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, 1997
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 [X] NO [ ]
Indicate the number of shares outstanding of each of the registrants classes of
common equity, as of the latest practicable date:
The registrant had 30,172,997 shares of Common Stock, $.01 par value,
outstanding at August 8, 1997
There are 20 pages in this document.
The Exhibit Index appears on sequentially numbered page 19.
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1997 (unaudited) 3
Consolidated Statements of Operations for the Three-month and
Six-month periods ended June 30, 1997 and 1996 (unaudited) 4
Consolidated Statement of Stockholders' Equity for the
Six-month period ended June 30, 1997 (unaudited) 5
Consolidated Statements of Cash Flows for the Six-month
periods ended June 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-17
PART II - OTHER INFORMATION
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Exhibit Index 19
Signature 20
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1997
(unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 48,238
Accounts receivable, less allowances for doubtful accounts
and sales discounts of $155,000 307,331
Inventory 4,992,882
Prepaid and other current assets 1,374,843
Deferred income tax asset, net of valuation allowance of $2,800,000 --
------------
Total current assets 6,723,294
Property and Equipment, net of accumulated depreciation of $289,257 1,202,960
Trademark and Trade name, net of accumulated amortization of $146,490 1,025,446
Other Intangible Assets, net of accumulated amortization of $32,146 11,163
Other Assets 13,240
------------
Total Assets $ 8,976,103
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to factor $ 2,752,279
Accounts payable 1,657,135
Accrued expenses and other current liabilities 2,162,205
Note payable 333,334
Current portion of capitalized lease obligations 31,973
Income Taxes Payable 22,026
------------
Total current liabilities 6,958,952
Capitalized Lease Obligations - net of current portion 85,554
Deferred Rent 88,360
Other Liabilities 23,301
Deferred Income Tax Liability 88,000
------------
Total Liabilities 7,244,167
------------
Minority Interest in Cable & Company 1955 SPA 2,404
------------
Stockholders' Equity: (Notes 1,2, 3, 4, 5, 6, & 7)
Preferred stock- $.01 par value; authorized 1,453,020 shares;
no shares issued --
Common stock - $.01 par value; authorized 50,000,000 shares;
issued and outstanding 16,482,997 shares 164,830
Additional paid-in capital 10,342,639
Treasury stock - 35,000 common shares, at cost (29,676)
Accumulated deficit (8,735,889)
Cumulative foreign currency translation adjustment (12,372)
------------
Stockholders' Equity 1,729,532
Total Liabilities and Stockholders' Equity $ 8,976,103
============
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three-month period ended Six-month period ended
June 30, June 30,
----------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,672,915 $ 2,584,481 $ 6,349,497 $ 7,279,041
Cost of goods sold 2,175,506 1,649,522 4,541,629 4,584,994
----------- ----------- ----------- -----------
Gross profit 497,409 934,959 1,807,868 2,694,047
Noncash compensatory charges (Notes 2 and 3) 140,417 223,424 2,530,648 363,841
Selling expenses 745,169 889,583 1,763,097 2,034,574
General and administrative expenses 557,405 552,649 1,030,561 1,134,728
----------- ----------- ----------- -----------
Loss from operations (945,582) (730,697) (3,516,438) (839,096)
Interest expense 185,787 112,706 351,637 194,432
Bridge note discount (Note 4) 615,000 -- 738,000 --
----------- ----------- ----------- -----------
Loss before provision for income taxes (1,746,369) (843,403) (4,606,075) (1,033,528)
Provision for income taxes 12,657 53,213 5,478 60,551
----------- ----------- ----------- -----------
Net loss (1,759,026) (896,616) (4,611,553) (1,094,079)
Dividends on preferred stock 12,287 -- 27,248 --
----------- ----------- ----------- -----------
Net loss applicable to common stock $(1,771,313) $ (896,616) $(4,638,801) $(1,094,079)
=========== =========== =========== ===========
Net loss per common share $ (.85) $ (.09) $ (2.39) $ (.14)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 2,076,095 9,501,961 1,944,150 7,546,992
=========== =========== =========== ===========
</TABLE>
See notes to Consolidated Financial Statements.
