SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 0-20769
CABLE & CO. WORLDWIDE, INC.
Exact name of registrant as specified in its charter
DELAWARE 22-3341195
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
724 FIFTH AVENUE, NEW YORK, NEW YORK 10019
(Address of principal executive offices) (Zip Code)
(212) 489-9686
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the registrants classes of
common equity, as of the latest practicable date:
THE REGISTRANT HAD 3,394,237 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AT AUGUST 10, 1996
There are 17 pages in this document. The
Exhibit Index appears on sequentially numbered page 16 .
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1996 (unaudited) 3
Consolidated Statements of Operations for the Three-month and
Six-month periods ended June 30, 1996 and 1995 (unaudited) 4
Consolidated Statement of Stockholders' Equity for the
Six-month period ended June 30, 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the Six-month
periods ended June 30, 1996 and 1995 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-14
PART II - OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Exhibit Index 16
Signature 17
</TABLE>
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 20,290
Accounts receivable, less allowances for doubtful accounts
and sales discounts of $52,000 627,903
Inventory 3,487,526
Prepaid and other current assets 1,038,535
Deferred income tax asset, net of valuation allowance of $1,340,000
Total current assets 5,174,254
Property and Equipment, net of accumulated depreciation of $107,646 979,323
Trademark and Trade name, net of accumulated amortization of $87,895 1,084,042
Other Intangible Assets, net of accumulated amortization of $19,256 24,053
Other Assets 7,015
--------------
Total Assets $7,268,687
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to factor $1,775,964
Accounts payable 966,975
Accrued expenses and other current liabilities 1,321,703
Current portion of note payable 333,336
Current portion of capitalized lease obligations 27,682
-------------
Total current liabilities 4,425,660
Note Payable - net of current portion 333,331
Capitalized Lease Obligations - net of current portion 119,382
Deferred Rent 58,407
Deferred Income Tax Liability 48,738
-------------
Total Liabilities 4,985,518
Stockholders' Equity: (Notes 2, 3, 4 and 5)
Preferred stock - $.01 par value; authorized 1,420,000 shares;
no shares issued
Common stock - $.01 par value; authorized 10,000,000 shares;
issued and outstanding 2,762,206 shares 27,622
Additional paid-in capital 6,970,209
Accumulated deficit (4,714,662)
------------
Stockholders' Equity 2,283,169
Total Liabilities and Stockholders' Equity $7,268,687
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three-month period ended Six-month period ended
June 30, June 30,
1995 1996 1995 1996
------------ ------------ ----------- -----
<S> <C> <C>
Net sales $ 2,010,743 $ 2,672,915 $ 4,715,170 $ 6,349,497
Cost of goods sold 1,197,684 2,175,506 2,815,654 4,541,629
----------- ----------- ----------- -----------
Gross profit 813,059 497,409 1,899,516 1,807,868
Noncash compensatory charges (Notes 2 and 3) -- 140,417 -- 2,530,648
Selling expenses 465,959 745,169 1,046,241 1,763,097
General and administrative expenses 313,924 557,405 571,324 1,030,561
----------- ----------- ----------- -----------
Income (loss) from operations 33,176 (945,582) 281,951 (3,516,438)
Interest expense 99,884 185,787 186,535 351,637
Bridge note discount (Note 4) -- 615,000 -- 738,000
----------- ----------- ----------- -----------
Income (loss) before provision (benefit) for income taxes (66,708) (1,746,369) 95,416 (4,606,075)
Provision (benefit) for income taxes (28,100) 12,657 38,900 5,478
----------- ----------- ----------- -----------
Net income (loss) (38,608) (1,759,026) 56,516 (4,611,553)
Dividends on preferred stock 14,793 12,287 22,027 27,248
----------- ----------- ----------- -----------
Net income (loss) applicable to common stock $ (53,401) $(1,771,313) $ 34,489 $(4,638,801)
=========== =========== =========== ===========
Net income (loss) per common share $ (.03) $ (.85) $ .02 $ (2.39)
Weighted average number of common shares outstanding 2,079,086 2,076,095 2,079,086 1,944,150
</TABLE>
See Notes to Consolidated Financial Statements.
