<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/A
AMENDMENT NO. 4
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
CABLE LINK, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Ohio 31-1239657
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
280 Cozzins Street, Columbus, Ohio 43215
- ---------------------------------------- ---------------------------------
(Address of Principal Executive Offices) (Zip Code)
(614) 221-3131
- --------------------------------------------------------------------------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
(Title of Class)
This amendment is being filed to amend Part II, Item 1, and Part
FS/Financial Statements.
<PAGE> 2
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The principal market where the Registrant's equity is traded is the
Nasdaq Bulletin Board. The range of high and low bids for the Registrant's
equity for each of the past ten quarters is as follows:
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
<S> <C> <C> <C>
1997 2ND 3.16 1.74
1ST 4.63 1.37
1996 4TH 1.15 .33
3RD 2.13 .63
2ND 2.88 1.32
1ST 2.29 .33
1995 4TH 1.11 .26
3RD 1.00 .19
2ND 1.54 .30
1ST 1.85 1.11
</TABLE>
The above quotations reflect inter-dealer prices, without retail
mark-up, mark down or commission and may not represent actual transactions.
There are approximately 245 holders of the common shares of the Registrant. All
amounts shown herein have been adjusted for prior stock splits and stock
dividends. All amounts shown herein have been adjusted for prior stock splits
and stock dividends.
DIVIDEND POLICY
The Registrant has not declared or paid any cash dividends on its common shares
since its inception, and the Board of Directors presently intends to retain all
earnings for use in the business for the foreseeable future.
2
<PAGE> 3
PART F/S
FINANCIAL STATEMENTS
In the opinion of management, all adjustments necessary for a fair
statement of results for the income statements for the period January 1, 1997
through June 30, 1997 have been included therein.
3
<PAGE> 4
CABLE LINK, INC.
FINANCIAL STATEMENTS
* * * * * *
DECEMBER 31, 1996 AND 1995
AND SIX MONTHS
ENDED JUNE 30, 1997
4
<PAGE> 5
CABLE LINK, INC.
COMPARATIVE STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDING JUNE 30 6 MONTHS ENDING JUNE 30
-------------------------------- ---------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $2,642,018 $2,223,413 $4,853,535 $4,942,623
Cost of Goods Sold 1,762,148 1,388,990 3,233,906 3,091,980
Operating Expenses 674,515 752,728 1,271,262 1,518,366
TOTAL EXPENSES $2,436,663 $2,141,718 $4,505,168 $4,610,346
INCOME FROM OPERATIONS $ 205,355 $ 81,695 $ 348,367 $ 332,277
Interest Expense (17,247) (23,502) (35,393) (42,062)
Other Income (Expenses) 873 550 2,059 15,341
INCOME (LOSS) BEFORE TAXES $ 188,981 $ 58,743 $ 315,033 $ 305,556
Provision For Taxes 0 (625) 0 44,900
NET INCOME (LOSS) $ 188,981 $ 59,368 $ 315,033 $ 260,656
SHARES OUTSTANDING 1,549,802 1,376,635 1,542,532 1,363,987
NET EARNINGS (LOSS) PER SHARE $ 0.12 $ 0.04 $ 0.20 $ 0.19
</TABLE>
NOTE: NET EARNINGS AND NUMBER OF SHARES ARE RESTATED TO REFLECT A 3 FOR 2
STOCK SPLIT EFFECTIVE JANUARY 21, 1997 AND A 10% STOCK DIVIDEND EFFECTIVE
AUGUST 1, 1997. THE SHARES ALSO REFLECT THE PURCHASE OF 165,000
(POST JANUARY SPLIT) SHARES BY AXXESS INTERNATIONAL GROUP.
