value
common stock, as of March 22, 1999 was 6,698,607.
Transitional Small Business Issuer Format (Check One):
Yes ____ No _X__
Documents Incorporated By Reference
Portions of the registrant's Proxy Statement for its May 25, 1999
Annual Meeting, which will be filed by April 25, 1999, are incorporated by
reference into Items 9, 10, 11 and 12 of Part III.
<PAGE>
ONELINK COMMUNICATIONS, INC.
TABLE OF CONTENTS
Page
PART I
ITEM 1. Description of Business................................. 3
ITEM 2. Description of Property................................. 5
ITEM 3. Legal Proceedings....................................... 5
ITEM 4. Submission of Matters to a Vote of Security Holders..... 5
PART II
ITEM 5. Market for Common Equity and Related Stockholder
Matters............................................... 5
ITEM 6. Management's Discussion and Analysis or
Plan of Operation .................................... 6
ITEM 7. Financial Statements.................................... 10
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 24
PART III
ITEM 9. Directors, Executive Officers , Promoters and Control
Persons; Compliance With Section 16(a) of the
Exchange Act.......................................... 24
ITEM 10. Executive Compensation.................................. 25
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management........................................... 25
ITEM 12. Certain Relationships and Related Transactions.......... 25
PART IV
ITEM 13. Exhibits and Reports on Form 8-K........................ 25
2
<PAGE>
PART I
Item 1. Description of Business
General
OneLink Communications, Inc. (the "Company" or "OneLink") was incorporated in
Minnesota in June, 1990. The Company specializes in transforming raw
telecommunications data into reports, containing information pertaining to
caller location, frequency of calls, unanswered calls, busy calls, etc.,
referred to in the industry as "business intelligence" that enables management
to make better informed and more accurate decisions. The Company markets its
TeleSmartTM Data Services solutions to telecommunications providers who provide
these services to their customers as value-added enhancements to strengthen
customer relationships and increase customer satisfaction, loyalty and
retention.
Historically, the Company has focused on the design, development and operation
of interactive voice response (IVR) systems. OneLink's IVR systems facilitated
caller information transactions by collecting and distributing information,
creating customer databases and accessing location-specific services by
telephone on a fully automated basis. In 1998, the Company discontinued the
deployment and service of its interactive technologies and solutions and focused
on becoming a management reporting and business intelligence partner for
telephone companies.
Products and Services
The Company provides a wide range of business intelligence services using its
in-house data processing facilities and expertise. The Company also offers
professional services aimed at supporting the consulting, development and
implementation needs of its customers.
TeleSmartTM Data Services
OneLink's TeleSmartTM service transforms raw telecommunications data into
visual business intelligence by converting the data into tabular, graphic
and geographic formats that can be easily interpreted by business managers.
OneLink's data processing, database expertise and its proprietary use of
Geographic Information Service (GIS) methodology enables OneLink to track
caller information and assemble it into coherent reports. These reports
strengthen a customer's insight into their customer base and creates market
intelligence. GIS technology is being used increasingly by businesses to
provide information needed to shape decisions and to translate large
amounts of tabular information into easy-to-read graphic formats.
The Company is expanding its TeleSmartTM Data Services within the
telecommunications industry by offering enhanced reporting and mapping
services for business analysis and marketing purposes. The Company has
developed these TeleSmartTM products and services with the intention of
focusing its sales efforts on the Regional Bell Operating Centers (RBOCs),
new Local Access Carriers, existing InterExchange Carriers and the
Teleservices Industry.
Call Graphics Software
Specifically created for the Company's TeleSmartTM Data Services customers,
this software allows for the easy customization of enhanced call management
reports at the desktop. This capability gives TeleSmartTM customers the
opportunity to fine-tune the reports they receive to meet specific business
intelligence needs.
Industry Background
The Telecom Act of 1996 gave rise to an increasing level of competition for
local access between the established Regional Bell Operating Companies, the
Independent Telephone Companies and Competitive Local Exchange Carriers. This
competition has caused incumbent phone companies to increase focus on customer
loyalty and retention through the offering of enhanced services and away from a
price-only customer retention strategy.
3
<PAGE>
Often telephone companies do not have the expertise, manpower or time to market,
develop and implement enhanced services like call management reports and end
user software. The need to offer these enhanced services quickly has created the
opportunity for small, fast moving companies to provide products and services
needed to assist in the retention and expansion of customer bases.
Interactive computer telephony, including IVR systems, has become a major
component in providing both product and service differentiation within the
telecommunications industry. However, these products are increasingly viewed and
priced as commodity products. There are many sources of interactive technology
and solutions which also lead to competition and price sensitivity. Because of
this, OneLink's management exited the IVR business in 1998 and focused its
resources on the development of its TeleSmartTM products.
Systems Design
The Company's systems are designed using an open architecture for maximum
flexibility with respect to the adoption of new modular applications,
customization of specific applications and incorporation of new technology. The
systems are an integration of proprietary software with products from a variety
of leading outside software vendors. Each system is designed around a basic
modular architecture and an interactive database module. The Company's systems
primarily use industrial grade micro computer hardware supplied by various
manufacturers. All OneLink applications utilize NT and UNIX operating system
software in order to manage the complex requirements of new services, increasing
call volumes and to readily allow user specific customization.
Sales and Marketing
The Company's primary sales and marketing strategy focuses on providing enhanced
management reporting and business intelligence services to telephone companies.
The Company sells its products directly through its own sales force and
indirectly through business alliances. OneLink sales representatives attend
trade shows likely to attract users of its products. The Company advertises in
publications tailored to businesses having the potential to use the Company's
products and, in addition, uses direct mailing, telephone and personal contact
to reach its markets.
Primary Customers
During 1998, the Company's revenues from continuing operations were $1,417,131.
Revenues from U S WEST Communications, Inc. and Cincinnati Bell Telephone
accounted for approximately $930,000 or 66% and $240,000 or 17% of revenues from
continuing operations, respectively. This revenue was primarily for the
development, implementation and the use of OneLink's TeleSmartTM products.
Competition
The Company is not aware of any current competitor that provides a product or
service materially similar to TeleSmartTM Data Services or Call Graphics
Software. Some telephone companies and RBOCs have previously offered segments of
management reports that are similar to those created by the Company's
TeleSmartTM Data Services, but prior to OneLink's entry into the field, none
appear to have offered a complete package of reports and end user software
specifically aimed at capturing incoming caller information. Companies with
significant financial resources, application development expertise and
telecommunications experience may attempt to duplicate OneLink's products and
services in this area. However, the Company believes time to market is a key
success factor and at this time, the Company believes it is first to market with
these products.