- 4-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX-MONTH PERIOD ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
NUMBER OF PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 1,007,445 $ 10,074 $ 34 $ (103,109) $ (93,001)
Issuance of common stock and warrants
to purchase common stock (Note 3) 400,000 4,000 1,721,000 1,725,000
Deferred consulting costs (Note 3) (1,685,000) (1,685,000)
Amortization of deferred consulting
costs (Note 3) 241,577 241,577
Issuance of common stock to existing
stockholders (Note 2) 224,761 2,248 941,748 943,996
Release of escrow shares (Note 2) 1,345,075 1,345,075
Issuance of common stock and warrants
in connection with private
placement (Note 4) 180,000 1,800 34,200 36,000
Discount on bridge note (Note 4) 738,000 738,000
Debt issue costs (Note 4) (217,000) (217,000)
Issuance of common stock and warrants
in connection with initial public
offering (Note 5) 950,000 9,500 5,803,500 5,813,000
Initial Public Offering Costs (Note 5) (1,872,529) (1,872,529)
Payment of dividends on preferred
stock (Note 6) (80,396) (80,396)
Net loss (4,611,553) (4,611,553)
----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1996 2,762,206 $ 27,622 $ 6,970,209 $(4,714,662) $ 2,283,169
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED
JUNE 30
1995 1996
----------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 56,516 $(4,611,553)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 37,997 108,735
Provision for doubtful accounts and sales discounts 134,544 (47,799)
Provision for deferred income taxes -- 20,638
Noncash compensatory charges -- 2,530,648
Amortization of discount on bridge note -- 738,000
Changes in operating assets and liabilities, net of effect of purchase of the
Cable & Co. product line:
Decrease in accounts receivable 223,445 70,436
(Increase) in inventory (342,064) (609,444)
(Increase) in prepaid expenses and other current assets (216,797) (395,089)
(Increase) in intangibles (42,345) (964)
(Increase) in other assets (16,000) --
(Decrease) in accounts payable (536,356) (299,148)
Increase in accrued expenses and other liabilities 403,503 550,177
Increase (decrease) in income taxes payable 37,500 (14,300)
Increase in deferred rent -- 13,025
----------- -----------
Net cash used in operating activities (260,057) (1,946,638)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (194,693) (200,352)
Purchase of Cable & Co. product line (1,401,787) --
----------- -----------
Cash used in investing activities (1,596,480) (200,352)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of public offering costs -- (1,872,529)
Debt issue costs -- (217,000)
Repayments to factor, net (32,802) (749,707)
Repayment of term note payable -- (130,000)
Principal payments under capital lease obligations -- (13,432)
Principal payments of long-term note payable -- (166,666)
Proceeds from issuance of bridge notes payable -- 1,764,000
Repayment of bridge notes payable -- (1,764,000)
Proceeds from issuance of long-term note payable 1,000,000 --
Proceeds from issuance of common stock 150,100 5,889,000
Proceeds from issuance of preferred stock 750,000 --
Redemption of preferred stock -- (500,000)
Payment of dividends on preferred stock -- (80,396)
----------- -----------
Net cash provided by financing activities 1,867,298 2,159,270
----------- -----------
Net increase in cash 10,761 12,280
Cash at beginning of period -- 8,010
----------- -----------
Cash at end of period $ 10,761 $ 20,290
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 186,534 $ 353,871
Cash paid for income taxes $ 1,400 $ 26,887
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted from the accompanying financial statements. The
results of operations for the three-month and six-month periods ended June 30,
1996 is not necessarily indicative of the results of operations expected for the
year ended December 31, 1996. The consolidated financial statements included
herein should be read in conjunction with the consolidated financial statements
and notes thereto for the year ended December 31, 1995.
The accompanying unaudited interim consolidated financial statements
include all adjustments (consisting only of those of a normal recurring nature)
necessary for a fair statement of the results of the interim period.
2. SHARES ISSUED TO STOCKHOLDERS AND RELEASE OF ESCROW SHARES:
At the time of the acquisition of the Cable & Co. product line (the
"Cable product line") from Hongson, Inc. (see Note 1 of the December 31, 1995
consolidated financial statements of Cable & Co. Worldwide, Inc. ( the
"Company")), the stockholders of the Company, including the Company's
management, entered into a stockholders' agreement (the "Stockholders'
Agreement") with respect to their shares of common stock. Pursuant to the
Stockholders' Agreement, the Company's management placed an aggregate of 320,256
shares of common stock in escrow. In January 1996, the Company terminated the
Stockholders' Agreement and released all of the shares held in escrow. As a
result of this release, the Company has recorded a noncash compensatory charge
in the amount of $1,345,075.
