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 March 31, 1998
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
Incorporation or Organization) Identification No.)
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 43,838,971 shares of Common Stock,
$.01 par value, outstanding at May 14, 1998
There are 17 pages in this document. The Exhibit Index appears on
sequentially numbered page 16 .
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1998 (unaudited) 3
Consolidated Statements of Operations for the Three-month
periods ended March 31, 1998 and 1997 (unaudited) 4
Consolidated Statement of Stockholders' Equity for the
Three-month period ended March 31, 1998 (unaudited) 5
Consolidated Statements of Cash Flows for the Three-month
periods ended March 31, 1998 and 1997 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Exhibit Index 16
Signature 17
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1998
(unaudited)
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash $ 55,166
Accounts receivable, less allowances for doubtful accounts
and sales discounts of $132,000 1,077,263
Inventory 5,797,427
Prepaid and other current assets 1,382,393
Deferred income tax asset, net of valuation allowance of $5,000,000 ---
-----------
Total current assets 8,312,249
Property and Equipment, net of accumulated depreciation of $520,818 1,274,900
Trademark and Trade name, net of accumulated amortization of $370,860 6,213,704
Other Intangible Assets, net of accumulated amortization of $3,291 19,467
Other Assets 505,115
------------
Total Assets $16,325,435
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to factor $ 7,677,219
Accounts payable 2,525,074
Accrued expenses and other current liabilities 941,513
Notes payable 1,341,951
Current portion of installment payable-trademark 334,030
Current portion of capitalized lease obligations 36,646
Income Taxes Payable 13,269
------------
Total current liabilities 12,869,702
Installment Payable-trademark-net of current portion 1,878,155
Capitalized Lease Obligations - net of current portion 55,446
Deferred Rent 93,571
Deferred Income Tax Liability 100,000
------------
Total Liabilities 14,996,874
------------
Minority Interest in Cable & Company 1955 SPA 2,404
------------
Stockholders' Equity: (Notes 2, 3, 4, and 5)
Preferred stock - $.01 par value; authorized 1,416,347 shares;
no shares issued and outstanding ---
Common stock - $.01 par value; authorized 50,000,000 shares;
issued and outstanding 43,048,164 shares 430,482
Additional paid-in capital 15,366,260
Treasury stock - 35,000 common shares, at cost (29,676)
Accumulated deficit (14,423,119)
Accumulated other comprehensive loss (17,790)
------------
Stockholders' Equity 1,326,157
------------
Total Liabilities and Stockholders' Equity $16,325,435
</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
March 31,
1997 1998
<S> <C> <C>
Net sales $4,542,653 $3,444,824
Cost of goods sold 2,935,472 2,238,074
----------- -----------
Gross profit 1,607,181 1,206,750
Noncash compensatory charges (Note 2) 140,417 12,500
Private Placement Costs (Note 5) --- 284,820
Selling expenses 1,144,991 1,162,140
General and administrative expenses 582,079 593,570
------------ -----------
Loss from operations (260,306) (846,280)
Interest expense 81,726 275,974
------------ -----------
Loss before provision for income taxes (342,032) (1,122,254)
Provision for income taxes 7,338 8,360
------------ -----------
Net loss $ (349,370) $(1,130,614)
------------ -----------
Net loss per common share $ (.06) $ (.03)
------------ -----------
Weighted average number of common shares outstanding 5,551,459 43,013,164
------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 4-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three-month period ended March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Treasury Stock Accumu- Other
Number of Paid-in Number Comprehensive lated Comprehensive Stockholders'
Shares Amount Capital of shares Amount Income Deficit Loss Equity
----------- -------- ----------- ------- -------- -------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 43,048,164 $430,482 $15,353,760 35,000 $(29,676) $(13,292,505) $21,407 $2,483,468
Comprehensive loss
Net Loss --- --- --- --- --- (1,130,614) (1,130,614) --- (1,130,614)
Foreign currency
translation adjustment
(Note 1) --- --- --- --- --- (39,197) --- (39,197) (39,197)
Comprehensive loss --- --- --- --- --- (1,169,811) --- ---
===========
Issuance of warrants to
purchase common stock
(Note 2 ) --- --- 150,000 --- --- --- --- --- 150,000
Amortization of deferred
consulting costs (Note 2 ) --- --- (137,500) --- --- --- --- --- (137,500)
---------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 43,048,164 $430,482 $15,366,260 35,000 $(29,676) --- $(14,423,119) $(17,790) $1,326,157
====================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
- 5-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three-month period ended
March 31
1997 1998
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(349,370) (1,130,614)