The Company's interactive voice response systems and services represent a
rapidly evolving market with competition from many companies pursuing the
development of competing interactive computer telephony systems. Most of the
Company's competitors had substantially greater capital resources, research and
4
<PAGE>
development staffs and facilities, and greater experience in the production and
marketing of products than the Company. Because of this, OneLink's management
has discontinued its IVR operations and focused its resources on the development
of its TeleSmartTM products.
Regulatory Environment
The Company's operations are currently subject to limited regulation both on the
federal and state level by the Federal Communications Commission and various
state Public Utility Commissions. With the current national trend of
deregulation in the communications industry, additional regulation is not
anticipated in the near future. However, there can be no assurance that the
current regulatory environment will not change significantly. Furthermore,
although the Company is not actively attempting to place its products in foreign
markets, any effort to do so in the future will be dependent on the regulatory
environment in such markets.
Research and Development
Research and development expenses were $71,322, $349,046 and $367,792 for the
years ended December 31, 1998, 1997 and 1996, respectively. In 1998, the Company
reduced its research and development expenditures by adopting a business model
where development projects and product enhancements were generally paid by the
customers requesting the development or enhancement. Research and development
expenses incurred in 1998 were primarily related to increasing the functionality
and capabilities of the TeleSmartTM product and the initial research to take the
TeleSmart product to the internet. Research and development costs for 1997 and
1996 were incurred in connection with the Company's IVR operations and are
included in discontinued operations.
Employees
As of December 31, 1998 the Company had 18 employees. This included 10 people
working with the Company's TeleSmart product and 8 people in sales,
administration and finance. The Company has a relationship with one independent
contractor and may, from time-to-time, use other outside contractors for
specific projects. The Company believes its relations with its employees are
good.
None of the Company's employees are represented by a labor union.
Item 2. Description of Property
The Company leases approximately 8,228 square feet of commercial office and
warehouse space for $7,542 per month plus taxes, common area expenses and
utilities at 10340 Viking Drive, Suite 150, Eden Prairie, Minnesota 55344 under
a lease which will terminate on June 30, 2003. The Company has an option to
extend the lease term for an additional five years.
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
Company's fourth quarter.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
In 1997, the Company's Common Stock was traded in the over-the-counter market
with prices quoted on the Nasdaq SmallCap Market under the symbol "ONEL". On
February 26, 1998, the Company's Common Stock was delisted from the Nasdaq
5
<PAGE>
SmallCap Market for failure to meet the new net tangible asset rules that went
into effect on February 23, 1998. The Company's Common Stock is currently traded
in the over-the-counter market with prices quoted on the OTC Bulletin Board
under the symbol "ONEL".
The following table sets forth the high and low bid prices for the Company's
Common Stock as reported by the OTC Bulletin Board in 1998 and by Nasdaq in
1997:
Year Ending December 31, 1998
-----------------------------
High Low
---- ---
First Quarter $ 1.250 $ 0.156
Second Quarter 2.875 0.721
Third Quarter 2.438 1.313
Fourth Quarter 1.500 0.969
Year Ending December 31, 1997
-----------------------------
High Low
---- ---
First Quarter $ 2.375 $ 1.000
Second Quarter 2.750 1.500
Third Quarter 1.750 1.188
Fourth Quarter 2.625 1.000
The above prices reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. The
approximate number of stockholders of record of the Common Stock as of March 22,
1999 was 900.
The Company has never declared or paid a cash dividend on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future.
In the first quarter of 1998, the Company issued 1,411 shares of Common Stock,
at $.66 per share, to a holder of an outstanding warrant upon the holder's
exercise of such warrant. This was a non-cash transaction, where the holder of
the warrants originally had 5,744 warrants. The calculation of 1,411 shares was
based on the fair market value of $0.875 per share. Such shares were issued in
reliance on the exemption from registration provided by Section 3(a)(9) of the
Securities Act of 1933.
Item 6. Management's Discussion and Analysis
Results of Operations
The following table sets forth, for the periods indicated, certain Statements of
Operations data as a percentage of revenues.
For Twelve Months
Ended December 31
-----------------
1998 1997
---- ----
Revenues 100.0% 100.0%
Cost of revenues 66.9% 80.3%
Gross Profit 33.1% 19.7%
Research & development expenses 5.0% 0.0%
Selling expenses 25.8% 11.0%
General & administrative expenses 83.2% 143.7
Total operating expenses 114.0% 154.7%
6
<PAGE>
Interest & other income/(expense) 0.5% (5.0%)
Income from continuing operations (80.5%) (139.9%)
Discontinued operations income/(loss) 13.3% (63.3%)
Gain/(loss) on disposal of assets from
discontinued operations 2.0% (53.6%)
Net Income/(loss) (65.2%) (256.8%)
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
---------------------------------------------------------------------
Revenues from Continuing Operations
The Company's revenues from continuing operations for the year ending December
31, 1998 were $1,417,131, an increase of $440,842 or 45% compared to $976,289
for the same period ending December 31, 1997. In 1997, the Company recognized
one-time revenues of approximately $760,000 for the initial development of its
TeleSmartTM prototype. Continuing revenues, excluding the one-time revenues,
increased $1,200,842 or 555% in 1998. Revenues from the TeleSmart service bureau
increased approximately $431,000 from customers activating the service in 1998.
Revenues from consulting/development projects increased by approximately
$770,000. The increase was a result of adding an additional telephone company in
1998 and charging customers for additional development and product enhancement
relating to the TeleSmart product.
Cost of Revenues and Gross Profit from Continuing Operations
The Company's cost of revenues from continuing operations for the year ending
December 31, 1998 was $948,178 compared to $783,804 for the same period in 1997,
an increase of $164,374, or 21%. In 1997, approximately $584,000 was related to
the initial development cost of the Company's TeleSmartTM prototype. Excluding
the costs to build the prototype, cost of revenues increased approximately
$750,000 in 1998. The increase is attributable to increased consulting and
service bureau revenue and consisted of approximately $430,000 for external
consulting costs and approximately $260,000 for additional personnel working
with the TeleSmart product and development of related products. In addition,
depreciation expense increased by approximately $44,000 on computer equipment
being used to run and support the service bureau and consulting revenue streams.
