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Previous: PUTNAM INVESTMENT GRADE MUNICIPAL TRUST II, DEFA14A, 1998-07-30 |
Next: 2002 TARGET TERM TRUST INC, NSAR-A, 1998-07-30 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
Date of report May 18, 1998
---------------------------------------------------------
Cable Link, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Ohio
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-23111 31-1239657
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
280 Cozzins Street 43215
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(614) 221-3131
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
This Amendment No. 1 is being filed to submit the financial statements
required to be filed pursuant to Item 7 of Form 8-K within 60 days after the
initial report on Form 8-K was due.
(1)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)-(b) Financial Statements.
Financial Statements of PC & Parts, Inc. dba Auro Computer Systems, for
fiscal years ended December 31, 1997 and 1996
Interim Financial Statements of PC & Parts, Inc. dba Auro Computer
Systems for the three months ended March 31, 1998.
Cable Link, Inc. Pro Forma Consolidated Balance Sheet for Cable Link,
Inc. and Subsidiary at March 31, 1998
Cable Link, Inc. Consolidated Statement of Operations for the quarter
ended March 31, 1998 and the year ended December 31, 1997.
(c) Exhibits.
(2) Plan of acquisition, reorganization, arrangement, liquidation, or
succession.
2.1. Stock Purchase and Non-Compete Agreement among PC & Parts, Inc.,
its Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998.*
2.2. Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian
Berger dated May 18, 1998.*
(23) Consent of experts and Counsel
23.1 Consent of Groner, Boyle & Quillin, LLP
(27) Financial Data Schedule (filed electronically for SEC information
only)
* Previously filed
(2)
<PAGE> 3
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 hereunto duly authorized.
CABLE LINK, INC.
Dated: July 29, 1998 By s/ Bob Binsky
--------------------
Bob Binsky, Chairman of the Board
(3)
<PAGE> 4
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
FINANCIAL STATEMENTS
* * * * * *
DECEMBER 31, 1997 AND 1996
(4)
<PAGE> 5
C O N T E N T S
---------------
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT ACCOUNTANTS' REPORT 6
BALANCE SHEETS 7
STATEMENTS OF INCOME 9
STATEMENTS OF RETAINED EARNINGS 10
STATEMENTS OF CASH FLOWS 11
NOTES TO FINANCIAL STATEMENTS 13
</TABLE>
(5)
<PAGE> 6
To the Shareholders
PC & Parts, Inc., dba Auro Computer Systems
Westerville, Ohio
We have audited the accompanying balance sheets of PC & Parts, Inc. dba
Auro Computer Systems as of December 31, 1997 and 1996, and the related
statements of income and changes in retained earnings (deficit) and cash flows
for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 PC & Parts, Inc. dba
Auro Computer Systems as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Groner, Boyle & Quillin, LLP
Columbus, Ohio
April 29, 1998 (except for the subsequent event and stock options footnotes as
to which are dated May 18, 1998)
(6)
<PAGE> 7
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
BALANCE SHEETS
December 31, 1997 and 1996
================================================================================
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 121,744 $ 70,800
Accounts receivable
Trade (less allowance for doubtful accounts
of $29,526 in 1997 and $0 in 1996) 1,413,629 1,249,546
Officers 40,220 64,220
Employees - 3,013
Income tax refunds 36,381 50,741
Inventory 355,083 385,895
Deferred tax asset 174,323 121,185
Prepaid expenses 5,500 32,000
--------------- --------------
Total current assets 2,146,880 1,977,400
------------ ------------
PROPERTY AND EQUIPMENT
Furniture and equipment 61,385 47,439
Computer equipment 272,978 178,573
Capital lease assets 47,610 47,610
Leasehold improvements 46,094 -
-------------- ------------
428,067 273,622
Less: Accumulated depreciation and amortization ( 156,861) ( 70,583)
------------- --------------
Net property and equipment 271,206 203,039
------------- -------------
OTHER ASSETS
Deposits 14,300 14,300
-------------- --------------
Total other assets 14,300 14,300
-------------- --------------
TOTAL ASSETS $ 2,432,386 $ 2,194,739
=========== ===========
</TABLE>
(7)
<PAGE> 8
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
1997 1996
--------------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Current portion long-term debt $ 56,407 $ 70,304
Line of credit 780,000 490,000
Accounts payable 818,985 694,844
Accrued expenses
Payroll and related taxes 133,630 123,640
Warranty expense 340,413 332,968
Other 219,354 60,966
------------- --------------
Total current liabilities 2,348,789 1,772,722
------------ ------------
LONG-TERM LIABILITIES
Notes payable - stockholders 202,026 202,026
Note payable - bank 41,667 91,667
Capital lease obligations 3,237 9,644
Deferred income taxes 2,291 -
--------------- -----------