Adjustments to reconcile net loss to net cash used in operating activities::
Depreciation and amortization 62,388 146,818
Effect of exchange rate changes --- (39,197)
Provision for doubtful accounts and sales discounts (380,000) (148,000)
Provision for deferred income taxes 4,801 6,000
Noncash compensatory charges 140,417 12,500
Noncash advertising expense --- 30,544
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 17,692 (42,105)
(Increase) decrease in inventory 548,953 (354,962)
(Increase) in prepaid expenses and other current assets (561,259) (146,418)
(Increase) in intangibles --- (7,655)
Decrease in other assets --- 11,107
Increase in accounts payable 316,996 939,469
(Decrease) in accrued expenses and other liabilities (176,154) (284,233)
(Decrease) in income taxes payable --- (406)
(Decrease) in other liabilities --- (13,502)
Increase (decrease) in deferred rent 6,444 (1,569)
---------- -----------
Net cash used in operating activities (369,092) (1,022,233)
---------- -----------
Cash Flows From Investing Activities: - Purchase of property equipment (79,680) (121,491)
---------- -----------
Cash Flows From Financing Activities:
Advances from factor, net 610,949 701,233
Net proceeds from notes payable --- 457,532
Principal payments under capital lease obligations (7,524) (8,816)
Principal payments of long-term note payable (83,333) (83,333)
Purchase of treasury stock (11,623) ---
---------- -----------
Net cash provided by financing activities 508,469 1,066,616
---------- -----------
Net increase (decrease) in cash 59,697 (77,098)
Cash at beginning of period 153,023 132,264
---------- -----------
Cash at end of period $ 212,720 $ 55,166
---------- -----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 83,599 $ 219,172
---------- -----------
Cash paid for income taxes $ 2,408 $ 2,360
---------- -----------
</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 period ended March 31, 1998 is not
necessarily indicative of the results of operations expected for the year ended
December 31, 1998. 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, 1997.
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 operations
of Cable & Company 1955 SPA are included from April 3, 1997, the date of
formation.
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 March 31,
1998, aggregating $(17,790), are included in the stockholders' equity. There
were no significant transaction gains or losses for the three-month period ended
March 31, 1998.
2. 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.
-7-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
The Company has valued these shares of common stock and warrants to
purchase shares of common stock at $1,725,000. The difference between this
amount and the purchase price of $40,000 is 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 period ended March 31, 1997, the Company recognized $140,417
of consulting expense in the accompanying consolidated statement of operations.
In May 1997, the Company entered into a one-year consulting agreement
with Susquehanna Holding Corp. In November 1997, the Company amended the
consulting agreement for an additional three years effective January 1, 1998 and
issued a warrant to purchase 1,000,000 shares of common stock at a purchase
price of $.15 per share, which is exercisable until November 2002. The Company
has valued this warrant at $150,000. The value of this warrant is being
recognized ratably as a noncash compensatory charge over the life of the
agreement. For the three month period ended March 31, 1998, the Company
recognized $12,500 of consulting expense in the accompanying consolidated
statement of operations.
3. 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 three month period ended March 31, 1997, 1,600 shares of the
non dividend paying preferred stock Series B was converted into 3,650,643 shares
of the Company's common stock, leaving 2,053 shares of the non-dividend paying
preferred stock Series B outstanding at March 31, 1997. The remaining 2,053
shares of the non-dividend paying preferred stock Series B was converted into
7,563,117 shares of the Company's common stock during the three month period
ended June 30, 1997.
-8-
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(unaudited)
4. NOTE PAYABLE-MATHERS ASSOCIATES:
In December 1997, Mathers Associates loaned the company $400,000. In
order to induce Mathers Associates to make the loan, the Company agreed to issue
790,807 shares of common stock to Susquehanna Holding Corp. ("Susquehanna"), a
company related to Mathers Associates. The Company also agreed to issue
Susquehanna a warrant which entitles Susquehanna to purchase the number of
shares of common stock equal to 1.75% of the Company's outstanding securities
less 790,807 shares of common stock at a purchase price of $.01 per share. The
warrant expires on the earlier of December 15, 1999 or on the date that the
Company consummates debt or equity financings, singly or in the aggregate of at
least $12,500,000. The shares and the warrants were not yet issued as of March
31, 1998.