The gross profit from continuing operations for the year ending December 31,
1998 was $468,953 compared to $192,485 for the same period ended December 31,
1997, an increase of $276,468 or 144%. Gross profit, as a percentage of revenues
was 33% in 1998 compared to 20% for the same period in 1997. The increase in the
Company's gross profit margin is attributable to customers increasing their use
of the Company's TeleSmartTM services and higher margins obtained on consulting
revenues. In 1997, the Company accepted a lower margin on the development of the
TeleSmart prototype to accelerate the product launch.
Research and Development Costs from Continuing Operations
Research and development expenses from continuing operations for the year ending
December 31, 1998 were $71,322. There were no comparable research and
development costs in 1997. In 1998, the Company adopted a business model where
development projects and product enhancements were generally paid by the
customers requesting the development or enhancement. Research and development
expenses incurred in 1998 were primarily related to increasing the functionality
and capabilities of the TeleSmartTM product and the initial research to take the
product to the internet. Research and development costs for 1997 were incurred
in connection with the Company's IVR operations and are included in discontinued
operations.
Selling Costs from Continuing Operations
Selling expenses from continuing operations for the year ended December 31, 1998
were $365,785, an increase of $257,935 compared to $107,850 for the same period
in 1997. In late 1997, the Company sold and developed the TeleSmart prototype to
U S WEST. In 1998, the Company started marketing the product to other telephone
companies. The increase in the Company's selling expense was primarily due to
increased costs of approximately $200,000 for sales personnel and approximately
$34,000 for new marketing materials for the Company's TeleSmart product.
7
<PAGE>
General and Administrative Costs from Continuing Operations
The Company's general and administrative expenses from continuing operations for
the year ended December 31, 1998 were $1,179,119 compared to $1,402,467 for the
same period in 1997, a decrease of $223,348 or 16%. The decrease is the result
of several one-time events that occurred in 1997, including: personnel search
costs of approximately $117,000 for a new President and for a Vice President of
Sales and Marketing and consulting costs of approximately $71,000 for an interim
Chief Operating Officer. In addition, depreciation of office assets and other
professional fees, including legal, audit and tax, decreased by approximately
$100,000. These decreases were offset by an increase in the Company's
compensation expense of approximately $130,000.
Other Income and Expense from Continuing Operations
Interest income from continuing operations for the year ended December 31, 1998
was $29,099 compared to $29,935 for the same period in 1997. Interest expense
from continuing operations for the year ended December 31, 1998 was $2,195
compared to $74,802 for the same period in 1997. The decrease in interest
expense is primarily due to a reduction in bridge loan financing needed in 1998
and the decrease in capital leases. Other non-interest expense from continuing
operations was $20,180 for the year ended December 31, 1998 compared to $3,509
for the same period in 1997. Included in the balance for 1998 was a lawsuit
settlement of $20,000.
Discontinued Operations Income/(Loss)
For the year ended December 31, 1998, the Company's revenues from discontinued
operations was $914,381, compared to $1,320,046 for the same period in 1997. The
decrease in revenues resulted from the Company's decision to exit the IVR
business in 1998. Cost of revenues for the year ended December 31, 1998
decreased to $455,357, from $531,753 in 1997. 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. In comparison, the Company had
selling expenses of $379,717 and research and development expenses of $349,046
in 1997. General and administrative expenses and other income/expense for the
year ended December 31, 1998 were $270,373 compared to $677,280 for the same
period in 1997. This decrease was primarily a result of reduced personnel costs
in 1998.
Gain/(Loss) on Disposal of Assets from Discontinued Operations
The gain on disposal of assets from discontinued operations was $28,227 for the
year ended December 31, 1998 compared to a loss on the disposal of assets from
discontinued operations of $522,917 for the year ended December 31, 1997. The
1998 gain resulted from the sale of the remaining IVR assets. The 1997 loss was
a result of the Company writing down the goodwill of $510,696 for the access
card business and the sale of the remaining access card assets at a loss of
$12,221.
Net Loss
The Company incurred a net loss of $923,671 for the year ended December 31, 1998
compared to a net loss of $2,506,875 for the prior year. This is a decrease of
$1,583,204 or 63%.
Liquidity and Capital Resources
The Company had positive working capital of $74,021 and $677,158 at December 31,
1998 and December 31, 1997, respectively. During 1998, cash used in operations
was $740,672 primarily resulting from a net loss of $923,671, offset by
depreciation of $227,944. Cash used in 1998 for investing activities was $95,407
for the purchase of property and equipment. An additional $198,217 was provided
from the sale of IVR assets.
In late 1997, the Company reviewed its strategy and multiple lines of business
to determine the best course of action to stem ongoing losses and generate
increased revenues. In 1998, the Company elected to focus on providing enhanced
management reporting services to the telecommunication industry and exited lines
of businesses that could not contribute a profitable cash flow. The Company's
TeleSmartTM Data Services and Call Graphics Software combine raw
telecommunications data with geographic information service technology to
produce enhanced caller reporting for business analysis and marketing purposes.
The Company has marketed TeleSmartTM products and services to the Regional Bell
Operating Companies, new Local Access Carriers, existing InterExchange Carriers
and the Teleservices Industry.
8
<PAGE>
On February 4, 1999 the Company called warrants issued as part of the 1997
Private Placement. The calling of the warrants raised $1,900,000 (of these
proceeds $225,000 is due no later than May 6, 1999), 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 working capital needs for the foreseeable future, assuming the
Company is able to generate sufficient revenues and control expenses during
fiscal year 1999. As a result, the Company's ability to meet its working capital
requirements in fiscal year 1999 will depend upon: (i) generating sales which
exceed the Company's fiscal 1998 sales; and (ii) avoiding any significant
increase in expenses. Failure to meet these projections may have a material
effect on the Company's ability to continue its business. Should the Company
seek additional financing, there is no assurance that additional capital will be
available to the Company on acceptable terms or 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.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components in the financial statements. OneLink Communications does not
currently have any comprehensive income, and therefore, will measure the impact
of this statement, as it becomes necessary.
In June 1998, the FASB issued Statement No. 133 ("SFAS No. 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. OneLink Communications is not currently involved in derivative
instruments or hedging activities, and therefore, will measure the impact of
this statement, as it becomes necessary.
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 and modifications to become Year 2000
compliant is not expected to be 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.
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.
9
<PAGE>
Forward Looking Statements
This Form 10-KSB 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, 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 generally.
