SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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 43,048,164 shares of Common Stock, $.01 par value,
outstanding at November 14, 1997
There are 23 pages in this document. The Exhibit Index appears on sequentially
numbered page 22 .
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1997 (unaudited) 3
Consolidated Statements of Operations for the Three-month and
Nine-month periods ended September 30, 1997 and 1996 (unaudited) 4
Consolidated Statement of Stockholders' Equity for the
Nine-month period ended September 30, 1997 (unaudited) 5
Consolidated Statements of Cash Flows for the Nine-month
period ended September 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of Matters to Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Exhibit Index 22
Signature 23
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1997
(unaudited)
ASSETS
Current assets:
Cash $ 26,134
Accounts receivable, less allowances for doubtful
accounts and sales discounts of $142,000 1,334,991
Inventory 5,071,511
Prepaid and other current assets 1,945,295
Deferred income tax asset, net of valuation
allowance of $3,000,000 ---
-----------
Total current assets 8,377,931
Property and Equipment, net of accumulated depreciation
of $347,640 1,296,378
Trademark and Trade name, net of accumulated amortization
of $206,141 (Note 9) 6,365,897
Other Intangible Assets, net of accumulated amortization
of $35,650 16,109
Other Assets 10,966
-----------
Total Assets $16,067,281
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to factor $ 4,731,309
Accounts payable 628,297
Accrued expenses and other current liabilities 2,199,839
Note payable - factor 250,000
Current portion of note payable-trademark (Note 9) 669,943
Current portion of capitalized lease obligations 31,973
Income Taxes Payable 18,901
-----------
Total current liabilities 8,530,262
Capitalized Lease Obligations - net of current portion 77,409
Note Payable-trademark (Note 9) 1,878,156
Deferred Rent 92,366
Other Liabilities 42,573
Deferred Income Tax Liability 94,000
-----------
Total Liabilities 10,714,766
-----------
Minority Interest in Cable & Company 1955 SPA 2,404
-----------
Stockholders' Equity: (Notes 1,2, 3, 4, 5, 6, 7, 9, & 10) Preferred
stock- $.01 par value; authorized 1,420,000 shares;
no shares issued ---
Common stock - $.01 par value; authorized 50,000,000 shares;
issued and outstanding 42,146,408 shares 421,464
Additional paid-in capital 15,137,018
Treasury stock - 35,000 common shares, at cost (29,676)
Accumulated deficit (10,168,032)
Cumulative foreign currency translation adjustment (10,663)
-----------
Stockholders' Equity 5,350,111
-----------
Total Liabilities and Stockholders' Equity $16,067,281
===========
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 Nine-month period ended
September 30, September 30,
------------------------ -----------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 5,375,379 $ 5,416,409 $ 11,724,876 $ 12,695,450
Cost of goods sold 3,492,083 3,215,246 8,033,712 7,800,240
------------ ------------ ------------ ------------
Gross profit 1,883,296 2,201,163 3,691,164 4,895,210
Noncash compensatory charges (Notes 2 and 3) 140,417 1,006,268 2,671,065 1,370,109
Selling expenses 1,328,990 1,237,026 3,092,087 3,271,600
General and administrative expenses 531,908 613,147 1,562,469 1,747,875
------------ ------------ ------------ ------------
(Loss) from operations (118,019) (655,278) (3,634,457) (1,494,374)
Interest expense 125,402 196,397 477,039 390,829
Termination Agreement (Note 10) -- 577,760 -- 577,760
Bridge note discount (Note 4) -- -- 738,000 --
------------ ------------ ------------ ------------
Loss before provision for income taxes (243,421) (1,429,435) (4,849,496)
Provision for income taxes (23,853) 2,708 (18,375) 63,259
------------ ------------ ------------ ------------
Net loss (219,568) (1,432,143) (4,831,121)
Dividends on preferred stock -- -- 27,248 --
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (219,568) $ (1,432,143) $ (4,858,369) $ 2,526,222)
============ ============ ============ ============
Net loss per common share $ (.07) $ (.05) $ (1.99) $ (.17)
============ ============ ============ ============
Weighted average number of common shares outstanding 3,375,813 30,516,224 2,443,075 15,272,199
============ ============ ============ ============
</TABLE>
See notes to Consolidated Financial Statements.