Total long-term liabilities 249,221 303,337
------------- -------------
Total liabilities 2,598,010 2,076,059
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock authorized, issued and
outstanding, 21,000 shares in 1997 and
20,000 shares in 1996, no par value 210,000 200,000
Additional paid-in capital 5,000 -
Retained deficit ( 380,624) ( 81,320)
-------------- --------------
Total stockholders' equity (deficit) ( 165,624) 118,680
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,432,386 $ 2,194,739
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(8)
<PAGE> 9
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
STATEMENTS OF INCOME
Years Ended December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
----------------- -----------
<S> <C> <C>
Net revenues $ 13,536,581 $ 12,243,014
Cost of sales 12,432,014 11,284,246
------------- -------------
Gross profit 1,104,567 958,768
Operating expenses 1,370,613 892,138
-------------- ---------------
Income (loss) from operations ( 266,046) 66,630
Other income (expense)
Interest and finance income 19,173 31,044
Interest expense ( 82,928) ( 84,591)
Miscellaneous income 1,997 11,171
Loss on disposal of assets ( 20,175) ( 18,415)
---------------- ----------------
Income (loss) before income taxes ( 347,979) 5,839
Provision (benefit) for income taxes
Current 2,055 37,624
Deferred ( 50,730) ( 108,950)
---------------- ---------------
Total ( 48,675) ( 71,326)
---------------- ----------------
Net income (loss) $( 299,304) $ 77,165
============== ===============
Basic and diluted earnings (loss) per share $( 14.91) $ 3.86
================ =================
Weighted average shares outstanding 20,071 20,000
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
(9)
<PAGE> 10
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
STATEMENTS OF CHANGES IN RETAINED EARNINGS (DEFICIT)
Years Ended December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
<S> <C>
BALANCE AT DECEMBER 31, 1995, as previously reported $ 59,323
Prior period adjustments:
Correction of errors (217,808)
-----------
BALANCE AT DECEMBER 31, 1995, as restated (158,485)
Net income year ended December 31, 1996 77,165
-----------
BALANCE AT DECEMBER 31, 1996 ( 81,320)
Net loss year ended December 31, 1997 (299,304)
----------
BALANCE AT DECEMBER 31, 1997 $(380,624)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(10)
<PAGE> 11
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $( 299,304) $ 77,165
------------ -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 120,326 44,362
Deferred tax benefit ( 50,730) ( 108,950)
Loss on disposal of assets 20,175 18,415
(Increase) decrease in operating assets:
Accounts receivable ( 122,710) 995,113
Inventory 30,812 5,973
Prepaid expenses 26,500 ( 32,000)
Increase (decrease) in operating liabilities:
Accounts payable 124,141 92,021
Accrued expenses 168,261 ( 125,572)
Accrued warranty 7,445 189,656
--------------- -------------
Total adjustments 324,220 1,079,018
------------- ------------
Net cash provided by operating activities 24,916 1,156,183
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ( 208,668) ( 87,810)
Decrease in deposits - 1,090
------------------- ---------------
Net cash used in investing activities ( 208,668) ( 86,720)
------------- --------------
</TABLE>
(11)
<PAGE> 12
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of 1,000 shares of common stock 15,000 -
Reduction of long-term debt ( 50,000) ( 50,000)
Borrowing on capital lease obligations - 47,610
Reduction of capital lease obligations ( 20,304) ( 17,662)
Net change in line of credit 290,000 ( 623,780)
------------- -------------
Net cash provided by (used in) financing activities 234,696 ( 643,832)
------------- -------------
Net increase in cash 50,944 425,631
Cash at beginning of year 70,800 ( 354,831)
-------------- -------------
Cash at end of year $ 121,744 $ 70,800
============ =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 8,365 $ 112,000
Interest 88,849 78,570
</TABLE>
The accompanying notes are an integral part of the financial statements
(12)
<PAGE> 13
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
NATURE AND SCOPE OF BUSINESS
PC & Parts, Inc. dba Auro Computer Systems (the "Company"),
located in Westerville, Ohio, was incorporated in August, 1989
and assembles computer hardware components into personal
computers for a number of customers located in Ohio. The Company
also sells personal computer software and provides software
service and consulting services. The Company sells its products
and provides service support throughout central Ohio and the
surrounding area.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE 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 and disclosure of contingent assets
and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
ACCOUNTS RECEIVABLE
The Company provides credit to businesses and government
entities in the normal course of business. Bad debt expense was
$30,853 and $890 for the years ended December 31, 1997 and 1996,
respectively.