5
<PAGE> 6
CABLE LINK, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
1997 1996
JUNE 30 June 30
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 41,316 $ --
Accounts Receivable 1,165,916 1,329,428
Inventories 987,918 1,180,036
Prepaid Expenses 154,336 120,416
------------- -------------
TOTAL CURRENT ASSETS 2,349,486 2,629,880
------------- -------------
Property & Equipment
Cost 1,396,449 1,200,265
Accumulated Depreciation (687,291) (514,116)
------------- -------------
Net Property & Equipment 709,158 686,149
------------- -------------
TOTAL ASSETS $ 3,058,644 $ 3,316,029
============= =============
LIABILITIES
Current Liabilities
Accounts Payable, Trade $1,228,658 $ 1,070,376
Current Portion Notes Payable 49,325 50,358
Bank Revolving Credit Line 326,592 711,452
Accrued Expenses 186,949 366,756
------------- -------------
TOTAL CURRENT LIABILITIES 1,791,524 2,198,942
LONG TERM DEBT 106,762 208,820
------------- -------------
TOTAL LIABILITIES 1,898,286 2,407,762
------------- -------------
STOCKHOLDER'S EQUITY
Current Stockholder's Equity
Common Stock 1,409,298 1,229,798
Deficit (248,940) (321,531)
------------- -------------
TOTAL STOCKHOLDER'S EQUITY 1,160,358 908,267
------------- -------------
TOTAL LIABILITIES & EQUITY $3,058,644 $ 3,316,029
============= =============
</TABLE>
6
<PAGE> 7
CABLE LINK, INC.
COMPARATIVE CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 315,033 $ 260,656
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 85,371 53,906
(Increase) decrease in operating assets:
Accounts receivable (429,353) (287,027)
Inventories 188,391 (30,800)
Prepaid expenses 75,303 50,392
Increase (decrease) in operating liabilities:
Accounts payable (84,686) (78,043)
Accrued expenses 1,846 (40,263)
---------- ----------
Net cash provided by (used in) operating activities 151,905 (71,179)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (73,009) (198,653)
---------- ----------
Net cash used in investing activities (73,009) (198,653)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 179,500 61,600
Repayments on line of credit, net (280,498) (38,530)
Issuance of long-term debt - 106,420
Principal payments on debt (52,378) (9,441)
---------- ----------
Net cash provided by (used in)
financing activities (153,376) 120,049
---------- ----------
Net decrease in cash (74,480) (149,783)
Cash - beginning of period 115,796 149,783
---------- ----------
Cash - end of period $ 41,316 $ -
========== ==========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 35,393 $ 42,062
</TABLE>
7
<PAGE> 8
C O N T E N T S
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT................................................................................. 9
BALANCE SHEETS............................................................................................... 10
STATEMENTS OF INCOME......................................................................................... 12
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY................................................................ 13
STATEMENTS OF CASH FLOWS..................................................................................... 14
NOTES TO FINANCIAL STATEMENTS................................................................................ 16
</TABLE>
8
<PAGE> 9
To the Board of Directors and Stockholders
Cable Link, Inc.
Columbus, Ohio
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Cable Link, Inc. as
of December 31, 1996, and the related statements of income, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cable Link, Inc. as
of December 31, 1996 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Groner, Boyle & Quillin, LLP
Columbus, Ohio
February 5, 1997
9
<PAGE> 10
CABLE LINK, INC.
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1995
1996 (Unaudited)
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 115,796 $ 149,783
Accounts receivable, net 736,563 1,042,401
Income taxes receivable 102,422 68,904
Inventories 1,176,309 1,149,236
Prepaid consulting 45,755 16,955
Prepaid and other assets 41,814 44,316
------------- -------------
Total current assets 2,218,659 2,471,595
------------- -------------
PROPERTY AND EQUIPMENT, at cost
Furniture and fixtures 510,587 401,601
Equipment 622,988 432,064
Leasehold improvements 175,425 167,947
Construction in progress 14,440 -
------------- -------------
1,323,440 1,001,612
Less accumulated depreciation (604,311) (462,601)
------------- -------------
Net property and equipment 719,129 539,011
------------- -------------
COVENANT NOT TO COMPETE AND
OTHER ASSETS, net 42,040 43,025
------------- -------------
TOTAL ASSETS $ 2,979,828 $ 3,053,631
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 11
CABLE LINK, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995
1996 (Unaudited)
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term obligations $ 101,703 $ 59,799
Revolving credit line 607,090 749,982
Accounts payable 1,313,344 1,148,419
Accrued expenses
Payroll and related taxes 149,060 231,228
Pension -- 81,637
Other 36,043 94,154
Total current liabilities 2,207,240 2,365,219
----------- -----------
LONG-TERM OBLIGATIONS 106,762 102,400
----------- -----------
Total liabilities 2,314,002 2,467,619
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, no par value 1,093,662 1,032,062
Additional paid-in capital 136,136 136,136
Deficit (563,972) (582,186)
----------- -----------
Total stockholders' equity 665,826 586,012
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,979,828 $ 3,053,631
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 12
CABLE LINK, INC.
STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1995
1996 (Unaudited)
----------- -------------
<S> <C> <C>
Sales $ 8,248,814 $ 7,650,356
Cost of sales 5,612,731 5,106,947
----------- -----------
Gross profit 2,636,083 2,543,409
Selling, general and administrative expenses 2,649,568 2,899,941
----------- -----------
Income (loss) from operations (13,485) (356,532)
----------- -----------
Other income (expense)
Interest expense (84,112) (74,228)
Gain (loss) on sale of assets 3,007 (2,506)
Reconciliation with vendors 93,518 18,772
Other 1,658 1,412
----------- -----------
Total other income (expense) 14,071 6,450
----------- -----------
Income (loss) before income taxes 586 (360,082)
Provision (benefit) for income taxes (17,628) (68,904)
----------- -----------
Net income (loss) $ 18,214 $ (291,178)
----------- -----------
Net income (loss) per share $ 0.01 $ (0.22)
=========== ===========
Shares used in per share computations 1,414,545 1,349,977
</TABLE>
NOTE: Net earnings and numbers of shares are restated to reflect a 3 for 2
stock split effective January 21, 1997 and a 10% stock dividend effective
August 1, 1997.
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 13
CABLE LINK, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Shares of Issued Additional
And Outstanding Common Paid-In
Common Stock Stock Capital Deficit Total
---------------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31,
1994 (Unaudited) 1,349,977 $1,032,062 $136,136 $(291,008) $ 877,190
Net loss - - - (291,178) (291,178)
--------- ---------- -------- ---------- ---------
BALANCE - DECEMBER 31,
1995 (Unaudited) 1,349,977 1,032,062 136,136 (582,186) 586,012
Exercise of options and warrants 34,848 61,600 - - 61,600
Net income - - - 18,214 18,214
--------- ---------- -------- ---------- ---------
BALANCE - DECEMBER 31,
1996 1,384,825 $1,093,662 $136,136 $(563,972) $ 665,826
--------- ---------- -------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 14
CABLE LINK, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1995
1996 (Unaudited)
-------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 18,214 $(291,178)
-------- ---------
Adjustments to reconcile net income(loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 156,717 95,338
(Gain) loss on sale of assets (3,007) 12,506
(Increase) decrease in operating assets:
Accounts receivable 305,838 286,341
Income tax receivable (33,518) (68,904)
Inventories (27,073) (347,424)
Prepaid and other assets (30,097) (8,520)
Increase (decrease) in operating liabilities:
Accounts payable 164,925 159,627
Accrued expenses (221,916) 88,609
--------- ---------
Total adjustments 311,869 217,573
--------- ---------
Net cash provided by (used in) operating activities 330,083 (73,605)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (213,086) (101,544)
Proceeds from sale of assets 10,575 2,500
--------- ---------
Net cash used in investing activities (202,511) ( 99,044)
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 15
CABLE LINK, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1995
1996 (Unaudited)
---------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and exercise of
stock options and warrants 61,600 -
Issuance of debt - 548,982
Repayments on line of credit, net (142,892) -
Payments to former stockholder (8,002) (124,496)
Principal payments on debt (20,163) (116,396)
Payments on capital lease obligations (52,102) (12,707)
---------- ----------
Net cash provided by (used in) financing activities (161,559) 295,383
---------- ----------
Net increase (decrease) in cash (33,987) 122,734
Cash - beginning of year 149,783 27,049
---------- ----------
Cash - end of year $ 115,796 $ 149,783
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 88,097 $ 71,215
Income taxes 10,000 14,816
SUPPLEMENTAL DISCLOSURE OF NONCASH PROPERTY
AND EQUIPMENT ACTIVITIES:
Capital lease obligations incurred for equipment $ 41,258 $ 148,793
Purchase of property and equipment with seller-financing 85,275 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
NATURE AND SCOPE OF BUSINESS
The Company sells new and refurbished cable TV equipment in addition to
repairing equipment for cable companies within the United States and various
international markets. The Company operates both its administrative and
manufacturing operations from a single, leased facility in Columbus, Ohio.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USES OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from these estimates.
ACCOUNTS RECEIVABLE
The Company utilizes the allowance method of accounting for accounts receivable
and has provided for possible uncollectible amounts in the accompanying
financial statements. The allowance for doubtful accounts was $40,360 and
$81,221 for the years ended December 31, 1996 and 1995, respectively. Bad debt
expense was $11,059 and $93,362 for the years ended December 31, 1996 and 1995,
respectively.