Item 7. Financial Statements
Report of Independent Auditors for Fiscal 1998
To OneLink Communications, Inc.:
We have audited the accompanying balance sheet of OneLink Communications, Inc.
as of December 31, 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OneLink Communications, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Lund Koehler Cox & Arkema, LLP
Minneapolis, Minnesota
January 29, 1999 (except for
Note 13 that is dated March 31, 1999)
10
<PAGE>
Report of Independent Auditors for Fiscal 1997
To the Shareholders
OneLink Communications, Inc.
We have audited the accompanying consolidated balance sheet of OneLink
Communications, Inc. (formerly MarketLink, Inc.) as of December 31, 1997, and
the related consolidated statement of operations, shareholders' equity and cash
flow for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OneLink
Communications, Inc. at December 31, 1997, and the consolidated results of its
operations and its cash flow for the year then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 14 to the 1997 financial statements, the Company's
recurring losses and negative cash flows from operations raise substantial doubt
about its ability to continue as a going concern without obtaining additional
capital. Management's plans as to these matters are also described in Note 14.
The 1997 financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 27, 1998
11
<PAGE>
OneLink Communications, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1998 1997
------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $420,600 $ 1,074,556
Trade accounts receivable, net of allowance for doubtful accounts
of $10,000 in 1998 and 1997 203,798 136,802
Minimum lease payments receivable - 17,100
Computer parts and supplies 12,751 4,032
Prepaid expenses 14,190 39,655
------------------------------------
Total current assets 651,339 1,272,145
------------------------------------
Property and equipment:
Furniture and equipment 628,475 785,696
Equipment leased to others - 273,607
------------------------------------
628,475 1,059,303
Accumulated depreciation (359,334) (508,975)
------------------------------------
269,141 550,328
------------------------------------
Deposits 14,916 35,311
------------------------------------
Total assets $935,396 $1,857,784
====================================
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt $ 3,414 $ 33,773
Accounts payable 149,047 74,125
Accrued expenses 422,157 343,366
Deferred revenue 2,700 143,723
------------------------------------
Total current liabilities 577,318 594,987
Unearned lease income - 313
Long-term debt, net of current maturities - 5,735
------------------------------------
Total liabilities 577,318 601,035
------------------------------------
Shareholders' equity:
Common stock, par value $.01 per share:
Authorized shares--50,000,000
Issued and outstanding shares:
1998--5,015,607 and 1997--4,991,696 50,156 49,917
Additional paid-in capital 8,491,886 8,467,125
Accumulated deficit (8,183,964) (7,260,293)
------------------------------------
Total shareholders' equity 358,078 1,256,749
------------------------------------
------------------------------------
Total liabilities and shareholders' equity $935,396 $1,857,784
====================================
See accompanying notes.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
OneLink Communications, Inc.
Consolidated Statements of Operations
Year ended December 31
1998 1997
------------------------------------
<S> <C> <C>
Continuing Operations:
Revenues $1,417,131 $976,289
Cost of revenues 948,178 783,804
------------------------------------
Gross profit 468,953 192,485
------------------------------------
Operating expenses:
Selling 365,785 107,850
Research and development 71,322 -
General and administrative 1,179,119 1,402,467
------------------------------------
Total operating expenses 1,616,226 1,510,317
------------------------------------
Operating loss (1,147,273) (1,317,832)
Other income (expense):
Interest income 29,099 29,935
Interest expense (2,195) (74,802)
Other expense (20,180) (3,509)
------------------------------------
Income from continuing operations (1,140,549) (1,366,208)
Discontinued Operations:
Discontinued operations income (loss) 188,651 (617,750)
Gain (loss) on disposal of assets from discontinued operations 28,227 (522,917)
-----------------------------------
Net loss $(923,671) $(2,506,875)
====================================
Net loss from continuing operations per common share:
Basic and diluted $(.23) $(.38)
Net loss per common share:
Basic and diluted $(.18) $(.71)
Weighted average number of shares outstanding:
Basic and diluted 4,994,161 3,549,401
See accompanying notes.
</TABLE>
13
<PAGE>
OneLink Communications, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Total
--------------------------- Paid-In Accumulated Shareholders'
Shares Amount Capital Deficit Equity
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,943,831 $29,438 $6,346,663 $(4,753,418) $1,622,683
Private placement net of expenses of $81,282 2,000,000 20,000 1,898,708 - 1,918,708
Exercise of stock warrants 47,865 479 (229) - 250
Issuance of warrants for services - - 167,383 - 167,383
Issuance of warrants in connection with bridge
financing - - 54,600 - 54,600
Net loss - - - (2,506,875) (2,506,875)
------------------------------------------------------------------------
Balance at December 31, 1997 4,991,696 49,917 8,467,125 (7,260,293) 1,256,749
Exercise of stock warrants 1,411 14 (14) - -
Exercise of stock options 22,500 225 22,275 - 22,500
Payments paid on contingent stockholder notes - - (2,500) - (2,500)
Issuance of warrants for services - - 5,000 - 5,000
Net loss - - - (923,671) (923,671)
------------------------------------------------------------------------
Balance at December 31, 1998 5,015,607 $50,156 $8,491,886 $(8,183,964) $358,078
========================================================================
</TABLE>
See accompanying notes.
14
<PAGE>
OneLink Communications, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
------------------------------------
<S> <C> <C>
Operating activities
Net loss $(923,671) $(2,506,875)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 227,944 317,931
Amortization and write-down of goodwill - 592,542
Write-down of assets 2,505 164,816
Write-off of accounts payable - (108,662)
Warrants issued for bridge financing - 54,600
Warrants issued for services 5,000 167,383
Loss (gain) on sale of property and equipment (28,227) 12,221
Changes in operating assets and liabilities:
Trade accounts receivable (66,996) (22,201)
Minimum lease payments receivable 17,100 17,100
Computer parts and supplies (8,719) 36,937
Prepaid expenses and deposits 22,015 251,173
Investment in sales type leases (313) 12,944
Accounts payable and accrued expenses 153,713 (25,561)
Customer deposits - (197,175)
Deferred revenue (141,023) 102,543
------------------------------------
Net cash used in operating activities (740,672) (1,130,284)
------------------------------------
Investing activities
Purchases of property and equipment (95,407) (376,257)
Proceeds from the sale of equipment 198,217 35,500
------------------------------------
Net cash provided by (used in) investing activities 102,810 (340,757)
------------------------------------
Financing activities
Net proceeds from short-term debt - 350,000
Payments on short-term and long-term notes payable (36,094) (82,387)
Payments on contingent stockholder notes (2,500) -
Proceeds from issuance of stock options 22,500 -
Proceeds from issuance of common stock - 1,568,708
Proceeds from warrants exercised - 250
------------------------------------
Net cash provided by (used in) financing activities (16,094) 1,836,571
------------------------------------
Increase (decrease) in cash and cash equivalents (653,956) 365,530
Cash and cash equivalents at beginning of year 1,074,556 709,026
------------------------------------
Cash and cash equivalents at end of year $420,600 $ 1,074,556
====================================
Supplemental Cash Flow Information
Cash paid for interest $2,195 $77,452
Cash paid for income taxes - -
Noncash investing and financing activities:
Exercise of stock warrants $14 $229
Conversion of short-term debt into common stock - $350,000
See accompanying notes.