INVENTORY
Inventory consists of purchased computer components for assembly
and resale and is stated at the lower of cost (first-in,
first-out) or market value. Assembly in process is not
significant and is not recorded as work in progress inventory.
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.
WARRANTY
Estimated future warranty obligations related to certain
products are provided by charges to operations in the period in
which the related revenue is recognized.
(Continued)
(13)
<PAGE> 14
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REVENUE RECOGNITION
Revenues are recognized when the related products are completed
and shipped, or services are performed. Revenues from service
contracts are recognized over the terms of the contract.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in
future years of differences between the financial reporting and
tax basis 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.
ADVERTISING
Advertising costs are expensed in the period in which the costs
are incurred. Advertising expense for the years ended December
31, 1997 and 1996 was $44,665 and $49,122.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash includes cash on hand
and demand deposits held by banks.
NOTES PAYABLE - STOCKHOLDERS
Certain stockholders have made interest free loans to the
Company. The amount of loans from stockholders is $202,026 as of
December 31, 1997 and 1996. Repayment of these loans is
restricted by a subordination agreement related to certain bank
loans.
NOTES PAYABLE - BANK
The Company has a $1,000,000 revolving line of credit that is
due on November 30, 1998. Interest is payable monthly at prime
plus 1/2% (the interest rate was 9% per annum at December 31,
1997 and 1996). The Company owed $780,000 on this note as of
December 31, 1997 and 1996, respectively. For the years ended
December 31, 1997 and 1996, the amount owed during the periods
on this revolving line of credit ranged from $490,000 to
$940,000.
Also, the Company has a $200,000 installment note that matures
on October 31, 1999 payable in monthly installments of $4,167
plus interest at prime plus 1/2% (the interest rate was 9% per
annum at December 31, 1997 and 1996). The balance due was
$91,667 and $141,667 as of December 31, 1997 and 1996,
respectively.
(Continued)
(14)
<PAGE> 15
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
NOTES PAYABLE - BANK (continued)
Both notes are collateralized by all business assets,
subordination of all stockholder debt, and personal guarantees
of certain stockholders.
Maturities of the installment note payable are:
<TABLE>
<CAPTION>
<S> <C>
1998 $50,000
1999 41,667
--------
$91,667
</TABLE>
CAPITAL LEASE AGREEMENTS
The Company leases a vehicle and various types of equipment
accounted for as capital leases. The cost of the leased assets
is $47,610 at December 31, 1997 and 1996. Accumulated
amortization of the leased assets is $15,223 and $7,434 for 1997
and 1996, respectively.
At December 31, 1997, the future minimum lease payments under
capital leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 7,134
1999 3,346
----------
Total 10,480
Less amount representing interest (836)
Total $ 9,644
Less current portion (6,407)
----------
$ 3,237
=========
</TABLE>
INCOME TAXES
The components of the deferred tax asset and liability are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Assets:
Accrued warranty expense $115,740 $113,209
Accrued vacation 7,939 5,086
Allowance for doubtful accounts 10,039 -
Depreciation carryover - 2,890
Net operating loss carryforward 40,605 -
-------- --------
Deferred tax assets $174,323 $121,185
======== ========
</TABLE>
(Continued)
(15)
<PAGE> 16
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Liability:
Property and equipment $ 2,291 $ -
========== ========
</TABLE>
(Continued)
(16)
<PAGE> 17
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
INCOME TAXES (continued)
A reconciliation of the Company's effective tax values is as
follows:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Income tax at statutory rates $ - $ 11,835
State and local taxes, net of federal benefit - 4,600
Temporary differences (48,675) (87,761)
--------- ---------
$(48,675) $(71,326)
======== ========
</TABLE>
As of December 31, 1997, the Company has approximately $120,000
in tax net operating loss carryforwards remaining to be utilized
that expire in the year 2007. No valuation allowance is recorded
because management feels it is more likely than not that all net
deferred tax assets will be realized.
WARRANTY LIABILITY
The Company provides a three-year on-site parts and labor
warranty on hardware sold. Replacement hardware components are
generally provided by the original equipment manufacturer. The
Company is responsible for installing the replacement parts. The
Company has estimated the future labor costs to install
replacement parts for systems that remain under warranty as of
December 31, 1997 and 1996.
