** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

**FORM 10-KSB**

 

 

**ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31, 2001**

 

**Commission file number 0-25764**

 

 

**OneLink, Inc.**

 

 

| **Minnesota**           |   | **41-1675041**                      |
|-------------------------|--------|-------------------------------------|
| State  of Incorporation |   | I.R.S.  Employer Identification No. |

 

**10340 Viking Drive, Suite 150**

**Eden Prairie, MN 55344**

**(952) 294-3398**

 

                Securitiesregistered under Section 12(g) of the Exchange Act:  common stock, par value $.01

 

                Check whether theissuer (1) filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 

Yes  o   No  ý

 

                Check if there isno disclosure of delinquent filers in response to Items 405 of Regulation S-Bin this form, and no disclosure will be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of the Form 10-KSB or any amendment to this Form10-KSB.  ý

 

                The Company’srevenues from continuing operations for the fiscal year ended December 31, 2001totaled $1,639,929.

 

                The aggregatemarket value of the common stock held by nonaffiliates of the registrant as ofAugust 5, 2002 was approximately $986.00 based on the average of theclosing bid and asked price of the registrant’s common stock on such date.  The number of shares outstanding of theregistrant’s common stock, as of September 10, 2002 was 9,861,254.

 

                Transitional SmallBusiness Issuer Format (Check One):

 

Yes  o   No  ý

 

 

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**ONELINK,INC.**

**TABLE OF CONTENTS**

 
| PART I    |   |                                                                                                              |   |   |
|-----------|--------|-------------------------------------------------------------------------------------------------------------------|--------|--------|
|      |   |                                                                                                              |   |   |
| Item 1.   |   | Description of Business                                                                                           |   |   |
| Item 2.   |   | Description of Property                                                                                           |   |   |
| Item  3.  |   | Legal  Proceedings                                                                                                |   |   |
| Item  4.  |   | Submission  of Matters to a Vote of Security Holders                                                              |   |   |
|      |   |                                                                                                              |   |   |
| PART II   |   |                                                                                                              |   |   |
|      |   |                                                                                                              |   |   |
| Item  5.  |   | Market  for Common Equity and Related Stockholder Matters                                                         |   |   |
| Item  6.  |   | Management’s  Discussion and Analysis                                                                        |   |   |
| Item 7.   |   | Financial Statements                                                                                              |   |   |
| Item  8.  |   | Changes  In and Disagreements With Accountants on Accounting and Financial Disclosure                             |   |   |
|      |   |                                                                                                              |   |   |
| PART III  |   |                                                                                                              |   |   |
|      |   |                                                                                                              |   |   |
| Item  9.  |   | Directors,  Executive Officers, Promoters and Control Persons; Compliance With Section  16(a) of the Exchange Act |   |   |
| Item 10.  |   | Executive  and Director Compensation                                                                              |   |   |
| Item  11. |   | Security  Ownership of Certain Beneficial Owners and Management                                                   |   |   |
| Item  12. |   | Certain  Relationships and Related Transactions                                                                   |   |   |
| Item 13.  |   | Exhibits and  Reports on Form 8-K                                                                                 |   |   |
| Item 14.  |   | Controls and  Procedures                                                                                          |   |   |

 

 

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**PART I**

** **

**Item 1.    Description of Business**

 

**General**

 

                OneLink, Inc. (the“**Company**”or “**OneLink**”)was incorporated in Minnesota in June 1990. Prior to July 1, 2002, OneLink provided telecommunications-basedbusiness-intelligence services via the Internet.  Our services enabled the production of business-intelligencereports based on caller data of business customers available fromtelecommunications companies.  Thereports included summaries and detail of the data about the location of thebusinesses’ incoming callers, frequency of calls, number of unanswered calls,busy calls, and similar information. Incumbent Local Exchange Carriers (referred to in the industry as “**ILECs**”)provided the data we used to generate the business-intelligence reports.  We sold our service directly to ILECs,primarily targeting the Regional Bell Operating Companies, and the ILECs inturn marketed and sold our services under their own private branding to theirown business customers (which we refer to as “**end-user customers**”),especially small to medium-sized businesses depending on incoming telephonecalls to generate revenue (e.g., businesses that rely on reservations,appointments, service calls, etc.).

 

**ProposedSale of Assets**

 

                On June 28, 2002,the Company entered into an asset purchase agreement with CallVision, Inc., aWashington corporation, pursuant to which the Company has agreed to sellsubstantially all of its assets to CallVision. The Company has ceased conducting business operations and hastransferred physical possession of its operating assets to CallVision.  The consummation and closing of the assetsale is contingent upon the approval of the Company’s shareholders.

 

                To date, we havenot generated revenues sufficient to break even, and have supported businessoperations through a combination of borrowings and equity sales.  Important factors in the board of director’sdetermination to enter into the proposed asset sale included but were notlimited to the following:

 

•                    our inability to continue funding existing operationswith our current cash flow

•                    our inability to obtain additional equity or debtfinancing

•                    our financial projections, which indicated that wecould not increase revenues quickly enough to achieve positive cash flow priorto exhausting our working capital

•                    the slowdown in the telecommunications industryresulting from the general economic recession, and the concomitant significantreduction in spending on advertising, marketing and promotion by telephonecompanies

•                    after seeking strategic partners and/or potentialpurchasers for our assets, we were unable to find a superior alternative to theproposed sale of assets to CallVision

 

                Our board ofdirectors believes that the proposed asset sale is in the best interests ofOneLink and its shareholders. Accordingly, our board of directors has unanimously approved the form,terms and provisions of the asset sale; determined that the asset sale is fairto and in the best interests of OneLink and its shareholders; approved anddeclared the asset sale advisable pursuant to an asset purchase agreementcontaining customary and standard terms and provisions and approved by ourboard of directors; and recommended that our shareholders approve the assetsale.

 

                The Company iscurrently preparing an information statement to file with the Securities andExchange Commission and mail to shareholders of record on September 23, 2002,as soon as practicable in order to hold a special meeting of the shareholders,at which the asset sale would be approved, in late September or early October2002.  The Company expects the closingof the asset sale to occur within a few days after the date of the specialmeeting and approval by the Company’s shareholders.

 

                OneLinkshareholders are not expected to receive any cash, stock or other property inconnection with or as a result of the sale of assets.  OneLink will no longer engage in any business but will attempt tocontinue being a 

 

 

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publicly held company by filing required disclosure documents.  Nevertheless, we cannot be certain that thiswill be possible.  Subject to regulatoryrequirements, OneLink common stock will continue to be quoted on the OTCBulletin Board, and OneLink will make reasonable efforts to continue filingdisclosure reports with the Securities and Exchange Commission.  OneLink hopes to find a private company seekingto become a publicly held company through a merger.

 

**Products and Services**

 

                OneLink’sfinancial results in the fiscal years ended December 31, 2000 and 2001 relatedto the following services and products:

 

*                TeleSmart Web*. Prior to the cessation of our business operations and the proposed saleof our assets, our principal service was TeleSmart Web, which generated reportsover the Internet enabling businesses to make better informed and more accuratemarketing and operational decisions. The end-user customers obtained the reports over the Internet in table,graph, or map form, allowing them to choose the best format for the informationaccording to their business needs.  Thereports could be updated every 48 hours to provide a steady stream of business-intelligenceinformation.  The marketing departmentsof the end-user customers could use the reports to gain greater knowledge oftheir own customers, allowing them to increase the efficiency and effectivenessof their marketing communications, promotions and offers.

 

                *TeleSmartData Services*.  Prior to thecessation of our business operations and the proposed sale of our assets,  our TeleSmart Data Service was thetechnology that transformed raw telecommunications data into visual businessintelligence by converting the data into tabular, graphic and geographicformats that were easily interpreted  byend-user customers.  Our dataprocessing, database expertise and its proprietary use of GeographicInformation Service (GIS) methodology enabled us to track caller informationand assemble it into coherent reports. These reports provided insight into a business’ customer base andcreated market intelligence.

 

                *TeleSmartSoftware*.  TeleSmart Softwareis no longer being produced, enhanced or sold. Specifically created for our TeleSmart Data Services customers, thissoftware allowed for the easy customization of enhanced call management reportson a computer desktop.  This capabilitygave our customers the opportunity to fine tune the reports they received tomeet specific business-intelligence needs.

 

**Industry Background**

 

                The Telecommunications Act of 1996 gave rise to anincreasing level of competition for local access between the establishedRegional Bell Operating Companies, the Independent Telephone Companies, andCompetitive Local Exchange Carriers. This competition has generally caused incumbent telephone companies toincrease focus on customer loyalty and retention by offering enhanced services.

 

**Systems Design**

 

                In 1999, wedeveloped and activated the systems that deliver our services on an ApplicationService Provider (ASP) basis.  Wedesigned our systems with open architecture that increased our flexibility toadopt new modular applications, customize specific applications, andincorporate new technology.  Our systemsintegrated proprietary software with products from a variety of leading outsidevendors, such as Oracle and SilverStream, to ensure that our systems functionedeasily and reliably with the Independent Local Exchange Carrier’s telecommunicationssystems as well as their end-user customers’ systems.

 

                Physicalpossession of our software systems has been transferred to CallVision pendingfinal approval of the proposed asset sale.

 

**Primary Customers**

 

                During 2001, ourrevenues totaled $1,639,929.  Revenuesfrom Qwest Communications International, Inc. (formerly U S WESTCommunications, Inc.) and Cincinnati Bell Telephone, respectively, accountedfor 

 

 

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approximately $762,000 or 46% and $501,000 or 30% of total revenuesfrom continuing operations.  Theserevenues resulted primarily from the use of our TeleSmart services.  Qwest Communications International, Inc.currently markets our services under its Call Reports OnLine brand.  As of July 1, 2002, we no longer receive anyrevenues from Qwest.

 

CallVision, Inc., a Washington corporation which hasagreed to purchase substantially all of the Company’s assets pending theapproval of our shareholders, is currently administering our service agreementwith Qwest.  On June 6, 2002, CincinnatiBell Telephone ceased marketing and selling our services.

 

**Competition**

 

                Our management isnot aware of any competitor that provides a product or service materiallysimilar to TeleSmart Data Services or TeleSmart Software.  Some telephone companies and Regional BellOperating Companies have previously offered segments of management reports thatare similar to those created by our TeleSmart Data Services, but prior to ourentry into the field none appear to have offered a complete package of reportsand end-user software specifically aimed at capturing incoming callerinformation.  Companies with significantfinancial resources, application development expertise, and telecommunicationsexperience may attempt to duplicate our products and services in this area.

 

                Under the terms ofthe asset purchase agreement with CallVision, CallVision has received physicalpossession of our business assets and is operating and providing our TeleSmartservices pending final approval of the sale of the Company’s assets toCallVision by our shareholders. Furthermore, the Company has agreed to not provide business-intelligenceservices for a one-year period following the consummation of the asset sale.

