-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N74QJa6cyIetjM31cFS9VvLKoJTO7EvORNyG9694XFqzkxdZ6n8Io8Bp+7IAIEaR SLdovDP2tRnInhY+dtuotA== 0000948830-96-000248.txt : 19961125 0000948830-96-000248.hdr.sgml : 19961125 ACCESSION NUMBER: 0000948830-96-000248 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961122 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATALINK SYSTEMS CORP /CA/ CENTRAL INDEX KEY: 0000832370 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 353574355 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21069 FILM NUMBER: 96670846 BUSINESS ADDRESS: STREET 1: 2105 HAMILTON AVENUE STREET 2: SUITE 240 CITY: SAN JOSE STATE: CA ZIP: 95125 BUSINESS PHONE: 408-558-0800 MAIL ADDRESS: STREET 1: 2105 HAMILTON AVENUE STREET 2: SUITE 240 CITY: SAN JOSE STATE: CA ZIP: 95125 FORMER COMPANY: FORMER CONFORMED NAME: PLATINUM PRODUCTIONS INC /CO DATE OF NAME CHANGE: 19930803 FORMER COMPANY: FORMER CONFORMED NAME: LORD ABBOTT INC DATE OF NAME CHANGE: 19920703 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1996 Commission file number: 0-21069 DATALINK SYSTEMS CORPORATION ---------------------------------------------------- (Exact name of small business issuer in its charter) Nevada 35-3574355 - ------------------------------ ---------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) Incorporation or Organization) 2105 Hamilton Avenue, Suite 240, San Jose, California 95125 ----------------------------------------------------------- (Address of Principal Executive Offices including zip code) (408) 558-0800 ------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] There were 16,638,683 shares of the Registrant's Common Stock outstanding as of September 30, 1996. Transitional Small Business Disclosure Format: Yes --- No -X- DATALINK SYSTEMS CORPORATION (a development stage company) TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: a. Condensed Consolidated Balance Sheets September 30, 1996 and March 31, 1996 3 b. Condensed Consolidated Statements of Operations Three months ended September 30, 1996 and 1995 and Six months ended September 30, 1996 and 1995 and the period from August 15, 1986 (date of inception) to September 30, 1996 4 c. Condensed Consolidated Statements of Cash Flows Six months ended September 30, 1996 and 1995 and the period from August 15, 1986 (date of inception) to September 30, 1996 5 d. Notes to the Condensed Consolidated Financial Statements 6-7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 9 ITEM 2. CHANGES IN SECURITIES. 9 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 9 ITEM 5. OTHER INFORMATION. 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURES 10 EXHIBITS INDEX TO EXHIBITS 11 EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE -2- DATALINK SYSTEMS CORPORATION (a development stage company) CONDENSED CONSOLIDATED BALANCE SHEETS September 30, March 31, 1996 1996 (Unaudited) (Unaudited) ----------- ----------- ASSETS: Current assets: Cash and cash equivalents $2,471,792 $353,274 Accounts Receivable 1,210,096 17,157 Prepaid expenses 9,689 5,491 ---------- ---------- Total current assets 3,691,577 375,922 Equipment, net 215,707 82,578 Other assets, net 89,823 - ---------- ----------- Total assets 3,997,107 458,500 ---------- ----------- LIABILITIES AND SHAREHOLDER'S EQUITY/DEFICIT: Current liabilities: Accounts payable $ 90,051 $ 51,698 Payable to related parties 18,000 18,000 Convertible debentures 2,130,000 - ---------- ----------- Total current liabilties 2,238,051 69,698 Deferred revenue, net 1,940,934 - ---------- ----------- Total liabilities 4,178,985 69,698 ---------- ----------- Commitments: SHAREHOLDERS' EQUITY Common stock and other equity 1,674,587 1,384,718 Accumulated deficit (1,856,465) (995,916) ---------- ----------- Total shareholders' equity/deficit (181,878) 388,802 ---------- ----------- Total liabilities and shareholders $3,997,107 $ 458,500 equity/deficit ---------- ----------- See accompanying notes. -3- DATALINK SYSTEMS CORPORATION (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Period from August 15, 1986 (date of Three months ended Six months ended inception) September 30, September 30, to Sept. 30, 1996 1995 1996 1995 1996 --------- ---------- --------- ---------- ------------ Net sales $ 37,847 $ 305 $ 59,763 $ 12,144 $ 155,821 --------- ---------- --------- ---------- ----------- Costs and operating expenses: Cost of sales 22,078 1,358 34,097 2,387 82,663 Research and development 104,747 58,684 157,527 13,821 626,089 Sales and marketing 156,639 17,141 195,898 17,971 377,470 General and administrative 248,257 43,478 615,573 61,695 1,041,693 --------- ---------- --------- ---------- ----------- Total operating