<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly period ended March 31, 1998
| | Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission File Number 0-23111
Cable Link, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter
Ohio 31-1239657
- ------------------------------- -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
280 Cozzins Street, Columbus, Ohio
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(Address of Principal Executive Offices)
(614) 221-3131
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(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,675,386 Common shares,
without par value as of April 30, 1998
Transitional Small Business Disclosure Format (check one):
Yes X No
----- -----
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CABLE LINK, INC.
COMPARATIVE STATEMENTS OF INCOME (UNAUDITED)
3 Months Ending March 31
1998 1997
Net Sales $2,712,166 $2,211,517
Cost of Goods Sold 1,828,937 1,471,758
Operating Expenses 678,510 596,747
---------- ----------
Total Expenses 2,507,447 2,068,505
Income From Operations 204,719 143,012
---------- ----------
Interest Expense (8,846) (18,146)
Other Income 327 1,186
Income Before Taxes 196,200 126,052
Provision For Taxes 34,251 0
---------- ----------
Net Income $ 161,949 $ 126,052
========== ==========
Basic Earnings Per Share $ 0.10 $ 0.08
Weighted Average Shares Outstanding 1,673,889 1,525,701
Diluted Earnings Per Share $ 0.08 $ 0.06
Weighted Average Shares Outstanding 2,008,605 1,952,762
Note: Net earnings and number of Shares are restated to reflect a three for two
stock split effective January 21, 1997 and an 11 for 10 stock dividend effective
August 1, 1997.
<PAGE> 3
CABLE LINK, INC.
COMPARATIVE BALANCE SHEETS
1998 1997
March 31 December 31
(Unaudited) (Audited)
ASSETS:
Current Assets
Cash $ 84,665 $ 204,990
Accounts Receivable 1,529,573 1,135,607
Inventories 1,150,391 1,332,619
Prepaid Expenses 177,072 195,574
Deferred Income Tax 36,500 36,500
---------- ----------
Total Current Assets $2,978,201 $2,905,290
Property and Equipment
Cost 1,477,645 1,466,764
Accumulated Depreciation (823,270) (774,125)
---------- ----------
Total Property and Equipment 654,375 692,639
Total Assets $3,632,576 $3,597,929
========== ==========
LIABILITIES:
Current Liabilities
Accounts Payable, Trade $ 672,390 $ 765,269
Current Portion Notes Payable 54,913 82,354
Bank Revolving Credit Line 516,197 290,957
Income taxes payable 80,077 138,742
Accrued Expenses 153,641 329,998
---------- ----------
Total Current Liabilities $1,477,218 $1,607,320
Long Term Debt 53,412 53,412
Deferred Income Taxes 48,000 48,000
---------- ----------
Total Liabilities $1,578,630 $1,708,732
STOCKHOLDER'S EQUITY:
Current Stockholder's Equity
Common Stock $1,588,643 $1,585,842
Retained Earnings 465,303 303,355
---------- ----------
Total Stockholder's Equity $2,053,946 $1,889,197
Total Liabilities and Equity $3,632,576 $3,597,929
========== ==========
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<TABLE>
CABLE LINK, INC.
CASH FLOW STATEMENT
<CAPTION>
3 Months Ending March 31
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 161,949 $ 126,052
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 51,145 42,835
(Increase) decrease in operating assets:
Accounts receivable (393,966) (494,872)
Inventories 182,228 193,901
Prepaid expenses 16,502 (29,184)
Increase (decrease) in operating liabilities:
Accounts payable (151,544) (113,432)
Accrued expenses (176,357) (32,963)
--------- ---------
Net cash used in operating activities (310,043) (307,663)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (10,881) (39,340)
--------- ---------
Net cash used in investing activities (10,881) (39,340)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 2,800 200,000
Net increase in line of credit 225,240 131,115
Principal payments on debt (27,441) (25,885)
--------- ---------
Net cash provided by financing activities 200,599 305,230
--------- ---------
Net decrease in cash (120,325) (41,773)
Cash - beginning of period 204,990 115,796
--------- ---------
Cash - end of period $ 84,665 $ 74,023
========= =========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 8,846 $ 18,146
Cash paid for income taxes during the period $ 129,000 $ 0
</TABLE>
<PAGE> 5
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
GENERAL
The interim financial statements have been prepared by Cable Link, Inc. (the
Registrant) without an audit and, in the opinion of the management, reflect all
adjustments of a normal recurring nature necessary for a fair statement of the
financial position of the Registrant as of March 31, 1998; the results of
operations for the three months ending March 31, 1998 and 1997; and cash flows
for the three months ending March 31, 1998. Interim results are not necessarily
indicative of results for a full year.
The balance sheet as of December 31, 1997 has been derived from the financial
statements that have been audited by the Registrant's independent public
accountants. The financial statements and notes are condensed as permitted by
Form 10-QSB and do not contain certain information included in the annual
financial statements and notes of the Registrant. The financial statements and
notes included herein should be read in conjunction with the financial
statements and notes included in the Registrant's annual report.