 

**Regulatory Environment**

 

                Prior to ourcessation of business operations and the proposed sale of our assets, ouroperations were subject to only limited regulation both on the federal andstate level by the Federal Communications Commission and various state publicutility commissions.

 

**Research and Product Development**

 

                Research andproduct development expenses were $451,944 and $1,857,181 for the years endedDecember 31, 2001 and 2000, respectively. The decrease in research and product development expenses was primarilycaused by a decrease in external consulting expenses and a reduction ofinternal labor dollars allocated to research and development.  The expenses in 2000 were largely due to thetransformation of our business model to an Application Service Provider (ASP)model.

 

**Employees**

 

                As of December 31,2001, we had 15 employees, including 11 people working with our TeleSmartproduct and 4 people in sales, administration and finance.  As of August 20, 2002, we had one employee.

 

 

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**Risk Factors**

 

                In addition tofactors discussed elsewhere in this Annual Report on Form 10-KSB, the followingare important factors that could cause actual results or events to differmaterially from those contained in any forward-looking statement made by or onbehalf of the Company.

 

***We currently have no business operations, nor dowe intend to engage in business operations in the foreseeable future.***

 

                Currently, theCompany is not engaging in any business operations.  Furthermore, we do not currently intend to resume our formerbusiness operations or pursue any new type of business operations.

 

***We may be unable to continue preparing andfiling disclosure reports.***

 

                In the event weare unable to consummate the proposed asset sale with CallVision, the Companywould have few options to obtain any potential value for shareholders.  In such a case, we will not have sufficientresources to maintain compliance with the reporting requirements under theSecurities Exchange Act of 1934, as amended. Furthermore, if we were unable to maintain such compliance, it isunlikely that we could locate a privately held company willing to enter into amerger agreement with us. Alternatively, it is possible that we will be unable to locate asuitable merger candidate prior to the exhaustion of the funds received in anasset sale or from any other source.  Insuch a case, we would be unable to bear the cost of preparing and filing therequired disclosure reports.

 

***It is possible that we will be unable toidentify and/or consummate a merger with a privately held company seeking tobecome publicly held.***

 

                Current market andeconomic conditions may reduce the number of privately held companies seekingaccess to the public markets.  Thesefactors and conditions are beyond our control, and may make it difficult orimpossible to identify and/or consummate a merger with a privately held companyseeking access to the public markets.

 

***We currently do not have possession of ouroperating assets.***

 

                As part of theproposed asset sale to CallVision, the Company has transferred physicalpossession of its operating assets. Legal title to those assets will be transferred upon the approval of theasset sale by our shareholders.  If theasset sale is not consummated, there can be no assurance that our assets wouldbe returned in the same condition or in a condition fit for operation.  In such a case, there could be no assurancethat we could locate a purchaser for the damaged or otherwise unfit assets.

 

***We are highly dependent upon the continuedservices of Paul Lidsky, our Chief Executive Officer.***

 

                Our efforts toconsummate the proposed asset sale with CallVision, continue preparing andfiling the required disclosure reports, and merge with a privately held companyseeking to become public, are highly dependent upon the knowledge, skill andservices of Paul Lidsky, our Chief Executive Officer.  The loss of Mr. Lidsky would likely have a materially negativeimpact on the Company’s current plans.

 

***Even if the Company were to reacquire itsoperating assets and attempt to resume the business, it would not be possibleto achieve profitability.***

 

                Even if theproposed asset sale to CallVision were not to be consummated, we would not beable to maintain operations for any length of time sufficient to achieveprofitability.  The sales cycleassociated with the Company’s products has historically been lengthy andsubject to a number of significant risks over which the Company has little orno control.

 

                In addition, theCompany’s operations were highly dependent upon a small number ofcustomers.  During fiscal year 2001, ourrevenues from TeleSmart Web were largely dependent on two primary customers,Qwest 

 

 

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Communications International, Inc. (formerly U S WEST Communications,Inc.), and Cincinnati Bell Telephone Co., who in turn provided our services totheir end-user customers.  Revenues fromQwest represented 46% of our 2001 revenues, and revenues from Cincinnati Bellrepresented 30% of our 2001 revenues. On June 6, 2002, Cincinnati Bell terminated its service agreement withus.

 

                The lengthy salescycle in our industry, combined with the small number of existing and potentialcustomers for our services, prevented us from expanding our revenues quickly enoughto achieve profitability.  If we were toreacquire our assets and attempt to operate our TeleSmart business, it isunlikely that any of these factors would change such that we could achieveprofitability.

 

                In addition, ourbusiness would remain subject to a variety of other risks, including:

 

•                  The dependency of our TeleSmart Web product on the Internet.

 

•                  Technological changes may render our TeleSmart Web product obsolete.

 

•                  An increase in government regulation could adversely impact ourbusiness operations

 

•                  The risk that the value of our intellectual-property rights could bediminished by improper use by third parties.

 

**Item 2.    Description of Property**

 

                Through June 30,2002, we leased approximately 8,228 square feet of commercial office and warehousespace for $8,228 per month plus operating expenses and utilities at 10340Viking Drive, Suite 150, Eden Prairie, Minnesota 55344.  As of July 1, 2002, we terminated thislease.

 

**Item3.    Legal Proceedings**

 

                We are not a partyto any material legal proceedings.

 

**Item 4.    Submission of Matters to a Vote of Security Holders**

 

                There were nomatters submitted to a vote of security holders during the Company’s fourthquarter.

 

**PART II**

** **

**Item 5.    Market for Common Equity and Related Stockholder Matters**

 

                Our common stockis currently traded in the over-the-counter market under the symbol“ONELE.PK.”  The following table setsforth the high and low bid prices for our common stock as reported by the OTCBulletin Board in 2001 and 2000:

 

| **Year  Ending December 31, 2001** |   |
|------------------------------------|--------|
|                               |   | **High** |   | **Low** |   |
| First Qtr.                         |   | $ | 1.156 |   | $ | .375 |   |
| Second Qtr.                        |   | .50 |   | .375 |   |
| Third Qtr.                         |   | .37 |   | .16 |   |
| Fourth Qtr.                        |   | .27 |   | .10 |   |
|                                    |        |  |  |  |  |  |  |

 

| **Year  Ending December 31, 2000** |   |
|------------------------------------|--------|
|                               |   | **High** |   | **Low** |   |
| First Qtr.                         |   | $ | 5.75 |   | $ | 3.50 |   |
| Second Qtr.                        |   | 4.50 |   | 1.875 |   |
| Third Qtr.                         |   | 3.063 |   | 1.219 |   |
| Fourth Qtr.                        |   | 1.25 |   | .438 |   |
|                                    |        |  |  |  |  |  |  |

 

 

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                The above pricesreflect inter-dealer prices, without retail mark-up, mark-down or commissionand may not necessarily represent actual transactions.  The approximate number of shareholders ofrecord of the common stock as of September 10, 2002 was 100.

 

                We have neverdeclared or paid a cash dividend on our common stock and do not anticipatepaying any cash dividends in the foreseeable future.

 

 

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**Item 6.    Management’s Discussion and Analysis or Plan of Operations**

 

**Resultsof Operations**

 

The following table sets forth, for the periods indicated, certainStatements of Operations data as a percentage of revenues.

 
|                                |   | **For Twelve  Months Ended December 31** |   |
|-------------------------------------|--------|------------------------------------------|--------|
|                                |   | **2001**                                 |   | **2000** |   |
| Revenues                            |   | 100.0                                    | %      | 100.0 | % |
| Cost of revenues                    |   | 62.9                                     | %      | 63.1 | % |
| Gross profit                        |   | 37.1                                     | %      | 36.9 | % |
| Selling                             |   | 22.2                                     | %      | 27.9 | % |
| Research &  product development |   | 27.6                                     | %      | 90.8 | % |
| General &  administrative       |   | 100.8                                    | %      | 94.0 | % |
| Restructuring  charges              |   | 1.8                                      | %      | 0.0 | % |
| Total operating  expenses           |   | 152.4                                    | %      | 212.6 | % |
| Other  income(expense)              |   | 5.6                                      | %      | 5.8 | % |
| Net Loss                            |   | (109.7                                   | )%     | (169.9 | )% |

 

**YearEnded December 31, 2001 Compared to Year Ended December 31, 2000**

 

*                Revenues. *Our revenues for the year ended December 31, 2001 were$1,639,929, a decrease of $406,355 or 20%, compared to $2,046,284 for the yearended December 31, 2000.  The decreasein revenues is the result of a slowdown in consulting projects related to thedevelopment of additional systems to support our products, a decline in theoverall economy, and a lack of additional sales for our TeleSmart Data Servicesand TeleSmart Web.  Customer servicerevenues were consistent for 2001 and 2000. Consulting revenues decreased because Cincinnati Bell did not requestany additional projects.

 

                *Cost ofRevenues and Gross Profit*. Our cost of revenues for the year ended December 31, 2001 was$1,030,835, compared to $1,291,787 for the year ended December 31, 2000, adecrease of $260,952 or 20%.  The decreasewas the primarily the result of fewer revenue-producing contracts andoperations.  Cost of revenues associatedwith TeleSmart Data Services decreased due to fewer consulting projects, nobonuses in 2001 and a reduction in paper costs.  The cost of revenues for the consulting line of businessdecreased by approximately $95,000 due to fewer consulting projects for ourcustomers.  Product costs and customerservice costs were consistent for 2001 and 2000.

 

                Gross profit forthe year ended December 31, 2001 was $609,094, compared to $754,497 for theyear ended December 31, 2000, a decrease of $145,403 or 19%.  Gross profit as a percentage of revenues was37% in both 2001 and 2000.  Theconsistency in our gross profit margin is mainly attributable to effective personnelmanagement and cost controls, and a mix of business during both years.

 

*                Research and Product DevelopmentExpenses*.  Research and product development expensesfor the year ended December 31, 2001 were $451,944, compared to $1,857,181 forthe year ended December 31, 2000, a decrease of $1,405,237.  The decrease in research and productdevelopment expenses was primarily the result of reduced external consultingexpenses and a reduction of internal labor dollars allocated to research anddevelopment.  Research and productdevelopment expenses incurred in 2000 were related to depreciation of theTeleSmart Web product, personnel costs and external consulting expenses.  These costs included internal and externalpersonnel time and depreciation expenses related to the TeleSmart Web product.

 

*                Selling Expenses*. Selling expenses for the year ended December 31, 2001 were $363,790, adecrease of $206,307, compared to $570,097 for the year ended December 31,2000.  Management decreased payroll bylimiting the number of sales personnel, thereby reducing personnel-relatedexpenses by approximately $61,000. Travel costs were reduced by 70%. Marketing expenses increased by $89,000 due to a change in marketingfirms. In addition, 

 

 

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marketing expenses for 2000 were only for a partial year.  Consulting expenses decreased byapproximately $139,000.  During 2001,the Company did not incur any consulting expenses related to the TeleSmartproducts.

