<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, 1999.
|_| 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
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(614) 221-3131
- --------------------------------------------------------------------------------
(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: 1,695,076 shares of Common
Stock as of April 30, 1999
Transitional Small Business Disclosure Format (check one):
Yes X No
----- -----
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
3 Months Ending March 31
1999 1998
------------- -------------
<S> <C> <C>
Net Sales $ 5,934,651 $ 2,712,166
Cost of goods sold 4,635,705 1,828,937
Operating expenses 1,387,822 678,510
------------- -------------
Total expenses 6,023,527 2,507,447
------------- -------------
Income (loss) from operations ( 88,876) 204,719
Interest expense ( 63,019) ( 8,846)
Other income (expenses) ( 4,606) 327
------------- -------------
Income (loss) before taxes ( 156,501) 196,200
Provision for taxes 2,152 34,251
----------- -----------
Net Income (loss) before cumulative effect of change
in accounting principle ( 158,653) 161,949
Cumulative effect of change in accounting
principle, net ( 42,246) -
------------- -------------
Net income (loss) $ ( 200,899) $ 161,949
============== ===========
Basic earnings (loss) per share for net income (loss) before
cumulative effect of change in accounting principle $ (0.09) $ 0.10
Weighted average shares outstanding 1,694,275 1,673,889
Basic (loss) per share for cumulative effect of
change in accounting principle $ (0.02) $ -
Weighted average shares outstanding 1,694,275 1,673,889
Basic earnings (loss) per share for net income (loss) after
cumulative effect of change in accounting principle $ (0.11) $ 0.10
Weighted average shares outstanding 1,694,275 1,673,889
Diluted earnings (loss) per share for net income (loss) $ (0.11) $ 0.08
Weighted average shares outstanding 1,694,275 2,008,605
</TABLE>
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
MARCH 31 December 31
(UNAUDITED) (Audited)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 104,099 $ 61,418
Accounts receivable, net 2,887,166 3,228,285
Income tax receivable 128,676 389,023
Inventories 1,718,947 2,368,694
Prepaid expenses 61,576 84,044
Deferred income taxes 198,000 198,000
Covenant not to compete 136,873 182,498
----------- -----------
Total current assets $ 5,235,337 $ 6,511,962
----------- -----------
Property and Equipment
Property and equipment, at cost 1,914,350 2,043,867
Accumulated Depreciation ( 1,071,476) ( 1,108,912)
----------- -----------
Total Property and Equipment 842,874 934,955
----------- -----------
Other Assets
Covenants not to Compete 43,920 45,116
Goodwill 516,209 530,857
Deferred tax asset 55,000 55,000
Organization cost - 42,246
Deposits 43,123 44,123
----------- -----------
Total other assets 658,252 717,342
TOTAL ASSETS $ 6,736,463 $ 8,164,259
=========== ===========
</TABLE>
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
MARCH 31 December 31
(UNAUDITED) (Audited)
----------- ---------
<S> <C> <C>
LIABILITIES
Current Liabilities
Current portion long-term obligation $ 28,743 $ 45,186
Bank revolving credit line 2,474,038 2,776,607
Accounts payable 1,376,868 2,180,117
Acquisition bonus 15,000 30,000
Accrued expenses 432,894 448,457
Accrued warranty 220,965 245,258
Covenants not to compete 93,748 152,498
Total current liabilities 4,642,256 5,878,123
----------- -----------
Long-term liabilities
Covenant not to compete 29,166 29,166
Acquisition bonus 120,000 120,000
Long-term obligations 27,062 27,063
Total long-term liabilities 176,228 176,229
----------- -----------
Total Liabilities $ 4,818,484 $ 6,054,352
----------- -----------
STOCKHOLDERS' EQUITY
Current Stockholders' Equity
Common stock 1,472,357 1,463,387
Additional paid-in capital 136,136 136,136
Retained earnings 309,486 510,384
----------- -----------
Total Stockholders' Equity 1,917,979 2,109,907
----------- -----------
TOTAL LIABILITIES AND EQUITY $ 6,736,463 $ 8,164,259
=========== ===========
</TABLE>
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ending March 31, 1999 and the year ended December 31, 1998
<TABLE>
<CAPTION>