- 4-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six-month period ended June 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
Number of Number of Paid-in
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 3,653 $ 37 3,394,237 $ 33,942 $ 10,109,649
Purchase of treasury stock -- -- -- -- --
Issuance of common stock upon
conversion of preferred
stock (Note 7) (3,653) (37) 11,213,760 112,138 (112,101)
Issuance of common
stock (Note 3) -- -- 1,875,000 18,750 479,297
Deferred consulting
costs (Note 3) -- -- -- -- (498,047)
Amortization of deferred consulting
costs (Note 3) -- -- -- -- 363,841
Cumulative Foreign Currency
translation adjustment (Note 1) -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1997 -- $ -- 16,482,997 $ 164,830 $ 10,342,639
============ ============ ============ ============ ============
<CAPTION>
Cumulative
Foreign
Treasury Stock Currency
Number Accumulated Translation Stockholders'
shares Amount Deficit Adjustment Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 20,000 $ (18,053) $(7,641,810) $ -- $ 2,483,765
Purchase of treasury stock 15,000 (11,623) -- -- (11,623)
Issuance of common stock upon
conversion of preferred
stock (Note 7) -- -- -- -- --
Issuance of common
stock (Note 3) -- -- -- -- 498,047
Deferred consulting
costs (Note 3) -- -- -- -- (498,047)
Amortization of deferred consulting
costs (Note 3) -- -- -- -- 363,841
Cumulative Foreign Currency
translation adjustment (Note 1) -- -- -- (12,372) (12,372)
Net loss -- -- (1,094,079) -- (1,094,079)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1997 35,000 $ (29,676) $(8,735,889) $ (12,372) $ 1,729,532
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
- 5-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six-month period ended
June 30
1996 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(4,611,553) (1,094,079)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 108,735 136,427
Provision for doubtful accounts and sales discounts (47,799) (430,000)
Provision for deferred income taxes 20,638 35,000
Noncash compensatory charges 2,530,648 363,841
Amortization of discount on bridge notes 738,000 --
Changes in operating assets and liabilities:
Decrease in accounts receivable 70,436 222,800
(Increase) in inventory (609,444) (2,251,267)
(Increase) in prepaid expenses and other current assets (395,089) (902,610)
(Increase) in intangibles (964) --
(Increase) in other assets -- (6,225)
Increase (decrease) in accounts payable (299,148) 758,473
Increase in accrued expenses and other current liabilities 550,177 1,509,390
Increase in other liabilities -- 23,301
Increase (decrease) in income taxes payable (14,300) 22,026
Increase in deferred rent 13,025 12,888
----------- -----------
Net cash used in operating activities (1,946,638) (1,600,035)
----------- -----------
Cash Flows From Investing Activities: Purchase of property equipment (200,352) (324,497)
----------- -----------
Cash Flows From Financing Activities:
Advances from (repayments to) factor, net (749,707) 2,023,354
Repayment of term note payable (130,000) --
Principal payments under capital lease obligations (13,432) (15,352)
Principal payments of long-term note payable (166,666) (166,664)
Redemption of preferred stock- Series A (500,000)
Net repayment on bridge note financing (227,000)
Net proceeds from issuance of common stock 4,026,471 --
Proceeds from issuance of stock for minority interest in consolidated subsidiary -- 2,404
Payment of dividends of preferred stock-Series A (80,396)
Purchase of treasury stock -- (11,623)
----------- -----------
Net cash provided by financing activities 2,159,270 1,832,119
----------- -----------
Effect of exchange rate changes -- (12,372)
Net increase (decrease) in cash 12,280 (104,785)
Cash at beginning of period 8,010 153,023
----------- -----------
Cash at end of period $ 20,290 $ 48,238
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 353,871 $ 196,307
=========== ===========
Cash paid for income taxes $ 26,887 $ 2,408
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
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, 1997 is not
necessarily indicative of the results of operations expected for the year ended
December 31, 1997. 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, 1996.