Estimated future warranty costs of $340,413 and $332,968 have
been accrued as of December 31, 1997 and 1996, respectively.
RETIREMENT PLAN
The Company maintains a qualified salary deferral plan.
Employees are eligible to participate upon attaining age
nineteen and completion of one-half year of service. The Company
made a matching contribution to the plan in the amount of $6,743
for 1997 and no contribution was made for 1996.
OPERATING LEASE AGREEMENTS
The Company has entered into various non-cancelable lease
agreements for vehicles, furniture and equipment. The Company's
facility lease agreement expired during 1996. The current
facility lease agreements are with a related party (see Related
Party Transaction note below).
Lease agreements for vehicles, furniture and equipment have
terms from two to five years. Rent expense under these leases
was $71,599 and $45,998 for the years ended December 31, 1997
and 1996, respectively. The future minimum lease payments due
over the terms of the leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $39,137
1999 16,568
--------
</TABLE>
(Continued)
(17)
<PAGE> 18
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
<S> <C>
$55,705
=======
</TABLE>
RELATED PARTY TRANSACTION
In January, 1997 the Company began leasing a new operating
facility from an entity owned, in part, by certain stockholders
that are also stockholders in the Company. The Company paid the
construction loan interest (on a monthly basis), in lieu of rent
during 1996 and part of 1997. For the remainder of 1997, the
Company began paying the entity's monthly principal and interest
mortgage obligation which estimates fair market value. The
Company recorded these payments as rent expense. There is no
written lease agreement, however, the Company anticipates
entering into a long-term lease agreement with the entity
sometime during 1998. The Company recorded $95,459 and $48,392
as rent expense during 1997 and 1996, respectively.
CORRECTION OF AN ERROR
The Company's retained earnings as of December 31, 1995 have
been restated to reflect liabilities that existed for accrued
warranty cost, deferred taxes, deferred service contract
revenue, accrued wages, vacation and commissions. The net effect
of these adjustments was a reduction in retained earnings of
$217,808.
STOCK OPTIONS
The Company granted options to purchase 1,000 shares of common
stock to an employee at an exercise price of $15 per share. As
of December 31, 1997, all remain outstanding. According to the
purchase agreement signed on May 18, 1998, the sellers have
agreed to reimburse the Company for any liability incurred if
any options are exercised.
SUBSEQUENT EVENT
On May 18, 1998, the outstanding common stock of the Company was
acquired by another company. All assets and certain liabilities
of the Company have been assumed by the purchaser. As part of
the purchase agreement, the Company contributed notes payable to
stockholders of $202,026 to equity.
(18)
<PAGE> 19
PC & PARTS, INC.
DBA AURO COMPUTER SYSTEMS
CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1998
================================================================================
ASSETS
CURRENT ASSETS
CASH $ 83,781
ACCOUNTS RECEIVABLE
TRADE (LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS
OF $29,526) 1,661,582
OFFICERS 3,850
INCOME TAX REFUNDS 36,881
INVENTORY 261,505
DEFERRED TAX ASSET 174,323
PREPAID EXPENSES 5,000
-----------
TOTAL CURRENT ASSETS 2,226,922
-----------
PROPERTY AND EQUIPMENT
FURNITURE AND EQUIPMENT 61,385
COMPUTER EQUIPMENT 272,978
CAPITAL LEASE ASSETS 71,006
LEASEHOLD IMPROVEMENTS 52,951
-----------
458,320
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION (198,865)
-----------
NET PROPERTY AND EQUIPMENT 259,455
-----------
OTHER ASSETS
DEPOSITS 15,384
-----------
TOTAL OTHER ASSETS 15,384
-----------
TOTAL ASSETS $ 2,501,761
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
(19)
<PAGE> 20
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
CURRENT PORTION LONG-TERM DEBT $ 60,295
LINE OF CREDIT 730,000
ACCOUNTS PAYABLE 999,275
ACCRUED EXPENSES
PAYROLL AND RELATED TAXES 180,502
WARRANTY EXPENSE 340,413
OTHER 214,822
-----------
TOTAL CURRENT LIABILITIES 2,525,307
-----------
LONG-TERM LIABILITIES
NOTES PAYABLE - STOCKHOLDERS 202,026
NOTE PAYABLE - BANK 29,167
CAPITAL LEASE OBLIGATIONS 20,489
DEFERRED INCOME TAXES 2,291
-----------
TOTAL LONG-TERM LIABILITIES 253,973
-----------
TOTAL LIABILITIES 2,779,280
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK AUTHORIZED, ISSUED AND
OUTSTANDING, 21,000 SHARES, NO PAR VALUE 210,000
ADDITIONAL PAID-IN CAPITAL 5,000
RETAINED DEFICIT (492,519)
------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (277,519)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,501,761
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
(20)
<PAGE> 21
PC & PARTS, INC.