5. SUBSEQUENT EVENT
The Company is attempting to raise approximately $4,000,000 of additional
financing. As of March 31, 1998, the Company had incurred $366,820 of costs
related to a pending private placement. The Company has expensed $284,820 and
deferred the remaining $82,000.
-9-
<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, Bacco Bucci
trademark and XBacco 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, introducing a new product line under the XBacco
trademark 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 Fall 1998 season.
Net Sales
The Company's net sales for the three-month period ended March 31, 1998
were $3,444,824 as compared to net sales of $4,542,653 for the three-month
period ended March 31, 1997, a decrease of 24.2%. The Company believes that the
decrease in net sales is primarily attributable to the decrease in net sales of
footwear bearing the Cable & Co. trademark. Net sales of
-10-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
footwear bearing the Cable & Co. trademark for the three-month period ended
March 31, 1998 was $2,085,077 as compared to net sales of $3,319,652 for the
three-month period ended March 31, 1997, a decrease of 37.2%. Included in the
net sales of the footwear bearing the Cable & Co. trademark for the three-month
period ended March 31, 1998 was $148,893 of net sales by the Company's factory
to third parties. The Company believes that the decrease in net sales is
primarily attributable to a decrease in orders for the Spring 1998 season as a
result of lower than anticipated sell-through at retail of certain styles during
previous seasons. Net sales of the footwear bearing the Bacco Bucci trademark
for the three-month period ended March 31, 1998 was $1,359,747 as compared to
net sales of $1,223,001 for the three-month period ended March 31, 1997, an
increase of 11.2%. The increase is primarily attributable to an increase in net
sales to existing customers as well as an increase in the number of customers.
The Company's total backorder as of May 8,1998, was $5,944,178 as
compared to the Company's backorder last year at this time of $4,894,739, an
increase of 21.4%. Included in the backorder for 1998 is $444,849 for footwear
bearing the XBacco trademark.
Cost of Goods Sold
The Company's cost of goods sold for the three-month period ended March
31, 1998 was $2,238,074 as compared to $2,935,472 for the three-month period
ended March 31, 1997, a decrease of 23.8%. The Company believes that such a
decrease is primarily attributable to the decease in net sales for the
three-month period ended March 31, 1998. The Company's gross profit as a
percentage of net sales was 35.0% for the three-month period ended March 31,
1998 as compared to 35.4% for the three-month period ended March 31, 1997. The
Company believes that the decrease in the gross profit margin as a percentage of
net sales is due to the sale of $148,893 of Cable & Co. footwear directly by the
Company's factory to third parties at a lower gross profit margin than net sales
at the wholesale level. The Company's gross profit margin exclusive of these
sales was 36.8%. The Company believes that such an increase is due to lower
manufacturing costs attributable to the opening of the Company's factory in
April 1997.
Markdown sales for the three-month period ended March 31, 1998 , was
12.6% of net sales as compared to 10.4% of net sales for the three-month period
ended March 31, 1997, yielding a gross profit margin of 9.3% and 1.9%
respectively.
Noncash Compensatory Charges
For the three-month period ended March 31, 1998 the Company incurred
noncash compensatory charges of $12,500 which is attributable to a warrant
issued to Susquehanna Holding Corp., to purchase shares of common stock,
pursuant to a consulting agreement effective January 1, 1998.
For the three-month period ended March 31, 1997 the Company incurred
noncash compensatory charges of $140,417 which is attributable to shares of
Common Stock issued in
-11-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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.
Private Placement Costs
The Company is attempting to raise approximately $4,000,000 of additional
financing. In connection with a pending private placement the Company has
incurred total costs of $366,820. For the three months ended March 31, 1998 the
Company has expensed $284,820 because these costs were incurred more than ninety
days prior to March 31, 1998. The remaining $82,000 has been deferred.