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.
The consolidated financial statements include the accounts of Cable &
Company Worldwide Inc. and its wholly owned subsidiary Cable & Co, Enterprises
Ltd. and its majority owned foreign subsidiary Cable & Company 1955 SPA
(collectively referred to as the "Company").
All significant intercompany accounts and transactions have been eliminated
in consolidation.
The Company translates assets and liabilities of the foreign subsidiary at
prevailing period-end rates of exchange, and income and expense accounts at the
weighted average rates during the period. Translation adjustments arising from
conversion of the foreign subsidiary's financial statements at June 30, 1997,
aggregating $12,372, are included in the stockholders' equity. There were no
significant transaction gains or losses for the six-month period ended June 30,
1997.
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, 1996
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. In
connection with this, a compensation charge in the amount of $1,345,075 ($4.20
per share) was recorded.
In February 1996, the Company issued 224,761 shares of common stock to
certain existing stockholders. In connection with this issuance, a compensation
charge in the amount of $943,996 ($4.20 per share) was recorded.
-7-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
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:
Impact of Without
As Stated Charges Charges
----------- ----------- -----------
Net sales $ 6,349,497 $ 6,349,947
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 benefit (4,606,075) 2,289,071 (2,317,004)
Income tax benefit 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
=========== ============
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.
-8-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
3. CONSULTING AGREEMENTS:
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, which was
subsequently paid in March 1996. The warrants are identical to the warrants
issued in conjunction with the Company's initial public offering (the "IPO")
(see note 5).
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 is being recognized ratably as a
noncash compensatory charge over the life of the agreement. For the three-month
period ended June 30, 1997 and 1996, the Company recognized $140,416 and
$140,417 of consulting expense, respectively, in the accompanying consolidated
statement of operations. For the six-month period ended June 30, 1997 and 1996,
the Company recognized $280,833 and $241,577 respectively, of consulting expense
in the accompanying consolidated statement of operations.
In May, 1997, the Company entered into one year consulting agreements for
an aggregate of 1,875,000 shares of common stock. The Company has valued these
shares of common stock at $498,047. The value of these shares is being
recognized ratably as a noncash compensatory charge over the life of the
agreement. For the three month and six month periods ended June 30, 1997 the
Company recognized $83,008 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 were 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. Net proceeds received of approximately $1,573,000
after deducting underwriting discounts and expenses of approximately $227,000
were used to repay a term loan and reduce the amount due to the factor.
In connection with the private placement, a discount of $738,000 had been
recorded based upon the allocation of the proceeds between the Bridge Notes
payable and the common stock and warrants issued. The discount had been
reflected as a reduction of the face amount of the Bridge Notes payable. This
amount was
-9-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
calculated by attributing a value of $4.20 per share of common stock and $.10
per warrant, less cash received of $36,000. The discount was originally being
amortized over a twelve month period. 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. Accordingly, the discount on the Bridge Notes were fully amortized on
June 19, 1996.
5. INITIAL PUBLIC OFFERING:
On June 5, 1996, 1,130,000 shares of the Company's common stock and common
stock purchase warrants were sold to the public, of which 950,000 shares of the
Company's common stock and 1,130,000 common stock purchase warrants were sold by
the Company and 180,000 shares of the Company's common stock were sold by the
March 28, 1996 private placement investors. The purchase price was $6.00 per
common share and $.10 per warrant. Each warrant entitles the holder to purchase
a share of the Company's common stock of $7.20 for a three-year period beginning
July 5, 1997. The warrants are redeemable at the Company's discretion at $.10
per warrant, subject to the closing bid price of the common stock. Net proceeds
to the company of approximately $3,785,000, after deducting underwriting
discounts and expenses of approximately $2,028,000, were used to repay
$1,764,000 in promissory notes and related accrued interest of approximately
$70,000, to redeem 43,327 shares of Series A redeemable preferred stock and to
pay related accrued dividends of approximately $80,000.