COMMON STOCK
On January 8, 1997, the Registrant entered into an agreement with another entity
(the Buyer) to purchase 165,000 shares of common stock of the Registrant and
165,000 warrants to purchase an additional 165,000 shares of common stock for
$200,000. The warrants were separated into four groups of 25,000 shares each
with exercise prices of $2.25, $2.75, $3.25 and $3.75. In July 1997, 82,500
warrants were exercised at an average price of $1.51 per share. The exercise
periods of the remaining warrants expired.
The Registrant declared a three for two stock split on January 21, 1997 and an
11 for 10 stock dividend on August 1, 1997. All per share amounts have been
adjusted to reflect the split and dividend.
On September 19, 1997, the Registrant filed a Form 10-SB to register its common
stock under Section 12(g) of The Securities Act of 1934 and amendments thereto
on November 17, 1997 and December 23, 1997. The Form 10-SB became effective
November 18, 1997.
NEW ACCOUNTING PRONOUNCEMENTS
In November 1997, the Registrant adopted Statement of Financial Accounting
Standard (SFAS) No. 128 "Earnings per Share." SFAS No. 128 establishes standards
for computing and presenting earnings per share and applies to entities with
publicly held common stock. The Registrant has restated prior periods' earnings
per share as required.
The Registrant will adopt Statement of Financial Accounting Standard (SFAS) No.
130 "Reporting Comprehensive Income" by reporting and displaying comprehensive
income and its components within its financial statements. Under the current
operating structure, the Registrant does not meet the conditions for adoption of
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
The Registrant will reevaluate these criteria if the anticipated acquisition is
consummated. See "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources."
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Result of Operations
NET SALES
Net sales for the first quarter ending March 31, 1998 were $2,712,166 compared
to $2,211,517 for the first quarter ending March 31, 1997. This represents an
increase of 23% or $500,649 over the previous year. The increase in sales is
primarily due to an expanded customer base and additional sales of new
equipment.
COST OF GOODS SOLD
The cost of goods sold increased to 67.4% of sales for the first quarter ending
March 31, 1998 from 66.5% for the same time in 1997. The increase is due to
increased sales of new equipment which resulted in increased product costs. The
production labor costs declined in the first quarter as a percent of sales to
13% from 16.7% in comparison to last year's first quarter. This decrease in
labor cost is primarily the result of a reduction in labor force as well as
increased efficiencies and new procedures that have led to improved productivity
of employees.
OPERATING EXPENSES
Operating expenses decreased to 25% of sales in the first quarter 1998 from 27%
for the first quarter 1997. The decrease was due to a reduction in
administrative personnel. Job procedures were implemented which increased the
efficiencies and reduced costs.
INCOME FROM OPERATIONS
Income from operations increased to $204,719 or 7.5% of sales for the first
quarter ending March 31, 1998 compared to $143,012 or 6.5% of sales for the
first quarter in 1997 due to the increased sales and decreased operating costs.
Through the first three months in 1998 the Company has expensed $34,251 for
federal, state and local taxes. No taxes were paid in the first quarter ending
March 31, 1997 because the Company had net operating loss carry forward that was
generated from prior years. As a result of the 23% increase in sales and
decreased operating costs, the Company has generated earnings of $161,949 or
$.08 diluted earnings per share for the first quarter in 1998 versus $126,053 or
$.06 diluted earnings per share for the first quarter in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations primarily through internally generated funds
and its bank line of credit. Bank borrowings decreased the first three months in
1998 compared to the same time in 1997, which resulted in lower interest
expenses of $9,000. As a result of the increase in sales, accounts receivables
increased $393,966 the first quarter in 1998 over the December 31, 1997 balance.
Inventory decreased $182,228 in the first three months over the December 31,
1997 balance. Accounts payable decreased $151,544. Accrued expenses have
decreased $176,357 due to the payment of income taxes and year-end bonuses from
1997.
The Company believes that its available financial resources are adequate to
meets its foreseeable working capital, debt service and capital expenditure
requirements.
The Company has entered into a letter of intent to acquire substantially all of
the outstanding capital stock of PC and Parts, Inc. dba Auro Computer Systems,
Westerville, Ohio. Auro Computer Systems is engaged in the business of providing
computer hardware and services related thereto, as well as designing and
implementing wide area and local area networks. The parties are currently
negotiating the terms of such transaction and definitive agreements have not yet
been executed. No assurance can be given that such transaction will be
consummated. It is the intention of the Company to fund the acquisition with
bank financing; however, no assurance can be given that such financing will be
obtained on terms acceptable to the Company or at all.
<PAGE> 7
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
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.
(2) Charter and Bylaws. The Articles of Incorporation and Code
of Regulations of the Issuer as presently in effect.
(3) Instruments Defining the Rights of Security Holders.
(a) See Exhibit 2.1 - Articles of Incorporation;
Articles IV, V and VI. See Exhibit 2.2 - Code
of Regulations; Articles I, IV and VII
(b) The registrant agrees to provide to the
Commission upon request instruments defining the rights of holders of long-term
debt of the registrant and all of its subsidiaries for which consolidated
financial statements are required to be filed.