Operating Expenses
The Company's selling and general and administrative expenses for the
three-month period ended March 31, 1998 were $1,755,710, 51.0% as a percentage
of net sales, as compared to selling and general and administrative expenses for
the three-month period ended March 31, 1997 of $1,727,070, 38.0% as a percentage
of net sales. The Company believes that the increase in selling and general and
administrative expenses is primarily attributable to an increase payroll and
related costs, show expenses, and amortization expense. The payroll and related
costs for the three month period ended March 31, 1998 was $514,833, 14.9% of net
sales as compared to payroll and related costs for the three month period ended
March 31, 1997, $457,004, 10.1% of net sales. The payroll and related costs
increased primarily due to the expansion of the sales staff in order to increase
revenues to existing accounts and to develop the Bacco Bucci product line. Show
expenses for the three month period ended March 31, 1998 was $193,483, 5.6% of
net sales as compared to show expenses for the three month period ended March
31, 1997 of $140,827, 3.1% of net sales. The show expenses increased due to
increased attendance of an expanded sales staff at the shows and changes and
additions made to the show display booths. Amortization expense for the three
month period ended March 31, 1998 was $80,990, 2.4% of net sales as compared to
amortization expense for the three months ended March 31, 1997 of $17,871, .4%
of net sales. The increase of the amortization expense is due to the Company
purchasing the Bacco Bucci and Cable & Co. trademarks in August 1997. Royalty
fees, which were $34,487 for the three-month period ended March 31, 1997, were
eliminated for the three-month period ended March 31, 1998 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. In addition, there was a decrease of approximately $69,000
in commission expense, shipping and warehousing expenses and factoring costs due
to the decrease in net sales.
In April 1998, the Company implemented a cost cutting program to reduce
the amount of selling and general and administrative expenses. Among other
reductions, payroll was reduced 12% and the Company's attendance at some trade
shows were eliminated.
-12-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest Expense
The Company's interest expense for the three-month period ended March
31, 1998 was $275,974 as compared to interest expense for the three-month period
ended March 31, 1997 of $81,726, an increase of 237.7%. The Company believes
that the increase is primarily attributable to interest incurred in connection
with the purchase of the Bacco Bucci trademark and the Cable & Co. trademark of
approximately $40,000, interest on a loan from Mathers Associates of
approximately $10,000, and interest for a loan discount related to shares to be
issued to Mathers Associates in connection with the loan of approximately
$14,000. In addition, the Company believes that the increase in interest expense
is due to the increased borrowing in relation to higher levels of inventory and
overadvances from the Company's factor, Heller Financial, Inc. ("Heller").
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, 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 March 31, 1998 the
Company had working capital deficiency of $4,557,453 and a debt to equity ratio
of 11.3 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 $83,334 was
outstanding as of March 31, 1998. 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 March 31, 1998 Heller has advanced the Company
$797,351 in excess of the inventory line. The Inventory Loan bears interest at
1.5% above Chase's prime rate (8.5% at March 31, 1998). 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 March 31, 1998, $976,494 of
the $2,860,497 (34.1%) 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. At March 31, 1998 Heller has
advanced the Company $1,677,219 in excess of its credit line. In addition, at
March 31, 1998, Heller had advanced the Company $4,758,008 in excess of its
borrowing base.
The Company has a letter of credit line with the factor up to maximum
of $750,000. At March 31, 1998, the Company has outstanding letters of credit in
the amount of $337,000, $200,000 of which is serving as collateral for foreign
currency contracts and $137,000 is serving as collateral for lease security
deposits.
At March 31, 1998, the Company was not in compliance with certain
covenants and the Company has received a notice of default from Heller. In the
event that Heller demands payment of the outstanding obligations or does not
advance additional funds to the Company, substantial doubt would exist with
regard to the Company's ability to continue as a going concern.
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
-13-
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Concluded)
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 made during 1997 was $252,747. The Company has
also advanced Cable & Company 1955 SPA $127,951 during the three-month period
ended March 31, 1998.
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 an
undiscounted amount of $3,150,000, of which $400,000 was paid during 1997, and
the balance shall be payable in installments. Payments of $350,000 and $400,000
are due in September 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 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 it has an immediate need for additional financing
of approximately $1,000,000 to $1,500,000. The Company also believes that
additional financing of approximately $7,000,000 will be required over the next
two to four months to finance the Companys plans for continued operations for at
least the next twelve months. The Company is presently seeking such additional
financing.
There can be no assurance that such financing will be consummated. If such
financing is not consummated substantial doubt would exist with regard to the
Company's ability to continue as a going concern.
-14-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
The Company's obligations to Heller Financial, Inc. include a collateral
installment note in the original principal amount of $1,000,000 of which $83,334
was outstanding as of March 31, 1998. At March 31, 1998, $976,494 of the
$2,860,497 (34.1%) of factored accounts receivable, were factored with recourse.
Under the credit facility, all of the Company's obligations to Heller may not
exceed $6,000,000. At March 31, 1998 Heller has advanced the Company $1,677,219
in excess of its credit line. In addition, at March 31, 1998, Heller had
advanced the Company $4,758,008 in excess of its borrowing base.