</TABLE>
15
<PAGE>
OneLink Communications, Inc.
Notes to Consolidated Financial Statements
1. Description of Business
OneLink Communications, Inc. (the "Company" or "OneLink") was incorporated in
Minnesota in June 1990. The Company specializes in transforming raw
telecommunications data into reports, containing information pertaining to
caller location, frequency of calls, unanswered calls, busy calls, etc. referred
to in the industry as "business intelligence" that enables management to make
better informed and more accurate decisions. The Company markets its
TeleSmart(TM) Data Services solutions to telecommunications providers who
provide these services to their customers as value-added enhancements to
strengthen customer relationships and increase customer satisfaction, loyalty
and retention.
Historically, the Company has focused on the design, development and operation
of interactive voice response (IVR) systems. OneLink's IVR systems facilitated
caller information transactions by collecting and distributing information,
creating customer databases and accessing location-specific services by
telephone on a fully automated basis. In 1998, the Company discontinued the
deployment and service of its interactive technologies and focused on becoming a
management reporting and business intelligence partner for telephone companies.
2. Summary of Accounting Policies
Consolidated Financial Statements
The financial statements include the accounts of OneLink Communications, Inc.
and its wholly-owned subsidiary, Provident Worldwide Communications, Inc.
("Provident"). Provident was dissolved in 1998. All references to the Company in
these financial statements relate to the consolidated entity. All significant
intercompany accounts and transactions are eliminated in consolidation.
Revenue Recognition
Revenue for operating leases and services is recognized at the end of each month
in which service is provided. Revenue for product sales is recorded upon
shipment. Revenue on certain contracts may require revenue recognition under
contract accounting rules, whereby revenue is recognized on a percentage of
completion basis.
Deferred revenue consists of amounts paid by customers for future services.
Deferred revenues are recognized on a straight-line basis over the period of the
service agreement or upon completion of the contract.
The Company extends unsecured credit to customers in the normal course of
business.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from the estimates.
Stock-Based Compensation
The Company follows Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25"), and related interpretations in accounting
for its stock options. Under APB 25, when the exercise price of stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
The Company has adopted the disclosure only provisions of the Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123"). Accordingly, the Company has made pro forma disclosures of
what net loss and net loss per share would have been had the provisions of
Statement 123 been applied to the Company's stock options.
16
<PAGE>
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount of
cash equivalents, which are available-for-sale, approximates market value. The
balances, at times, may exceed federally insured limits.
Computer Parts and Supplies
Computer parts and supplies are valued at the lower of cost, first-in, first-out
(FIFO) method, or market.
Property and Equipment
Property and equipment is stated at cost. Depreciation expense is recognized on
the straight-line basis over the estimated useful life of the equipment.
Equipment leased to others is depreciated over the life of the lease.
Income Taxes
The Company accounts for income taxes using the liability method. Deferred
income taxes are provided for temporary differences between the financial
reporting and tax basis of assets and liabilities.
Net Loss Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share. Statement 128 replaced the previously
reported primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the Statement 128
requirements.
Impairment of Long-Lived Assets
The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
Fair value of financial instruments
The carrying amounts for all financial instruments approximates fair value. The
carrying amounts for cash, accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity of these
instruments. The fair value of debt approximates the current rates at which the
Company could borrow funds with similar remaining maturities.
Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation. The reclassifications had no impact on net
loss or shareholders' equity.
3. Provident Acquisition and IVR Discontinued Operations
On August 2, 1996 the Company acquired the business and substantially all of the
assets of Provident through the issuance of 230,000 stock options valued at
$265,645 and the assumption of $380,806 in net liabilities.
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the cost was allocated to the assets based on their fair value at
the date of acquisition. The excess of purchase price over fair value of the net
assets acquired was $646,451 and was allocated to goodwill. In September 1997,
the Company recorded a goodwill write-down of $510,696. The write-down
eliminated the remaining goodwill of the Company related to the acquisition of
Provident. The write-down of the goodwill and the subsequent sale of the
remaining assets acquired from Provident have been included in the loss on
disposal of assets from discontinued operations.
17
<PAGE>
During 1998, the Company completed the discontinuance of its IVR operations (of
which Provident was a part of) and sold the IVR related assets of the segment.
The operating results, sale of all IVR assets and the related asset write-downs
are accounted for as discontinued operations in the Consolidated Statements of
Operations. Based on the Company's net operating loss carryforwards (see Note
9), no income tax benefit was recorded in the years ended December 31, 1998 and
1997. A summary of operations relating to discontinued operations is as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
------------------------------------
<S> <C> <C>
Revenues $914,381 $1,320,046
Cost of revenues 455,357 531,753
------------------------------------
Gross profit 459,024 788,293
Operating and other expenses (income):
Selling - 379,717
Research and development - 349,046
General and administrative 270,373 677,280
------------------------------------
Income (loss) from discontinued operations $188,651 $(617,750)
====================================
</TABLE>
4. Other Accrued Liabilities
At December 31, 1995, the Company reclassified payables related to the pursuit
of the N11 application in Atlanta, Georgia in 1993 and 1994 into other accrued
liabilities. In 1997, the Company determined that it was unlikely that they
would have to pay the remaining balances and subsequently wrote off $108,662 of
payables in 1997.
18
<PAGE>
5. Long-Term Debt
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
<S> <C> <C>
Notes payable - monthly installments in varying amounts including $1,940 $35,714
interest at 10%, unsecured and maturing through February 1999
Other 1,474 3,794
---------------- -----------------
3,414 39,508
Less amount due within one year 3,414 33,773
---------------- -----------------
$0 $ 5,735
================ =================
</TABLE>
There was a note payable to a director of $1,466 at December 31, 1997 included
in notes payable.