DBA AURO COMPUTER SYSTEMS
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
================================================================================
NET REVENUES $ 3,020,454
COST OF SALES 2,812,746
-----------
GROSS PROFIT 207,708
OPERATING EXPENSES 294,708
-----------
INCOME (LOSS) FROM OPERATIONS (87,000)
OTHER INCOME (EXPENSE)
INTEREST AND FINANCE INCOME 6,887
INTEREST EXPENSE (32,341)
MISCELLANEOUS INCOME 559
-----------
INCOME (LOSS) BEFORE INCOME TAXES (111,895)
PROVISION (BENEFIT) FOR INCOME TAXES
CURRENT
DEFERRED --
-----------
TOTAL --
-----------
NET INCOME (LOSS) $ (111,895)
===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (5.33)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING 21,000
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
(21)
<PAGE> 22
PC & PARTS, INC.
DBA AURO COMPUTER SYSTEMS
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
MARCH 31, 1998
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(111,895)
---------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES: 145,545
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,650
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF FIXED ASSETS (30,253)
---------
NET CASH USED IN INVESTING ACTIVITIES (30,253)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
BORROWING ON CAPITAL LEASE OBLIGATIONS 23,396
REDUCTION OF CAPITAL LEASE OBLIGATIONS (6,144)
NET CHANGE IN LINE OF CREDIT (58,612)
---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (41,360)
---------
NET DECREASE IN CASH (37,963)
CASH AT BEGINNING OF YEAR 121,744
---------
CASH AT END OF YEAR $ 83,781
=========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
INCOME TAXES $ --
INTEREST 32,341
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
(22)
<PAGE> 23
PC & PARTS, INC.
DBA AURO COMPUTER SYSTEMS
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
================================================================================
GENERAL
THE INTERIM FINANCIAL STATEMENTS HAVE BEEN PREPARED BY PC & PARTS, INC.
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 PC & PARTS, INC. AS OF MARCH 31, 1998; THE
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDING MARCH 31, 1998; AND CASH
FLOWS FOR THE THREE MONTHS ENDING MARCH 31, 1998. INTERIM RESULTS ARE NOT
NECESSARILY INDICATIVE OF RESULTS FOR A FULL YEAR.
THE FINANCIAL STATEMENTS ARE CONDENSED AS PERMITTED AND DO NOT CONTAIN
INFORMATION INCLUDED IN THE ANNUAL FINANCIAL STATEMENTS AND NOTES. THE
FINANCIAL STATEMENTS AND NOTES INCLUDED HEREIN SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES INCLUDED IN THE
FINANCIAL STATEMENTS.
(23)
<PAGE> 24
CABLE LINK, INC.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed financial statements include the
historical and pro forma effects of the May 18, 1998 acquisition of PC & Parts,
Inc. dba Auro Computer Systems (Auro Computer Systems).
The following unaudited pro forma condensed financial statements have been
prepared by the management of Cable Link, Inc. (the Company) from its historical
financial statements and the historical financial statements of Auro Computer
Systems which are included in this Current Report on Form 8-K/A. The unaudited
pro forma condensed statements of operations reflect adjustments as if the
transactions had occurred on January 1, 1997. The unaudited pro forma condensed
balance sheet reflects adjustments as if the transactions had occurred on March
31, 1998. See footnote for "Nature and Scope." The pro forma adjustments
described in the accompanying notes are based upon preliminary estimates and
certain assumptions that management believes are reasonable in the
circumstances.
The unaudited pro forma condensed financial statements are not necessarily
indicative of what the financial position or results of operations actually
would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results of
operations or financial position. The unaudited pro forma condensed financial
statements should be read in conjunction with the historical consolidated
financial statements of the Company and the related notes thereto which are
included in the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, which was filed with the Securities and Exchange Commission (the
Commission) on May 15, 1998, and the Company's Annual Report on Form 10-KSB
filed with the Commission on March 31, 1998. The unaudited pro forma condensed
financial statements should be read in conjunction with the historical financial
statements of Auro Computer Systems which are included in this Current Report on
Form 8-K/A.