At March 31, 1998, the Company was not in compliance with certain
covenants and the Company has received a notice of default from Heller. In the
event that Heller demands payment of the outstanding obligations or does not
advance additional funds to the Company, substantial doubt would exist with
regard to the Company's ability to continue as a going concern.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Please see Exhibit Index on page 16.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on February 24,
1998.
-15-
<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. *
10.1 Employment Agreement dated as of July 1, 1997 between the Company and
Alan Kandall. *
10.2 Agreements between the Company and Heller Financial, Inc. *
10.4 Lease dated July 28, 1995 between Raritan Plaza I Associates, L.P., as
landlord, and Cable & Company Enterprises, Ltd., as tenant. *
10.5 Lease dated May 16, 1995 between 724 Fifth Avenue Realty Co., as
landlord, and Cable & Company Enterprises, Ltd., as tenant. *
10.6 Agreement dated as of July 21, 1997 between the Company and
David Albahari.**
10.7 License Agreement dated July 1, 1997 between the Company and Roffe
Accessories, Inc.**
10.8 Commercial Lease between Eugenio Scheggia and Cable & Co. 1955 SPA.
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
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CABLE & CO. WORLDWIDE, INC.
(Registrant)
Date:May 15, 1998 /s/ Alan Kandall
Alan Kandall
President; Chief Executive Officer
Date:May 15, 1998 /s/ Joel Brooks
Joel Brooks
Chief Financial Officer
-17-
COMMERCIAL LEASE
dated 4/2/97
In this private agreement, the lessor, EUGENIO SCHEGGIA, Via R. Morandi,
38, Montegranaro (AP(1)), Tax Identification Number SCHGNE67DO5F522Y, leases to
the lessee, CABLE & CO. 1955 SPA(2), Via Filippo Turati, 30, Montegranaro (AP),
V.A.T. code and Tax Identification Number 01520870443, with offices at the
property which is the subject of the lease, namely, the property used as a shoe
workshop, made up of a large room, 2 offices, bath and storage area, located at
Via Filippo Turati, 30, Montegranaro, subject to the following terms and
conditions:
1. The lease shall have a term of 6 (six) years commencing April 7,
1997. The lessee shall not have the option to withdraw from the lease in advance
pursuant to paragraph 7 of Article 27 of Law 392/1978.
2. The lease payment has been set at Lit. 30,000,000 per annum to be
paid in monthly installments in advance of Lit. 2,500,000 at the offices of the
Lessor.
3. Pursuant to Article 32 of Law 392/1978, the parties agree that the
lease payment shall be adjusted annually at the request of the lessor, at a rate
of 75% of the increase in the consumer price index for families of factory and
office workers as confirmed by ISTAT(3).
4. The Lessee may not, in any manner, delay the payment of the lease
and ancillary charges beyond the due date set forth in current regulations, and
may not assert any action or exception until after making payment of the
installments due.
5. The property shall be leased solely for use as a shoe workshop, and
it is forbidden to sublet or sell all or a part [of the lease], and to change
the property's intended use. Pursuant to the provisions of Articles 34, 35, 37
and subsequent articles of Law 392/1978, the lessor represents that the property
shall be used for activities that result/do not result in direct contact with
the public.
6. Pursuant to the provisions of paragraph 3? of Article 27 of Law
392/1978, it is hereby confirmed that the denial of authorizations and permits
required by current laws for the purposes of carrying out the lessee's business
may serve as a reason to withdraw from the lease.
7. The lessor represents that the property is in compliance with
building and city planning codes having obtained a building permit and occupancy
permit.
8. The lessee represents that it has been advised that during the
period prior to the current lease, the property was/was not used as a residence.
9. The lessee represents that it has examined the leased property, and
found it to be suitable for its use, in a good state of repair, and free of any
defects that could, in any way, affect the health of anyone carrying on business
therein, and agrees to return the property at the expiration of the lease in the
same condition. Any
- -----------
1 [Ascoli Piceno Province]
2 [Abbreviation used to designate an Italian corporation]
3 [Central Statistics Institute]
<PAGE>
addition which cannot be removed at any time without damaging the property, or
any other change, may not be made by the lessee without the prior written
consent of the owner.
The lessee shall be responsible for the cost of all minor maintenance
repairs, and in particular, those concerning water, light and sanitary systems;
locks and keys; window and door hinges; the surfaces of walls, ceilings and
fixtures; marble floors; and floor and wall tiling. The lessor shall carry out
any repairs not completed by the Lessee and deduct the amount spent from the
security deposit.