Shares of Issued Additional
and Outstanding Common Paid-In Retained
Common Stock Stock Capital Earnings Total
---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 1,673,802 $ 1,449,706 $ 136,136 $ 303,355 $ 1,889,197
Exercise of options and warrants 15,334 $ 13,681 - - $ 13,681
Net Income - - - $ 207,029 $ 207,029
--------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 1,689,136 $ 1,463,387 $ 136,136 $ 510,384 $ 2,109,907
Exercise of options and warrants 5,940 $ 8,970 - - $ 8,970
Net Income (loss) - - - $( 200,899) $( 200,899)
--------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 1999 1,695,076 $ 1,472,357 $ 136,136 $ 309,486 $ 1,917,979
========= =========== =========== =========== ===========
</TABLE>
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three Months Ending March 31
<TABLE>
<CAPTION>
1999 1998
------------ --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ ( 200,899) $ 161,949
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 137,155 51,145
Loss on sale of equipment 10,368 -
Cumulative effect of change in accounting principle 42,246 -
(Increase) decrease in operating assets:
Accounts receivable 341,119 (393,966)
Income tax receivable 260,347 -
Inventories 649,747 182,228
Prepaid and other assets 23,468 16,502
Increase (decrease) in operating liabilities
Accounts payable (803,249) (151,544)
Accrued warranty (24,293) -
Acquisition bonus (15,000) -
Accrued expenses (15,563) (176,357)
------------ -----------
Total adjustments 606,345 (471,992)
Net cash provided by (used in) operating activities 405,446 (310,043)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (57,870) ( 10,881)
Proceeds from sales of equipment 63,897 -
------------ -----------
Net cash used in investing activities 6,027 (10,881)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 8,970 2,800
Payments on covenant not to compete liability (58,750) -
Net increase (decrease) in line of credit (302,569) 225,240
Principal payments on debt (16,443) ( 27,441)
------------ -----------
Net cash provided by (used in) financing activities (368,792) 200,599
------------ -----------
Net increase (decrease) in cash 42,681 (120,325)
Cash - beginning of period 61,418 204,990
------------ -----------
Cash - end of period $ 104,099 $ 84,665
============ ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 63,019 $ 8,846
Cash paid for income taxes during the period $ 2,152 $ 129,000
</TABLE>
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CABLE LINK, INC AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NATURE AND SCOPE
On May 18, 1998 the Company purchased 85.1% of the common stock of PC & Parts,
Inc dba Auro Computer System for $370,000 in cash. On December 28, 1998 the
Company purchased the remaining minority interest for $100,000 in cash.
The interim consolidated financial statements have been prepared by the Company
without an audit and, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair statement of the consolidated
financial position of the Company as of March 31, 1999, the consolidated results
of operations for the three month ended March 31, 1999 and consolidated cash
flow for the three month ended March 31, 1999. Interim results are not
necessarily indicative of results for a full year.
The balance sheet as of December 31, 1998 has been derived from the financial
statements that have been audited by the Company'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 Company. The financial statements and
notes included herein should be read in conjunction with the financial
statements and notes included in the Company's annual report, Form 10-KSB and
the audited statements of the Subsidiary filed with Form 8-K/A on November 6,
1998.
BASIS OF PRESENTATION
The acquisition has been accounted for under the purchase method of accounting
based on the Subsidiary's balance sheet as of May 5, 1998, the agreed upon
closing date. The consolidated financial statements are on the accrual basis of
accounting and include the financial statements of its wholly-owned Subsidiary
after the acquisition closing date of May 5, 1998. All significant inter-company
balances and transactions have been eliminated in consolidation.