6. Contingent Stockholder Notes Payable
In January 1994, the Company acquired 219,364 shares of common stock from two
stockholders for $2.18 per share by issuing promissory notes totaling $478,212
which bear interest at 6%. These shares have been canceled and retired. Under
the terms of the notes, payments shall be made when, and only if, the Company
receives payments for exercise of options under its stock option plan until the
notes are paid in full. The Company is required to use 100 percent of any cash
proceeds resulting from the exercise of options under the Plan to pay down these
obligations until these notes are satisfied. Management cannot currently
determine if additional options will be exercised, thereby requiring payments on
the notes. Consequently, no liability has been recorded in the financial
statements. Payments of $2,500 were made on these promissory notes in 1998.
7. Shareholders' Equity
The Company completed a private placement of Common Stock in 1997 in which it
sold 2,000,000 shares of Common Stock, resulting in net proceeds to the Company
of $1,918,708.
19
<PAGE>
8. Warrants and Stock Options
In September 1997, the Company completed a private placement of 40 Units at
$50,000 per unit. Each unit consisted of 50,000 shares of the Company's Common
Stock and a warrant to purchase an additional 50,000 shares of Common Stock at
$1.50 per share. The Company also issued warrants to the agent in the private
placement to purchase 146,000 shares of Common Stock at $1.00 per share. These
warrants are exercisable through September 15, 2000.
During 1997, the Company borrowed an aggregate of $350,000 from certain
investors including a director, under 9% unsecured notes due in seven months or
upon receipt of proceeds from the private placement and issued warrants to
purchase 105,000 shares of Common Stock at an exercise price of $1.28 per share.
The warrants are exercisable until the year 2000. The value of these warrants
was determined to be $54,600 on the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions: risk-free
interest rate of 5.81%, a volatility factor of the expected market price of the
Company's Common Stock of .53 and a warrant life of three years. The entire
$54,600 was charged to interest expense during the year ended December 31, 1997.
The entire amount borrowed was converted to common stock as part of the private
placement in September 1997.
In November 1997, the Board of Directors issued warrants to purchase 25,000
shares of the Company's Common Stock to outside consultants in exchange for
consulting services. These warrants had an exercise price of $0.010 per share
and were exercised in November 1997. The value of these warrants was determined
to be $49,750.
In December 1997, the Board of Directors issued warrants to purchase 81,247
shares of the Company's Common Stock to outside consultants in exchange for
providing consulting services. These warrants have an exercise price of $1.50
per share and are exercisable through July 30 and December 1, 2004. The value of
these warrants was determined to be $65,833.
In December 1997, the Board of Directors issued warrants to purchase 64,500
shares of the Company's Common Stock to an outside consultant in exchange for
consulting services. These warrants have an exercise price of $1.50 per share
and are exercisable through August 31, 2000. The value of these warrants was
determined to be $38,000.
In December 1997, the Board of Directors issued warrants to purchase 30,000
shares of the Company's Common Stock to an outside consultant in exchange for
consulting services. These warrants have an exercise price for $1.13 per share
and are exercisable through December 31, 2000. The value of these warrants was
determined to be $13,800.
In December 1998, the Board of Directors issued warrants to purchase 12,000
shares of the Company's Common Stock to an outside consultant in exchange for
consulting services. These warrants have an exercise price for $1.25 per share
and are exercisable through December 1, 2003. The value of these warrants was
determined to be $5,000.
The Company established a stock option plan in 1994 to provide incentives to
employees whereby 750,000 shares of Common Stock have been reserved. The options
can be either incentive stock options or non-statutory stock options and are
valued at the fair market value of the stock on the date of grant. An increase
in the stock option pool of an additional 1,500,000 shares was approved by
shareholders, effective January 3, 1997.
Exercisable options and warrants were 444,462 and 2,708,627, respectively, at
December 31, 1998 and 316,775 and 2,885,928, respectively, at December 31, 1997.
On January 3, 1997, the shareholders of OneLink approved the grant of 600,000
stock options to the President and 400,000 stock options to the Chairman of the
Board effective as of September 4, 1996.
20
<PAGE>
The following table summarizes options and warrants to purchase shares of the
Company's Common Stock:
<TABLE>
<CAPTION>
Weighted Weighted
Shares Average Average Warrant
Available Options Option Price Warrants Price
for Grant Outstanding Per Share Outstanding Per Share
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 (981,517) 1,731,517 $2.67 644,308 $2.96
Authorized 1,500,000
Granted (1,159,500) 1,159,500 1.41 2,451,747 1.44
Exercised - - (60,035) .39
Canceled 1,022,906 (1,022,906) 1.80 (150,092) 2.15
---------------------------- --------------
Balance at December 31, 1997 381,889 1,868,111 1.55 2,885,928 1.77
Granted (1,269,963) 1,269,963 1.16 12,000 1.25
Exercised 22,500 (22,500) 1.00 (5,744) .66
Canceled 1,160,579 (1,160,579) 1.53 (183,557) 2.96
---------------------------- --------------
Balance at December 31, 1998 295,005 1,954,995 $1.31 2,708,627 $1.69
=============================================================================
</TABLE>
The following table summarizes information about the stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Range of Number Remaining Number Exercise Price of
Exercise Price Outstanding Contractual Life Exercisable Vested Options
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$.01 - $1.50 1,310,883 8.0 years 147,850 $1.15
$1.51 - $3.50 644,112 7.4 years 296,612 1.91
-------------------------------------------------------------------------------------
Total 1,954,995 7.8 years 444,462 $1.66
</TABLE>
21
<PAGE>
Stock-Based Compensation
Effective January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS
123 requires companies to recognize compensation expense associated with
stock-based compensation plans over the anticipated service period based on the
fair value of the award on the date of grant. However, SFAS 123 allows companies
to continue to measure compensation costs prescribed by APB Opinion No. 25
"Accounting for Stock Issued to Employees" (APB 25"). Companies electing to
continue accounting for stock-based compensation plans under APB 25 must make
pro forma disclosures of net income and earnings per share, as if SFAS 123 had
been adopted. The Company has continued to account for stock-based compensation
plans under APB 25. The pro forma disclosure of the effect of SFAS 123 on net
loss and loss per share for the years ended December 31, is presented below. The
fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998 and 1997: risk-free interest rate of 4.5% and 5.81%,
respectively: volatility factor of the expected market price of the Company's
common stock of .80 and .53, respectively, and an option life of four years.
Fair value calculations assume no dividends will be paid on the Company's common
stock.