INVENTORIES
Inventories consist of new and used cable TV equipment and parts used to
refurbish and repair cable TV equipment. New and used inventory items are
separately identified as items of inventory. Inventory is valued at the lower of
cost or market, using the average-cost method. The weighted average cost is
calculated per item of inventory. Impairment and changes in market value are
evaluated on a per item basis.
If the cost of the inventory exceeds their market value evaluation based on
individual inventory items, provisions are made for the difference between the
cost and the market value. Provision for potential obsolete or slow moving
inventory is made based on analysis of inventory levels, changes in technology
and future sales forecasts.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
related assets. Furniture, fixtures, and equipment are depreciated over lives
ranging from three to seven years, and leasehold improvements are depreciated
over the shorter of the lease term or useful life of the improvement, generally
six to seven years. Major renewals and betterments are capitalized and
depreciated; maintenance and repairs which neither improve nor extend the life
of the respective assets are charged to expense as incurred. Upon disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
The Company leases certain equipment under capital lease agreements with a cost
and accumulated amortization of $218,516 and $54,314, respectively, at December
31, 1996, and $176,808 and $15,124, respectively at December 31, 1995.
Depreciation expense, which includes the amortization of assets held under
capital leases, was $151,933 and $89,338 for 1996 and 1995, respectively.
REVENUES
Revenues for all products are recognized when the related products are
shipped. Warranties are extended on new and repaired and refurbished products
for periods up to one year. The Company's expense for such warranties is not
significant. Warranties are not extended for used equipment.
EARNINGS PER SHARE
Earnings per share are computed on the weighted average number of common shares
outstanding including any dilutive options and warrants. Per share amounts have
been restated for the effects of the 20% stock dividend, that was effective May
16, 1996 for stockholders of record as of May 6, 1996.
16
<PAGE> 17
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses were
$41,980 and $60,121 for the years ended December 31, 1996 and 1995,
respectively.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash includes cash on hand and demand
deposits held by banks.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in future years of
differences between the financial reporting and tax bases of assets and
liabilities at each year-end based on enacted tax laws and statutory tax rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense represents the
taxes currently payable and the net change during the period in deferred tax
assets and liabilities.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements to
conform with the 1996 presentation.
CASH
As of December 31, 1996, the Company had deposits in a bank which exceeded the
federally insured limits.
INVENTORIES
Inventories at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
PARTS:
USED 0 0
NEW 359,234 272,405
CONVERTERS:
USED 218,800 336,619
NEW 164,900 0
LINEGEAR:
USED 327,980 459,149
NEW 46,640 0
HEAD-END:
USED 106,121 124,252
NEW 2,930 0
TOTAL:
USED 652,901 920,020
NEW 573,704 272,405
RESERVES (50,296) (43,189)
NET INVENTORY 1,176,309 1,149,236
</TABLE>
The Company reserves and periodically writes down slow moving inventory by
category such as converters, linegear, parts, and headend.
REVOLVING CREDIT LINE
The Company has a revolving credit line with a bank for the lesser of $750,000
or an amount based on eligible inventory and accounts receivable. The credit
line is secured by substantially all assets of the Company and is payable on
demand. The line, which was renewed in 1996, matures on May 30, 1997, and
interest is charged at prime plus 1%.
17
<PAGE> 18
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
REVOLVING CREDIT LINE (continued)
In connection with the participation agreement discussed in the stockholder
transactions, the Company acted as guarantor of personal loans for various Board
members and stockholders. No guarantees were outstanding at December 31, 1996.
The total amount guaranteed at December 31, 1995 was $98,000.
LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Notes payable to a bank relating to motor
vehicle purchases due in monthly installments
of $342 with interest at 8.75% thru April
1997. The notes are secured by the
motor vehicles. $ 1,274 $ 8,809
Amount payable to stockholder 9,302 17,304
Amounts due under capital leases, net of $19,453
and $27,118 representing interest at December 31,
1996 and 1995, respectively. 125,242 136,086
Non-interest bearing note payable to an entity
relating to an equipment purchase due in
monthly installments of $2,722 through June,
1999. The face amount of the note is $97,985,
and the effective interest rate is 9.25%. The
unamortized discount at December 31, 1996
is $12,710. The note is secured by the related
equipment. 72,647 -
---------- ----------
Total 208,465 162,199
Less: Current maturities 101,703 59,799
---------- ----------
Long-term obligations $ 106,762 $ 102,400
========== ==========
</TABLE>
18
<PAGE> 19
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
LONG-TERM OBLIGATIONS (continued)
Maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
Long-term Capital Lease
Obligations Obligations
----------- -------------
<S> <C> <C>
1997 $ 36,345 $ 77,480
1998 30,986 44,553
1999 15,892 10,667
2000 - 10,667
2001 - 1,328
----------- -------------
144,695
Less amount representing interest - 19,453
----------- -------------
Total $83,223 $ 125,242
=========== =============
</TABLE>
RETIREMENT PLANS
The Company had a defined benefit pension plan, that was frozen effective
December 31, 1990, and a qualified defined contribution profit sharing plan. The
plans were terminated effective August 1, 1995 and no contributions were made to
either plan during 1995. Approval of the plan terminations and disbursement of
plan assets was granted by the IRS during 1996. The remaining unfunded liability
of $68,583 was paid during 1996. At December 31, 1996, the Company has no
further liability for either plan.
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Current (benefit) expense
Federal $ (7,826) $(68,904)
State and local (9,802) -
---------- --------
Income tax (benefit) expense $ (17,628) $(68,904)
========= ========
</TABLE>
19
<PAGE> 20
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
INCOME TAXES (continued)
The components of the net deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Assets:
Accounts receivable $ 15,337 $ 30,900
Inventories 46,660 90,700
Pension - 31,000
Net operating loss 174,133 66,900
Accrued liabilities - 19,400
Other 3,811 10,600
---------- ----------
Gross deferred tax assets 239,941 249,500
---------- ----------
Liability:
Property and equipment 35,603 33,400
Prepaid asset 17,387 6,400
----------- ----------
Gross deferred tax liabilities 52,990 39,800
----------- ----------
Net deferred tax asset 186,951 209,700
Less: Valuation allowance (186,951) (209,700)
----------- ----------
$ 0 $ 0
=========== ==========
</TABLE>
A reconciliation of the Company's effective tax values is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Income tax at statutory rates $ 200 $(122,428)
State and local taxes, net of federal benefit (6,469) -
Surtax and other rate differences 5,298 (10,082)
Meals and entertainment/officer's life
insurance 6,092 9,362
Change in valuation allowance (22,749) 54,244
------------ ---------
$ (17,628) $(68,904)
============ =========
</TABLE>
Net deferred tax assets have been fully reserved, as it is not known if the
benefit will be realized by the Company.
As of December 31, 1996, the Company has approximately $458,000 of tax net
operating loss carryforwards remaining to be utilized. The tax net loss
carryforwards begin to expire in the year 2007.
20
<PAGE> 21
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
STOCKHOLDERS' EQUITY
At December 31, 1996 and 1995, the Company had authorized common shares, no par
value, of 1,800,000 and authorized preferred shares, no par value, of 200,000.
No preferred stock is issued or outstanding at December 31, 1996 or 1995.
The Company adopted the 1995 Stock Option Plan ("1995 Plan") effective October
17, 1995. The 1995 Plan authorizes the Company to grant options ("Options") to
purchase shares of the Company's common stock to directors, employees and
consultants of the Company. The 1995 Plan also authorizes the Company to grant
stock appreciation rights ("SARS") to employees of the Company. The maximum
number of common shares that may be issued under the 1995 Plan is 395,010. An
SAR may be issued, at the discretion of the board of directors, either in tandem
or not in tandem with an Option. The holder of an SAR tandem to an Option is
entitled to receive, upon exercise of the SAR, payment of an amount determined
by multiplying the excess of fair market value of a common share on the date the
SAR is exercised over the exercise price of the related Option by the number of
shares as to which the SAR has been exercised. The board of directors shall
determine the exercise price of each SAR that is not in tandem with an Option at
the time of granting the SAR, but in no event shall the exercise price be less
than the fair market value of a common share on the date such SAR is granted.
The exercise of an SAR tandem to an Option shall cancel the related Option with
respect to the number of shares as to which such SAR is exercised. The exercise
of an Option granted in tandem with an SAR shall cancel the related SAR with
respect to the number of shares as to which such Option is exercised. At the
discretion of the board of directors, payment upon the exercise of an SAR may be
made in cash, shares of the Company's common stock or any combination thereof.
All options granted during 1996 and 1995 were granted in tandem with SARS for an
identical number of common shares.
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plan. The vesting period of
the options granted range from immediately exercisable to four years.