 

*                General and AdministrativeExpenses*.  Our general and administrative expenses forthe year ended December 31, 2001 were $1,653,166, compared to $1,922,935 forthe year ended December 31, 2000, a decrease of $269,769 or 14%.  The majority of this decrease resulted fromthe fact that no bonuses were earned during 2001, travel costs were reduced by35%, consulting fees decreased by 75%, and no placement fees were incurredduring 2001.

 

*                Other Income and Expense*. Interest income for the year ended December 31, 2001 was $18,940,compared to $121,785 for the same period in 2000, due to a decrease in cashbalances.  Other non-interest income(expense) was $71,796 for the year ended December 31, 2001, compared to($3,519) for the year ended December 31, 2000. During 2001, non-interest income includes a reversal of an estimatedsales tax liability of approximately $110,000 and the recording of anadditional liability of $35,000 related to software licensing.

 

*                Net Loss*. We incurred a net loss of $1,798,976 for the year ended December 31,2001, compared to a net loss of $3,477,450 for the prior year.  This reduction is primarily the result ofreduced staffing and reduced depreciation of $596,431 in 2001 related to ourInternet product.

 

*                Liquidity and Capital Resources*. We had positive working capital of $105,753 and $616,072 atDecember 31, 2001 and 2000, respectively. During 2001, cash used in operations was $1,038,526 primarily resultingfrom a net loss of $1,798,976, reduced by depreciation and amortization of$580,530.  Cash used in 2001 forinvesting activities was $82,441 for the purchase of property andequipment.  Financing activitiesprovided cash of $615,133, net of issuance costs, from a private placement ofthe Company’s Series A Convertible Preferred Stock.

 

                During 2000, cashused in operations was $2,728,252, primarily resulting from a net loss of$3,477,450, reduced by depreciation and amortization of $1,048,814.  Cash used in 2000 for investing activitieswas $821,625 for the purchase of property and equipment.  Most of the purchases were for hardware andsoftware in support of the new Web-enabled product.  Financing activities provided cash of $473,509.

 

                To date, we havenot generated revenues sufficient to break even, and have supported businessoperations through a combination of borrowings and equity sales.  On June 28, 2002, the Company entered intoan asset purchase agreement with CallVision, Inc., a Washington corporation,pursuant to which CallVision has agreed to purchase substantially all of theCompany’s operating assets.  Importantfactors in the board of director’s determination to enter into the proposedasset sale with CallVision, Inc. included but were not limited to thefollowing:

 

•                    our inability to continue funding existing operationswith our current cash flow

•                    our inability to obtain additional equity or debtfinancing

•                    our financial projections, which indicated that wecould not increase revenues quickly enough to achieve positive cash flow priorto exhausting our working capital

•                    the slowdown in the telecommunications industryresulting from the general economic recession, and the concomitant significantreduction in spending on advertising, marketing and promotion by telephonecompanies

•                    after seeking strategic partners and/or potentialpurchasers for our assets, we were unable to find a superior alternative to theproposed sale of assets to CallVision

 

**NewAccounting Pronouncements**

 

                In June 2001, theFinancial Accounting Standards Board (“**FASB**”) issued Statement of FinancialAccounting Standards (“**SFAS**”) No. 141 “Business Combinations.”SFAS No. 141 eliminates the pooling-of-interests method of accounting forbusiness combinations except for qualifying business combinations initiatedprior to July 1, 2001.  In addition,SFAS No. 141 further clarifies the criteria to recognize intangible assetsseparately from goodwill.  Therequirements of SFAS No. 141 are effective for any business combinationaccounted for by the 

 

 

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purchase method that is completed after June 30, 2001.  The Company believes the adoption of SFASNo. 141 will not have a material effect on the Company’s financial position orresults of operations.

 

                In June 2001, FASBadopted SFAS No. 142, “Goodwill and Other Intangible Assets.”  SFAS No. 142 discontinues the amortizationof recorded goodwill for fiscal years beginning after December 15, 2001.  In the future, goodwill will be reducedbased upon an impairment analysis of the amount recorded on the Company’sbooks.  To the extent it has beendetermined that the carrying value of goodwill is not recoverable and is inexcess of fair value, an impairment loss will be recognized.  The Company believes the adoption of SFASNo. 142 will not have a material effect on the Company’s financial position orresults of operations.

 

                In June 2001, FASBissued SFAS No. 143. “Accounting for Asset Retirement Obligations.” SFAS No.143 is effective for fiscal years beginning after June 15, 2002.  The Company believes the adoption of SFASNo. 143 will not have a material effect on the Company’s financial position orresults of operations.  In October 2001,the FASB issued SFAS No. 144 “Accounting for the Impairment or Disposal ofLong-Lived Assets.”  SFAS 144primarily addresses significant issues relating to the implementation of SFASNo. 121 and develops a single accounting model for long-lived assets to bedisposed of, whether primarily held, used or newly acquired.  The provisions of SFAS 144 will be effectivefor fiscal years beginning after December 15, 2001. The provisions of SFAS No.144 generally are to be applied prospectively. The Company is evaluating the impact of this new accounting standard.

 

                In April 2002, FASB issued SFAS No. 145, “Rescissionof FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, andTechnical Corrections.”  The Companybelieves the adoption of SFAS No. 145 will not have a material effect on theCompany’s financial position or results of operations.

 

                InJune 2002, FASB issued SFAS No. 146, “Accounting for Costs Associated with Exitor Disposal Activities.”  SFAS No. 146requires the recognition of a liability for a cost associated with an exit ordisposal activity when the liability is incurred versus the date the Companycommits to an exit plan.  In addition,SFAS No. 146 states the liability should be initially measured at fairvalue.  The requirements of SFAS No. 146are effective for exit or disposal activities that are initiated after December31, 2002.  The Company believes theadoption of SFAS No. 146 will not have a material effect on the Company’sfinancial position or results of operations.

 

**CriticalAccounting Estimates**

 

                Our criticalaccounting policies are those (i) having the most impact on the reporting ofour financial condition and results, and (ii) requiring significant judgmentsand estimates.  Our critical accountingpolicies include those related to property and equipment and a long-termprepaid expense.  At December 31, 2001,the Company had net property and equipment of $382,359 and a long-term prepaidexpense of $516,509.  The estimated fairvalue of these assets depends on the Company’s future performance.  As of December 31, 2001, the Company did notrecord any impairment losses related to these assets.  Subsequent to year end, the Company entered into an assetpurchase agreement with CallVision, Inc. pursuant to which the Company hasagreed to sell substantially all of its assets to CallVision subject toshareholder approval, and will record for the six months ended June 30, 2002,an impairment loss of approximately $336,000.

 

**Forward-Looking Statements**

 

                This Form 10-KSBcontains certain forward-looking statements within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended.  Allstatements included herein regarding our ability to maintain compliance withSEC disclosure requirements and/or locate a privately held company seeking tomerge with OneLink, and other statements that address activities, events ordevelopments that we expect, believe or anticipate will or may occur in thefuture, including such things as future capital expenditures (including theamount and nature thereof), business strategy and measures to implementstrategy, goals and other such matters are forward-looking statements.

 

                Actual events maydiffer materially from those anticipated in the forward-lookingstatements.  Important factors that maycause such a difference include our possible inability to continue preparingand filing SEC disclosure reports and identify or consummate a merger with aprivately held company; the fact that we no longer 

 

 

9

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have possession of our operating assets, that we are highly dependenton the services of certain officers, and that our assets may become lessmarketable in the event the asset sale is not consummated or there aresignificant changes in technology.  Forfurther information about these risks and uncertainties, see the “Item 1.Description Business — Risk Factors” section of this Annual Report on Form10-KSB.

 

 

10

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**Item 7.    Financial Statements**

 

 

**INDEPENDENT AUDITORS’ REPORT**

 

 

To Shareholders and Board of Directors of

OneLink, Inc.

 

We have audited the accompanying balance sheets of OneLink, Inc. as ofDecember 31, 2001 and 2000, and the related statements of operations,shareholders’ equity and cash flows for the years then ended.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of OneLink, Inc. as ofDecember 31, 2001 and 2000, and the results of its operations and its cashflows for the years then ended, in conformity with accounting principlesgenerally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming thatthe Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had netlosses for the years ended December 31, 2001 and 2000 and had an accumulateddeficit at December 31, 2001.  Theseconditions raise substantial doubt about its ability to continue as a goingconcern. Management’s plans regarding those matters also are described in Note1.  The financial statements do notinclude any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ VIRCHOW, KRAUSE & COMPANY, LLP

 

 

Minneapolis, Minnesota

February 13, 2002

 

 

11

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**OneLink, Inc.**

**Balance Sheets**

 
|                                                                    |   | **December  31,** |      |
|-------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                    |   | **2001**          |      | **2000** |   |
| **ASSETS**                                                              |   |              |      |   |   |
| CURRENT ASSETS:                                                         |   |              |      |   |   |
| Cash and cash  equivalents                                              |   | $                 | 147,768   |   | $ | 653,602 |   |
| Trade accounts  receivable                                              |   | 145,761           |      | 304,481 |   |
| Prepaid expenses                                                        |   | 65,207            |      | 104,401 |   |
| *Total  current assets:*                                                |   | 358,736           |      | 1,062,484 |   |
|                                                                    |   |              |      |   |   |
| PROPERTY AND  EQUIPMENT:                                                |   |              |      |   |   |
| Furniture and  equipment                                                |   | 513,793           |      | 583,988 |   |
| TeleSmart  equipment                                                    |   | 997,171           |      | 991,531 |   |
| Product  equipment                                                      |   | 214,505           |      | 214,505 |   |
| Web-based  software                                                     |   | 745,940           |      | 745,940 |   |
|                                                                    |   | 2,471,409         |      | 2,535,964 |   |
| Accumulated  depreciation and amortization                              |   | (2,089,050        | )         | (1,652,251 | ) |
| *Total  property and equipment, net:*                                   |   | 382,359           |      | 883,713 |   |
|                                                                    |   |              |      |   |   |
| OTHER ASSETS:                                                           |   |              |      |   |   |
| Long-term  prepaid expense                                              |   | 516,509           |      | 688,679 |   |
| Deposits                                                                |   | 11,465            |      | 11,465 |   |
|                                                                    |   |              |      |   |   |
| *Total  Assets:*                                                        |   | $                 | 1,269,069 |   | $ | 2,646,341 |   |
|                                                                    |   |              |      |   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                          |   |              |      |   |   |
| CURRENT  LIABILITIES:                                                   |   |              |      |   |   |
| Accounts payable                                                        |   | $                 | 54,305    |   | $ | 115,767 |   |
| Accrued payroll  and related taxes                                      |   | 33,212            |      | 162,348 |   |
| Accrued expenses                                                        |   | 62,110            |      | 143,297 |   |
| Deferred revenue                                                        |   | 103,356           |      | 25,000 |   |
| *Total  current liabilities:*                                           |   | 252,983           |      | 446,412 |   |
|                                                                    |   |              |      |   |   |
| SHAREHOLDERS’  EQUITY:                                             |   |              |      |   |   |
| Capital stock,  par value $.01 per share, 50,000,000 shares authorized: |   |              |      |   |   |
| Series A  Convertible Preferred Stock, par value $.01 per share:        |   |              |      |   |   |
| Authorized  shares—1,400,000                                       |   |              |      |   |   |
| Issued and  outstanding shares:                                         |   |              |      |   |   |
| 2001—1,320,000  and 2000—0                                    |   | 13,200            |      | — |   |
| ($660,000  liquidation preference)                                      |   |              |      |   |   |
| Common stock,  par value $.01 per share:                                |   |              |      |   |   |
| Authorized  shares—40,000,000                                      |   |              |      |   |   |
| Issued and  outstanding shares:                                         |   |              |      |   |   |
| 2001—9,861,254  and 2000—9,861,254                            |   | 98,612            |      | 98,612 |   |
| Additional  paid-in capital                                             |   | 16,116,976        |      | 15,515,043 |   |
| Stock-subscription  receivable                                          |   | (223,922          | )         | (223,922 | ) |
| Accumulated deficit                                                     |   | (14,988,780       | )         | (13,189,804 | ) |
| *Total  shareholders’ equity:*                                     |   | 1,016,086         |      | 2,199,929 |   |
|                                                                    |   |              |      |   |   |
| *Total  liabilities and shareholders’ equity:*                     |   | $                 | 1,269,069 |   | $ | 2,646,341 |   |