- 4-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine-month period ended September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Treasury Stock
Number of Number of Paid-in Number
Shares Amount Shares Amount Capital shares Amount
------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 3,653 $ 37 3,394,237 $ 33,942 $ 10,109,649 20,000 $ (18,053)
Purchase of treasury stock -- -- -- -- -- 15,000 (11,623)
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) -- -- -- -- 1,370,109 -- --
Issuance of common stock
in connection with private
placement (Note 4) -- -- 13,690,000 136,900 1,232,100 -- --
Private placement costs (Note 4) -- -- -- -- (328,251) -- --
Issuance of common stock
in connection with purchase
of trademark (Note 9) -- -- 11,973,411 119,734 2,574,283 -- --
Issuance of options in
connection with Termination
Agreement (Note 10) -- -- -- -- 309,979 -- --
Cumulative Foreign Currency
translation adjustment (Note 1) -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- --
---- ---- ----- --------- ------------ ------ ---------
Balance at September 30, 1997 -- $-- 42,14 $ 421,164 $ 15,137,018 35,000 $ (29,676)
==== ==== ===== ========= ============ ====== =========
Cumulative
Foreign
Currency
Accumulated Translation Stockholders'
Deficit Adjustment Equity
------- ---------- ------
<S> <C> <C> <C>
Balance at December 31, 1996 $ (7,641,810) -- $ 2,483,765
Purchase of treasury stock -- -- (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) -- -- 1,370,109
Issuance of common stock
in connection with private
placement (Note 4) -- -- 1,369,000
Private placement costs (Note 4) -- -- (328,251)
Issuance of common stock
in connection with purchase
of trademark (Note 9) -- -- 2,694,017
Issuance of options in
connection with Termination
Agreement (Note 10) -- -- 309,979
Cumulative Foreign Currency
translation adjustment (Note 1) -- (10,663) (10,663)
Net loss (2,526,222) -- (2,526,222)
------------ ----------- -----------
Balance at September 30, 1997 $(10,168,032) $ (10,633) $ 5,350,111
============ =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 5-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
Nine-month period ended
September 30
-----------------------
1996 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(4,831,121) (2,526,222)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 170,966 257,965
Provision for doubtful accounts and sales discounts 57,875 (443,000)
Provision for deferred income taxes (3,215) 41,000
Noncash compensatory charges 2,671,065 1,370,109
Issuance of options in connection with termination agreement -- 309,979
Amortization of discount on bridge notes 738,000 --
Changes in operating assets and liabilities:
Decrease in accounts receivable (211,422) (791,860)
Decrease (increase) in inventory 731,839 (2,329,896)
(Increase) in prepaid expenses and other current assets (448,670) (1,473,062)
(Increase) in intangibles (964) (8,450)
(Increase) in other assets -- (3,951)
(Decrease) in accounts payable (157,560) (270,365)
Increase (decrease ) in accrued expenses and other current liabilities (353,790) 1,547,025
Increase in other liabilities -- 42,573
Increase (decrease) in income taxes payable (14,300) 18,901
Increase in deferred rent 19,538 16,894
---------- ----------
Net cash used in operating activities (1,631,759) (4,242,360)
---------- ----------
Cash Flows From Investing Activities
Purchase of property equipment (312,022) (476,298)
Purchase of trademarks -- (66,591)
---------- ----------
Net cash used in investing activities (312,022) (542,889)
---------- ----------
Cash Flows From Financing Activities
Advances from (repayments to) factor, net (1,596,828) 4,002,384
Repayment of term note payable (130,000) --
Principal payments under capital lease obligations (20,384) (23,497)
Principal payments of long-term note payable factor (250,000) (250,000)
Principal payments of long-term note payable trademark -- (91,394)
Redemption of redeemable preferred stock- Series A (500,000) --
Net repayment on bridge notes financing (227,000) --
Net proceeds from issuance of common stock and warrants 4,760,513 1,040,749
Proceeds from issuance of stock for minority interest in consolidated subsidia-- 2,404
Payment of dividends on redeemable preferred stock-Series A (80,396) --
Purchase of treasury stock -- (11,623)
---------- ----------
Net cash provided by financing activities 1,955,905 4,669,023
---------- ----------
Effect of exchange rate changes -- (10,663)
---------- ----------
Net increase (decrease) in cash 12,124 (126,889)
Cash at beginning of period 8,010 153,023
---------- ----------
Cash at end of period $ 20,134 $ 26,134
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 479,634 $ 365,408