<TABLE>
<CAPTION>
1998 1997
--------------------------------------
<S> <C> <C>
Pro forma net loss $(1,133,326) $(3,004,720)
Pro forma net loss per common share - basic and diluted $(.23) $(.85)
</TABLE>
9. Income Taxes
The Company has net operating loss carryforwards of approximately $7,900,000 at
December 31, 1998 expiring at various times beginning 2008 that can be used to
22
<PAGE>
offset future taxable income. These carryforwards are subject to the limitations
of the Internal Revenue Code Section 382 in the event of certain changes in the
equity ownership of the Company.
The provision for income taxes from continuing operations differs from the
amount computed by applying the federal statutory tax rate of 34% because of the
following:
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
<S> <C> <C>
Tax benefit at federal statutory tax rate $(314,000) $(811,000)
Increase in valuation allowance 314,000 811,000
---------------- -----------------
$ - $ -
================ =================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Components of deferred tax assets are as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
Other $ - $26,000
Net operating loss carryforwards 2,686,000 2,346,000
Less valuation allowance (2,686,000) (2,372,000)
------------------------------------
Net deferred tax assets $ - $ -
====================================
</TABLE>
10. Retirement Savings Plan
The Company has a pre-tax salary reduction/profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code, which covers
employees meeting certain eligibility requirements. The plan does not currently
allow for Company contributions.
11. Lease Commitment
The Company leases its administrative facilities under an operating lease. The
lease requires monthly rental payments of $7,542 increasing to $8,914 over the
life of the lease and their prorata share of operating expenses. The current
lease expires on June 30, 2003, with an option to extend the lease term for an
additional five years. Total rent expense, including operating expenses, was
$89,564 and $85,944 for 1998 and 1997.
At December 31, 1998, future minimum lease payments under operating leases are
as follows:
December 31
------------------
1999 $92,565
2000 96,679
2001 100,793
2002 104,907
2003 53,482
==================
$448,426
==================
23
<PAGE>
12. Significant Customers
The Company's revenues from continuing operations totaled $1,417,131 and
$976,289 during 1998 and 1997, respectively. Sales from continuing operations to
two customers were 66% and 17% of revenues in 1998 and 69% and 15% of trade
accounts receivable in December 1998. Sales from continuing operations to one
customer were 81% of revenues in 1997 and 4% of trade accounts receivable in
December 1997.
13. Subsequent Event
On February 4, 1999, the Company called the warrants from the September 1997
Private Placement. The warrants were called at a reduced price of $1.00 from
$1.50. The discounted warrants could be exercised until March 17, 1999. After
this date, the unexercised warrants could be exercised at $1.50 per share. The
calling of the warrants raised additional proceeds of $1,900,000 (of these
proceeds $225,000 is due no later than May 6, 1999) which will be used for
further development of products related to TeleSmartTM Data Services.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Effective July 28, 1998, the Board of Directors of the Company, acting on the
recommendation of management, approved the engagement of Lund Koehler Cox &
Arkema LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998. Lund Koehler Cox & Arkema LLP replaces the firm of Ernst &
Young LLP, who was dismissed as the Company's certified public accountants
responsible for auditing the Company's financial statements.
Ernst & Young LLP's reports for the last two fiscal years contained an emphasis
paragraph about the Company's ability to continue as a going concern without
obtaining additional capital due to recurring losses and negative cash flows
from operations. Ernst & Young LLP's reports contained no adverse opinions,
disclaimers, or qualifications or modifications as to audit scope, accounting
principles, or uncertainty, other than the previously mentioned uncertainty.
For each of the two fiscal years ended December 31, 1997, and in the subsequent
interim period, there were no disagreements with Ernst & Young LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfactions of
Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the
matter in their reports.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Paul F. Lidsky, 45, joined the Company as President and CEO in September 1997
with 14 years of telecommunication experience. Prior to this, he served as the
Executive Vice President, Strategy and Business Development for Norstan, Inc. In
this position, he was responsible for the development of corporate strategies,
market positioning and new business development. This included the
identification of acquisition targets and leadership of Norstan's acquisition
teams. His prior positions with Norstan included Executive Vice
President-Norstan Integration Services, Vice President of Sales and General
Manager of the Ohio Branch. Mr. Lidsky was a Product Manager with Electronic
Engineering Company when it was acquired by Norstan, Inc. in 1985.
Gregory H. Mohn, 35, is Vice President of Business Development. Prior to
founding the Company in April 1990, he founded a start-up venture using the
predecessor to the technology used in the Company's first systems. Mr. Mohn is
also responsible for many of the Company's new products and features including
the development and introduction of OneLink's Geographic Information Systems
(GIS) products and the development of the TeleSmartTM Data Services.
Michael J. Ryan, 35, joined the company in November 1996 as Vice President of
Finance and Administration and Chief Financial Officer. Prior to joining the
Company, Mr. Ryan developed broad telecommunications operational experience as
the Regional Controller for Frontier Communications, a telecommunications
company reseller, and as the Controller for American Sharecom before the company
was acquired by Frontier Communications. Previously, Mr. Ryan obtained his
public accounting experience as a Senior Auditor for Ernst & Young and Coopers &
Lybrand. Mr. Ryan is a graduate of the University of Northern Iowa and a
Certified Public Accountant. Mr. Ryan has tendered his resignation and will be
leaving the Company on April 19, 1999.
24
<PAGE>
Kirk Danzl, 39, is Vice President of Operations for OneLink. Mr. Danzl has over
13 years experience working in telecommunications. Prior to joining the company,
he was Director of Information Services for Frontier Communications, Inc. At
Frontier, Mr. Danzl was responsible for the project management of several
corporate-wide projects including network facilities consolidation and system
integration. Prior to Frontier, he was responsible for the development and
operations of the mission critical billing, network management and end user
systems for American Sharecom. American Sharecom was the nations' 10th largest
long distance company before its merger with Frontier.
The information required by Item 9 relating to election of directors and
compliance with 16(a) of the Exchange Act is incorporated herein by reference to
the sections labeled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" respectively, which appear in the Company's
definitive Proxy statement for its 1999 Annual meeting of Shareholders.
Item 10. Executive Compensation
The information required by Item 10 is incorporated by reference to the sections
labeled "Executive Compensation" and "Compensation of Directors" in the
Company's Proxy Statement for its 1999 Annual meeting of Shareholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 11 is incorporated by reference to the section
labeled "Security ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement for its 1999 Annual meeting of Shareholders.