(5) Voting Trust Agreement. None.
(6) Material Contracts.
See Exhibit 6.1 - 1995 Stock Option Plan dated October 17,
1995.
See Exhibit 6.2. - Warrant Agreement for Axxess International
Group, Inc. dated January 8, 1997.
See Exhibit 6.3. Non-Competition and Consulting Agreement
dated October 18, 1994.
See Exhibit 6.4. First Amendment Agreement to Non-Competition
and Consulting Agreement dated June 1, 1995.
See Exhibit 6.5. Second Amendment Agreement to Non-Competition
and Consulting Agreement dated November 16, 1995.
See Exhibit 6.6. Consulting Agreement dated October 1, 1996.
<PAGE> 8
See Exhibit 6.7. Eric S. Newman Independent Consulting Letter
Agreement dated August 1, 1994.
See Exhibit 6.8. Loan and Security Agreement dated November
27, 1996.
See Exhibit 6.9. Promissory Note dated April 30, 1997.
See Exhibit 6.10. Lease dated November 4, 1992 and Lease
Modification Agreement dated October 26, 1995 for Suite 201, 280 Cozzins,
Columbus, Ohio.
(7) Material Foreign Patents. None.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the period covered.
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CABLE LINK, INC.
Dated May 11, 1997 By /s/ Bob Binsky
----------------- ----------------------------------
Bob Binsky, Chairman of the Board
(principal executive officer)
By /s/ Zaida Wahlberg
----------------------------------
Zaida Wahlberg, Treasurer
(principal accounting officer)
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<TABLE>
EXHIBIT INDEX
<CAPTION>
PAGE IN
SEQUENTIALLY
NUMBERED
EXHIBIT COPY
<S> <C> <C>
2.1. Articles of Incorporation of Cable Link, Inc., as amended (incorporated
by reference to Exhibit 2.1 of 10-SB, as amended. filed December 23,
1997 (the "Form 10-SB"); Commission File No. 0-23111). *
2.2. Code of Regulations of Cable Link, Inc., as amended (incorporated by
reference to Exhibit 2.2 to the Form 10-SB). *
3.1. See Articles IV, V and VI of the Articles of Incorporation of the
Registrant (see Exhibit 3.1).
3.2. See Articles I, IV and VII of the Code of Regulations of the
Registrant (see Exhibit 3.2).
6.1. 1995 Stock Option Plan dated October 17, 1995 (incorporated by reference
to Exhibit 6.1 to the Form 10-SB). *
6.2. Warrant Agreement for Axxess International Group, Inc. dated January 8,
1997 (incorporated by reference to Exhibit 6.2 to the Form 10-SB). *
6.3. Non-Competition and Consulting Agreement dated October 18, 1994
(incorporated by reference to Exhibit 6.3 to the Form 10-SB). *
6.4. First Amendment Agreement to Non-Competition and Consulting Agreement
dated June 1, 1995 (incorporated by reference to Exhibit 6.4 to the Form
10-SB). *
6.5. Second Amendment Agreement to Non-Competition and Consulting Agreement
dated November 16, 1995 (incorporated by reference to Exhibit 6.5 to the
Form 10-SB). *
6.6. Consulting Agreement dated October 1, 1996 (incorporated by reference to
Exhibit 6.6 to the Form 10-SB). *
6.7. Eric S. Newman Independent Consulting Letter Agreement dated August 1,
1994 (incorporated by reference to Exhibit 6.7 to the Form 10-SB). *
6.8. Loan and Security Agreement dated November 27, 1996 (incorporated by
reference to Exhibit 6.8 to the Form 10-SB). *
6.9. Promissory Note dated April 30, 1997 (incorporated by reference to
Exhibit 6.9 to the Form 10-SB). *
6.10. Lease dated November 4, 1992 and Lease Modification Agreement dated
October 26, 1995 for Suite 201, 280 Cozzins, Columbus, Ohio
(incorporated by reference to Exhibit 6.10 to the Form 10-SB/A of
Registrant, Registration No. 0-23111)). *
27. Financial Data Schedule (submitted electronically for SEC purposes only)
*Incorporated by reference
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Registrant's unaudited financial statements for the three months ended March 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 84,665
<SECURITIES> 0
<RECEIVABLES> 1,529,573
<ALLOWANCES> 0
<INVENTORY> 1,150,391
<CURRENT-ASSETS> 2,978,201
<PP&E> 1,477,645
<DEPRECIATION> 823,270
<TOTAL-ASSETS> 3,632,576
<CURRENT-LIABILITIES> 1,477,218
<BONDS> 0
0
0
<COMMON> 1,588,643
<OTHER-SE> 465,303
<TOTAL-LIABILITY-AND-EQUITY> 3,632,576
<SALES> 2,712,166
<TOTAL-REVENUES> 2,712,493
<CGS> 1,828,937
<TOTAL-COSTS> 2,507,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,846
<INCOME-PRETAX> 196,200
<INCOME-TAX> 34,251
<INCOME-CONTINUING> 161,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161,949
<EPS-PRIMARY> .10
<EPS-DILUTED> .08
</TABLE>