In February 1996, the Company issued 224,761 shares of common stock to
certain existing stockholders. As a result of this issuance the Company has
recorded a noncash compensatory charge in the amount of $943,996 ($4.20 per
share).
The noncash compensatory charges relating to release of the 320,256
escrow shares and the issuance of the 224,761 shares are offset by an increase
in additional paid-in capital. There is no impact on total stockholders' equity
reflected on the Company's consolidated financial statements as a result of
these transactions. The charges related to the release of the 320,256 escrow
shares are not deductible for income tax purposes.
The following table illustrates the impact of the noncash compensatory
charges relating to the release of the escrow shares and the issuance of common
stock to certain existing stockholders for the six-month period ended June 30,
1996:
-7-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Impact of Without
As Stated Charges Charges
<S> <C> <C> <C>
Net sales $ 6,349,497 $ 6,349,497
Cost of goods sold 4,541,629 4,541,629
----------- -----------
Gross profit 1,807,868 1,807,868
Noncash compensatory charges (2,530,648) $ 2,289,071 (241,577)
Selling expenses (1,763,097) (1,763,097)
General and administrative expenses (1,030,561) (1,030,561)
----------- ----------- -----------
Loss from operations (3,516,438) 2,289,071 (1,227,367)
Interest expense 351,637 351,637
Bridge note discount 738,000 738,000
----------- -----------
Loss before income tax provision (4,606,075) 2,289,071 (2,317,004)
Income tax provision 5,478 5,478
----------- ----------- ------------
Net loss (4,611,553) 2,289,071 (2,322,482)
Dividends on preferred stock 27,248 27,248
----------- ----------- -----------
Net loss applicable to common stock $(4,638,801) $ 2,289,071 $(2,349,730)
----------- ----------- -----------
Net loss per common share $ (2.39) $ (1.21)
----------- -----------
Weighted average number of common
shares outstanding 1,944,150 1,944,150
----------- -----------
</TABLE>
The presentation of the net loss without the noncash compensatory
charges does not intend to represent an alternative to the calculation of the
net loss in accordance with generally accepted accounting principles as an
indicator of operating performance.
This information is presented to assist a reader of the consolidated
financial statements in understanding the effect of these compensatory charges.
These charges represent noncash items, which have no net effect on the
stockholders' equity.
3. INTERNATIONAL CONSULTING AGREEMENT:
In January, 1996, the Company entered into a three-year international
consulting agreement with U.K. Hyde Park Consultants, Ltd. ("Hyde Park"). In
addition, Hyde Park purchased 400,000 shares of common stock and warrants to
purchase up to 450,000 shares of common stock for $40,000. The warrants are
identical to the warrants issued in conjunction with the Company's initial
public offering (the "IPO") (see note 5). The agreement contains cancellation
clauses and stock repurchase provisions in the event that the Company does not
have a net worth of at least $3,000,000 at July 31, 1996.
-8-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
The Company has valued these shares of common stock and warrants to
purchase shares of common stock at $1,725,000. The difference between this
amount and the purchase price of $40,000 will be recognized ratably as a noncash
compensatory charge over the life of the agreement. For the three-month and
six-month periods ended June 30, 1996, the Company recognized $140,417 and
$241,577 respectively, of consulting expense in the accompanying consolidated
statement of operations.
4. PRIVATE PLACEMENT:
On March 28, 1996, the Company completed a private placement, whereby
it issued 36 units at a price of $50,000 per unit. Each unit consisted of a
$49,000 promissory note ( the "Bridge Note"), 5,000 shares of common stock and a
warrant to purchase up to 5,000 shares of common stock, subject to adjustment,
as defined, at an exercise price of $7.20 per share, 120% of the IPO price per
share (see note 5). The Bridge Notes, aggregating $1,764,000 bear interest at an
annual rate of 11% and are due upon the earlier of 12 months from the date of
issuance or the Company's receipt of gross proceeds of at least $4,080,000 from
the sale of its debt and/or equity securities in a public or private financing.
The warrants are exercisable over a 3-year period, commencing 13 months from the
date of issuance. Upon the closing of the Company's IPO, the terms of the
warrants were adjusted to be identical to the terms of the warrants issued in
conjunction with the IPO.