========== ==========
Cash paid for income taxes $ 27,036 $ 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 nine-month periods ended September
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 September
30, 1997, aggregating $10,663, are included in the stockholders' equity. There
were no significant transaction gains or losses for the nine-month period ended
September 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 noncash compensatory 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 noncash
compensatory 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 nine-month period ended September
30, 1996:
<TABLE>
Impact of Without
As Stated Charges Charges
--------- ------- -------
<S> <C> <C>
Net sales $ 11,724,876 -- $ 11,724,876
Cost of goods sold 8,033,712 -- 8,033,712
------------ ------------ ------------
Gross profit 3,691,164 -- 3,691,164
Noncash compensatory charges (2,671,065) $ 2,289,071 (381,994)
Selling expenses (3,092,087) -- (3,092,087)
General and administrative expenses (1,562,469) -- (1,562,469)
------------ ------------ ------------
Loss from operations (3,634,457) 2,289,071 (1,345,386)
Interest expense 477,039 -- 477,039
Bridge note discount 738,000 -- 738,000
------------ ------------ ------------
Loss before income tax benefit (4,849,496) 2,289,071 (2,560,425)
Income tax benefit (18,375) -- (18,375)
Net loss (4,831,121) 2,289,071 (2,542,050)
Dividends on preferred stock 27,248 -- 27,248
------------ ------------ ------------
Net loss applicable to common stock $ (4,858,369) $ 2,289,071 $ (2,569,298)
============ ============ ============
Net loss per common share $ (1.99) -- $ (1.05)
============ ============ ============
Weighted average number of common
shares outstanding 2,443,075 -- 2,443,075
============ ============ ============
</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.
-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 was being recognized ratably as a
noncash compensatory charge over the life of the agreement. In September 1997
the Company determined that Hyde Park was no longer providing services to the
Company. As a result, the Company expensed the remaining balance of $741,340.
For the three-month periods ended September 30, 1997 and 1996, the Company
recognized $881,757 and $140,417 respectively, of consulting expense, in the
accompanying consolidated statement of operations. For the nine-month period
ended September 30, 1997 and 1996, the Company recognized $1,162,590 and
$381,994 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 nine month periods ended September 30, 1997,
the Company recognized $124,511 and $207,519 respectively of consulting expense
in the accompanying consolidated statement of operations.
4. PRIVATE PLACEMENTS:
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.
-9-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
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 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 remaining discount of $453,050 on the Bridge
Notes were fully amortized on June 19, 1996.
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 $1,041,000, after deducting
underwriting discounts and expenses of approximately $328,000 were used to
purchase the rights to the Bacco Bucci trademark as well as the additional
rights to the Cable and Co. trademark in other countries. The remaining funds
were used to reduce the amount due to the factor and to fund the Companys
working capital requirements. In addition, the Company issued warrants to
purchase 75,0000 shares of common stock at a price of $.60 and 75,000 shares of
common stock at a price of $.75 for consulting services in connection with the
private placement. The warrants expire July 31, 2002.
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 September 30, 1996, the Company had incurred costs in connection
with the IPO in the amount of $2,162,437.
-10-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
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
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 nine-month period ended September 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
nine-month period ended September 30, 1997 was $252,747
9. 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 rights sold to the Company include
trademarks registered in the United States, Canada, Italy, Austria, China,
France, Germany, Portugal, Russia, Spain, Switzerland, Hong Kong, India, Korea,
Sri Lanka, Taiwan and the United Kingdom together with any other rights owned by
D&D Design whether or not registered throughout the world. Prior to the
acquisition, the Company held a license for the rights to the Bacco Bucci
trademark in North, Central and South America.