10. The lessee specifically holds the lessor harmless from any liability
for direct or indirect damage which it may incur as a result of the acts or
neglect of other tenants of the property, or of third parties, even if made
possible or facilitated by the absence or carelessness of the doorkeeper.
11. The lessee agrees to follow, and make its family members and employees
follow, the internal regulations for the property, which it represents that it
is acquainted with and accepts, and to follow, in any event, proper neighborly
and civil conduct.
12. The Lessor shall be held harmless from any liability resulting from an
interruption in utility service for reasons beyond its control.
13. 40% of applicable expenses for heating costs shall be calculated based
on the area occupied, and the remaining 60% shall be based on meter readings.
14. The Lessor may inspect, or have the leased property inspected, at any
time.
15. The breach by the lessee of any of the provisions contained in this
lease shall result, ipso jure, in the termination of the lease.
16. Any amount deposited by the lessee as security against any damage,
shall be set aside as a security deposit in accordance with current laws, and
shall be returned after the property has been returned in good order, and may
never be used to offset lease payments. At the request of either party, the
deposit may/may not be increased or decreased in proportion to changes in the
lease payment, and must be replenished for any drawings thereof.
17. The lessee shall be responsible for paying the stamp tax for the lease
and receipts, and the recording tax in the amounts set by current laws, as well
as heating costs and applicable shared expenses which are set at Lit. 120,000
per month and subject to adjustment.
18. The provisions of this document shall remain valid and applicable
between the parties if no exceptions or amendments are made by special laws
regarding leasing, to the extent such laws are applicable.
19. The lease shall be recorded by the lessee.
20. The Lessee shall be responsible for expenses incurred by the Lessor for
the Fire [Insurance] Policy, but only with respect to risks related to the lease
which shall be set proportionally, based on the number of square meters occupied
by the Lessee, at Lit. 572,650 (five hundred seventy-two thousand 650) per
annum, to be paid to the Lessor in semi-annual installments in advance.
<PAGE>
Lessor Lessee
We hereby agree to the lease, and specifically Articles 1, 2, [illegible], 10,
12, 15, 16, 17 and 19.
Lessor Lessee
[Signature] Manager of Castle & Co. 1955 SpA
[Signature]
[Text along left side of page]: Recorded in __________ on _____________
under No. __________ , Volume _______ Page
_____ of theRegister of Private Agreements.
Lit __________ collected
REGISTRAR
[Text along right side of page]: Notification made to local authorities on
_______ to __________.
<PAGE>
Receipt for security deposit and delivery of keys
COPY FOR
THE LESSOR
On 4/4/97 CABLE & CO. 1955 SPA, lessee of the property located at Via Filippo
Turati, 30, Montegranaro (AP), paid to the lessor, EUGENIO SCHEGGIA, the
non-interest-bearing amount of Lit. 5,000,000 (five million) as a security
deposit for the proper performance of the lease entered into on 4/2/97, for the
period from __________ to __________. The Lessee shall also pay to the Lessor
the amount of Lit. 200,000 as a contribution for the establishment of the shared
expense reserve, which shall be returned to it at the time the lease is
terminated. The security deposit may never be applied as payment of lease
installments, even close to the expiration of the lease, and shall be returned
after the property leased has been returned in good order, and after any
adjustments have been made for the use of electricity, water, gas and similar
utilities.
The security deposit shall be returned ____ days after the performance of
all obligations under the lease. Upon receipt of this amount, the lessor shall
deliver to the lessee ____ keys.
LESSEE (for receipt of the keys) LESSOR (for receipt of the security deposit)
[Signature]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 55,166
<SECURITIES> 0
<RECEIVABLES> 1,209,263
<ALLOWANCES> 132,000
<INVENTORY> 5,797,427
<CURRENT-ASSETS> 8,312,249
<PP&E> 1,795,718
<DEPRECIATION> 520,818
<TOTAL-ASSETS> 16,325,435
<CURRENT-LIABILITIES> 12,869,702
<BONDS> 1,933,601
0
0
<COMMON> 430,482
<OTHER-SE> 895,675
<TOTAL-LIABILITY-AND-EQUITY> 16,325,435
<SALES> 3,444,824
<TOTAL-REVENUES> 3,444,824
<CGS> 2,238,074
<TOTAL-COSTS> 1,162,140
<OTHER-EXPENSES> 890,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,974
<INCOME-PRETAX> (1,122,254)
<INCOME-TAX> 8,360
<INCOME-CONTINUING> (1,130,614)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,130,614)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