 

See accompanying notes to financial statements.

 

 

12

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**OneLink,Inc.**

**Statementsof Operations**

 
|                                            |   | **Years  ended December 31,** |       |
|-------------------------------------------------|--------|-------------------------------|------------|
|                                            |   | **2001**                      |       | **2000** |   |
| REVENUES                                        |   | $                             | 1,639,929  |   | $ | 2,046,284 |   |
| COST OF REVENUES                                |   | 1,030,835                     |       | 1,291,787 |   |
| GROSS PROFIT                                    |   | 609,094                       |       | 754,497 |   |
|                                            |   |                          |       |   |   |
| OPERATING  EXPENSES:                            |   |                          |       |   |   |
| Selling                                         |   | 363,790                       |       | 570,097 |   |
| Research and  product development               |   | 451,944                       |       | 1,857,181 |   |
| General and  administrative                     |   | 1,653,166                     |       | 1,922,935 |   |
| Restructuring  expenses                         |   | 29,906                        |       | — |   |
| *Total  Operating Expenses:*                    |   | 2,498,806                     |       | 4,350,213 |   |
|                                            |   |                          |       |   |   |
| OPERATING LOSS                                  |   | (1,889,712                    | )          | (3,595,716 | ) |
|                                            |   |                          |       |   |   |
| OTHER INCOME  (EXPENSE):                        |   |                          |       |   |   |
| Interest income                                 |   | 18,940                        |       | 121,785 |   |
| Other income  (expense)                         |   | 71,796                        |       | (3,519 | ) |
| *Net  Loss:*                                    |   | $                             | (1,798,976 | ) | $ | (3,477,450 | ) |
|                                            |   |                          |       |   |   |
| NET LOSS PER  COMMON SHARE:                     |   |                          |       |   |   |
| Basic and  diluted                              |   | $                             | (.18       | ) | $ | (.36 | ) |
|                                            |   |                          |       |   |   |
| WEIGHTED-AVERAGE  NUMBER OF SHARES OUTSTANDING: |   |                          |       |   |   |
| Basic and  diluted                              |   | 9,861,254                     |       | 9,712,155 |   |

 

See accompanying notes to financial statements.

 

 

13

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**OneLink, Inc.**

**Statements of Shareholders’ Equity**

 
|                                                                                    |   | **Series A Convertible  Preferred Stock** |   | **Common  Stock** |   | **Additional  Paid-In  Capital** | ** ** | **Stock  Subscription  Receivable** | ** ** | **Accumulated  Deficit** | ** ** | **Total  Shareholders’  Equity** | ** ** |
|-----------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|-------------------|--------|----------------------------------|------------|-------------------------------------|------------|--------------------------|------------|---------------------------------------|------------|
|                                                                                    |   | **Shares**                                |   | **Amount**        |   | **Shares**                       |       | **Amount**                          |       |
| Balance at December 31, 1999                                                            |   | —                                    |   | —            |   | 9,254,018                        |       | $                                   | 92,540     |                     | $          | 14,076,000                            |       | $ | (226,852 | ) | $ | (9,712,354 | ) | $ | 4,229,334 |   |
| ***Exercise of stock warrants, net of  issuance costs***                                |   | —                                    |   | —            |   | 359,500                          |       | 3,595                               |       | 454,530                  |       | —                                |       | — |   | 458,125 |   |
| ***Exercise of stock options***                                                         |   | —                                    |   | —            |   | 30,350                           |       | 303                                 |       | 31,289                   |       | —                                |       | — |   | 31,592 |   |
| ***Payments on contingent stockholder  notes***                                         |   | —                                    |   | —            |   | —                           |       | —                              |       | (31,593                  | )          | —                                |       | — |   | (31,593 | ) |
| ***Issuance of warrants for services***                                                 |   | —                                    |   | —            |   | —                           |       | —                              |       | 113,687                  |       | —                                |       | — |   | 113,687 |   |
| ***Stock issued as payment on  long-term prepaid expense***                             |   | —                                    |   | —            |   | 217,386                          |       | 2,174                               |       | 858,675                  |       | —                                |       | — |   | 860,849 |   |
| ***Payment on stock subscription  receivable***                                         |   | —                                    |   | —            |   | —                           |       | —                              |       | 12,455                   |       | 2,930                                 |       | — |   | 15,385 |   |
| ***Net loss***                                                                          |   | —                                    |   | —            |   | —                           |       | —                              |       | —                   |       | —                                |       | (3,477,450 | ) | (3,477,450 | ) |
| Balance at December 31, 2000                                                            |   | —                                    |   | —            |   | 9,861,254                        |       | 98,612                              |       | 15,515,043               |       | (223,922                              | )          | (13,189,804 | ) | 2,199,929 |   |
| ***Private placement of Series A  convertible preferred stock, net of issuance costs*** |   | 1,320,000                                 |   | 13,200            |   | —                           |       | —                              |       | 601,933                  |       | —                                |       | — |   | 615,133 |   |
| Net loss                                                                                |   | —                                    |   | —            |   | —                           |       | —                              |       | —                   |       | —                                |       | (1,798,976 | ) | (1,798,976 | ) |
| Balance at December 31, 2001                                                            |   | 1,320,000                                 |   | 13,200            |   | 9,861,254                        |       | $                                   | 98,612     |                     | $          | 16,116,976                            |       | $ | (223,922 | ) | $ | (14,988,780 | ) | $ | 1,016,086 |   |

 

See accompanying notes to financial statements.

 

 

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**OneLink, Inc.**

**Statements of Cash Flows**

 
|                                                                                             |   | **Years  ended December 31,** |       |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                                             |   | **2001**                      |       | **2000** |   |
| **Operating activities**                                                                         |   |                          |       |   |   |
| NET LOSS                                                                                         |   | $                             | (1,798,976 | ) | $ | (3,477,450 | ) |
| ADJUSTMENTS TO  RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:                     |   |                          |       |   |   |
| Depreciation and  amortization                                                                   |   | 580,530                       |       | 1,048,814 |   |
| Loss on disposal  of property                                                                    |   | 3,265                         |       | 4,275 |   |
| Warrants issued  for services                                                                    |   | —                        |       | 113,687 |   |
| Changes in  operating assets and liabilities:                                                    |   |                          |       |   |   |
| Trade accounts  receivable                                                                       |   | 158,720                       |       | 66,999 |   |
| Inventory, net                                                                                   |   | —                        |       | 7,104 |   |
| Prepaid expenses                                                                                 |   | 211,364                       |       | 129,476 |   |
| Accounts  payable, payroll and related taxes and accrued expenses                                |   | (271,785                      | )          | (603,476 | ) |
| Deferred revenue                                                                                 |   | 78,356                        |       | (17,682 | ) |
| *Net  cash used in operating activities:*                                                        |   | (1,038,526                    | )          | (2,728,252 | ) |
|                                                                                             |   |                          |       |   |   |
| **Investing activities**                                                                         |   |                          |       |   |   |
| PURCHASES OF  PROPERTY AND EQUIPMENT                                                             |   | (83,954                       | )          | (821,675 | ) |
| PROCEEDS FROM  THE SALE OF EQUIPMENT                                                             |   | 1,513                         |       | 50 |   |
| *Net  cash used in investing activities:*                                                        |   | (82,441                       | )          | (821,625 | ) |
|                                                                                             |   |                          |       |   |   |
| **Financing activities**                                                                         |   |                          |       |   |   |
| PAYMENTS ON  CONTINGENT SHAREHOLDER NOTES                                                        |   | —                        |       | (31,593 | ) |
| PROCEEDS FROM  EXERCISE OF STOCK OPTIONS                                                         |   | —                        |       | 31,592 |   |
| PROCEEDS FROM  PAYMENT ON STOCK-SUBSCRIPTION RECEIVABLE                                          |   | —                        |       | 15,385 |   |
| PROCEEDS FROM  PRIVATE PLACEMENT OF SERIES A CONVERTIBLE PREFERRED STOCK, NET OF ISSUANCE  COSTS |   | 615,133                       |       | — |   |
| PROCEEDS FROM  EXERCISE OF WARRANTS, NET OF ISSUANCE COSTS                                       |   | —                        |       | 458,125 |   |
| *Net  cash provided by financing activities:*                                                    |   | 615,133                       |       | 473,509 |   |
|                                                                                             |   |                          |       |   |   |
| DECREASE IN CASH  AND CASH EQUIVALENTS                                                           |   | (505,834                      | )          | (3,076,368 | ) |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                                  |   | 653,602                       |       | 3,729,970 |   |
| *Cash  and cash equivalents at end of year:*                                                     |   | $                             | 147,768    |   | $ | 653,602 |   |
|                                                                                             |   |                          |       |   |   |
| **Supplemental cash flow information**                                                           |   |                          |       |   |   |
| CASH PAID FOR  INTEREST                                                                          |   | $                             |       | $ |   |
| CASH PAID FOR  INCOME TAXES                                                                      |   | —                        |       | — |   |
| **Noncash financing activities**                                                                 |   |                          |       |   |   |
| COMMON STOCK  ISSUED IN EXCHANGE FOR LONG-TERM PREPAID EXPENSE                                   |   | $                             |       | $ | 860,849 |   |

 

See accompanying notes to financial statements.

