SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 7,406,281 shares of Common Stock, $.01 par value,
outstanding at April 25, 1997
There are 15 pages in this document.
The Exhibit Index appears on sequentially numbered page 14.
<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1997 (unaudited) 3
Consolidated Statements of Operations for the Three-month
periods ended March 31, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the Three-month
periods ended March 31, 1997 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II - OTHER INFORMATION
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Exhibit Index 14
Signature 15
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<PAGE>
PART I - FINANCIAL INFORMATION
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1997
(unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 212,720
Accounts receivable, less allowances for doubtful accounts
and sales discounts of $205,000 462,439
Inventory 2,192,662
Prepaid and other current assets 1,033,492
Deferred income tax asset, net of valuation allowance of $2,350,000 --
------------
Total current assets 3,901,313
Property and Equipment, net of accumulated depreciation of $233,089 1,014,311
Trademark and Trade name, net of accumulated amortization of $131,841 1,040,095
Other Intangible Assets, net of accumulated amortization of $28,923 14,386
Other Assets 7,015
------------
Total Assets $ 5,977,120
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to factor $ 1,339,874
Accounts payable 1,215,658
Accrued expenses and other current liabilities 476,660
Current portion of note payable 333,336
Current portion of capitalized lease obligations 31,973
------------
Total current liabilities 3,397,501
Note Payable - net of current portion 83,331
Capitalized Lease Obligations - net of current portion 93,382
Deferred Rent 81,916
Deferred Income Tax Liability 57,801
------------
Total Liabilities 3,713,931
------------
Stockholders' Equity: (Notes 2, 3, 4, 5 and 6)
Preferred stock Series B- $.01 par value; authorized 1,500,000 shares;
issued and outstanding 2,053 shares (liquidation preference $2,053,000) 21
Common stock - $.01 par value; authorized 10,000,000 shares;
issued and outstanding 7,044,880 shares 70,448
Additional paid-in capital 10,213,576
Treasury stock - 35,000 common shares, at cost (29,676)
Accumulated deficit (7,991,180)
------------
Stockholders' Equity 2,263,189
------------
Total Liabilities and Stockholders' Equity $ 5,977,120
============
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three-month period ended
March 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Net sales $ 3,676,582 $ 4,542,653
Cost of goods sold 2,366,123 2,935,472
----------- -----------
Gross profit 1,310,459 1,607,181
Noncash compensatory charges (Notes 2 and 3) 2,390,231 140,417
Selling expenses 1,017,928 1,144,991
General and administrative expenses 473,156 582,079
----------- -----------
Loss from operations (2,570,856) (260,306)
Interest expense 165,850 81,726
Bridge note discount (Note 4) 123,000 --
----------- -----------
Loss before provision (benefit) for income taxes (2,859,706) (342,032)
Provision (benefit) for income taxes (7,179) 7,338
----------- -----------
Net loss (2,852,527) (349,370)
Dividends on preferred stock 14,961 --
----------- -----------
Net loss applicable to common stock $(2,867,488) $ (349,370)
----------- -----------
Net loss per common share $ (1.58) $ (.06)
=========== ===========
Weighted average number of common shares outstanding 1,812,206 5,551,459
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three-month period ended
March 31
1996 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(2,852,527) (349,370)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 51,773 62,388
Provision for doubtful accounts and sales discounts (24,125) (380,000)
Provision for deferred income taxes 7,562 4,801
Noncash compensatory charges 2,390,231 140,417
Amortization of discount on bridge notes 123,000 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (84,400) 17,692
Decrease in inventory 229,040 548,953
(Increase) in prepaid expenses and other current asset (247,444) (561,259)
(Increase) in intangible (579) --
Increase (decrease) in accounts payable (648,210) 316,996
Increase (decrease) in accrued expenses and other liabilities 308,456 (176,154)
(Decrease) in income taxes payable (14,300) --
Increase in deferred rent 6,512 6,444
----------- -----------
Net cash used in operating activities (755,011) (369,092)
----------- -----------
Cash Flows From Investing Activities: - Purchase of property equipment (77,890) (79,680)
----------- -----------
Cash Flows From Financing Activities:
Deferred offering costs (288,486) --
Debt issue costs (217,000) --
Advances from (repayments to) factor, net (184,741) 610,949
Repayment of term note payable (130,000) --
Principal payments under capital lease obligations (6,748) (7,524)
Principal payments of long-term note payable (83,333) (83,333)
Proceeds from issuance of bridge notes payable 1,714,000 --
Proceeds from issuance of common stock 76,000 --
Purchase of treasury stock -- (11,623)
----------- -----------
Net cash provided by financing activities 879,692 508,469
----------- -----------
Net increase in cash 46,791 59,697
Cash at beginning of period 8,010 153,023
----------- -----------
Cash at end of period $ 54,801 $ 212,720
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 137,755 $ 83,599
=========== ===========
Cash paid for income taxes $ 25,540 $ 2,408
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION:
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from the accompanying financial statements. The results of
operations for the three-month period ended March 31, 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.