On July 10, 1996, the Underwriter purchased 169,500 shares of the Company's
common stock and 169,500 warrants at a price of $6.00 and $.10, respectively.
Net proceeds to the Company of approximately $900,000, after deducting
underwriting discounts and expenses of approximately $134,000, were used to
reduce the amount due to the factor.
At June 30, 1996, the Company had incurred costs in connection with the IPO
in the amount of $1,872,529. Subsequent to June 30, 1996 the Company incurred
additional costs of $155,471.
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 462,531 shares of
common stock to the preferred stockholders.
7. REGULATION S OFFERING
On November 20, 1996, the Company completed a Regulation S offering whereby
it issued 3,653 shares of the Company's non-dividend preferred stock Series B
for a price of $750 per share. Net proceeds to the Company of approximately
$2,051,000, after deducting underwriting discounts and expenses of
-10-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(unaudited)
approximately $689,000, were used to reduce the amount due to the factor. In
addition, the company issued warrants to purchase 200,000 shares of common stock
at a price of $3.00 to the underwriter of the Regulation S offering. The
warrants expire October 31, 2001.
During the six-month period ended June 30, 1997, all of the 3,653 shares of
the non-dividend paying preferred stock Series B were converted into 11,213,760
shares of the Company's common stock.
8. NEWLY FORMED SUBSIDIARY
On April 3, 1997, the Company became a 99% owner of a newly formed
corporation, Cable & Company 1955 SPA, located in Italy. Cable & Company 1955
SPA, leases a manufacturing facility in Montegranaro, Italy to manufacture the
Company's footwear bearing the Cable & Co trademark. Alberto Salvucci, the
Chairman of the board and stockholder of the Company, owns the remaining 1% of
Cable & Company 1955 SPA. The total investment, which was paid during the
six-month period ended June 30, 1997 was $252,747
9. SUBSEQUENT EVENTS
Private Placement
In July, 1997, the Company completed a private placement, whereby it issued
13,690,000 shares of common stock at a price of $.10 per share. Net proceeds to
the Company of approximately $1,100,000 will be used to purchase the rights to
the Bacco Bucci trademark as well as the additional rights to the Cable & Co.
trademark in other countries. The remaining funds will be used to reduce the
amount due to the factor and to fund the Company's working capital requirements.
Purchase of Trademarks
In August 1997 the Company purchased all of the rights to the Bacco Bucci
trademark from D&D Design and Details limited ("D&D Design"), an entity
controlled by Alberto Salvucci, the Chairman of the Board, a director, and a
principal stockholder of the Company. The Company also acquired in many major
countries throughout the world all of the rights to the Cable & Co. trademark
from Cable & Co. S.R.L. an entity controlled by Mr. Salvucci. The purchase price
for the Bacco Bucci trademark is $3,150,000. In addition, the Company has agreed
to pay to D&D Design annual royalties of 7% of net sales for a period of five
years for all goods sold outside North and South America. The Company has also
agreed to issue to D&D Design and Cable & Co. S.R.L. an aggregate of 11,973,411
shares of common stock. The purchase price for the rights to the Cable & Co.
trademark include the shares of common stock discussed above, together with a
payment of $100,000.
-11-
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in the Form 10-QSB and in future filings by the Company with the
securities and Exchange Commission, the words or phrases, "will likely result"
and "the Company expects" "will continue," "is anticipated," "estimated,"
"project," or "outlook" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.
General
The Company designs, manufactures, imports and markets on a wholesale basis
a broad range of footwear bearing the Cable & Co. trademark and Bacco Bucci
trademark. The Company markets its products to approximately 1,500 department
and specialty store locations in the United States. Prior to August 1997, the
Company had 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 Chairman of the Board, and director. In August 1997, the Company acquired
the rights to the Bacco Bucci trademark from D&D Design. In addition in August
1997, the Company acquired the Cable & Co. trademark from Cable & Co. S.R.L., an
entity also controlled by Mr. Salvucci, in many major countries throughout the
world.