 

 

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**OneLink,Inc.**

**Notesto Financial Statements**

 

**1.**                   Descriptionof Business

 

OneLink, Inc. (the “**Company**” or “**OneLink**”)was incorporated in Minnesota in June 1990. Prior to July 1, 2002, OneLink provided telecommunications-basedbusiness-intelligence services via the Internet.  Our services enabled the production of business-intelligencereports based on caller data of business customers available fromtelecommunications companies.  Thereports included summaries and detail of the data about the location of thebusinesses’ incoming callers, frequency of calls, number of unanswered calls,busy calls, and similar information. Incumbent Local Exchange Carriers (referred to in the industry as “**ILECs**”)provided the data we used to generate the business-intelligence reports.  We sold our service directly to ILECs,primarily targeting the Regional Bell Operating Companies, and the ILECs inturn marketed and sold our services under their own private branding to theirown business customers (which we refer to as “**end-user customers**”),especially small to medium-sized businesses depending on incoming telephonecalls to generate revenue (e.g., businesses that rely on reservations,appointments, service calls, etc.).

 

                On June 28, 2002,the Company entered into an asset purchase agreement with CallVision, Inc., aWashington corporation, pursuant to which the Company has agreed to sellsubstantially all of its assets to CallVision. The Company has ceased conducting business operations and hastransferred physical possession of its operating assets to CallVision.  The consummation and closing of the assetsale is contingent upon the approval of the Company’s shareholders.

 

The accompanying financial statements have beenprepared on the basis that the Company will continue as a going concern.  The Company had net losses for the yearsended December 31, 2001 and 2000 and had an accumulated deficit at December 31,2001.  As noted in Note 11 to thefinancial statements, the Company has entered into an asset purchase agreementto sell substantially all of its assets. Upon the closing of this transaction, the Company will not have anymaterial assets and will not have sufficient funds to pay ongoing operatingexpenses.  The financial statements donot include any adjustments that might result from the outcome of theseuncertainties.

 

**2.**                   Summaryof Accounting Policies

 

*RevenueRecognition. *Revenue for services is recognized at theend of each month in which services are provided.  Revenue for product sales is recorded upon shipment.  Revenue on certain contracts may requirerevenue recognition under contract accounting rules, whereby revenue isrecognized on a percentage-of-completion basis.  Billings in excess of costs and estimated earnings are includedin deferred revenue.  The Companyensures that the transactions comply with the seven conditions and sixconsiderations contained in Accounting and Auditing Enforcement Release No. 108of the SEC.  In November 1999, the SECissued Staff Accounting Bulletin (**“SAB”**) No. 101, “Revenue Recognition.” SABNo. 101, as amended, sets forth the SEC staff’s position regarding the point atwhich it is appropriate for a registrant to recognize revenue.  The staff believes that revenue isrealizable and earned when all of the following criteria are met:  persuasive evidence of an arrangementexists, delivery has occurred or service has been rendered, the seller’s priceto the buyer is fixed or determinable, and collectibility is reasonablyassured.  The Company uses the abovecriteria to determine whether revenue can be recognized, and therefore,believes that the issuance of this bulletin did not have a material impact onthese financial statements.  The Companyadopted SAB No. 101 during the year ended December 31, 2000 and the effect ofadoption was not material to the Company’s financial statements.

 

The Company extends unsecured credit to customers inthe normal course of business.  TheCompany believes all accounts receivable are fully collectible at December 31,2001 and 2000, respectively.

 

 

16

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*Use of Estimates. *The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions affecting the amountsreported in the financial statements and accompanying notes.  Actual results could differ from theestimates.

*Stock-Based Compensation*. The Company follows Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees” (**“APB 25”**), and relatedinterpretations in accounting for its stock options.  Under APB 25, when the exercise price of stock options equals orexceeds the market price of the underlying stock on the date of grant, nocompensation expense is recognized.

The Company has adopted the disclosure-only provisionsof Statement of  Financial AccountingStandards No. 123, “Accounting for Stock-Based**Compensation”**(“SFASNo. 123”).  Accordingly, the Company hasmade *proforma* disclosures of what net loss and net loss per share would havebeen had the provisions of SFAS No. 123 been applied to the Company’s stockoptions.

 

*CashEquivalents*.  The Company considers all highly liquidinvestments with a maturity of three months or less when purchased to be cashequivalents.  The Company deposits itscash in a high quality financial institution. The balances, at times, mayexceed federally insured limits.

 

*Propertyand Equipment*.  Property and equipment is stated atcost.  Depreciation of an asset isrecognized on the straight-line basis over the asset’s estimated useful liferanging from one to seven years.  Leaseholdimprovements are amortized using the straight-line method over the shorter ofthe lease term or the estimated useful life. Maintenance, repairs and minor renewals are expensed when incurred.  Depreciation and amortization expense onproperty and equipment was $580,530 and $1,048,814 for the years ended December31, 2001 and 2000, respectively.

 

The Company has adopted Statement of Position 98-1 (**“SOP 98-1”**),“Accounting for the Costs of Computer Software Developed or Obtained forInternal Use”*.*  SOP 98-1 requiresthe capitalization of direct costs incurred in connection with developing orobtaining software for internal use, including external direct costs ofmaterials and services and payroll and payroll-related costs for employees whoare directly associated with and devote time to an internal-usesoftware-development project.  During2001 and 2000, no software-development costs were capitalized.

 

*Long-termprepaid expense*.  The long-term prepaid expense is beingamortized using the straight-line method over five years.  The carrying value of the long-term prepaidexpense is reviewed if the facts and circumstances suggest that it may beimpaired.  If the review indicates thatthe long-term prepaid expense will not be recoverable, as determined based onthe undiscounted cash flows of the assets acquired over the remainingamortization period, the Company’s carrying value of the long-term prepaidexpense is reduced by the estimated shortfall of cash flows.

 

*IncomeTaxes*.  The Company accounts for income taxes usingthe liability method.  Deferred taxassets and liabilities are recognized for the expected future tax consequencesattributable to the temporary differences between the financial and income taxreporting bases of assets and liabilities.

 

*NetLoss Per Share*.  Basic and diluted loss per share is computedby dividing net loss by the weighted-average number of common sharesoutstanding for the reporting period. Dilutive common-equivalent shares have not been included in thecomputation of diluted loss per share because their inclusion would beantidilutive.  Antidilutive commonequivalent shares issuable based on future exercise of stock options orwarrants could potentially dilute basic loss per share in subsequentyears.  All options and warrantsoutstanding during the years ended December 31, 2001 and 2000 were antidilutive (*seeNote 5*).

 

*Fair Value of Financial Instruments*. The carrying amounts for all financial instruments approximate fairvalue.  The carrying amounts for cashand cash equivalents, accounts receivable, accounts payable and accruedexpenses approximate fair value because of the short maturity of theseinstruments.

 

 

17

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*RecentAccounting Pronouncements.*  SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” as amended, iseffective for years beginning after June 15, 2000.  SFAS No. 133 establishes accounting and reporting standardsrequiring that every derivative instrument, including certain derivative instrumentsembedded in other contracts, be recorded in the balance sheet as either anasset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value berecognized currently in earnings unless specific hedge criteria are met.Special accounting for qualifying hedges allows derivative gains or losses tooffset related results on the hedged item in the statement of operations andrequires that a company must formally document, designate and assess the effectivenessof transactions that receive hedge accounting. The adoption of SFAS No. 133 did not have a material effect on theCompany’s financial position or results of operations as the Company has noderivative instruments.

 

In June 2001, FASB issued SFAS No. 141 “BusinessCombinations.” SFAS No. 141 eliminates the pooling-of-interest method ofaccounting for business combinations except for qualifying businesscombinations that were initiated prior to July 1, 2001.  In addition, SFAS No. 141 further clarifiesthe criteria to recognize intangible assets separately from goodwill.  The requirements of SFAS No. 141 areeffective for any business combination accounted for by the purchase methodthat is completed after June 30, 2001. The Company believes the adoption of SFAS No. 141 will not have amaterial effect on the Company’s financial position or results of operations.

 

In June 2001, FASB adopted SFAS No. 142, “Goodwill andOther Intangible Assets.” SFAS No. 142 discontinues the amortization ofrecorded goodwill for fiscal years beginning after December 15, 2001.  In the future, goodwill will be reducedbased upon an impairment analysis of the amount recorded on the Company’sbooks.  To the extent it has beendetermined that the carrying value of goodwill is not recoverable and is inexcess of fair value, an impairment loss will be recognized.  The Company believes the adoption of SFASNo. 142 will not have a material effect on the Company’s financial position orresults of operations.

 

In June 2001, FASB issued SFAS No. 143. “Accountingfor Asset Retirement Obligations.” SFAS No. 143 is effective for fiscal yearsbeginning after June 15, 2002.  TheCompany believes the adoption of SFAS No. 143 will not have a material effecton the Company’s financial position or results of operations.

 

In October 2001, FASB issued SFAS No. 144 “Accountingfor the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supersedesSFAS No. 121.  SFAS No. 144 primarilyaddresses significant issues relating to the implementation of SFAS No. 121 anddevelops a single accounting model for long-lived assets to be disposed of,whether primarily held, used or newly acquired.  The provisions of SFAS No. 144 will be effective for fiscal yearsbeginning after December 15, 2001.  Theprovisions of SFAS No. 144 generally are to be applied prospectively.  The Company believes the adoption of SFASNo. 144 will not have a material effect on the Company’s financial position orresults of operations.

 

In April 2002,FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64,Amendment of FASB Statement No. 13, and Technical Corrections.”  TheCompany believes the adoption of SFAS No. 145 will not have a material effecton the Company’s financial position or results of operations.

 

In June 2002, FASB issued SFASNo. 146, “Accounting for Costs Associated with Exit or DisposalActivities.”  SFAS No. 146 requires therecognition of a liability for a cost associated with an exit or disposalactivity when the liability is incurred versus the date the Company commits toan exit plan.  In addition, SFAS No. 146states the liability should be initially measured at fair value.  The requirements of SFAS No. 146 are effectivefor exit or disposal activities initiated after December 31, 2002.  The Company believes the adoption of SFASNo. 146 will not have a material effect on the Company’s financial position orresults of operations.

 

 

18

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**3.**                   **Contingent ShareholderNotes Payable**

 

                In January 1994, theCompany acquired 219,364 shares of common stock from two shareholders for $2.18per 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, andonly if, the Company receives payments for the exercise of options under itsstock option plan until the notes are paid in full.  The Company is required to use 100% of any cash proceeds resultingfrom the exercise of options under the Stock Option Plan to pay down theseobligations until the notes are satisfied. Management cannot currently determine if additional options will beexercised, thereby requiring payments on the notes.  Consequently, no liability has been recorded in the financialstatements.  No interest payments weremade on these promissory notes in 2001 and 2000.  The principal balances of the promissory notes are $465,769 atDecember 31, 2001 and 2000.