Accordingly, no compensation cost has been recognized in the accompanying
financial statements for options or SARs issued under the plan since the
exercise price of the options and SARs was equal to the market value of the
shares at the date of grant. Had compensation cost for the Company's stock
option plan been determined based on the fair value at the grant dates for
awards under the plan consistent with the methodology of Financial Accounting
Standards Board Statement No. 123 "Accounting for Stock-Based Compensation," the
Company's net income (loss) and net income (loss) per share would change as
indicated below:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Net income (loss):
As reported $ 18,214 $ (291,178)
Pro forma (21,524) (305,041)
Net income (loss) per share:
As reported $ 0.01 $ (0.22)
Pro forma (0.02) (0.23)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------
<S> <C> <C>
Dividend yield 0 0
Expected volatility 574% 574%
Risk-free interest rates 5.72%, 5.82%, 6.32% and 6.58% 7.55% and 6.80%
Expected lives 5, 4 and 1 years 5 and 1 years
</TABLE>
21
<PAGE> 22
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
STOCKHOLDERS' EQUITY (continued)
A summary of the status of the Company's employee stock option plan as of
December 31, 1996 and 1995 and changes for the years then ended is presented
below:
<TABLE>
<CAPTION>
1996 1995
--------------------------------- -----------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
January 1 217,998 $1.37 153,648 $1.87
Granted 138,270 1.40 123,750 1.06
Exercised (17,028) 1.77 - -
Canceled (126,918) 1.05 (59,400) 2.03
------- --------
December 31 212,322 1.53 217,998 1.51
======= ========
Options exercisable
at year-end
101,574 94,644
Weighted-average
fair value of options
granted during the
year $ 1.33 $ 1.50
</TABLE>
The following table summarizes information about employee stock options at
December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average
Number Remaining Weighted- Number Weighted-
Outstanding Contractual Average Exercisable Average
Range of December 31, Life Exercise December 31, Exercise
Exercise Prices 1996 (In Years) Price 1996 Price
--------------- ------------- ----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
$1.33 - $2.27 200,442 7.3 $ 1.35 99,594 $ 1.69
2.99 - 3.52 11,880 7.9 3.08 1,980 3.52
------- -------
Total
212,322 101,574
======= =======
</TABLE>
The company entered into one year consulting agreements in 1993, 1994, 1995 and
1996 under which the current chief executive officer served as a consultant and
continued to operate under the consulting agreements. During the time of the
consulting agreements, no compensation expense was recorded as amounts paid
thereunder were recorded as professional fees.
Under the 1993 consulting agreement, the company paid for certain services by
issuing a warrant for the purchase of 19,800 shares (adjusted pursuant to
anti-dilution provisions) at a price of $.9264 (as adjusted). On December 13,
1995, the company extended the expiration date of the warrant until May 31,
2004.
Options to purchase shares were also granted under the consulting agreements,
which were all subject to anti-dilution provisions. Options granted under the
1993 and 1994 consulting agreements were also amended on December 13, 1995 to
extend the expiration dates. No compensation expense was recorded for the
warrant or the options since the exercise prices exceeded the market price of
the shares on the respective dates of grant and on the date of the extensions.
22
<PAGE> 23
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
STOCKHOLDERS' EQUITY (continued)
Following is a summary of the director's options, substantially all of which are
fully vested:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- ---------------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
January 1 366,300 $1.71 297,000 $1.90
Granted 34,980 0.88 69,300 0.88
-------- -------
December 31 401,280 $1.64 366,300 $1.71
======= =======
</TABLE>
The stock options and SARs expire at various dates through 2006.
At December 31, 1996 and 1995, the director held warrants to purchase 19,800
shares of stock for $0.93 per share. The warrants expire in 2004.
At December 31, 1996 and 1995, outside Board of Directors members held options
to purchase 100,980 and 85,140 shares of common stock, respectively, with
exercise prices ranging from $1.52 to $3.52. At December 31, 1996 and 1995,
97,020 and 85,140 of the options are vested. At December 31, 1996, 13,860 of
these options have no expiration date, and the remaining options expire at
various dates through 2006.