-11-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
The purchase price for the Bacco Bucci trademark consists of $3,150,000
of which $400,000 will be paid 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 remaining balance is payable in
four equal 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 bearing the Bacco Bucci
trademark sold outside North, Central, and South America, commencing on the date
the Company commences exploiting the Bacco Bucci trademark in each country, but
expiring no later than December 31, 2007. The Company also issued to D&D Design
an aggregate of 11,973,411 shares of Common Stock. The Company has valued the
shares of common stock at $2,694,017.
The Company also acquired in many major countries throughout the world
outside of the Western Hemisphere, all of the rights to the Cable & Co.
trademark from Cable & Co. S.R.L., an entity controlled by Mr. Salvucci. Prior
to the acquisition, the Company owned the rights to the Cable & Co. trademark in
the Western Hemisphere. The rights sold to the Company include trademark
registrations in the following countries among others, Austria, Belgium, France,
Germany, India, Russia, Italy, Netherlands, Spain, Sweden and Switzerland. The
rights also include all of the rights owned by Cable & Co. S.R.L. in Africa,
Asia Minor, Australia, all of Europe and other parts of the world, except United
Kingdom and Asia.
The purchase price for the rights to the Cable & Co. trademark include
the shares of common stock discussed above, the 7% royalties payable with
respect to the Bacco Bucci trademark, together with a payment of $100,000, which
amount has been paid to Cable & Co. S.R.L.
The total purchase price, including costs and expenses, for the Bacco
Bucci and Cable & Co. trademarks is approximately $5,400,000, which is being
amortized over a period of 20 years. The total cash payments of $3,250,000 for
the Bacco Bucci and Cable & Co. trademark was discounted at a rate of 8.5% and
recorded as a long term note payable in the amount of $2,639,493. The remaining
$610,507 represents deferred interest. The 11,973,411 shares were recorded at a
value of 2,694,017. The remaining amount of the purchase price represents legal
and other fees incurred in connection with the purchase of the trademarks.
10. TERMINATION AGREEMENT:
In October 1997, the Company entered into an agreement as of July 21,
1997, to terminate an employment agreement between the Company and David
Albahari the former President, Chief Executive Officer and a director of the
Company. As part of the termination agreement, Mr Albahari is to receive
$250,000 commencing July 1, 1997 through September 30, 1998, as well as
reimbursement for certain legal and other expenses. Included in the $250,000
payments is a non-competion agreement, effective from July 1, 1997 through June
30, 1998, in the amount of $50,000. Additionally, the Company issued Mr.
Albahari options to purchase 901,756 shares of Common Stock at a purchase price
of $0.01 per share. The 901,756
-12-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(unaudited)
options were recorded at a value of $309,979. In October 1997, Mr. Albahari
converted these options into common stock.
The total non-recurring expense of $577,760 recognized in connection
with the termination agreement during the three-month period ended September 30,
1997 includes (i) $200,000, which represents the total payments of $250,000 less
$50,000 allocable to the non-competion agreement, (ii) $309,979, which
represents the value of the 901,756 options to purchase shares of common stock
and (iii) $67,781 in legal and other expenses.
-13-
<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 1,800
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 a 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 rights to 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 and 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 Cable & Co. and Bacco Bucci
brands. 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 Company anticipates that the neckwear line will be
in stores for the 1997 holiday season.
Net Sales
The Company's net sales for the three-month period ended September 30,
1997 were $5,416,409 as compared to net sales of $5,375,379 for the three-month
period ended September 30, 1996, an increase of .8%. The Company believes that
the increase in net sales is primarily attributable to the increase in net sales
of men's footwear bearing the Bacco Bucci trademark. Net Sales of the mens
footwear bearing the Bacco Bucci trademark for the three-month period ended
September 30, 1997 was $1,979,834 as compared to net sales of $1,424,875 for the
three-month period ended September 30, 1996, an increase of 38.9%.The increase
is primarily attributable to the increase in net sales to existing customers as
well as an increase in
-14-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
the number of customers. Net sales of the men's footwear bearing the Cable &
Co. trademark for the three-month period ended September 30, 1997 was $3,436,575
as compared to net sales of $3,784,210 for the three-month period ended
September 30, 1996, a decrease of 9.2%. The Company believes that the decrease
is primarily attributable to a decrease in sales of $113,000 as a result of a
major pre-season promotion, during the three-month period ended September 30,
1996, which did not occur in 1997. The balance of the decrease was primarily
attributable to an increase in returns due to lower than anticipated
sell-through at retail of certain styles during previous seasons. Net sales for
the three-month period ended September 30, 1996 of womens footwear bearing the
Cable and Co trademark and the Bacco Bucci trademark was $105,824 and $60,470,
respectively. During the year ended December 31, 1996, the Company temporarily
suspended the production and marketing of the women's footwear bearing both the
Cable & Co. trademark and the Bacco Bucci trademark. The Company does not plan
to reintroduce the women's footwear bearing either the Cable & Co. trademark or
the Bacco Bucci 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 September 30, 1997 there were no sales
of the women's footwear bearing the Cable & Co. trademark or the Bacco Bucci
trademark.