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 and to globalize the brands Cable & Co. and Bacco Bucci. The
Company intends to increase its marketing to include direct mail but does not
intend to do so prior to fiscal 1998. The Company also intends to explore
opportunities to license rights to related products such as bags, belts, ties,
wallets, accessories and other small leather goods. However, there can be no
assurance that the Company will be able to achieve such objectives.
On June 23, 1997, the Company entered into an agreement with Roffe
Accessories Inc., as licensee, to manufacture a line of Cable & Co. neckwear,
effective July 1, 1997. The neckwear line is targeted to be in stores for the
1997 holiday season.
Net Sales
The Company's net sales for the three-month period ended June 30, 1997 were
$2,584,481 as compared to net sales of $2,672,915 for the three-month period
ended June 30, 1996, a decrease of 3.3%.
-12-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company believes that the decrease in net sales is primarily attributable to
the decrease in net sales of men's footwear bearing the Cable & Co. trademark
and the temporary suspension of the production and marketing of women's footwear
bearing the Cable and Co. trademark. Net sales of the men's footwear bearing the
Cable & Co. trademark for the three-month period ended June 30, 1997 was
$1,673,015 as compared to net sales of $2,026,556 for the three-month period
ended June 30, 1996, a decrease of 17.4%. The decrease is primarily attributable
to a major pre-season promotion, of approximately $485,000, in the six-month
period ended June 30, 1996, which did not occur in 1997. Additionally, for the
three-month period ended June 30, 1996 net sales of womens footwear bearing the
Cable and Co trademark was $37,325. During the year ended December 31, 1996, the
Company temporarily suspended the production and marketing of the women's
footwear bearing the Cable & Co. trademark. The Company does not plan to
reintroduce the women's footwear bearing the Cable & Co. trademark prior to
fiscal 1998 in order to continue focusing the Company's resources on the
development of the Bacco Bucci product line. As a result, for the three-month
period ended June 30, 1997 there were no sales of the women's footwear bearing
the Cable & Co. trademark. Net Sales of the mens footwear bearing the Bacco
Bucci trademark for the three-month period ended June 30, 1997 was $911,466 as
compared to net sales of $609,034 for the three-month period ended June 30,
1996, an increase of 49.7%.
The Company's net sales for the six-month period ended June 30, 1997 were
$7,279,041 as compared to net sales of $6,349,497 for the six-month period ended
June 30, 1996, an increase of 14.6%. The Company believes that the increase in
net sales is primarily attributable to the increase in net sales of men's
footwear bearing the Cable & Co. trademark and Bacco Bucci trademark. The
Company believes that approximately 10.3% of the increase was due to an increase
in the number of pairs sold and 4.3% of the increase was primarily due to a
decrease in mark-down sales. Net sales of the men's footwear bearing the Cable &
Co. trademark for the six-month period ended June 30, 1997 was $5,034,735 as
compared to net sales of $4,697,820 for the six-month period ended June 30,
1996, an increase of 7.2%. Net sales of the mens footwear bearing the Bacco
Bucci trademark for the six-month period ended June 30, 1997 was $2,244,306 as
compared to net sales of $1,356,456 for the six-month period ended June 30,
1996, an increase of 65.4%. As a result of the temporary suspension of the
women's footwear bearing the Cable and Co. trademark, there were no sales of
womens footwear bearing the Cable and Co. trademark for the six-month period
ended June 30, 1997, as compared to $295,221 for the six months ended June 30,
1996.
Cost of Goods Sold
The Company's cost of goods sold for the three-month period ended June 30,
1997 was $1,649,522 as compared to $2,175,506 for the three-month period ended
June 30, 1996, a decrease of 24.2%. The Company believes that such decrease is
primarily attributable to the decrease in the cost of the merchandise purchased
for the three-month period ended June 30, 1997. The Company's gross profit as a
percentage of net sales was 36.2% for the three-month period ended June 30, 1997
as compared to 18.6% for the three-month period ended June 30, 1996. The Company
believes that such an increase is primarily attributable to a more favorable
exchange rate between the dollar versus the lira, a greater percentage of
shipments made by boat versus air, lower manufacturing costs attributable to the
opening of the Company's factory in April 1997, and a decrease in the quantity
and size of markdown sales. Markdown sales for the three-month period ended June
30, 1997, was 11.3% of net sales as compared to 21.4% of net sales for the
three-month period ended June 30, 1996, yielding a gross margin of 7.9% and
(12.1%) respectively.