2. SHARES ISSUED TO STOCKHOLDERS AND RELEASE OF ESCROW SHARES:
At the time of the acquisition of the Cable & Co. product line (the "Cable
product line") from Hongson, Inc. (see Note 1 of the December 31, 1996
consolidated financial statements of Cable & Co. Worldwide, Inc. ( the
"Company")), the stockholders of the Company, including the Company's
management, entered into a stockholders' agreement (the "Stockholders'
Agreement") with respect to their shares of common stock. Pursuant to the
Stockholders' Agreement, the Company's management placed an aggregate of 320,256
shares of common stock in escrow. In January 1996, the Company terminated the
Stockholders' Agreement and released all of the shares held in escrow. In
connection with this, a compensation charge in the amount of $1,345,075 ($4.20
per share) was recorded.
In February 1996, the Company issued 224,761 shares of common stock to
certain existing stockholders. In connection with this issuance, a compensation
charge in the amount of $943,996 ($4.20 per share) was recorded.
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 three-month period ended March
31, 1996:
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
<TABLE>
<CAPTION>
Impact of
As Stated Charges Without Charges
----------- ----------- --------------
<S> <C> <C> <C>
Net Sales $ 3,676,582 $ 3,676,582
Cost of goods sold 2,366,123 2,366,123
----------- -----------
Gross profit 1,310,459 1,310,459
Noncash compensatory charges (2,390,231) $ 2,289,071 (101,160)
Selling expenses (1,017,928) (1,017,928)
General and administrative expenses (473,156) (473,156)
----------- -----------
Loss from operations (2,570,856) 2,289,071 (281,785)
Interest expense 165,850 165,850
Bridge note discount 123,000 123,000
----------- ----------- -----------
Loss before income tax benefit (2,859,706) 2,289,071 (570,635)
Income tax benefit 7,179) (7,179)
----------- ----------- -----------
Net Loss (2,852,527) 2,289,071 (563,456)
Dividends on preferred stock 14,961 14,961
----------- ----------- -----------
Net loss applicable to common stock $(2,867,488) $ 2,289,071 $ (578,417)
=========== =========== ===========
Net loss per common share $ (1.58) $ (.32)
=========== ===========
Weighted average number of common shares outstanding 1,812,206 1,812,206
=========== ===========
</TABLE>
The presentation of the net loss without the noncash compensatory charges
does not intend to represent an alternative to the calculation of the net loss
in accordance with generally accepted accounting principles as an indicator of
operating performance.
This information is presented to assist a reader of the consolidated
financial statements in understanding the effect of these compensatory charges.
These charges represent noncash items, which have no net effect on the
stockholders' equity.
3. INTERNATIONAL CONSULTING AGREEMENT:
In January, 1996, the Company entered into a three-year international
consulting agreement with U.K. Hyde Park Consultants, Ltd. ("Hyde Park"). In
addition, Hyde Park purchased 400,000 shares of common stock and warrants to
purchase up to 450,000 shares of common stock for $40,000, 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).
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
The Company has valued these shares of common stock and warrants to
purchase shares of common stock at $1,725,000. The difference between this
amount and the purchase price of $40,000 is being recognized ratably as a
noncash compensatory charge over the life of the agreement. For the three-month
period ended March 31, 1997 and 1996, the Company recognized $140,417 and
$101,160 of consulting expense, respectively, in the accompanying consolidated
statement of operations.
4. PRIVATE PLACEMENT:
On March 28, 1996, the Company completed a private placement, whereby it
issued 36 units at a price of $50,000 per unit. Each unit consisted of a $49,000
promissory note ( the "Bridge Note"), 5,000 shares of common stock and a warrant
to purchase up to 5,000 shares of common stock, subject to adjustment, as
defined, at an exercise price of $7.20 per share, 120% of the IPO price per
share (see note 5). The Bridge Notes, aggregating $1,764,000 bear interest at an
annual rate of 11% and were due upon the earlier of 12 months from the date of
issuance or the Company's receipt of gross proceeds of at least $4,080,000 from
the sale of its debt and/or equity securities in a public or private financing.