In connection with the private placement, a discount of $738,000 has
been recorded based upon the allocation of the proceeds between the Bridge Notes
payable and the common stock and warrants issued. The discount has been
reflected as a reduction of the face amount of the Bridge Notes payable. This
amount was calculated by attributing a value of $4.20 per share of common stock
and $.10 per warrant, less cash received of $36,000.
The Bridge Notes were repaid, with accrued interest, in the amount of
$1,833,585 on June 19, 1996 with the proceeds from the IPO. The discount on the
Bridge Notes was fully amortized on June 19, 1996.
The Company has incurred costs in connection with the private placement
in the amount of $217,000. These costs have been recorded as a reduction to
additional paid-in capital.
-9-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(UNAUDITED)
5. INITIAL PUBLIC OFFERING:
On June 5, 1996, the Company effected an initial public offering
("IPO"). A total of 1,130,000 common shares and common share purchase warrants
were sold to the public, of which 950,000 shares of common stock and 1,130,000
common share purchase warrants were sold by the Company and 180,000 shares of
common stock were sold by the private placement investors (see note 4) at a
price of $6.00 per share and $.10 per warrant. The warrants entitle the holder
to purchase common stock at $7.20 per share over a 3-year period beginning July
5, 1997. The warrants may be redeemed by the Company commencing on June 5, 1997
at the price of $.10 per warrant, subject to the closing bid price of the common
stock.
On July 10, 1996, State Street Capital Markets Corp. ( the
"Underwriter") exercised its over-allotment option to purchase from the Company,
an additional 169,500 shares of common stock and 169,500 common stock purchase
warrants at a price of $6.00 per share and $.10 per warrant.
At June 30, 1996, the Company has incurred costs in connection with the
IPO in the amount of $1,872,529. These costs have been recorded as a reduction
to additional paid-in capital. On July 10, 1996, the Company incurred an
additional $134,414 of IPO costs in connection with the exercise of the
over-allotment option.
6. REDEMPTION OF PREFERRED STOCK:
On June 19, 1996 the company redeemed and retired 43,327 shares of
series A-12% cumulative preferred stock for a redemption price of $580,396,
inclusive of accrued dividends of $80,396.
In connection with the redemption, the company issued in July, 1996,
462,531 shares of common stock to the preferred stockholders.
-10-
<PAGE>
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was formed on November 10, 1994, to purchase certain net
assets of Hongson, Inc. used in the sale and marketing of footwear bearing the
Cable & Co. trademark (the "Acquired Net Assets"). The Company purchased the
Acquired Net Assets effective as of the close of business on December 31, 1994
for a net purchase price of $1,401,787.
The Company designs, imports and markets on a wholesale basis a broad
range of footwear bearing the Cable & Co. trademark. The Company markets its
products to approximately 700 department and specialty store locations in the
United States. In addition, the Company markets a line of casual men's and
womens footwear under the name "Bacco Bucci." The Company has licensed the right
to use the Bacco Bucci name from D&D Design, an entity controlled by Alberto
Salvucci, a principal stockholder of the Company.
The Company plans to increase revenues by increasing sales to existing
accounts, establishing new accounts, developing high quality shoes with styling
and design detail to sell at competitive prices and expanding the Company's
marketing programs. The Company intends to increase its marketing to include
direct mail. The Company also intends to explore opportunities to acquire rights
to related products such as bags, belts, wallets, accessories and other small
leather goods. In addition, the Company may seek to grant license rights to the
Cable & Co. trademark.
During the three-month period ended June 30, 1996, the Company
temporarily suspended the production and marketing of the womens footwear
bearing the Cable & Co. trademark and redirected the Companys production and
marketing of womens footwear into the Bacco Bucci trademark. The Company plans
to reintroduce the womens footwear bearing the Cable & Co. trademark during the
upcoming seasons.
NET SALES
The Company's net sales for the three-month period ended June 30, 1996
were $2,672,915 as compared to net sales of $2,010,743 for the three-month
period ended June 30, 1995, an increase of 32.9%. The Company believes that the
increase in net sales for the three-month period ended June 30, 1996 is
primarily attributable to the addition of net sales of the women's footwear of
$37,325 and net sales of footwear bearing the Bacco Bucci name of $609,034. Net
sales of $2,010,743 for the three-month period ended June 30, 1995 were derived
from the sale of men's footwear bearing the Cable & Co. trademark as compared to
net sales of $2,026,556 for the three-month period ended June 30, 1996, an
increase of .8%.