 

**4.**                   Shareholders’Equity

 

During December 1999, the Company sold 113,426 sharesof common stock and received a stock-subscription receivable for $226,852.  The receivable is payable when payments onthe contingent shareholder notes payable are made by the Company (see Note 3).  The outstanding balance on thestock-subscription receivable earns interest at 6%.  There were no payments made in 2001.  Payments, consisting primarily of interest, of $0 and $15,385were made on this subscription receivable in 2001 and 2000, respectively.  The principal balance of the subscription receivablewas $223,922 at December 31, 2001 and 2000.

 

During the year ended December 31, 2001, the Companysold 1,320,000 shares of Series A Convertible Preferred Stock and received net proceeds of $615,133.  The preferred stock has voting rightsidentical to common stock.  In the eventof liquidation, the Series A Preferred Shareholders receive a liquidationpreference of $660,000.

 

The holder of Series A Convertible Preferred Stock mayelect to convert all or a portion of the shares of Series A ConvertiblePreferred Stock held into commonstock of the Company as defined in the Series A Convertible Preferred StockCertificate of Designation on file with the Minnesota Secretary of State.

 

**5.**                   Warrantsand Stock Options

 

During 2000, the Company issued warrants to purchase72,501 shares of the Company’s common stock for services rendered to theCompany.  These warrants have anexercise price ranging from $0.60 to $2.94 with a weighted-average exerciseprice of  $1.57.  The value of thesewarrants was determined to be $113,687.

 

During 2000, holders of 359,500 warrants exercisedtheir warrants at exercise prices ranging from $1.00 to $1.75 with theweighted-average exercise price being $1.27. Net proceeds to the Company were $458,125.

 

During 2001, no warrantswere issued or exercised.  At December31, 2001, the Company had 184,991 warrants outstanding with exercise pricesranging from $0.60 to $2.94.  Thewarrants expire serially through December 2005.

 

The Company established a stock option plan in 1994 toprovide incentives to employees and under which 3,000,000 shares of commonstock have been reserved forissuance.  The options can be eitherincentive stock options or non-statutory stock options and are valued at thefair market value of the stock on the date of grant.  The options generally vest over a period of four years and have alife of six to ten years.

 

The Company established a stock option plan in 1999 toprovide incentives to directors and officers and under which 600,000 shares ofcommon stock have been reserved forissuance.  The options can only benon-qualified stock options and are valued at the fair market value of thecommon stock on the date of grant unless otherwise determined by the planadministrator, in which case the option may not be less than 85% of the fairmarket value of the common stock on the date of grant.

 

At December 31, 2001, the  Company had 1,275,557exercisable options outstanding with a weighted-average exercise price of$1.46, and a weighted-average remaining contractual life of 6.5 years.

 

 

19

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The followingtable summarizes options andwarrants to purchase shares of the Company’s common stock:

 
|                         |   | **Options  Outstanding** |   | **Weighted  Average  Exercise Price  Per Share** |   | **Range of  Option  Exercise  Price** |           | **Warrants  Outstanding** |    | **Weighted  Average Exercise  Price  Per Share** |   |
|------------------------------|--------|--------------------------|--------|--------------------------------------------------|--------|---------------------------------------|----------------|---------------------------|---------|--------------------------------------------------|--------|
| Balance at December 31, 1999 |   | 2,201,577                |   | $                                                | 1.37   |                                  | $.81  to $3.50 |                      | 679,990 |                                             | $      | 2.03 |   |
| Granted                      |   | 670,000                  |   | 2.23                                             |   | $.75  to $4.63                        |           | 72,501                    |    | 1.57                                             |   |
| Exercised or redeemed        |   | (30,350                  | )      | 1.04                                             |   | $.81  to $1.50                        |           | (359,500                  | )       | 1.27                                             |   |
| Canceled/expired             |   | (262,483                 | )      | 1.34                                             |   | $.94  to $2.18                        |           | (13,500                   | )       | 2.67                                             |   |
| Balance at December 31, 2000 |   | 2,578,744                |   | 1.60                                             |   | $.75  to $4.63                        |           | 379,491                   |    | 2.64                                             |   |
| Granted                      |   | 170,000                  |   | 0.56                                             |   | $.37  to $1.03                        |           | —                    |    | —                                           |   |
| Exercised                    |   | —                   |   | —                                           |   | —                                |           | —                    |    | —                                           |   |
| Canceled/expired             |   | (467,414                 | )      | 2.03                                             |   | $.75  to $4.63                        |           | (194,500                  | )       | 3.73                                             |   |
| Balance at December 31, 2001 |   | 2,281,330                |   | $                                                | 1.43   |                                  | $.37  to $3.88 |                      | 184,991 |                                             | $      | 1.50 |   |

 

The following table summarizes information about stockoptions outstanding at December 31, 2001:

 
|                 |   | **Options  outstanding** |   | **Options  exercisable**                             |   |
|----------------------|--------|--------------------------|--------|------------------------------------------------------|--------|
| **Exercise  Prices** |   | **Number  outstanding**  |   | **Weighted-  Average  Remaining  Contractual  Life** |   | **Weighted-  Average  Exercise  price** |   | **Number  Exercisable** |   | **Weighted-  Average  Exercise  Price** |   |
| $0.37 - $0.75        |   | 220,000                  |   | 9.27                                                 |   | $ | 0.54 |   | 25,000 |   | $ | 0.75 |   |
| $1.00 - $1.50        |   | 1,118,330                |   | 6.39                                                 |   | 1.06 |   | 625,473 |   | 1.06 |   |
| $1.75 - $2.25        |   | 730,000                  |   | 5.40                                                 |   | 1.84 |   | 599,584 |   | 1.84 |   |
| $2.88 - $3.88        |   | 213,000                  |   | 8.03                                                 |   | 2.93 |   | 25,500 |   | 3.05 |   |
| $0.37 - $3.88        |   | 2,281,330                |   | 6.50                                                 |   | $ | 1.43 |   | 1,275,557 |   | $ | 1.46 |   |

 

*Stock-BasedCompensation*.  The Company accounts for stock-basedcompensation plans under APB No. 25. The *proforma* disclosure of the effect of SFAS No. 123 on net loss and netloss per share for the years ended December 31, 2001 and 2000 is presentedbelow.  The fair value of these optionswas estimated at the date of grant using a Black-Scholes option-pricing modelwith the following weighted-average assumptions for 2001 and 2000: risk-freeinterest rate of 5% and 5%, volatility of 151% and 77%, and a maximum optionlife of ten years.  Calculations of fairvalue assume no dividends will be paid on the Company’s common stock.  The weighted-average fair value of optionsgranted during the years ended December 31, 2001 and 2000 were $0.56 and $1.58,respectively.

 
|                                                            |   | **2001** |       | **2000** |   |
|-----------------------------------------------------------------|--------|----------|------------|----------|--------|
| *Pro forma* net loss                                            |   | $        | (2,097,701 | )        | $      | (3,861,258 | ) |
| *Pro forma* net loss per common share — basic and  diluted |   | $        | (.21       | )        | $      | (.40 | ) |

 

 

20

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**6.**                   IncomeTaxes

 

The Company hasnet operating loss carryforwards of approximately $14,350,000 at December 31,2001 expiring at various times beginning 2008 that can be used to offset futuretaxable income and research and development credit carryforwards ofapproximately $101,000 which, if not used, will begin to expire in 2007.  These carryforwards are subject to thelimitations of the Internal Revenue Code Section 382 in the event of certainchanges in the equity ownership of the Company.

 

Deferred income taxes reflect the net tax effects oftemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for income taxpurposes.  The temporary differencesprincipally relate to net operating loss carryforwards and depreciation.

 

The Company hasrecorded a full valuation allowance against the net deferred tax asset due tothe uncertainty of realizing the related benefits as follows at December 31:

 
|                                           |   | **2001**   |      | **2000**   |   |
|------------------------------------------------|--------|------------|-----------|------------|--------|
| Deferred income  tax assets:                   |   |       |      |       |   |
| Net operating  loss carryforwards              |   | $          | 5,747,500 |       | $      | 4,983,700 |   |
| Research and  development credit carryforwards |   | 101,000    |      | 101,000    |   |
| Less:  valuation allowance                |   | (5,498,400 | )         | (4,735,700 | )      |
| Deferred income  tax liabilities:              |   |       |      |       |   |
| Depreciation and  amortization                 |   | (350,100   | )         | (309,100   | )      |
| Asset valuation  reserves and other            |   | 0          |      | (39,900    | )      |
|                                           |   | (350,100   | )         | (349,000   | )      |
| Net deferred  income tax assets                |   | $          | —    |       | $      | — |   |

 

Income tax computed at the U. S. federal statutoryrate reconciled to the effective tax rate is as follows for the years endedDecember 31:

 
|                                 |   | **2001** |   | **2000** |   |
|--------------------------------------|--------|----------|--------|----------|--------|
| Federal  statutory tax rate benefits |   | -35.0    | %      | -35.0    | %      |
| State tax, net  of federal benefit   |   | -5.0     | %      | -5.0     | %      |
| Change in  valuation allowance       |   | 43.2     | %      | 38.0     | %      |
| Permanent  differences               |   | 0.1      | %      | 0.1      | %      |
| Other                                |   | -3.3     | %      | 1.9      | %      |
| Effective tax rate                   |   | 0.0      | %      | 0.0      | %      |

 

**7.**                   RetirementSavings Plan

 

The Company has a pre-tax salary reduction/profitsharing plan under the provisions of Section 401(k) of the Internal RevenueCode, which covers employees meeting certain eligibility requirements.  The plan does not currently allow forCompany contributions.

 

**8.**                   LeaseCommitment

 

The Company leases its administrative facilities underan operating lease.  The lease requiresmonthly rental payments of $8,571 increasing to $8,914 over the life of thelease, and the Company’s *pro rata*share of operating expenses.  The lease expires on June 30, 2003 with anoption to extend the lease term for an additional five years.  Rent expense, excluding operating expenses,was $100,793 and $96,679 for the years ended December 31, 2001 and 2000,respectively.  See Note 11.

 

 

21

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**9.**                   Employmentagreement

 

The Company has an employment agreement with oneemployee.  The agreement allows for wagecontinuation for up to 12 months in the event of a change in control of theCompany or termination without cause.

 

**10.**            SignificantCustomers

 

Revenues to three customers were 46%, 31% and 23% oftotal revenues in 2001 and 20%, 58% and 23% of total trade accounts receivableat December 31, 2001.  Revenues to threecustomers were 43%, 32% and 17% of total revenues in 2000 and 54%, 32% and 0%of total trade accounts receivable at December 31, 2000.