expenses 531,721 120,661 1,003,095 95,874 2,127,915 --------- ---------- --------- ---------- ----------- Loss from operations (493,874) (120,356) (943,332) (83,730) (1,972,094) --------- ---------- --------- ---------- ----------- Other income (expense) Interest 5,666 - 5,666 - 34,534 Government grants - - 4,016 - 7,838 Income from sale of technology 7,907 - 7,907 - 7,907 Canadian investment tax credit 65,350 - 65,350 - 65,350 --------- ---------- --------- ---------- ----------- Net loss ($414,951) ($120,356) ($860,393) ($83,730) ($1,856,465) --------- ---------- --------- ---------- ----------- Net loss per share (0.02) (0.0007) (0.0099) (0.0005) (0.06) Net loss per share (fully diluted) (0.02) (0.0007) (0.0097) (0.0005) (0.06) ---------- ----------- ---------- ----------- ----------- Shares used in per share calculations 16,738,683 162,117,662 87,186,615 162,117,662 32,435,947 Fully diluted shares used in 20,038,683 162,117,662 88,873,281 162,117,662 32,517,131 per share calculations
See accompanying notes. -4- DATALINK SYSTEMS CORPORATION (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
Six months ended Period from August 15, September 30, 1986 (date of inception) 1996 1995 to Sept. 30, 1996 ---------- --------- ----------------------- Cash flows from operating activities: Net loss $ (860,549) $(119,834) $(1,856,465) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation/Amortization 13,022 - 29,650 Changes in assets and liabilities: Accounts receivable (1,192,939) - (1,210,096) Prepaid expenses (4,198) - (9,689) Deferred assets (89,823) - (89,823) Accounts payable 38,353 119,329 90,051 Advances from related parties - - 18,000 ---------- --------- ----------- Net cash used in operating activities (2,096,134) (505) (3,028,372) ---------- --------- ----------- Cash used in investing activities: Acquisition of equipment 146,151 18,859 245,357 ---------- --------- ----------- Cash flows from financing activities: Proceeds from sale of technology, net of transaction costs 1,940,934 - 1,940,934 Issuance of convertible debentures 2,130,000 - 2,130,000 Proceeds from sale of common stock 289,869 14,490 1,674,587 ----------- --------- ----------- Net cash provided by financ- ing activities 4,360,803 14,490 5,745,521 ----------- --------- ----------- Net increase (decrease) in cash and cash equivalents 2,118,518 (4,874) 2,471,792 Cash and cash equivalents, beginning of period 353,274 10,327 - ----------- --------- ----------- Cash and cash equivalents, end of period $ 2,471,792 $ 5,453 $ 2,471,792
See accompanying notes. -5- DATALINK SYSTEMS CORPORATION (a development stage company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION: The accompanying consolidated financial statements have been prepared by the Company without audit in accordance with generally accepted accounting principles for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair representation have been included. The results of operations for the interim periods presented are not necessarily indicative of the results expected for any other interim period or for the full year. These financials statements should be read in conjunction with the Company's consolidated financial statements and notes contained in the Company's annual report on form 10-KSB for the fiscal year March 31, 1996 and on form 8-K filed during the period from April 1, 1996 through September 30, 1996. 2. ACQUISITION: On June 27, 1996, Datalink Systems Corporation (formerly Lord Abbott, Inc.) (the Company) completed the acquisition of 100% of the outstanding common stock of Datalink Communications Corporation (DCC) (formerly Datalink Systems Corporation or DSC) in exchange for shares of the Company's common stock. The Company issued a total of 16,465,316 shares of its common stock to the shareholders of DCC. In anticipation of the above acquisition, on June 18, 1996, the Company changed its domicile from Colorado to Nevada, changed its name from Lord Abbott, Inc. to Datalink Systems Corporation, and effected a 1-for-300 reverse stock split. Pursuant to the agreement, at closing, the Company issued to Westridge Capital Limited (Westridge), as a finder's fee, a debenture in the principal amount of $130,000 which is convertible into 1,300,000 shares of the Company's common stock. 