The Company's net sales for the nine-month period ended September 30,
1997 were $12,695,450 as compared to net sales of $11,724,876 for the nine-month
period ended September 30, 1996, an increase of 8.3%. The Company believes that
the increase in net sales is primarily attributable to the increase in net sales
of men's footwear bearing the Bacco Bucci trademark. Net sales of the men's
footwear bearing the Bacco Bucci trademark for the nine-month period ended
September 30, 1997 was $4,224,140 as compared to net sales of $2,781,331 for the
nine-month period ended September 30, 1996, an increase of 51.9%. The increase
is primarily attributable to the increase in net sales to existing customers as
well as an increase in the number of customers. Net sales of the men's footwear
bearing the Cable & Co. trademark for the nine-month period ended September 30,
1997 was $8,471,310 as compared to net sales of $8,482,030 for the nine-month
period ended September 30, 1996, a decrease of .1%. The Company believes that
the decrease is primarily attributable to a decrease in sales of $598,000, as a
result of a major pre-season promotion during the nine-month period ended
September 30, 1996, which did not occur in 1997. The balance of the decrease was
primarily attributable to an increase in returns due to the lower than
anticipated sell-through at retail of certain styles during the previous
seasons. Additionally, as a result of the temporary suspension of the women's
footwear bearing the Cable and Co. trademark and the Bacco Bucci trademark,
there were no sales of womens footwear bearing the Cable and Co. trademark and
Bacco Bucci trademark for the nine-month period ended September 30, 1997, as
compared to net sales of $401,045 of the womens footwear bearing the Cable and
Co. trademark and $60,470 of the womens footwear bearing the Bacco Bucci
trademark for the nine-month period ended September 30, 1996.
Cost of Goods Sold
The Company's cost of goods sold for the three-month period ended
September 30, 1997 was $3,215,246 as compared to $3,492,083 for the three-month
period ended September 30, 1996, a decrease of 7.9%. 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 September 30, 1997. The
primary reasons for the decrease in the cost of the merchandise was a 7.8%
decrease in the average price of the goods at the factory level, which is
attributable to the Company redesigning the shoes as well as a portion of the
shoes being manufactured at the Company's facility. The Company's gross profit
as a percentage of net sales was 40.6%
-15-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
for the three-month period ended September 30, 1997 as compared to 35.0% for the
three-month period ended September 30, 1996. The Company believes that such an
increase is primarily attributable to a more favorable exchange rate between the
dollar versus the lira, lower freight rates, 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 the redesign of the shoes and a
decrease in the quantity and size of markdown sales. Markdown sales for the
three-month period ended September 30, 1997, were 8.6% of net sales as compared
to 9.1% of net sales for the three-month period ended September 30, 1996,
yielding a gross margin of 9.8% and .4% respectively.
The Company's cost of goods sold for the nine-month period ended
September 30, 1997 was $7,800,240 as compared to $8,033,712 for the nine-month
period ended September 30, 1996, a decrease of 2.9%. The Company believes that
such decrease is primarily attributable to the decrease in the cost of the
merchandise purchased for the nine-month period ended September 30, 1997. The
primary reasons for the decrease in the cost of the merchandise was a 12.2%
decrease in the average price of the goods at the factory level, which is
attributable to the Company redesigning the shoes as well as a portion of the
shoes being manufactured at the Company's facility. The Company's gross profit
as a percentage of net sales was 38.6% for the nine-month period ended September
30, 1997 as compared to 31.5% for the nine-month period ended September 30,
1996. The Company believes that such an increase is primarily attributable to a
more favorable exchange rate between the dollar versus the lira, lower 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 and the
redesign of the shoes and a decrease in the quantity and size of markdown sales.