(24)
<PAGE> 25
CABLE LINK, INC. AND PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1998
================================================================================
ASSETS
<TABLE>
<CAPTION>
PC & Parts, Inc.
Cable dba Auro PRO FORMA
Link, Inc. Computer Systems Pro Forma CONSOLIDATED
(Historical) (Historical) Total Adjustments TOTAL
------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 84,665 $ 83,781 $ 168,446 $ 100,000 (a) $ 68,446
500,000 (b)
(700,000)(c)
Cash held in escrow 100,000 (c) 100,000
Accounts receivable
Trade, net 1,529,573 1,661,582 3,191,155 3,191,155
Officers 0 3,850 3,850 3,850
Income tax refunds 0 36,881 36,881 36,881
Inventory 1,150,391 261,505 1,411,896 1,411,896
Deferred tax asset 36,500 174,323 210,823 17,438 (f) 228,261
Covenant not to compete 0 0 100,000 (d) 100,000
Prepaid expenses and other assets 177,072 5,000 182,072 182,072
------------- -------------- ------------- ------------- ------------
Total current assets 2,978,201 2,226,922 5,205,123 117,438 5,322,561
------------- -------------- ------------- ------------- ------------
PROPERTY AND EQUIPMENT 1,477,645 458,320 1,935,965 1,935,965
------------- -------------- ------------- ------------- ------------
1,477,645 458,320 1,935,965 0 1,935,965
Less accumulated depreciation (823,270) (198,865) (1,022,135) (1,022,135)
------------- -------------- ------------- ------------- ------------
Net property and equipment 654,375 259,455 913,830 0 913,830
------------- -------------- ------------- ------------- ------------
OTHER ASSETS
Covenant not to compete 0 0 0 100,000 (d) 100,000
Goodwill 0 0 0 683,598 (c) 632,308
(51,290)(e)
Deposits 0 15,384 15,384 15,384
------------- -------------- ------------- ------------- ------------
Total other assets 0 15,384 15,384 732,308 747,692
------------- -------------- ------------- ------------- ------------
TOTAL ASSETS $ 3,632,576 $ 2,501,761 $ 6,134,337 $ 849,746 $ 6,984,083
============= ============== ============= ============= ============
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
(25)
<PAGE> 26
================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
PC & Parts, Inc.
Cable dba Auro PRO FORMA
Link, Inc. Computer Systems Pro Forma CONSOLIDATED
(Historical) (Historical) Total Adjustments TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Current portion of long-term obligations $ 54,913 $ 60,295 $ 115,208 $ $ 115,208
Accounts payable 672,390 999,275 1,671,665 1,671,665
Income taxes payable 80,077 80,077 80,077
Revolving line of credit 516,197 730,000 1,246,197 1,246,197
Accrued expenses 153,641 735,737 889,378 100,000 (d) 989,378
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,477,218 2,525,307 4,002,525 100,000 4,102,525
----------- ----------- ----------- ----------- -----------
LONG-TERM LIABILITIES
Other long-term obligations 53,412 49,656 103,068 500,000 (b) 603,068
Notes payable to sellers of PC & Parts, Inc. 120,000 (c) 120,000
Due to minority interest in PC & Parts, Inc. 100,000 (a) 100,000
Notes payable stockholders 0 202,026 202,026 (202,026)(c) 0
Covenant not to compete 0 0 0 100,000 (d) 100,000
Acquisition bonus 16,560 (g) 16,560
Deferred income taxes 48,000 2,291 50,291 50,291
----------- ----------- ----------- ----------- -----------
Total long-term liabilities 101,412 253,973 355,385 634,534 989,919
----------- ----------- ----------- ----------- -----------
Total liabilities 1,578,630 2,779,280 4,357,910 734,534 5,092,444
----------- ----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, authorized, issued and
outstanding shares, no par value 1,452,507 210,000 1,662,507 (210,000)(c) 1,452,507
Additional paid-in capital 136,136 5,000 141,136 (5,000)(c) 136,136
Retained earnings (deficit) 465,303 (492,519) (27,216) 380,624 (c) 302,996
(51,290)(e)
17,438 (f)
(16,560)(g)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 2,053,946 (277,519) 1,776,427 115,212 1,891,639
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,632,576 $ 2,501,761 $ 6,134,337 $ 849,746 $ 6,984,083
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
(26)
<PAGE> 27
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
================================================================================
<TABLE>
<CAPTION>
PC & Parts, Inc.