 

**11.**            SubsequentEvents — Unaudited

 

On June 28, 2002, the Company entered into an assetpurchase agreement with CallVision Inc. to sell substantially all its assets ofits business in exchange for cash payments of up to $214,300.  Pursuant to the signing of a definitiveasset purchase agreement, CallVision, Inc. will pay the Company the sum of$100,000 in cash, plus up to an additional $14,300 in cash for the Company’sJune office rent and T-1 bandwidth.  Atthe closing, CallVision will pay the Company $100,000 in cash.  In addition, CallVision has agreed to paythe Company an amount equal to 15% of any revenue generated from the sale ofcurrent or future versions of the the Company’s TeleSmart and Telemetricsproducts during the period from closing through December 31, 2003.

 

During the six months ended June 30, 2002, the Companyrecorded an impairment loss on a long-term prepaid expense and property andequipment sold to CallVision, Inc. of approximately $336,000 in connection withthe proposed asset sale to CallVision.

 

The Company successfully negotiated with theproperty’s landlord for a termination of the lease (described in Note 8 above)without penalty as of July 1, 2002.

 

**Item 8.    Changes In and Disagreements With Accountants on Accounting andFinancial Disclosure**

 

None.

 

 

22

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**PART III**

** **

**Item 9.****          ****Directors, Executive Officers,Promoters and Control Persons; Compliance With Section 16(a) of the ExchangeAct**

 

**                Ronald E. Eibensteiner**, 51, joined the Company as Chairman ofthe Company’s board of directors in May 1996. He is President of Wyncrest Capital, Inc. and has been a seed investorin several early-stage technology companies. He was a cofounder of Diametrics Medical, Inc., a manufacturer of bloodgas diagnostic systems, and was Chairman of Prodea Software Corporation, adata-warehousing software company, until its sale to Platinum *technology,inc.*, in January 1996.  In1983, Mr. Eibensteiner cofounded Arden Medical Systems and served as its ChiefFinancial Officer until its sale to Johnson & Johnson in 1987.  Mr. Eibensteiner holds a Bachelor of Sciencedegree in Political Science from the University of Minnesota.

 

 

**                Paul F. Lidsky**,****48, joined the Company as President andCEO in September 1997 with 15 years of telecommunication experience.  Prior to this, he served as the ExecutiveVice President, Strategy and Business Development for Norstan, Inc.  In this position, he was responsible for thedevelopment of corporate strategies, market positioning and new businessdevelopment.  This included theidentification of acquisition targets and leadership of Norstan’s acquisitionteams.  His prior positions with Norstanincluded Executive Vice President-Norstan Integration Services, Vice Presidentof Sales and General Manager of the Ohio Branch.  Mr. Lidsky was a Product Manager with Electronic EngineeringCompany when Norstan, Inc. acquired it in 1985.  Mr. Lidsky serves on the board of directors for DatalinkCorporation.

 

**                Vin Weber**, 49, has been a director of the Companysince 1994 and is Managing Partner at Clark and Weinstock, Inc.’s Washingtonoffice.  Mr. Weber provides strategicadvice to institutions interested in issues before, and governmental processesof, the legislative and executive branches of the federal government.  Prior to joining Clark and Weinstock, Mr. Weberwas President, and remains co-director of Empower America, an organizationadvocating policies that emphasize individual responsibility and accountabilityin approaching economic, social welfare and educational problems.  Mr. Weber is also co-director of theDomestic Policy Project of the Aspen Institute.  He is also a fellow at the Humphrey Institute at the Universityof Minnesota, where he is co-director of the Policy Forum (formerly the MondaleForum.)  Prior to that, Mr. Weber servedin the United States House of Representatives from 1981-1993, representing theSecond Congressional District of Minnesota. He is also a director of Department 56, Inc., ITT Education Services,Inc., National Public Radio and the American Institute of Certified Public Accountants.

 

**                Thomas M. Kieffer**, 44,****has been a director of the Company since1997.  With more than 20 yearsexperience in the technology industry, Mr. Kieffer is currently the ChiefExecutive Officer of Agiliti, Inc., which he founded in 1999 in order toparticipate in the emerging Application Service Provider (ASP) market forrentable, web-based applications and services. In 1986, Mr. Kieffer founded Connect Computer Company, an informationtechnology consulting and services company, which was sold in 1996 to Norstan,a national technology services company. Mr. Kieffer’s team also built one of the nation’s largest single-siteindependent IT training firms, which was sold to Aris Corporation in 1997.  Mr. Kieffer served as Chairman of theMinnesota Software Association, now known as the Minnesota High TechAssociation, from 1995 to 1997.  Hecontinues to serve on its board of directors and has a particular interest ingrowing the number of technology companies that make their home in Minnesota.  Mr. Kieffer also serves as an advisor andinvestor for many start-up and emerging companies, and serves on the boards ofseveral companies.  As an earlyparticipant in the systems integration industry, he has also served on numerousindustry advisory boards for companies such as Microsoft, Intel, Lotus andNovell.  Mr. Kieffer writes a monthlytechnology column for the Twin Cities Business Monthly that alerts Minnesotansto new technology trends.  He is alsothe author of Get Connected, A Guide to Telecommunications, published byPrentice Hall/Ashton-Tate Publishing Group in 1983.  Mr. Kieffer holds a Bachelor of Science degree in electricalengineering from Iowa State University.

 

**                Mark N. Ricca**, 64,****was appointed to the board of directors inFebruary 2001.  Mr. Ricca is a VicePresident at Phillips InfoTech, a consulting and market research firm focusingon the telecommunications and information technology industries.  He has over 35 years of experience in thefield of telecommunications and 

 

 

23

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information technology.  Mr.Ricca is a leader of the Custom Consulting practice at Phillips InfoTech.  This practice provides a range of consultingservices designed to improve business results of clients through the effectiveapplication of telecommunications/information technology services, and advancedmanagement and marketing practices. Prior to joining Phillips InfoTech, he was the Managing Director of theTelecommunications Consulting practice for the Gartner Group.  He also held the positions of Division MarketingManager-Financial Services Industry at AT&T, and Division Manager-MarketPlanning at AT&T International.  Mr.Ricca was also the Senior Manager of the national Telecommunications Consultingpractice for Coopers & Lybrand, and Corporate Telecommunications Managerfor American Express.  At AmericanExpress, his responsibilities included the planning, implementation andoperational/economic performance of the global data and voice networks andcommunications systems serving over 290 offices.  Mr. Ricca is a member of the Advisory Board for Mariner Networks,a manufacturer of integrated communications access devices.  While at American Express, Mark was a memberof the “Ad-Hoc Committee,” an advisory group to the FCC.  He earned a B.S. degree in BusinessAdministration from Rutgers University. Mr. Ricca graduated from the AT&T Advanced Data CommunicationsSchool, an intensive 3-month technical and management training program, held inCooperstown, New York.

 

**Compliancewith Section 16(a) of the Securities Exchange Act of 1934**

 

                Section 16(a) ofthe Securities Exchange Act of 1934, as amended, requires the Company’sofficers, directors and persons considered to be beneficial owners of more thanten percent of a registered class of the Company’s equity securities to filereports of ownership and changes in ownership with the Securities and ExchangeCommission and Nasdaq.  Officers,directors and greater-than-ten-percent shareholders are required by SECregulations to furnish the Company with copies of all Section 16(a) formsthey file.  Based on a review of thecopies of such forms furnished to the Company, or written representations thatno applicable filings were required, the Company believes that all such filingswere filed on a timely basis for the fiscal year 2001.

 

**Item 10. Executive and Director Compensation**

 

The following table sets forth the total compensationpaid by the Company during its last three fiscal years to the persons whoserved as President and Chief Executive Officer of the Company and each otherexecutive officer of the Company whose total annual base salary plus bonuscompensation for the most recent fiscal year exceeded $100,000 (all of whom arethe “**NamedExecutive Officers**”).

 

SUMMARY COMPENSATION TABLE

 
|                                |   |     |   | **Annual Compensation** | ** ** | **Long-Term  Compensation  Awards  Securities  Underlying  Options  (#)** | ** ** |
|-------------------------------------|--------|----------|--------|-------------------------|------------|---------------------------------------------------------------------------|------------|
| **Name and  Principal Position**    |   | **Year** |   | **Salary ($)**          |       | **Bonus ($)**                                                             |       | **Other  Annual  Compensation  ($)** |
| Paul Lidsky,  President and CEO (1) |   | 2001     |   | 187,500                 |       | 0                                                                         |       | 8,456 |   | 0 |   |
|                                |   | 2000     |   | 187,500                 |       | 37,500                                                                    |       | 6,539 |   | 100,000 |   |
|                                |   | 1999     |   | 175,000                 |       | 87,500                                                                    |       | 7,678 |   | 200,000 |   |

 

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(1)           Mr. Lidsky wasappointed President and CEO on September 2, 1997.

 

OPTION GRANTS DURING 2001FISCAL YEAR

 

                The followingtable sets forth the options that were granted to the Named Executive Officersduring the Company’s last fiscal year which ended December 31, 2001.

 

 

24

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| **Name**                           |   | **Number of  Securities  Underlying  Options  Granted (#)** |   | **Percent of  Total Options/  Granted to  Employees in  Fiscal Year** |   | **Exercise  or  Base Price  ($/Share)** |   | **Expiration  Date** |   |
|------------------------------------|--------|-------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------|--------|
| Paul F. Lidsky,  President and CEO |   | 0                                                           |   | 0                                                                     |   | —                                  |   | —               |   |

 

OPTION EXERCISES DURINGFISCAL 2001

AND FISCAL YEAR-ENDOPTION VALUES

 

                The followingtable provides certain information regarding the exercise of stock options topurchase shares of the Company’s common stock by the Named Executive Officersduring the year ended December 31, 2001, and the fiscal year-end value ofunexercised stock options held by such Named Executive Officers.

 
| **Name**                           |   | **Number  of  Shares  Acquired  On  Exercise** |   | **Value  Realized  ($)** |   | **Number of  Unexercised  Options at  Fiscal Year End  (exercisable /  unexercisable)** |   | **Value of  Unexercised  In-the-Money Options  at Fiscal Year End ($)  (exercisable /  unexercisable)** |   |
|------------------------------------|--------|------------------------------------------------|--------|--------------------------|--------|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|
| Paul F. Lidsky,  President and CEO |   | 0                                              |   | 0                        |   | 450,000 / 350,000                                                                       |   | $0 / $0                                                                                                 |   |

 

***EmploymentAgreements with Directors and Named Executive Officers***

 

The Company entered into an employment agreement with Mr. Lidsky in1997, which was amended in December 2000. The agreement contains provisions for annual renewals.  The agreement provides that, in the event(i) Mr. Lidsky dies, (ii) he becomes disabled, (iii) the Company terminates hisemployment without cause, or (iv) the Company materially breaches the agreement,Mr. Lidsky would be entitled to his base salary, plus health, life anddisability insurance until the earlier of (a) the date he obtains otherfull-time employment, or (b) twelve months from the date of termination ofemployment.  In addition:  (i) in the event of a change in control ofthe Company, the employment agreement’s term will automatically extend for sixmonths beyond the date of the change in control; (ii) the Company must requireany purchaser of all or substantially all of the Company’s business or assetsto assume the obligations of Mr. Lidsky’s employment agreement; and (iii) thepersonal representatives of Mr. Lidsky, or another last-designated beneficiary,may collect any amounts owed by the Company, or any successors or assignsthereof, to Mr. Lidsky after his death.