The Company's net sales for the six month period ended June 30, 1996
were $6,349,497 as compared to net sales of $4,715,170 for the six-month period
ended June 30, 1995, an increase of 34.7%. The Company believes that the
increase in net sales for the six-month period ended June 30, 1996 is primarily
attributable to the addition of net sales of the women's footwear of $295,221
and net sales of footwear bearing the Bacco Bucci name of $1,356,456. Net sales
of $4,715,170 for the six-month period ended June 30, 1995 were derived from the
men's footwear bearing the Cable & Co. trademark as compared to net sales of
$4,697,820 for the six-month period ended June 20, 1996 a decrease of .4%
COST OF GOODS SOLD
The Company's cost of goods sold for the three-month period ended June
30, 1996 was $2,175,506 as compared to $1,197,684 for the three-month period
ended June 30, 1995, an increase of 81.6%. The Company believes that such
increase is primarily attributable to the increase in net sales for the
three-month period ended
-11-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
June 30, 1996. The Company's gross profit as a percentage of net sales was 18.6%
for the three-month period ended June 30, 1996 as compared to 40.4% for the
three-month period ended June 30, 1995. The Company believes that such decrease
is primarily attributable to the lower initial gross profit margins on the Bacco
Bucci footwear, increased freight and manufacturing costs and a decline in the
exchange rate of the lira to the dollar. The Company believes that such decrease
in gross profit is also attributable to a substantial markdown being taken
during the three-month period ended June 30, 1996 in relation to the temporary
suspension of the womens footwear bearing the Cable & Co. trademark. In May
1996, the Company launched a major pre-season promotion of Cable & Co. mens
footwear with a customer at a reduced gross profit.
The Company's cost of goods sold for the six-month period ended June
30, 1996 was $4,541,629 as compared to $2,815,654 for the six-month period ended
June 30, 1996, an increase of 61.3%. The Company believes that such increase is
primarily attributable to the increase in net sales for the six-month period
ended June 30, 1996. The Company's gross profit as a percentage of net sales was
28.5% for the six-month period ended June 30, 1996 as compare to 40.3% for the
six-month period ended June 30, 1995. The Company believes that such decrease is
attributable to the lower initial gross profit margins on the Bacco Bucci and
women's footwear, increased freight and manufacturing costs and a decline in the
exchange rate of the lira to the dollar. The Company believes that such decrease
in gross profit is also attributable to a substantial markdown being taken
during the three-month period ended June 30, 1996 in relation to the temporary
suspension of the womens footwear bearing the Cable & Co. trademark. In May
1996, the Company launched a major pre-season promotion of Cable & Co. mens
footwear with a customer at a reduced gross profit.
NONCASH COMPENSATORY CHARGES
For the six-month period ended June 30, 1996 the Company incurred
noncash compensatory charges of $2,530,648. Of such amount (i) $241,577 is
attributable to shares of common stock issued pursuant to an international
consulting agreement, (ii) $1,345,075 is attributable to an aggregate of 320,256
shares of common stock held by David Albahari, the Company's Chairman of the
Board, President and Chief Executive Officer, Alan Kandall, the Company's
Executive Vice President, Treasurer and Chief Financial Officer, and Alberto
Salvucci, a principal stockholder of the Company, which shares were released
from escrow pursuant to the Stockholders Agreement, and (iii) $943,996 is
attributable to an aggregate of 224,761 shares of Common Stock issued to Mr.
Albahari, Mr. Kandall and Mr. Salvucci.
During the three-month period ended June 30, 1996 the Company incurred
noncash compensatory charges of $140,417. This is attributable to shares of
common stock issued pursuant to an international consulting agreement, which is
being amortized over a three-year period.
OPERATING EXPENSES
The Company's selling and general and administrative expenses for the
three-month period ended June 30, 1996 were $1,302,574, 48.7% as a percentage of
net sales, as compared to selling and general and administrative expenses for
the three-month period ended June 30, 1995 of $779,883, 38.8% as a percentage of
net sales. The Company believes that the increase in selling and general and
administrative expenses is primarily attributable to increases in expenses
related to the increase in net sales, including commissions, shipping and
factoring costs, expenses incurred in connection with severing the Company's
business with Hongson, Inc., additional costs attributable to launching the
Bacco Bucci lines in 1996, including increased selling expenses and sampling
costs, show expenses, additional marketing and advertising expenses, higher rent
expenses and increased factoring costs.