Cable dba Auro PRO FORMA
Link, Inc. Computer Systems Pro Forma CONSOLIDATED
(Historical) (Historical) Total Adjustments TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 2,712,166 $ 3,020,454 $ 5,732,620 $ $ 5,732,620
Cost of revenues 1,828,937 2,812,746 4,641,683 4,641,683
----------- ----------- ----------- ----------- -----------
Gross profit 883,229 207,708 1,090,937 0 1,090,937
Selling, general and administrative expenses 678,510 294,708 973,218 51,290 (e) 1,024,508
0
0
0
----------- ----------- ----------- ----------- -----------
Income (loss) from operations 204,719 (87,000) 117,719 (51,290) 66,429
----------- ----------- ----------- ----------- -----------
Other income
Interest expense (8,846) (32,341) (41,187) 0 (41,187)
Interest income 0 6,887 6,887 0 6,887
Miscellaneous income 327 559 886 0 886
----------- ----------- ----------- ----------- -----------
Income (loss) before taxes 196,200 (111,895) 84,305 (51,290) 33,015
Provision (benefit) for income taxes
Current 34,251 0 34,251 34,251
Deferred 0 0 0 (17,438)(f) (17,438)
Total ----------- ----------- ----------- ----------- -----------
Net income (loss) $ 161,949 (111,895) 50,054 $ (33,852) $ 16,202
=========== =========== =========== =========== ===========
Basic earnings per common share $ 0.097 $ 0.010
=========== ===========
Weighted average shares outstanding
used to compute basic earnings per share 1,673,889 1,673,889
=========== ===========
Diluted earnings per common share $ 0.081 $ 0.008
=========== ===========
Weighted average shares outstanding
used to compute diluted earnings per share 2,008,605 2,008,605
=========== ===========
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements
(27)
<PAGE> 28
PC & PARTS, INC.
dba AURO COMPUTER SYSTEMS
PRO FORMA STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
PC & Parts, Inc.
Cable dba Auro PRO FORMA
Link, Inc. Computer System Pro Forma CONSOLIDATED
(Historical) (Historical) Total Adjustments TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 10,094,178 $ 13,536,581 $ 23,630,759 $ $ 23,630,759
Cost of revenues 6,277,709 12,432,014 18,709,723 18,709,723
------------ ------------ ------------ ------------ ------------
Gross profit 3,816,469 1,104,567 4,921,036 0 4,921,036
Selling, general and administrative expenses 2,633,876 1,370,613 4,004,489 34,180 (e) 4,038,669
0
0
0
------------ ------------ ------------ ------------ ------------
Income (loss) from operations 1,182,593 (266,046) 916,547 (34,180) 882,367
------------ ------------ ------------ ------------ ------------
Other income
Interest expense (60,541) (82,928) (143,469) (143,469)
Loss on disposal of assets 0 (20,175) (20,175) (20,175)
Interest income 0 19,173 19,173 19,173
Miscellaneous income 2,824 1,997 4,821 4,821
------------ ------------ ------------ ------------ ------------
Income (loss) before taxes 1,124,876 (347,979) 776,897 (34,180) 742,717
Provision (benefit) for income taxes
Current 246,049 2,055 248,104 248,104
Deferred 11,500 (50,730) (39,230) (11,621)(f) (50,851)
Total ------------ ------------ ------------ ------------ ------------
Net income (loss) $ 867,327 (299,304) 568,023 $ (22,559) $ 545,464
============ ============ ============ ============ ============
Basic earnings per common share $ 0.545 $ 0.343
============ ============
Weighted average shares outstanding
used to compute basic earnings per share 1,591,976 1,591,976
============ ============
Diluted earnings per common share $ 0.453 $ 0.285
============ ============
Weighted average shares outstanding
used to compute diluted earnings per share 1,913,958 1,913,958
============ ============
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements
(28)
<PAGE> 29
CABLE LINK, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
NATURE AND SCOPE
The accompanying unaudited pro forma statements of operations present
the historical results of operations of the Company and Auro Computer Systems
for the three months ended March 31, 1998 and for the year ended December 31,
1997 with pro forma adjustments as if the transaction had taken place on January
1, 1997. The unaudited pro forma statement of operations for the year ended
December 31, 1997, is presented using the combined audited historical results of
the Company and Auro Computer Systems for the respective period. The unaudited
pro forma statement of operations for the three months ended March 31, 1998, is
presented using the combined unaudited historical results of the Company and
Auro Computer Systems for the respective period. The unaudited pro forma balance
sheet presents the historical balance sheets of the Company and Auro Computer
Systems as of March 31, 1998, with adjustments as if the transaction had been
consummated as of January 1, 1997 in a transaction accounted for as a purchase
in accordance with generally accepted accounting principles.