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company's cost of goods sold for the six-month period ended June 30,
1997 was $4,584,994 as compared to $4,541,629 for the six-month period ended
June 30, 1996, an increase of 1%. The Company believes that such an increase is
primarily attributable to the increase in net sales for the six-month period
ended June 30, 1997. The Company's gross profit as a percentage of net sales was
37.0% for the six-month period ended June 30, 1997 as compared to 28.5% for the
six-month period ended June 30, 1996. The Company believes that such an increase
is primarily attributable to a more favorable exchange rate between the dollar
versus the lira, resulting in a $100,000 positive charge, an 8.6% decrease in
freight rates, a greater percentage of shipments made by boat versus air, lower
product costs attributable to the opening of the Company's factory in April 1997
which decreased the average cost of goods at the factory level by approximately
15%, and a decrease in the quantity and size of markdown sales. Markdown sales
for the six-month period ended June 30, 1997, was 7.1% of net sales as compared
to 13.1% of net sales for the six-month period ended June 30, 1996, yielding a
gross margin of 6.19% and (11.3%) respectively.
Noncash Compensatory Charges
For the three-month period ended June 30, 1997 the Company incurred noncash
compensatory charges of $223,424. Of such amount (i) $140,416 is attributable to
shares of Common Stock issued in January 1996 pursuant to an international
consulting agreement, and (ii) $83,008 is attributable to shares of common stock
issued pursuant to consulting agreements entered into in May 1997.
For the six-month period ended June 30, 1997 the Company incurred noncash
compensatory charges of $363,841. Of such amount (i) $280,833 is attributable to
shares of Common Stock issued in January 1996 pursuant to an international
consulting agreement, and (ii) $83,008 is attributable to shares of common stock
issued pursuant to consulting agreements entered into in May 1997.
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 former President and Chief
Executive Officer, Alan Kandall, Company's President and Chief Executive
Officer, and Alberto Salvucci, the Chairman of the Board, 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.
For 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.
Operating Expenses
The Company's selling and general and administrative expenses for the
three-month period ended June 30, 1997 were $1,442,232, 55.8% as a percentage of
net sales, as compared to selling and general and administrative expenses for
the three-month period ended June 30, 1996 of $1,302,574, 48.7% as a percentage
of net sales. The Company believes that the increase in selling and general and
administrative expenses is primarily attributable to the payroll and travel and
entertainment expenses related to the expansion of the sales staff in order to
increase revenues to existing accounts and to develop the Bacco Bucci product
line. The
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
increase in selling and general and administrative expenses is also attributable
to professional fees in relation to being a public company in 1997.
The Company's selling and general and administrative expenses for the
six-month period ended June 30, 1997 were $3,169,302, 43.5% as a percentage of
net sales, as compared to selling and general and administrative expenses for
the six-month period ended June 30, 1996 of $2,793,658, 44.0% 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, such as commission expense, royalties and
factoring costs. In addition, the Company believes that the increase in selling
and general and administrative expenses is also attributable to the payroll and
travel and entertainment expenses related to the expansion of the sales staff in
order to increase revenues to existing accounts and to develop the Bacco Bucci
product line, as well as professional fees in relation to being a public company
in 1997.