-12-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company's selling and general and administrative expenses for the
six-month period ended June 30, 1996 were $2,793,658, 44.0% as a percentage of
net sales, as compared to selling and general and administrative expenses for
the six-month period ended June 30, 1995 of $1,617,565, 34.3% as a percentage of
net sales. The company believes that the increase in selling and general and
administrative expenses is primarily attributable to increases in expenses
related to the increase in net sales, including commissions, shipping expenses
and factoring costs, expenses incurred in connection with severing the Company's
business with Hongson, Inc., additional costs attributable to launching the
Bacco Bucci line and the women's footwear line in 1996, including increased
selling expenses and sampling costs, show expenses, additional marketing and
advertising expenses, higher rent expenses and increased factoring costs. In
addition, management believes that the increase is also attributable to
increased warehouse costs of approximately $43,000 which resulted from the
Company terminating its warehouse lease and moving its inventory and increased
depreciation charges of approximately $68,000.
INTEREST EXPENSE AND BRIDGE NOTE DISCOUNT
The Company's interest expense for the three-month and six month
periods ended June 30, 1996 was $185,787 and $351,637 respectively, as compared
to interest expense for the three-month and six-month periods ended June 30,
1995 of $99,884 and $186,535 respectively, an increase of 86.0% and 88.5%. The
Company believes that the increase is primarily attributable to an increase in
borrowing relating to the higher sales and inventory levels for the three-month
and six-month periods ended June 30, 1996 together with additional borrowing
attributable to the purchase in October 1995 of 266,880 shares of Common Stock
and 21,660 shares of Preferred Stock from a former shareholder. Additionally,
the Company incurred interest expense on the Bridge Notes payable in the amount
of $38,890 and $69,585 respectively.
For the three-month and six-month periods ended June 30, 1996, the
Company incurred a charge of $615,000 and $738,000, respectively, in relation to
the discount on the Bridge Notes payable. A total discount of $738,000 was
recorded in February 1996 and was being amortized over a 12 month period. The
Company repaid the Bridge Notes in June 1996. Upon repayment of the Bridge
Notes, the Company fully amortized the remaining discount.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its requirements for the Acquisition, working
capital, capital expenditures and the purchase of stock from a former
shareholder from net cash provided through various borrowings, including
borrowings under its credit facility with Heller Financial, Inc. ("Heller") , a
$1,800,000 private placement (the " Bridge Financing") and a $6,846,950 IPO,
inclusive of an over-allotment option of $1,033,950. As of June 30, 1996, the
Company had working capital of $748,594 and a debt to equity ratio of 2.2 to 1.
The Company's obligations to Heller include a collateral installment
note in the original principal amount of $1,000,000 of which $666,667 was
outstanding as of June 30, 1996. The collateral installment note is payable in
36 monthly installments of $27,777 and bears interest at 3.0% above the prime
rate of Chase Manhattan Bank, N.A. ("Chase"). In addition, the Company may
borrow from Heller the lesser of 50% of the Company's eligible inventory or
$2,000,000 (the "Inventory Loan"). The Inventory Loan bears interest at 2.0%
above Chase's prime rate. The Company also finances its accounts receivable
under a factoring agreement with Heller. Pre-approved accounts are factored
without recourse to the Company and non-approved accounts are factored with
recourse. At June 30, 1996, $371,253 of the $2,717,755 (13.7%) of factored
accounts receivable, were factored with recourse. Heller is entitled to a fee
equal to 1.25% of all accounts receivable purchased.
-13-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
Moreover, advances by Heller bear interest at rates equal to Chase's prime rate
plus 1.5% to 2.0%. Under the credit facility, all of the Company's obligations
to Heller may not exceed $6,000,000.
In March, 1996, the Company consummated the Bridge Financing of 36
units (the "Units") at a purchase price of $50,000 per Unit, $1,800,000 in the
aggregate. Each Unit consists of the Company's 11.0% Bridge Note in the original
principal amount of $49,000, 5,000 shares of Common Stock and 5,000 common share
purchase warrants (the "Bridge Warrants"). The Bridge Notes are due and payable
upon the earlier of February 2, 1997 or the Company's receipt of gross proceeds
of at least $4,080,000 from the sale of its debt and/or equity securities in a
public or private financing. The Bridge Notes were repaid, with accrued
interest, in the amount of $1,833,585 on June 19, 1996 with the proceeds from
the sale of 950,000 shares of common stock and 1,130,000 common share purchase
warrants. The gross proceeds from the sale were $5,813,000. The proceeds were
also used to redeem, on June 19, 1996, 43,327 shares of preferred stock in the
amount of $580,396, inclusive of accrued dividends. In conjunction with the
redemption of the preferred stock, 462,531 shares of Common Stock have been
issued to the preferred shareholders.