3. CONVERTIBLE DEBENTURES AND WARRANTS: On July 1, 1996, the Company issued an unaffiliated investor a non interest bearing convertible debenture in the amount of $2,000,000. The debenture was convertible at any time prior to its maturity date of July 1, 1998 for 1,000,000 shares of the Company's common stock; subsequent to the quarter ending September 30, 1996, the debenture was converted to 1,000,00 shares of common stock. In conjunction with the above issuance, the Company issued to the same investor a warrant to purchase an additional 1,000,000 shares of common stock at $2.50 per share any time prior to July 15, 1998. Westridge, also, exercised its debenture subsequent to the quarter ending September 30, 1996, and all 1,300,000 shares were issued. The common stock issued to both the investor and Westridge was issued pursuant to the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Regulation S; the Company was a -6- "Reporting Issuer" under the provisions of the Securities Exchange Act of 1933, as amended, as such term is defined in Rule 902 under Regulation S, at the time of the sale of common stock; the Company was current in its reporting obligations under the Exchange Act at the date of sale; and the sales were made in "offshore transactions" as such term is defined in Rule 902. 4. NET LOSS PER SHARE Net income (loss) per share is computed by dividing net income (loss) the weighted average number of common and common equivalent, when dilutive, shares of common stock outstanding during each period. All calculations reflect the effects of the reverse split (300 to 1) of the merger of Lord Abbott, the original public shell, and the resulting issued and outstanding common stock of the Company. The Company is a development stage company. The condensed consolidated statement of operations includes revenue and expenditures from August 15, 1986, the date of inception, through September 30, 1996, the interim quarterly reporting period. The outstanding debentures are deemed likely for conversion and all per share calculations reflect this assumption. 5. FIXED ASSETS: September 30, March 31, 1996 1996 ---------- ---------- Computer equipment $185,940 $60,422 Computer software 28,579 372 Furniture & fixtures 26,618 36,363 Leasehold improvements 4,220 2,369 ---------- ---------- Accumulated depreciation (29,650) (16,948) ---------- ---------- Net fixed assets $215,707 $82,578 6. DEFERRED REVENUE: Deferred revenue represents amounts received pursuant to the sale of intellectual property technology and is as follows: September 30, March 31, 1996 1996 ------------ -------- Sale of technology, net of transaction costs of $246,000 $1,940,934 - ------------ -------- Deferred revenue is recognized over a period of 120 months using the straight line method. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached financial statements and notes thereto. Except for the historical information contained herein, the matters discussed in this document are forward-looking statements that involve certain risks and uncertainties, including, without limitation those described in the Company's annual report on Form 10KSB or Form 8K which have been filed with the Securities and Exchange Commission. Actual results may differ materially. NET SALES Net sales for the second fiscal quarter of 1996 increased over the second fiscal quarter of 1995 by $37,542 and by $47,619 for the first half of fiscal 1996 as compared to the first half of fiscal 1995 due to the Company realizing revenue from sales of services to customers. Sales are almost exclusively Quotexpress customers in Canada. No significant sales are expected until the first calendar quarter of 1997. RESEARCH AND DEVELOPMENT Research and development expenses increased in absolute dollars, primarily due to patent and trademark expenses and product development. The Company expects to continue investing significantly in research and product development; however, dollars and percentages may vary from period to period. Expenditures for the second quarter of 1996 rose by 78% compared to the second quarter of 1995 and rose by 1,040% for the first half of 1996 compared to the first half of 1995. SELLING AND MARKETING Selling and marketing expenses increased in absolute dollars due to increased spending on advertising, marketing consulting, and marketing literature. Expenditures for the second quarter of 1996 rose by 814% compared to the second quarter of 1995 and rose by 990% for the first half of 1996 compared to the first half of 1995. The Company expects to continue to invest significantly in the area of selling and marketing expenditures as it implements its promotional strategy for its products. GENERAL AND ADMINISTRATIVE General and administrative expenses for the quarter increased compared to the first quarter of 1996 largely due to increased costs in the development of U.S. operations and key personnel travel between the US (San Jose) and the Canadian (Vancouver) locations. Expenditures for the second quarter of 1996 rose by 471% compared to the second quarter of 1995 and rose by 898% for the