Markdown sales for the nine-month period ended September 30, 1997, were 7.7% of
net sales as compared to 11.3% of net sales for the nine-month period ended
September 30, 1996, yielding a gross margin of 7.9% and (7.0%) respectively.
Noncash Compensatory Charges
For the three-month period ended September 30, 1997 the Company
incurred noncash compensatory charges of $1,006,268. Of such amount (i) $124,511
is attributable to shares of common stock issued pursuant to consulting
agreements entered into in May 1997, and (ii) $881,757 is attributable to shares
of common stock issued in January 1996 pursuant to an international consulting
agreement. The initial amount of the international consulting agreement was
$1,685,000 and was being amortized over a 36 month period. In September 1997 the
Company determined that it was no longer receiving consulting services and
expensed the remaining balance of $741,340.
For the nine-month period ended September 30, 1997 the Company incurred
noncash compensatory charges of $1,370,109. Of such amount (i)$207,519 is
attributable to shares of common stock issued pursuant to consulting agreements
entered into in May 1997, and (ii)$1,162,500 is attributable to shares of common
stock issued in January 1996 pursuant to an international consulting agreement.
The initial amount of the international consulting agreement was $1,685,000 and
was being amortized over a 36 month period. In September 1997 the Company
determined that it was no longer receiving consulting services and expensed the
remaining balance of $741,340.
-16-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
For the three-month period ended September 30, 1996 the Company
incurred noncash compensatory charges of $140,417, which is attributable to
shares of common stock issued pursuant to an international consulting agreement.
For the nine-month period ended September 30, 1996 the Company incurred
noncash compensatory charges of $2,671,065. Of such amount (i) $381,994 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 a 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.
Operating Expenses
The Company's selling and general and administrative expenses for the
three-month period ended September 30, 1997 were $1,850,173, 34.2% as a
percentage of net sales, as compared to selling and general and administrative
expenses for the three-month period ended September 30, 1996 of $1,860,898,
34.6% as a percentage of net sales. The Company believes that the decrease in
selling and general and administrative expenses is primarily attributable to a
decrease in royalty fees. In August 1997 the Company purchased the Bacco Bucci
trademark. As a result, the Company was no longer required to pay royalty fees
on the Bacco Bucci footwear in the western hemisphere. In addition, the payroll,
travel and entertainment expenses, show expenses, and amortization expense
increased which offset the decrease in royalty fees. The payroll and travel and
entertainment expenses increased due to the expansion of the sales staff in
order to increase revenues to existing accounts and to develop the Bacco Bucci
product line. The show expenses increased due to the Company participating in
more shows in 1997 and increased attendance of an expanded sales staff at the
shows. The amortization expense increased due to the Company purchasing the
Bacco Bucci and Cable & Co. trademarks during the three-month period ended
September 30, 1997, which are being amortized over a period of 20 years.
The Company's selling and general and administrative expenses for the
nine-month period ended September 30, 1997 were $5,019,475, 39.5% as a
percentage of net sales, as compared to selling and general and administrative
expenses for the nine-month period ended September 30, 1996 of $4,654,556, 39.7%
as a percentage of net sales. The Company believes that the increase in selling
and general and administrative expenses is primarily attributable to the
increase in payroll, travel and entertainment expenses, show expenses,
professional fees, and amortization expense. The payroll and travel and
entertainment expenses increased due to the expansion of the sales staff in
order to increase revenues to existing accounts and to develop the Bacco Bucci
product line. The show expenses increased due to the Company participating in
more shows in 1997 and increased attendance of an expanded sales staff at the
shows. The increase in professional fees is primarily due to an increase in
costs related to being a public company for the full nine month period in 1997
compared to a three month period for the nine months ended September 30, 1996.