 

In December 2000,the Company and Mr. Lidsky executed an amendment to Mr. Lidsky’s employmentagreement.  This amendment providesthat:  (i) in the event of a change incontrol of the Company, the employment agreement’s term will automaticallyextend for six months beyond the date of the change in control; (ii) theCompany must require any purchaser of all or substantially all of the Company’sbusiness or assets to assume the obligations of Mr. Lidsky’s employmentagreement; and (iii) the personal representatives of Mr. Lidsky, or anotherlast-designated beneficiary, may collect any amounts owed by the Company, orany successors or assigns thereof, to Mr. Lidsky after his death.  Notwithstanding the provisions of Mr. Lidsky’samended employment agreement, Mr. Lidsky will not receive remuneration fromCallVision as part of the Company’s proposed sale of assets to CallVision.

 

**Director Compensation**

 

                Directors do notpresently receive any compensation from the Company for attending board ofdirectors or committee meetings, although the Company does reimburse directorsfor expenses incurred in attending such meetings.

 

 

25

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Currently, eachnonemployee director receives an option to purchase 50,000 shares of theCompany’s common stock upon such director’s initial election or appointment tothe board of directors.  No furtheroptions have been granted to a nonemployee director upon a director’ssubsequent reelection to the board of directors by the shareholders.  The options vest in the followingmanner:  5,000 shares upon initialelection or appointment; 15,000 shares upon first reelection to the board bythe shareholders; 15,000 shares upon second reelection to the board by the shareholders;15,000 shares upon third reelection to the board by the shareholders.  The exercise price of the options is equalto the fair market value of the Company’s common stock on the date thenonemployee director is initially elected or appointed to the Company’sboard.  No nonemployee directorsreceived option grants during fiscal year 2001.

 

**Item 11. Security Ownership of Certain Beneficial Owners and Management**

 

The following table sets forth certain informationwith respect to beneficial ownership of the Company’s common stock as of the August23, 2002 by:  (i) each director of theCompany, (ii) each executive officer of the Company named in the SummaryCompensation Table, (iii) all directors and executive officers of the Companyas a group, and (iv) each person or entity known by the Company to ownbeneficially more than five percent (5%) of the Company’s common stock.  Unless otherwise indicated, the address ofeach beneficial owner is 10340 Viking Drive, Suite 150, Eden Prairie, Minnesota  55344.

 

| **Name and Address of Shareholder**                                                                          |   | **Number of  Shares  Beneficially  Owned (1)** |   | **Percent of  Outstanding  Shares (1)** |   |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|-----------------------------------------|--------|
| Paul F. Lidsky (2)                                                                                           |   | 487,200                                        |   | 4.7                                     | %      |
| Ronald E. Eibensteiner (3)  U S Bancorp Building  800 Nicollet Mall, Suite 2690  Minneapolis, MN  55402 |   | 1,330,000                                      |   | 12.7                                    | %      |
| Vin Weber (4)  1775 I Street, N.W.  Washington, D.C.  20006                                             |   | 75,294                                         |   | *                                       |   |
| Mark Ricca (5)  90 East Halsey Road  Parsippany, NJ  07054                                              |   | 20,000                                         |   | *                                       |   |
| Thomas M. Kieffer (6)  4300 Market Pointe Dr., Ste 100  Bloomington, MN  55435                          |   | 75,000                                         |   | *                                       |   |
| All current executive officers and  directors as a group (five persons) (7)                                  |   | 1,987,494                                      |   | 18.0                                    | %      |
| Perkins Capital Management, Inc. (8)  730 East Lake Street  Wayzata, MN  55391-1769                     |   | 2,255,867                                      |   | 22.9                                    | %      |
| Fargo Investments, LP (9)  11100 Santa Monica Blvd., Ste 1900  Los Angeles, CA  90025                   |   | 1,117,000                                      |   | 11.1                                    | %      |
| Wayne W. Mills (10)  5020 Blake Rd. S.  Edina, MN  55436                                                |   | 703,000                                        |   | 7.1                                     | %      |

 

 

26

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----

* less than 1 percent

 

(1)           Beneficial ownership is determined inaccordance with the rules of the Securities and Exchange Commission, andincludes general voting power and/or investment power with respect tosecurities.  Shares of common stocksubject to options or warrants currently exercisable or exercisable within 60days of the record rate are deemed outstanding for computing the beneficialownership percentage of the person holding such options or warrants but are notdeemed outstanding for computing the beneficial ownership percentage of anyother person.  Except as indicated byfootnote, the persons named in the table above have the sole voting andinvestment power with respect to all shares of common stock shown asbeneficially owned by them.

(2)           Includes (i) 450,000 shares of commonstock issuable pursuant to options exercisable within 60 days, and (ii) 200shares of common stock held indirectly by Mr. Lidsky.

(3)           Includes (i) 400,000 shares of commonstock issuable pursuant to options exercisable within 60 days, and (ii) 200,000shares of Series A Convertible Preferred Stock which is convertible intoapproximately 200,000 shares of common stock.

(4)           Includes 73,000 shares of commonstock issuable pursuant to options exercisable within 60 days.

(5)           Represents 20,000 shares of commonstock issuable pursuant to options exercisable within 60 days.

(6)           Includes 50,000 shares of commonstock issuable pursuant to options exercisable within 60 days.

(7)           Includes (i) 993,000 shares of commonstock issuable pursuant to options exercisable within 60 days, and (ii) 200,000shares of Series A Convertible Preferred Stock which is convertible intoapproximately 200,000 shares of common stock.

(8)           As disclosed in a Schedule 13G filedon January 29, 2002, Perkins Capital Management, Inc. has sole power to vote ordirect the vote for 1,160,167 shares and sole power to dispose of or direct thedisposition of all shares listed in the table as beneficially owned by it.

(9)           As disclosed in a Schedule 13G filedon March 17, 2000, Fargo Investments’ holdings include 50,000 shares of commonstock held by Bradford M. Freeman, its general partner.  Also includes 200,000 shares of  Series A Convertible Preferred Stock whichis convertible into approximately 200,000 shares of common stock.

(10)         As disclosed in a Schedule 13G/A filedon February 7, 2002.

**Item 12. Certain Relationships and Related Transactions**

 

                None.

 

**Item 13. Exhibits and Reports on Form 8-K**

 

(a)  Exhibits

 
| **Number** |   | **Description**                                                                                  |
|------------|--------|--------------------------------------------------------------------------------------------------|
| 3.1        |   | Articles of Incorporation *                                                                      |
| 3.2        |   | Bylaws *                                                                                         |
| 4.1        |   | Certificate of Designation for Series A Preferred  Stock                                         |
| 10.1       |   | Asset Purchase Agreement by and between OneLink,  Inc. and CallVision, Inc., dated June 28, 2002 |
| 23.1       |   | Consent of Virchow, Krause & Company, LLP                                                    |

 

 

27

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*             Incorporatedby reference to the Company’s Registration Statement on Form SB-2 (File No.33-90084C) filed March 7, 1995.

 

(b)  Reportson Form 8-K

 

The Company filed current reports on Form 8-K on May14, 2002, and on June 5, 2002.

 

**Item 14. Controls and Procedures**

 

(a)          Not applicable.

(b)         No disclosures.

 

 

28

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**SIGNATURES**

 

                Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,OneLink, Inc., has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized:

 
|   | /s/  Paul F.  Lidsky                                                                             |   | September  12,  2002 |
|--------|-------------------------------------------------------------------------------------------------------|--------|--------------------------------|
| By:    | Paul F. Lidksy, Chief Executive Officer principal  financial officer and principal accounting officer |   | Date                           |

 

                Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by persons on behalf of the Registrant and in the capacities andon the dates indicated.  Each personwhose signature to this report on Form 10-KSB appears below hereby constitutesand appoints Paul F. Lidsky and Ronald E. Eibensteiner, and each of them, ashis or her true and lawful attorney-in-fact and agent, with full power ofsubstitution, to sign on his or her behalf individually and in the capacitystated below and to perform any acts necessary to be done in order to file allamendments to this report on Form 10-KSB and any and all instruments ordocuments filed as part of or in connection with this report on Form 10-KSB orthe amendments thereto and each of the undersigned does hereby ratify andconfirm all that said attorney-in-fact and agent, or his substitutes, shall door cause to be done by virtue hereof.

 
|   | /s/  Ronald  E. Eibensteiner                           |   | September  12,  2002 |
|--------|-------------------------------------------------------------|--------|--------------------------------|
| By:    | Ronald E. Eibensteiner, Director and Chairman of the  Board |   | Date                           |
|   |                                                        |   |                           |
|   | /s/  Mark N.  Ricca                                    |   | September  12,  2002 |
| By:    | Mark N. Ricca, Director                                     |   | Date                           |
|   |                                                        |   |                           |
|   | /s/  Paul F.  Lidsky                                   |   | September  12,  2002 |
| By:    | Paul F. Lidksy, Director                                    |   | Date                           |
|   |                                                        |   |                           |
|   | /s/  Vin  Weber                                        |   | September  12,  2002 |
| By:    | Vin Weber, Director                                         |   | Date                           |
|   |                                                        |   |                           |
|   | /s/  Thomas  Kieffer                                   |   | September  12,  2002 |
| By:    | Thomas Kieffer, Director                                    |   | Date                           |

 

 

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**CERTIFICATIONS**

 

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

 

I, Paul F. Lidsky, the Chief Executive Officer andprincipal accounting officer of OneLink, Inc. (the ”**Company**”) in compliance with18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002, hereby certify that, the Company’s Annual Report onForm 10-KSB for the period ended December 31, 2001 fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934and fairly presents, in all material respects, the financial condition andresults of operations of the Company.

 

| Signed: | /s/  Paul F.  Lidsky                                |
|---------|----------------------------------------------------------|
| Name:   | Paul F. Lidsky                                           |
| Title:  | Chief Executive Officer and principal financial  officer |

 

 

 

**CERTIFICATION PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

 

I, Paul F. Lidsky, Chief Executive Officer andprincipal financial officer of OneLink, Inc., certify that:

 

1.               I have reviewed this annual report on Form 10-KSB ofOneLink, Inc.;

 

2.               Based on my knowledge, this annual report does notcontain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the periodcovered by this annual report; and

 

3.               Based on my knowledge, the financial statements, andother financial information included in this annual report, fairly present inall material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this annualreport;

 

 

Dated:  September 12, 2002

 

 

| Signed: | /s/  Paul F.  Lidsky                                |
|---------|----------------------------------------------------------|
| Name:   | Paul F. Lidsky                                           |
| Title:  | Chief Executive Officer and principal financial  officer |

 

 

 

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