Certain reclassifications have been made to the historical financial
statements of the Company and Auro Computer Systems to conform to the pro forma
financial statement presentation.
PRO FORMA ADJUSTMENTS
The following adjustments give pro forma effect to the transaction:
(a) To record cash received from Brian Berger for minority interest of $100,000.
(b) To record loan from Provident Bank for $500,000 used to finance purchase.
(c) To record purchase price consideration and goodwill. As part of the
purchase agreement the seller contributed the notes payable to stockholders to
capital.
(d) To record non-compete agreement for $200,000 to be paid monthly over two
years.
(e) To record amortization of goodwill using the straight-line method over 20
years.
(f) To record deferred tax effect for pro forma adjustments.
(g) To record portion of acquisition bonus payable to minority interest.
(29)
<PAGE> 30
CABLE LINK, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
CONTINGENCY
As outlined in Section 1.7 of the Stock Purchase and Non-Compete Agreement
included herein as Exhibit 2.1, the buyers have requested a refund of the
overpayment of purchase consideration of $522,106. The sellers have a period to
dispute the overpayment and the dispute will be submitted to the CPA firm of
Winterset CPA for resolution. The effect of the contingent overpayment refund
would be to increase net income by $17,230, basic earnings per share by $.011
and diluted earnings per share by $.009.
ACQUISITION BONUS
The Board approved a $180,000 bonus payable to Cable Link related to the
acquisition of Auro. The amount will be reported as an expense in the 10-QSB for
the six months ended June 30, 1998, and therefore is not reflected in the
accompanying financial statements.
(30)
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NO. IN
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DOCUMENT COPY
<S> <C> <C>
2.1 Stock Purchase and Non-Compete Agreement
among PC & Parts, Inc., its Shareholders, Brian
Berger and Cable Link, Inc. dated May 18, 1998 *
2.2 Stock Agreement among Cable Link, Inc., PC & Parts,
Inc. and Brian Berger dated May 18, 1998 *
23.1 Consent of Groner Boyle & Quillin, LLP 32
27 Financial Data Schedule 33
</TABLE>
* Previously filed.
(31)
<PAGE> 1
EXHIBIT 23.1
We hereby consent to the use in the Form 8-K/A of our report dated April 29,
1998 relating to the financial statements of PC & Parts, Inc. dba Auro Computer
Systems.
/s/ Groner, Boyle & Quillin, LLP
(32)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PC & PARTS,
THE DBA AURO COMPUTER SYSTEMS UNAUDITED FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1998 DEC-31-1997 DEC-31-1996
<EXCHANGE-RATE> 1 1 1
<CASH> 83,781 121,744 70,800
<SECURITIES> 0 0 0
<RECEIVABLES> 1,731,839 1,519,756 1,367,520
<ALLOWANCES> 29,526 29,526 0
<INVENTORY> 261,505 36,381 385,895
<CURRENT-ASSETS> 2,226,922 2,146,880 1,977,400
<PP&E> 458,320 428,067 273,622
<DEPRECIATION> (198,865) 156,861 70,583
<TOTAL-ASSETS> 2,501,761 2,432,386 2,194,739
<CURRENT-LIABILITIES> 2,525,307 2,348,789 1,772,722
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 210,000 210,000 200,000
<OTHER-SE> (487,519) (375,624) (81,320)
<TOTAL-LIABILITY-AND-EQUITY> 2,501,761 2,432,386 2,194,739
<SALES> 3,020,454 13,536,581 12,243,014
<TOTAL-REVENUES> 3,027,900 13,557,751 12,285,229
<CGS> 2,812,746 12,432,014 11,284,246
<TOTAL-COSTS> 3,107,454 13,802,627 12,176,384
<OTHER-EXPENSES> 0 20,175 18,415
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 32,341 82,928 84,591
<INCOME-PRETAX> (111,895) (347,979) 5,839
<INCOME-TAX> 0 (48,675) (71,326)
<INCOME-CONTINUING> (111,895) (299,304) 77,165
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (111,895) (299,304) 77,165
<EPS-PRIMARY> (5.33) (14.91) 3.86
<EPS-DILUTED> (5.33) (14.91) 3.86
</TABLE>
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