On July 10, 1996, the Underwriter exercised its over-allotment option
(the "Over-allotment") to purchase an additional 169,500 shares of common stock
and 169,500 common stock purchase warrants at an over-allotment price of $6.00
per share and $.10 per warrant. The gross proceeds of the Over-allotment were
$1,033,950.
The Company believes that the proceeds of the IPO, together with net
cash provided by operations and available borrowings under the Company's credit
facility, will be sufficient to meet its anticipated cash requirements for at
least the 18 months subsequent to the closing of the IPO. However, additional
funds may be required for additional expansion.
-14-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 10, 1996, State Street Capital Markets Corp. ( the
"Underwriter") exercised its over-allotment option to purchase from the Company,
an additional 169,500 shares of common stock and 169,500 common share purchase
warrants at a price of $6.00 per share and $.10 per warrant.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Please see Exhibit Index on page 16.
(B) REPORTS ON FORM 8-K
None.
-15-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1.1 Form of Underwriting Agreement between the Company and State Street Capital Markets, Corp.
( the "Underwriter") *
2.1 Asset Purchase Agreement dated January 16, 1995 between Hongson, Inc. as seller and Cable & Co.
Worldwide, Inc. as buyer. *
3.1 Certificate of Incorporation of the Company, as amended. *
3.2 By-Laws of the Company. *
4.1 Form of Warrant Agreement between the Company and American Stock Transfer & Trust, as warrant
agent. *
4.2 Specimen Certificate of the Company's Common Stock. *
4.3 1996 Stock Option Plan. *
4.4 Specimen Certificate of the Company's Warrant. *
4.5 Form of Underwriter's Purchase Option. *
4.6 Form of Bridge Warrant. *
4.7 Form of Bridge Note. *
10.1 Employment Agreement dated as of January 1, 1995 between the Company and David Albahari. *
10.2 Employment Agreement dated as of January 1, 1995 between the Company and Alan Kandall. *
10.3 Agreements between the Company and Heller Financial, Inc. *
10.4 Intentionally omitted.
10.5 Agreement dated as of the 26th day of January 1996 between U.K. Hyde Park Consultants, Ltd.
and the Company. *
10.6 Lease dated July 28, 1995 between Raritan Plaza I Associates, L.P., as landlord, and Cable & Company
Enterprises, Ltd., as tenant. *
10.7 Lease dated May 16, 1995 between 724 Fifth Avenue Realty Co., as landlord, and Cable & Company
Enterprises, Ltd., as tenant. *
10.8 Financial Consulting Agreement between the Underwriter and the Company.*
10.9 Agreements between Gruntal & Co., Inc. and the Company. *
21.1 List of Subsidiaries. *
99.1 Cable & Co. Trademark Registration from the United States Patent and Trademark Office. *
</TABLE>
* Previously filed with the Company's Registration Statement, Registration No.
333-3000
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CABLE & CO. WORLDWIDE, INC.
(Registrant)
Date: August 14, 1996 /s/ Alan Kandall
----------------
Alan Kandall
Executive Vice-President; Chief Financial Officer
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 54,801
<SECURITIES> 0
<RECEIVABLES> 835,065
<ALLOWANCES> 76,000
<INVENTORY> 2,649,042
<CURRENT-ASSETS> 4,353,798
<PP&E> 964,507
<DEPRECIATION> 68,554
<TOTAL-ASSETS> 6,857,832
<CURRENT-LIABILITIES> 5,498,843
<BONDS> 542,730
500,000
0
<COMMON> 18,122
<OTHER-SE> 240,581
<TOTAL-LIABILITY-AND-EQUITY> 6,887,832
<SALES> 3,676,582
<TOTAL-REVENUES> 3,676,582
<CGS> 2,366,123
<TOTAL-COSTS> 1,017,928
<OTHER-EXPENSES> 2,863,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 288,850
<INCOME-PRETAX> (2,859,706)
<INCOME-TAX> (7,179)
<INCOME-CONTINUING> (2,852,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,852,527)
<EPS-PRIMARY> (1.58)
<EPS-DILUTED> (1.58)
</TABLE>