Interest Expense and Bridge Note Discount
The Company's interest expense for the three-month and six month periods
ended June 30, 1997 was $112,706 and $194,432 respectively, as compared to
interest expense for the three-month and six-month periods ended June 30, 1996
of $185,787 and $351,637 respectively a decrease of 39.3% and 44.7%. The Company
believes that the decrease is primarily attributable to a decrease in borrowing
for the three-month and six month periods ended June 30, 1997. During the
six-month period ended June 30, 1996, the Company incurred interest charges
attributable to the October 1995 purchase of 266,880 shares of Common Stock and
21,660 shares of Preferred Stock from a former shareholder. Additionally, for
the three month and six-month periods ended June 30, 1996, 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 of $453,050.
Liquidity and Capital Resources
The Company has funded its requirements for working capital and capital
expenditures 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"), a public offering of the
Company's securities, an off shore financing, and a July 1997 private placement.
As of June 30, 1997, the Company had working capital deficiency of $235,658 and
a debt to equity ratio of 4.2 to 1.
The Company's obligations to Heller include a collateral installment note
in the original principal amount of $1,000,000 of which $333,334 was outstanding
as of June 30, 1997. The collateral installment note is payable in 36 monthly
installments of $27,777 and bears interest at 3% 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 1.5% 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
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
non-approved accounts are factored with recourse. At June 30, 1997, $394,207 of
the $2,498,926 (15.8%) of factored accounts receivable, were factored with
recourse. Heller is entitled to a fee equal to 1.0% of all accounts receivable
purchased. Moreover, advances by Heller bear interest at rates equal to Chase's
prime rate plus 1.0% to 1.5%. Under the credit facility, all of the Company's
obligations to Heller may not exceed $6,000,000.
The Company has a letter of credit line with Heller up to maximum of
$750,000. At June 30, 1997, the Company has outstanding letters of credit in the
amount of $537,000, $400,000 of which is serving as collateral for foreign
currency contracts and $137,000 is serving as collateral for lease security
deposits.
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 consisted of the Company's 11% 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 were repaid, with
accrued interest, in the amount of $1,833,585 on June 19, 1996 with the net
proceeds from the sale of 1,119,500 shares of common stock and 1,299,500 common
stock purchase warrants (the "Initial Public Offering"). The gross proceeds to
the Company from the Initial Public Offering were $6,846,950. The proceeds were
also used to redeem 43,327 shares of the Company's Series A preferred stock at a
redemption price of $580,396, inclusive of accrued dividends. In conjunction
with the redemption of the Series A preferred stock, 462,531 shares of Common
Stock have been issued to the preferred shareholders.
In November 1996, the Company completed an offshore financing (the
"Offshore Financing") whereby the Company issued 3,653 shares of the Company's
Series B preferred stock for a price of $750 per share. The gross proceeds
received in such offering was $2,739,750.
On April 3, 1997, the Company became a 99% owner of a newly formed
corporation, Cable & Company 1955 SPA, located in Italy. Cable & Company 1955
SPA, leases a manufacturing facility in Montegranaro, Italy to manufacture the
Company's footwear bearing the Cable & Co trademark. Alberto Salvucci, the
Chairman of the board and stockholder of the Company, owns the remaining 1% of
Cable & Company 1955 SPA. The total investment during the six-month period ended
June 30, 1997 was $252,747
In August 1997 the Company purchased all of the rights to the Bacco Bucci
trademark from D&D Design, an entity controlled by Alberto Salvucci, the
Chairman of the Board, a director, and a principal stockholder of the Company.
The Company also acquired in many major countries throughout the world all of
the rights to the Cable & Co. trademark from Cable & Co. S.R.L. an entity also
controlled by Mr. Salvucci. The purchase price for the Bacco Bucci trademark
consists of $3,150,000 of which $400,000 will be paid periodically by December
1, 1997, and the balance of which shall be payable in installments. Payments of
$350,000 and $400,000 are due in January 1998 and January 1999 respectively. The
balance is payable in four installments of $500,000 in January 2000 through
January 2003. In addition, the Company has agreed to pay to D&D Design annual
royalties of 7% of net sales for a period of five years for all goods sold
outside North and South America. The Company has also agreed to issue to D&D
Design and Cable & Co S.R.L. an aggregate of 11,973,411 shares of common stock.