The warrants are exercisable over a 3-year period, commencing 13 months from the
date of issuance. Upon the closing of the Company's IPO, the terms of the
warrants were adjusted to be identical to the terms of the warrants issued in
conjunction with the IPO.
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 discount on the Bridge Notes were fully amortized
on June 19, 1996.
At March 31, 1996, the Company had incurred costs in connection with the
private placement in the amount of $217,000.
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
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 $2,082,000, were used to repay
$1,764,000 in promissory notes and related accrued interest of approximately
$70,000, to redeem 43,337 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 March 31, 1996, the Company had incurred costs in connection with the
IPO in the amount of $288,486.
6. 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.
This non-dividend paying preferred stock Series B has a stated value and
liquidation preference of $1,000 per share with a 4% annual accretion rate and
is convertible into shares of the Company's common stock. Conversion is based
upon a formula utilizing the lower of $2.50 or the average of the closing bid
price of the Company's common stock for the five trading days prior to
conversion. Conversion is at the option of the stockholder commencing January 4,
1997, through October 31, 2000, at which time the shares will be automatically
converted into shares of the Company's common stock.
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<PAGE>
CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(unaudited)
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.
7. SUBSEQUENT EVENT
Effective 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 initial investment, which was paid in April, 1997,
was $200,000.
8. RESTATEMENT OF QUARTERLY RESULTS FOR BARTER SALES
In the original March 31, 1997 10Q, the Company recorded barter
transactions at the wholesale value of the inventory. At December 31, 1997, the
Company restated the value of barter transactions from wholesale value of the
inventory to cost. After restating the value of the barter transactions, the
financial position and results of operations of the Company have been adjusted.
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<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, imports and markets on a wholesale basis a broad range
of footwear bearing the Cable & Co. trademark. The Company markets its products
to approximately 1,500 department and specialty store locations in the United
States. In addition, the Company markets a line of casual men's footwear under
the name "Bacco Bucci." The Company has licensed the right to use the Bacco
Bucci name from D&D Design, an entity controlled by Alberto Salvucci, a
principal stockholder of the Company. In January 1997 Mr. Salvucci was elected
to the board of directors of the Company and named the Chairman of the Board.
The Company plans to increase revenues by increasing sales to existing
accounts, establishing new accounts, developing high quality shoes with styling
and design detail to sell at competitive prices and expanding the Company's
marketing programs and to globalize the brands Cable & Co. and Bacco Bucci. The
Company intends to increase its marketing to include direct mail but does not
intend to do so prior to fiscal 1998. The Company also intends to explore
opportunities to license rights to related products such as bags, belts, ties,
wallets, accessories and other small leather goods. In addition, the Company may
seek to grant license rights to the Cable & Co. trademark. However, there can be
no assurance that the Company will be able to achieve such objectives.
Net Sales
The Company's net sales for the three-month period ended March 31, 1997
were $4,542,653 as compared to net sales of $3,676,582 for the three-month
period ended March 31, 1996, an increase of 23.6%. The Company believes that the
increase in net sales is primarily attributable to the increase in net sales of
mens footwear bearing the Cable & Co. trademark and Bacco Bucci trademark. Net
sales of the mens footwear bearing the Cable & Co. trademark for the three-month
period ended March 31, 1997 was $3,319,652 as compared to net sales of
$2,671,264 for the three-month period ended March 31, 1996, an increase of
24.3%. Net Sales of the mens footwear bearing the Bacco Bucci trademark for the
three-month period ended
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
March 31, 1997 was $1,223,001 as compared to net sales of $747,422 for the
three-month period ended March 31, 1996, an increase of 63.6%. Additionally, for
the three-month period ended March 31, 1996 net sales of womens footwear bearing
the Cable and Co trademark was $257,896. During the year ended December 31,
1996, the Company temporarily suspended the production and marketing of the
women's footwear bearing the Cable & Co. trademark. The Company does not plan to
reintroduce the women's footwear bearing the Cable & Co. trademark prior to
fiscal 1998 in order to continue focusing the Company's resources on the
development of the Bacco Bucci product line. As a result, for the three-month
period ended March 31, 1997 there were no sales of the women's footwear bearing
the Cable & Co. trademark.