first half of 1996 compared to the first half of 1995. OTHER INCOME (EXPENSE) Other income includes an investment tax credit given by the Canadian government for scientifically related research and development costs, the recognition revenue from the sale of technology, and money market interest income from cash management. -8- ADDITIONAL COMMENTS In addition, a wide variety of factors influence the Company's quarterly and annual operating results, any of which could materially affect revenues and profitability. These include, among others, business factors such as increases in competition and related pricing pressure, changes in distribution channels, variations in product mix, and potential problems and delays in new product development and introduction; as well as, national economic and other factors, such as interest rates. LIQUIDITY AND CAPITAL RESOURCES For the six months ended September 30, 1996 cash and cash equivalents increased due principally to (1) the issuance of a $2,000,000 debenture and (2) the sale of intellectual property technology to a Canadian investment company for $1,094,890 in cash and $1,099,950 as a short term note receivable. Details related to the sale of technology are contained in the Company's October 10, 1996 form 8K filing with the SEC. Total net cash provided by financing activities for the six months ended September 30, 1996 was $4.36 million which was offset by cash used in operations of approximately $2.1 million and cash used in the acquisition of equipment of $146,000. The cash and cash equivalents balance at the end of the six months ended September 30, 1996 increased by a net of $2.1 million compared to a decrease in cash and cash equivalents of approximately $5,000 for the six month period ended September 30, 1995. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - None. ITEM 2. CHANGES IN SECURITIES - None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None. ITEM 5. OTHER INFORMATION - None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits have been filed with this report: Exhibit 27 - Financial Data Schedule (b) Amendment No. 1 to Form 8-K was filed by the Company during the period covered by this report. The Form 8-K was dated June 27, 1996 and reported the acquisition of Datalink Communications Corporation under Items 1, 2 and 7. The Company filed Form 8-K dated August 26, 1996 reporting information under ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS, and ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. -9- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. DATALINK SYSTEMS CORPORATION Date: November 22, 1996 By/s/ Anthony N. LaPine Anthony N. LaPine, President and Chief Executive Officer (Principal Executive and Financial Officer) -10- INDEX TO EXHIBITS EXHIBIT METHOD OF FILING - ------- ------------------------------ 11.1 Statement Regarding Computation of Net Loss Per Share Filed herewith electronically 27. Financial Data Schedule Filed herewith electronically EX-11.1 2 DATALINK SYSTEMS CORPORATION COMPUTATION OF NET LOSS PER SHARE (unaudited)
August 15, 1986 Three months ended Six months ended (date of September 30, September 30, inception) 1996 1995 1996 1995 30, 1996 ----------------------- ----------------------- ---------- PRIMARY: Weighted average common shares outstanding for the period 16,738,683 162,117,662 87,186,615 162,117,662 32,435,947 ---------- ----------- ---------- ----------- ---------- Shares used in per share calculation 16,738,683 162,117,662 87,186,615 162,117,662 32,435,947 Net loss ($414,951) ($120,356) ($860,393) ($83,730)($1,856,465) Net Loss per share ($0.02) ($0.001) ($0.01) ($0.001) ($0.06) FULLY DILUTED: Weighted average common shares outstanding for the period 20,038,683 162,117,662 88,873,281 162,117,662 32,517,131 ---------- ----------- ---------- ----------- ---------- Shares used in per share calculation 20,038,683 162,117,662 88,873,281 162,117,662 32,517,131 Net loss ($414,951) ($120,356) ($860,393) ($83,730)($1,856,465) Net Loss per share ($0.02) ($0.001) ($0.01) ($0.001) ($0.06) Calculated in accordance with the guidelines of Item 601 of Regulation S-B.
EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from the condensed consolidated balance sheets and condensed consolidated statements of operations found on pages 3-5 of the Company's Form 10-Q for the year to date, and is qualified in its entirety by reference to such financial statements. 6-MOS SEP-30-1996 MAR-31-1996 2,471,792 0 1,210,096 0 0 3,691,577 0 0 3,997,107 2,238,051 0 1,674,587 0 0 (1,856,465) 3,997,107 59,763 59,763 34,097 34,097 968,998 0 5,666 (860,393) 0 0 0 0 0 (860,393) (.0097) 0
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