The purchase price for the rights to the Cable & Co. trademark include the
shares of Common Stock discussed above, together with a payment of $100,000
which amount has been paid to Cable & Co. S.R.L. The Company anticipates that
part of the cash portion of the purchase will be offset by the savings from the
projected royalty payments the Company would have had to make to D&D Design for
the use of the Bacco Bucci trademark in the western hemisphere.
In July 1997, the Company completed a private placement, whereby it issued
13,690,000 shares of common stock at a price of $.10 per share. Net proceeds to
the Company of approximately $1,100,000 will be used to purchase the rights to
the Bacco Bucci trademark as well as the Cable & Co. trademark. The
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Concluded)
remaining funds will be used to reduce the amount due to the factor and to fund
the Company's working capital requirements.
The Company believes that net cash provided by operations and available
borrowings under the Company's credit facility, will be sufficient to meet its
anticipated operating cash requirements for at least the next 12 months.
However, additional funds may be required for additional expansion.
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<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On July, 31, 1997 the Company consummated a private placement to 11
accredited investors of an aggregate of 13,690,000 shares of Common Stock at a
purchase price of $.10 per share. J.W. Charles Securities, Inc. acted as the
placement agent and received a fee equal to 13% of the gross proceeds. These
sales were intended to be exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) and Rule 506 promulgated thereunder
Item 5. Other Information
In August 1997 the Company purchased all of the rights to the Bacco Bucci
trademark from D&D Design, an entity controlled by Alberto Salvucci, the
Chairman of the Board, a director, and a principal stockholder of the Company.
The Company also acquired in many major countries throughout the world all of
the rights to the Cable & Co. trademark from Cable & Co. S.R.L. an entity also
controlled by Mr. Salvucci. The purchase price for the Bacco Bucci trademark
consists of $3,150,000 of which $400,000 will be paid periodically by December
1, 1997, and the balance of which shall be payable in installments. Payments of
$350,000 and $400,000 are due in January 1998 and January 1999 respectively. The
balance is payable in four installments of $500,000 in January 2000 through
January 2003. In addition, the Company has agreed to pay to D&D Design annual
royalties of 7% of net sales for a period of five years for all goods sold
outside North and South America. The Company has also agreed to issue to D&D
Design and Cable & Co S.R.L. an aggregate of 11,973,411 shares of common stock.
The purchase price for the rights to the Cable & Co. trademark include the
shares of Common Stock discussed above, together with a payment of $100,000
which amount has been paid to Cable & Co. S.R.L.
Effective July, 21, 1997, Alan Kandall, formerly chief operating officer
and chief financial officer of the Company, was appointed president and chief
executive officer, replacing David Albahari as president and chief executive
officer. Joel Brooks, formerly comptroller, was appointed chief financial
officer and treasurer.
See also item 2. with respect to the issuance of 13,690,000 shares of
common stock.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Please see Exhibit Index on page 19.
(b) Reports on Form 8-K
None.
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<PAGE>
EXHIBIT INDEX
Number Description of Exhibit
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 Continental Stock
Transfer Trust Company, 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. *
10.1 Employment Agreement dated as of January 1, 1995 between the Company and
David Albahari. *
10.2 Employment Agreement dated as of July 1, 1997 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. *
10.11 Assignment of trademark dated July 29, 1997 between D&D Design and the
Company.**
10.12 Assignment of trademark dated July 29, 1997 between Cable & Co. S.R.L.
and the Company.**
21.1 List of Subsidiaries. *
27.1 Financial Data Schedule.
99.1 Cable & Co. Trademark Registration from the United States Patent and
Trademark Office. *
* Previously filed with the Company's Registration Statement, Registration No.
333-3000
** Previously filed with the Company's Registration Statement, Registration No.
333-33079
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<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: November 21, 1997 /s/ Alan Kandall
---------------- ----------------------------------
Alan Kandall
President; Chief Executive Officer
Date: November 21, 1997 /s/ Joel Brooks
---------------- ----------------------------------
Joel Brooks
Chief Financial Officer
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