The amortization expense increased due
-17-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
to the Company purchasing the Bacco Bucci and Cable & Co. trademarks during the
three-month period ended September 30, 1997, which are being amortized over a
period of 20 years. The Company also believes that the increase in selling and
general and administrative expenses is also attributable to increases in
expenses related to the increase in net sales, such as commission expense. In
addition, the royalty fees decreased due to the purchase of the Bacco Bucci
trademark in August 1997. As a result, the Company is no longer required to pay
royalty fees on sales of Bacco Bucci footwear in the western hemisphere.
Interest Expense and Bridge Note Discount
The Company's interest expense for the three-month period ended
September 30, 1997 was $196,397 as compared to interest expense for the
three-month period ended September 30, 1996 of $125,402, an increase of 56.6%.
The Company believes that the increase is primarily attributable interest of
approximately $36,000 in connection with the purchase of the Bacco Bucci
trademark and the Cable and Co. trademark. In addition, the Company believes the
increase in interest expense is due to the increased borrowing in relation to
higher levels of inventory.
The Company's interest expense for the nine-month period ended
September 30, 1997 was $390,829 as compared to interest expense for the
nine-month period ended September 30, 1996 of $477,039, a decrease of 18.1%. The
Company believes that the decrease is primarily attributable to a decrease in
borrowing for the nine-month period ended September 30, 1997. During the
nine-month period ended September 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 nine-month period ended September 30, 1996, the Company
incurred interest expense on the Bridge Notes payable in the amount of $69,585.
For the nine-month periods ended September 30, 1996, the Company
incurred a charge of $738,000 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
Termination Agreement
In October 1997, the Company entered into an agreement as of July 21,
1997, to terminate an employment agreement between the Company and David
Albahari the former President, Chief Executive Officer and a director of the
Company. As part of the termination agreement, Mr Albahari is to receive
$250,000 commencing July 1, 1997 through September 30, 1998, as well as
reimbursement for certain legal and other expenses. Included in the $250,000
payments is a non-competion agreement, effective from July 1, 1997 through June
30, 1998, in the amount of $50,000. Additionally, the Company issued Mr.
Albahari options to purchase 901,756 shares of Common Stock at a purchase price
of $0.01 per share. The 901,756 options were recorded at a value of $309,979. In
October 1997, Mr. Albahari converted these options into common stock.
The total non-recurring expense of $577,760 recognized in connection
with the termination agreement during the three-month period ended September 30,
1997 includes (i) $200,000, which represents the total payments of $250,000 less
$50,000 allocable to the non-competion agreement, (ii) $309,979, which
represents
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
the value of the 901,756 options to purchase shares of common stock and (iii)
$67,781 in legal and other expenses.
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 securities, an off shore financing, and a July 1997 private placement.
As of September 30, 1997, the Company had working capital deficiency of $152,331
and a debt to equity ratio of 2.0 to 1.0.
The Company's obligations to Heller include a collateral installment
note in the original principal amount of $1,000,000 of which $250,000 was
outstanding as of September 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"). At September 30, 1997 Heller has advanced the
Company $1,086,931 in excess of the inventory line. 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 non-approved accounts
are factored with recourse. At September 30, 1997, $1,265,347 of the $4,337,705
(29.2%) 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 (8.5% at
September 30, 1997) 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 a maximum of
$750,000. At September 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 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 nine-month period
ended September 30, 1997 was $252,747.
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. The gross
proceeds received in such an offering was $1,369,000.
In August 1997 the Company purchased all of the rights to the Bacco
Bucci trademark, an intangible asset, 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 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 remaining balance is
payable in four equal installments of $500,000 in January 2000 through January
2003. In addition, the
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Concluded)
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 bearing the Bacco Bucci trademark sold
outside North, Central, and South America, commencing on the date the Company
commences exploiting the Bacco Bucci trademark in each country, but expiring no
later than December 31, 2007. The Company also issued to D&D Design an aggregate
of 11, 973, 411 shares of Common Stock.
The Company also acquired in many major countries throughout the world
outside of the Western Hemisphere, 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 rights to the Cable & Co. trademark include
the shares of common stock discussed above, the 7% royalties payable with
respect to the Bacco Bucci trademark, together with a payment of $100,000, which
amount has been paid to Cable & Co. S.R.L.