Item 12. Certain Relationships and Related Transactions
None
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of the Company, as amended
4.2 1994 Stock Option Plan, as amended (a)
10.12 Stock Option Agreement with Ronald E. Eibensteiner effective September
4, 1996 (c)
10.13 Agreement Between US WEST Communications, Inc. and OneLink
Communications, Inc., dated November 11, 1997 [The Company has received
confidential treatment for portions of this agreement.] (d)
10.14 Employment Agreement between Paul Lidsky and OneLink Communications,
Inc. (d)
10.15 Stock Options Agreements with Paul Lidsky dated September 2, 1997 and
November 19, 1997 (d)
10.16 Agreement Between Cincinnati Bell Telephone Company and OneLink
Communications, Inc., dated September 30, 1998 [The Company has
received confidential treatment for portions of this agreement.] (e)
23.1 Consent of Ernst & Young LLP for fiscal year ending December 31,
1997(f)
23.2 Consent of Lund Koehler Cox & Arkema, LLP for fiscal year ending
December 31, 1998(f)
24 Power of Attorney (Included on signature page)
27 Financial Data Schedule (filed only in electronic format)
- -----------------
25
<PAGE>
(a) Incorporated by reference to the Company's Registration Statement on
FormSB-2 (File No. 33-90084C) filed March 7, 1995
(b) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1995 (File No. 0-25764).
(c) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1996 (File No. 0-25764).
(d) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1997 (File No. 0-25764).
(e) Incorporated by reference to the Company's Report on Form 10-QSB filed
for the quarterly period ended September 30, 1998 (File No. 0-25764).
(f) Please refer to Part II, Item 7 of this Form 10-KSB.
* Indicates a material contract, management contract or compensatory plan
or arrangement required to be filed as an Exhibit to this Form 10-KSB.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on July 31, 1998 reporting under
Item 4 a change in the Company's independent auditors.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, OneLink Communications, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
OneLink Communications, Inc.
/s/ Paul F. Lidsky March 29, 1999
By: Paul F. Lidsky, Date
President, CEO & Director
/s/ Michael J. Ryan March 29, 1999
By: Michael J. Ryan, CFO Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by persons on behalf of the Registrant and in the
capacities and on the dates indicated. Each person whose signature to this
report on Form 10-KSB appears below hereby constitutes and appoints Paul F.
Lidsky and Ron Eibensteiner, and each of them, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his or
her behalf individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments to this report on Form
10-KSB and any and all instruments or documents filed as part of or in
connection with this report on Form 10-KSB or the amendments thereto and each of
the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or his substitutes, shall do or cause to be done by virtue hereof.
/s/ Ronald Eibensteiner March 29, 1999
By: Ronald E. Eibensteiner, Chairman Date
of the Board &Director
/s/ Paul F. Lidsky March 29, 1999
By: Paul F. Lidsky, President, CEO, & Date
Director
/s/ John F. Stapleton March 29, 1999
By: John F. Stapleton, Director Date
/s/ Vin Weber March 29, 1999
By: Vin Weber, Director Date
/s/ Tomas M. Kieffer March 29, 1999
By: Tomas M. Kieffer, Director Date
27
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of the Company, as amended
4.2 1994 Stock Option Plan, as amended (a)
10.12 Stock Option Agreement with Ronald E. Eibensteiner effective September
4, 1996 (c)
10.13 Agreement Between US WEST Communications, Inc. and OneLink
Communications, Inc., dated November 11, 1997 [The Company has received
confidential treatment for portions of this agreement.] (d)
10.14 Employment Agreement between Paul Lidsky and OneLink Communications,
Inc. (d)
10.15 Stock Options Agreements with Paul Lidsky dated September 2, 1997 and
November 19, 1997 (d)
10.16 Agreement Between Cincinnati Bell Telephone Company and OneLink
Communications, Inc., dated September 30, 1998 [The Company has
received confidential treatment for portions of this agreement.] (e)
23.1 Consent of Ernst & Young LLP for fiscal year ending December 31,
1997(f)
23.2 Consent of Lund Koehler Cox & Arkema, LLP for fiscal year ending
December 31, 1998(f)
24 Power of Attorney (Included on signature page)
27 Financial Data Schedule (filed only in electronic format)
- -----------------
28
<PAGE>
(a) Incorporated by reference to the Company's Registration Statement on
FormSB-2 (File No. 33-90084C) filed March 7, 1995
(b) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1995 (File No. 0-25764).
(c) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1996 (File No. 0-25764).
(d) Incorporated by reference to the Company's Report on Form 10-KSB filed
for the fiscal year ended December 31,1997 (File No. 0-25764).
(e) Incorporated by reference to the Company's Report on Form 10-QSB filed
for the quarterly period ended September 30, 1998 (File No. 0-25764).
(f) Please refer to Part II, Item 7 of this Form 10-KSB.
* Indicates a material contract, management contract or compensatory plan
or arrangement required to be filed as an Exhibit to this Form 10-KSB.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on July 31, 1998 reporting under
Item 4 a change in the Company's independent auditors.
29
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement on Form S-2 of OneLink Communications, Inc. for the Registration of
3,840,000 shares of its common stock, of our report dated February 27, 1998, on
the consolidated financial statements of OneLink Communications, Inc. for the
year ended December 31, 1997 included in the Annual Report (Form 10-KSB) for the
year ended December 31, 1998 filed with the Securities and Exchange Commission.
/s/ Ernst & Young L.L.P.
Minneapolis, Minnesota
April 20, 1999
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement on Form S-2 of OneLink Communications, Inc. of our report dated
January 29, 1999 (except for Note 13 that is dated March 31, 1999) on the
consolidated financial statements of OneLink Communications, Inc., which report
appears in the Annual Report on Form 10-KSB for the year ended December 31,
1998.
/s/ Lund Koehler Cox & Arkema, LLP
Minneapolis, Minnesota
April 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 420,600
<SECURITIES> 0
<RECEIVABLES> 213,798
<ALLOWANCES> (10,000)
<INVENTORY> 12,751
<CURRENT-ASSETS> 651,339
<PP&E> 628,475
<DEPRECIATION> (359,334)
<TOTAL-ASSETS> 935,396
<CURRENT-LIABILITIES> 577,318
<BONDS> 0
0
0
<COMMON> 50,156
<OTHER-SE> 307,922
<TOTAL-LIABILITY-AND-EQUITY> 935,396
<SALES> 1,417,131
<TOTAL-REVENUES> 1,417,131
<CGS> 948,178
<TOTAL-COSTS> 948,178
<OTHER-EXPENSES> 1,616,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,195)
<INCOME-PRETAX> (923,671)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,140,549)
<DISCONTINUED> 216,878
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (923,671)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