OPERATING LEASE OBLIGATIONS
The Company leases production and office space from a director of the Company
under an operating lease expiring in October, 1998 with a three-year renewal
option. During 1996 and 1995, modifications were made to the lease which
increased the Company's occupancy area and monthly rent. At December 31, 1996,
monthly payments of $9,504 were required, subject to increases in real estate
taxes and rent increases each November. Minimum lease payments:
<TABLE>
<S> <C>
1997 $114,504
1998 97,320
--------
$211,824
========
</TABLE>
Rent expense was $135,449 and $108,566 for the years ended December 31, 1996 and
1995, respectively.
RECONCILIATION WITH VENDORS
During 1996 and 1995, the Company reconciled amounts owed to various vendors.
These reconciliations resulted in a reduction of expenses of $93,518 and $81,772
in 1996 and 1995, respectively. At December 31, 1995, there was a contingency
accrual of $63,893 included in accounts payable related to unresolved amounts.
No such contingency exists at December 31, 1996.
23
<PAGE> 24
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
STOCKHOLDER TRANSACTIONS
On October 18, 1994, the Company's former president and largest stockholder
entered into an agreement, with a director, whereby the director would purchase
from the former president 581,636 common shares. The disinterested stockholders
of the Company approved the transaction on December 28, 1994. In addition, the
director entered into a participation agreement whereby directors and third
parties will acquire 25% of shares purchased pursuant to the Agreement.
Effective December 31, 1995, the share purchase transaction was completed.
Under terms of the agreement, the Company entered into a separation,
Non-competition and consulting agreement with the former president. The
Separation Agreement requires the Company to pay the former president $100,000.
Consulting services are to be provided by the former president through December
31, 1998, for total consideration of $350,000 payable in seven monthly
installments of approximately $15,394; 25 monthly installments of approximately
$9,333; and a final installment of $8,917. The former president also agreed not
to compete with the Company through December 31, 1998, for total consideration
of $25,000 payable in seven monthly installments of approximately $1,100; 25
monthly installments of approximately $667; and a final installment of $625. The
covenant not to compete and the related obligation are reflected in the
accompanying balance sheets, and the covenant is being amortized on the
straight-line method over the term of the covenant. Total accumulated
amortization in relation to the covenant not-to-compete was $11,981 and $7,197
for 1996 and 1995, respectively. The consulting services are being expensed over
the term of the Agreement as services are rendered. Under this agreement, the
Company recognized expenses of $84,000 per year in 1996 and 1995.
The following are the annual payments due under these agreements:
<TABLE>
<S> <C>
1997 $120,000
1998 19,547
</TABLE>
CONCENTRATIONS OF CREDIT RISK
The Company grants credit to cable operations in the United States, Central and
South America, Europe and the Pacific Rim. Sales are denominated principally in
U. S. dollars and, therefore, the Company does not have significant foreign
exchange rate risk. Sales to customers outside the United States were $745,897
and $1,713,518 and the corresponding accounts receivable were $93,450 and
$92,393 at December 31, 1996 and 1995, respectively. In most cases, sales of
product in international markets are cash in advance or cash on delivery.
Additionally, the Company carries insurance on all significant international
accounts receivable.
As of December 31, 1996, approximately 14% of the accounts receivable balance
was due from a single customer. At December 31, 1995, approximately 15% of the
accounts receivable balance was due from a different customer.
24
<PAGE> 25
CABLE LINK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (Unaudited)
SUBSEQUENT EVENTS
On January 8, 1997 the Company entered into an agreement with another entity
(the Buyer) to purchase 165,000 shares of common stock of the Company and
165,000 warrants to purchase an additional 165,000 shares for $200,000. The
warrants are fully vested and may be exercised in increments of 1,000 shares.
The warrants have been separated into four groups of 41,250 shares each, with
exercise prices of $1.36 for one group, $1.67 for one group, $1.97 for one group
and $2.27 for one group. The expiration dates for these four warrant groups are
six months, six months, nine months, and nine months, after January 8, 1997, the
effective date of the offering. The warrants issued are transferable by the
Buyer under any manner that is in compliance with all applicable security laws.
On January 21, 1997, the Company declared a 3 for 2 stock dividend for
stockholders of record as of January 21, 1997, payable on January 31, 1997. Net
income (loss) per share at December 31, 1996 and 1995 would be $ .01 and $
(.22), respectively, after consideration of this above-mentioned issuance of
common stock, warrants and stock split.