The Company believes that additional financing of approximately
$3,000,000 will be required over the next 16 months to finance the Company's
plans for expansion overseas and to pay the additional amounts due in connection
with the acquisition of the Bacco Bucci trademark. In addition, the fourth
quarter of the year is generally the most unpredictable. In the event that the
results in the fourth quarter of 1997 were substantially below expectations,
additional financing may be required.
In order to obtain the financing necessary to accelerate the Company's
plans for expansion, the Company intends to raise approximately $20,000,000 in
additional financing through the sale of convertible preferred stock which will
be offered and sold to the public in an underwritten offering in the first
quarter of 1998. It is anticipated that the preferred stock will be convertible
into shares of Common Stock at a premium to the market price of the Common Stock
and that the preferred stock will be redeemable, at the option of the Company,
if the market price of the Common Stock reaches a certain level. The offering of
the preferred stock will be made only by means of a prospectus. There can be no
assurance that such financing will be consummated on the anticipated terms, or
at all.
-20-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company effected an underwritten initial public offering of its
securities on June 5, 1996 (the "IPO"). On July 15, 1997, as part of an inquiry
into the activities of a principal underwriter of the IPO, the Securities and
Exchange Commission (the "Commission") issued on Order of Private Investigation
relating to such underwriter and three companies, including the Company, in
which the underwriter had acted as principal underwriter. Prior to the
Commission issuing its Order of Private Investigation, and since November 19,
1996, the Company and its officers and directors have fully cooperated with the
Commission in connection with its present inquiry.
Separate and apart from the Commission's Order of Private
Investigation, the Company received a grand jury subpoena which the Company
believes is in connection with an investigation of the underwriter pending in
the United States District Court for the Southern District of New York. The
Company has been advised by the Assistant United States Attorney conducting the
Grand Jury investigation that the company is not the subject or target of such
investigation.
Item 2. Changes in Securities and use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Please see Exhibit Index on page 22.
(b) Reports on Form 8-K None.
-21-
<PAGE>
EXHIBIT INDEX
Number Description of Exhibit
2.1 Assignment of Trademark dated July 29, 1997 between D&D Design and
Details Limited and the Company.**
2.2 Assignment of Trademark dated July 29, 1997 between Cable & Co. S.R.L.
and the Company.**
2.3 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. *
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 Agreement dated as of July 21, 1997 between the Company and David
Albahari.**
10.12 License Agreement dated July 1, 1997 between the Company and Roffe
Accessories, Inc.**
10.13 Assignment of trademark dated July 29, 1997 between D&D Design and
Details Limited and the Company.**
10.14 Assignment of trademark dated July 29, 1997 between Cable & Co. S.R.L.
and the Company.**
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. 333-3079
-22-
<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 19, 1997 /s/ Alan Kandall
Alan Kandall
President; Chief Executive Officer
Date: November 19, 1997 /s/Joel Brooks
Joel Brooks
Chief Financial Officer
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997
<PERIOD-START> Jul-01-1997 Jan-01-1997
<PERIOD-END> Sep-30-1997 Sep-30-1997
<CASH> 0 26,134
<SECURITIES> 0 0
<RECEIVABLES> 0 1,476,991
<ALLOWANCES> 0 142,000
<INVENTORY> 0 5,071,511
<CURRENT-ASSETS> 0 8,377,931
<PP&E> 0 1,644,018
<DEPRECIATION> 0 347,640
<TOTAL-ASSETS> 0 16,067,281
<CURRENT-LIABILITIES> 0 8,530,262
<BONDS> 0 1,955,565
0 0
0 0
<COMMON> 0 421,464
<OTHER-SE> 0 4,928,647
<TOTAL-LIABILITY-AND-EQUITY> 0 16,067,281
<SALES> 5,416,409 12,695,450
<TOTAL-REVENUES> 5,416,409 12,695,450
<CGS> 3,215,246 7,800,240
<TOTAL-COSTS> 1,237,026 3,271,600
<OTHER-EXPENSES> 2,197,175 3,695,744
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 196,397 390,829
<INCOME-PRETAX> (1,429,435) (2,462,963)
<INCOME-TAX> 2708 63259
<INCOME-CONTINUING> (1,432,143) (2,562,222)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,432,143) (2,562,222)
<EPS-PRIMARY> (0.05) (0.17)
<EPS-DILUTED> (0.05) (0.17)
</TABLE>