Cost of Goods Sold
The Company's cost of goods sold for the three-month period ended March 31,
1997 was $2,935,472 as compared to $2,366,123 for the three-month period ended
March 31, 1996, an increase of 24.1%. The Company believes that such an increase
is primarily attributable to the increase in net sales for the three-month
period ended March 31, 1997. The Company's gross profit as a percentage of net
sales was 35.4% for the three-month period ended March 31, 1997 as compared to
35.6% for the three-month period ended March 31, 1996. The Company believes that
such a decrease is primarily attributable to an increase in the quantity and
size of markdown sales. Markdown sales for the three-month period ended March
31, 1997, was 10.4% of net sales as compared to 7.1% of net sales for the
three-month period ended March 31, 1996, yielding a gross margin of 1.9% and
(9.6%) respectively. In addition the Company also believes the consistent gross
profit percentage 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 and lower manufacturing costs.
Noncash Compensatory Charges
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 January 1996 pursuant to an international consulting
agreement.
For the three-month period ended March 31, 1996 the Company incurred
noncash compensatory charges of $2,390,231. Of such amount (i) $101,160 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 President and Chief
Executive Officer, Alan Kandall, the Company's Chief Operating Officer,
Executive Vice President, Treasurer and Chief Financial Officer, and Alberto
Salvucci, the Chairman of the Board, which shares were released from escrow
pursuant to the Stockholders Agreement, and (iii) $943,996 is attributable to an
aggregate of 224,761 shares of Common Stock issued to Mr. Albahari, Mr. Kandall
and Mr. Salvucci.
- 12 -
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Expenses
The Company's selling and general and administrative expenses for the
three-month period ended March 31, 1997 were $1,727,070, 38.0% as a percentage
of net sales, as compared to selling and general and administrative expenses for
the three-month period ended March 31, 1996 of $1,491,084, 40.6% as a percentage
of net sales. The Company believes that the increase in selling and general and
administrative expenses is primarily attributable to increases in expenses
related to the increase in net sales, such as commission expense, royalties,
salaries and travel and entertainment. The decrease in selling and general and
administrative expenses as a percentage of net sales is primarily attributable
to decreases in shipping expenses and factoring costs. The decrease in shipping
expenses is primarily attributable to the elimination of approximately $43,000,
incurred during three-month period ended March 31, 1996, which resulted from the
Company terminating its warehouse lease and moving its inventory. The decrease
in factoring costs is due the fact that the Companys factoring rates were
decreased by approximately .5% of invoices factored.
Interest Expense and Bridge Note Discount
The Company's interest expense for the three-month period ended March 31,
1997 was $81,726 as compared to interest expense for the three-month period
ended March 31, 1996 of $165,580, a decrease of 50.6%. The Company believes that
the decrease is primarily attributable to a decrease in borrowing for the
three-month period ended March 31, 1997. During the three month period ended
March 31, 1996, the Company incurred interest charges attributable to the
October 1995 purchase of 266,880 shares of Common Stock and 21,660 shares of
Preferred Stock from a former shareholder. Additionally, for the three month
period ended March 31, 1996, the Company incurred interest expense on the Bridge
Notes payable in the amount of $30,695.
For the three-month period ended March 31, 1996, the Company incurred a
charge of $123,000 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.
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
Companys securities and an off shore financing. As of March 31, 1997, the
Company had working capital of $503,812 and a debt to equity ratio of 1.64 to 1.
The Company's obligations to Heller include a collateral installment note
in the original principal amount of $1,000,000 of which $416,667 was outstanding
as of March 31, 1997. The collateral installment note is payable in 36 monthly
installments of $27,777 and bears interest at 3% above the prime rate of Chase
Manhattan Bank, N.A. ("Chase"). In addition, the Company may borrow from Heller
the lesser of 50% of the Company's eligible inventory or $2,000,000 (the
"Inventory Loan"). The Inventory Loan bears interest at 1.5% above Chase's prime
rate. The
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Concluded)
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, 1997, $616,643 of
the $2,971,453 (20.8%) of factored accounts receivable, were factored with
recourse. Heller is entitled to a fee equal to 1.0% of all accounts receivable
purchased. Moreover, advances by Heller bear interest at rates equal to Chase's
prime rate plus 1.0% to 1.5%. Under the credit facility, all of the Company's
obligations to Heller may not exceed $6,000,000.
The Company has a letter of credit line with the factor up to maximum of
$750,000. At March 31, 1997, the Company has outstanding letters of credit in
the amount of $542,000, $400,000 of which is serving as collateral for foreign
currency contracts and $142,000 is serving as collateral for lease security
deposits.