25
<PAGE> 26
MANAGEMENT DISCUSSION AND ANALYSIS
Result of Operations
Net sales
Net sales for third quarter ending September 30, 1997 were $2,720,514 compared
to $1,822,359 for the third quarter ending September 30, 1996. This represents
an increase of 49% or $898,155 over the previous year. Sales for the nine
months ending September 30, 1997 were $7,574,049 versus $6,764,982 for
September 30, 1996. This represents an increase of 12% or $809,067 over the
previous year. The increase in sales is primarily due to an expanded customer
base and an increase in the company's repair and refurbishing business.
Cost of goods sold
The cost of goods sold decreased to 59.5% of sales in the third quarter of 1997
from 73.8% for the third quarter 1996. For the nine months ending September 30,
1997 the cost of goods sold decreased to 64% of sales compared to 65.6% of
sales for the nine months ending September 30,1996. The majority of the
reduction in cost of goods sold is production labor expenses. The production
labor costs declined in the third quarter as a percent of sales to 12.1% from
23.3% in comparison to last year's third quarter. The labor cost has decreased
to 13.9 percent of sales through the third quarter 1997 from 18.0 percent
through the same period in 1996. 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
The operating expenses decreased to 24.4% of sales in the third quarter 1997
from 40.2% for third quarter 1996. In 1996 the operating expenses, as a percent
of sales were 33.3% for nine months ending September 30 and have decreased to
25.5% of sales for the nine months ending September 30,1997. The decrease was
due to a reduction in administrative personnel. Job procedures were implemented
which increased the efficiencies and reduced costs.
26
<PAGE> 27
Income from operations
Income from operations increased to $437,075 or 16.1% of sales for the third
quarter ending September 30,1997 compared to a loss of ($254,833) in the third
quarter 1996. The income from operations increased to $785,442 or 10.4% of
sales for the first nine months ending September 30,1997 as compared to $77,444
or 1.1% of sales through the same period in 1996. Net income for the third
quarter of 1997 was $288,214 or $.18 per share versus a loss of ($239,674) or
($.17) per share for the third quarter of 1996. Per share earnings for the
nine months ending September 30, 1997 were $.37 versus $.02 ending September
30, 1996.
The company's increased profitability over the past nine months ending
September 30, 1997 has exhausted all net operating loss carryforward that was
generated from prior years. Through the first nine months in 1997 the company
has expensed $135,000 for federal, state and local taxes. As a result of a 12%
increase in sales and improved gross profit margin, and reduced costs the
company has generated earnings of $603,247 or 8.0% of sales through the first
nine months in 1997 as compared to $20,982 or 0.3% of sales the nine months
ending September 30, 1996.
The company entered into negotiations with vendors during 1995 and 1996 which
resulted in the recognition of $93,518 and $18,772 reflected as other income.
This represents adjustments for inventory items that were later found to be
defective, undelivered or otherwise unacceptable and the related interest on
overdue accounts. The company anticipates a similar settlement in 1997 for
approximately $112,000, but does not anticipate similar adjustments after 1997,
due to procedures now in place to eliminate such adjustments.
Liquidity and Capital Resources
The company finances its operations primarily through internally generated
funds and the bank line of credit. Bank borrowings decreased which resulted in
lower interest expense. As a result of the increase in sales, accounts
receivable increased $523,765 over the December 31, 1996 balance. Inventory
remained constant. As a result of improved cash flow, accounts payable
decreased $423,706. Accrued expenses increased $120,367 due to income taxes and
bonuses. Property and equipment purchases decreased in 1997 and are expected to
be below 1996 expenditures for the remainder of 1997.
The company declared a 10% stock dividend on August 1, 1997.
On January 8, 1997, the company entered into an agreement with another entity
(the Buyer) to purchase 165,000 shares of common stock and warrants to purchase
additional 165,000 shares of common stock for $200,000. As of September 30,
1997 the company has sold 165,000 shares and warrants to purchase 82,000 shares
were exercised for a total working capital of $325,000.
The company believes that its available financial resources are adequate to
meet its foreseeable working capital, debt service and capital expenditure
requirements.
27
<PAGE> 28
New Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board issued Statements 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. This statement is
effective for fiscal years ending after December 15, 1997 and early adoption is
not permitted. When adopted, the statement will require restatement of prior
years' earnings per share. The company will adopt this statement for the year
ending December 31, 1997. The effect of adopting this standard on earnings per
share is not expected to materially affect earnings per share.
28
<PAGE> 29
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Columbus, State of Ohio, on December 9, 1998.
CABLELINK, INC.
By: /s/ Bob Binsky
------------------------------------------------
Bob Binsky, Chairman and Chief Executive Officer
29