In March, 1996, the Company consummated the Bridge Financing of 36 units
(the "Units") at a purchase price of $50,000 per Unit, $1,800,000 in the
aggregate. Each Unit consisted of the Company's 11% Bridge Note in the original
principal amount of $49,000, 5,000 shares of Common Stock and 5,000 common share
purchase warrants (the "Bridge Warrants"). The Bridge Notes were repaid, with
accrued interest, in the amount of $1,833,585 on June 19, 1996 with the net
proceeds from the sale of 1,119,500 shares of common stock and 1,299,500 common
stock purchase warrants (the "Initial Public Offering"). The gross proceeds to
the Company from the Initial Public Offering were $6,846,950. The proceeds were
also used to redeem 43,327 shares of the Company's Series A preferred stock at a
redemption price of $580,396, inclusive of accrued dividends. In conjunction
with the redemption of the Series A preferred stock, 462,531 shares of Common
Stock have been issued to the preferred shareholders.
In November 1996, the Company completed an offshore financing (the
"Offshore Financing") whereby the Company issued 3,653 shares of the Company's
Series B preferred stock for a price of $750 per share. The gross proceeds
received in such offering was $2,739,750.
On April 3, 1997, the Company expended approximately $200,000 in connection
with the commencement of operations of its manufacturing facility in
Montegranaro, Italy.
The Company anticipates acquiring the balance of the worldwide rights,
except for the United Kingdom and Asia, to the "Cable & Co." trademark from
Cable & Co. S.R.L., during 1997. It is anticipated that the cash portion of the
purchase price will be approximately $1,250,000, of which $250,000 will be paid
during 1997. The Company also plans to purchase the rights to the Bacco Bucci
trademark for a purchase price of $3,000,000 of which $200,000 will be paid
during 1997. The Company anticipates that the cash portion of the purchase price
will be offset by the savings from projected royalty payments, however there is
not yet a definitive agreement and there can be no assurances that the Company
will acquire such rights.
The Company believes that net cash provided by operations and available
borrowings under the Company's credit facility, will be sufficient to meet its
anticipated operating cash requirements for at least the next 12 months.
However, additional funds may be required for additional expansion.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Please see Exhibit Index on page 17.
(b) Reports on Form 8-K
None.
- 15 -
<PAGE>
EXHIBIT INDEX
Number Description of Exhibit
- ------ ----------------------
1.1 Form of Underwriting Agreement between the Company and State Street
Capital Markets, Corp. ( the "Underwriter") *
2.1 Asset Purchase Agreement dated January 16, 1995 between Hongson, Inc. as
seller and Cable & Co. Worldwide, Inc. as buyer. *
3.1 Certificate of Incorporation of the Company, as amended. *
3.2 By-Laws of the Company. *
4.1 Form of Warrant Agreement between the Company and American Stock Transfer
& Trust, as warrant agent. *
4.2 Specimen Certificate of the Company's Common Stock. *
4.3 1996 Stock Option Plan. *
4.4 Specimen Certificate of the Company's Warrant. *
4.5 Form of Underwriter's Purchase Option. *
4.6 Form of Bridge Warrant. *
4.7 Form of Bridge Note. *
10.1 Employment Agreement dated as of January 1, 1995 between the Company and
David Albahari. *
10.2 Employment Agreement dated as of January 1, 1995 between the Company and
Alan Kandall. *
10.3 Agreements between the Company and Heller Financial, Inc. *
10.4 Intentionally omitted.
10.5 Agreement dated as of the 26th day of January 1996 between U.K. Hyde Park
Consultants, Ltd. and the Company. *
10.6 Lease dated July 28, 1995 between Raritan Plaza I Associates, L.P., as
landlord, and Cable & Company Enterprises, Ltd., as tenant. *
10.7 Lease dated May 16, 1995 between 724 Fifth Avenue Realty Co., as
landlord, and Cable & Company Enterprises, Ltd., as tenant. *
10.8 Financial Consulting Agreement between the Underwriter and the Company.*
10.9 Agreements between Gruntal & Co., Inc. and the Company. *
10.10 Agreement dated May 15, 1996 among D&D Design & Details, LTD, Pio Alberto
Salvucci and the Company.*
21.1 List of Subsidiaries.
27.1 Financial Data Schedule.
99.1 Cable & Co. Trademark Registration from the United States Patent and
Trademark Office. *
* Previously filed with the Company's Registration Statement, Registration
No. 333-3000
- 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: April 18, 1998
/s/ Alan Kandall
-------------------------------------------------
Alan Kandall
Executive Vice-President; Chief Financial Officer
- 17 -
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