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, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting periods. Actual amounts
could differ from these estimates.
AMORTIZATION OF GOODWILL
Purchased goodwill is amortized using the straight-line method over 15 years.
NOTE PAYABLE - BANK
As part of the acquisition, the Company borrowed $500,000, which bears interest
at the prime interest rate plus 1%. This matures on April 30, 1999. As of May 1,
1999 this note was converted to a one year note and amortized on an equal
monthly payment of principal based on a five year schedule ($8,333.33) plus
interest. The interest rate is prime plus 1%.
ACQUISITION BONUS
In 1998, the Company Board of Directors approved a $180,000 bonus payable to the
Chief Executive Officer of Cable Link related to the acquisition of the
Subsidiary. The bonus is payable in equal monthly installments of $5,000. The
payments, which commenced in the first twelve months beginning July 6, 1998, are
without conditions. The remaining payments in the second and third twelve-month
periods are subject to the conditions that the
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percentage of earnings of the Subsidiary is equal to or greater than 15% of the
capital invested in the Subsidiary by the Company.
COVENANTS NOT TO COMPETE
Under the terms of the purchase agreement, the Company will pay the sellers
$150,000 in monthly installment over two years. Accordingly, a short-term and
long-term liability has been recognized. The Company has allocated $200,000 of
the purchase price to the covenant to be amortized using the straight-line
method over the same two year period. Additionally, the Company has a non
compete agreement with the Subsidiary's former president through December 31,
1999. The amount of $82,500 will be paid over six months. Accordingly, a
short-term asset and liability have been recorded and will be amortized using
the straight-line method during 1999.
REPORTABLE SEGMENTS
The Company implemented Financial Accounting Standards Board Statement No. 131
"Disclosures About Segment of an Enterprise and Related Information."
Comparative segment information is not presented for the first quarter ending
March 31, 1998 since the acquisition of PC & Parts dba Auro Computer Systems
date was not consummated until May 5, 1998.
Management has elected to identify the Company's reportable segments based on
operating units: Cable Link, Inc and PC & Parts dba Auro Computer Systems.
Information related to the Company's first quarter 1999 reportable segments is
as follow:
<TABLE>
<CAPTION>
Auro
Cable Link Computer
Inc. Systems Total
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 3,163,075 $ 2,771,576 $ 5,934,651
Cost of sales 2,073,846 2,561,859 4,635,705
------------ ----------- -------------
Gross margin 1,089,229 209,717 1,298,946
Operating expenses 784,014 589,160 1,373,174
------------ ----------- -------------
Operating income (loss) 305,215 ( 379,443) ( 74,228)
Interest expenses ( 31,337) ( 31,682) ( 63,019)
Other income (expenses) ( 10,211) 5,605 ( 4,606)
------------ ----------- -------------
Operating income (loss) $ 263,667 $( 405,520) $( 141,853)
Cumulative effect of change in
accounting principle, net ( 42,246) - ( 42,246)
------------ ----------- -------------
Operating income (loss) after change
in accounting principle, net $ 221,361 $( 405,520) $( 184,099)
Total assets $ 4,563,461 $ 2,562,289 $ 7,125,750
Depreciation and amortization
expenses $ 47,509 $ 74,998 $ 122,507
</TABLE>
A reconciliation of the segments' operating income to the consolidated net loss
is a follows:
<TABLE>
<S> <C>
Segments operating income $( 184,099)
Less:
Income tax expense 2,152
Goodwill amortization 14,648
Consolidated net (loss) income $( 200,899)
</TABLE>
A reconciliation of the segments' total assets to the consolidated total assets
is as follows:
<TABLE>
<S> <C>
Segments total assets $ 7,125,750
Plus:
Goodwill 516,209
Less:
Investment in subsidiary at cost ( 470,000)
Intercompany receivables ( 435,496)
Consolidated total assets $ 6,736,463
</TABLE>
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REPORTABLE SEGMENTS (continued)
A reconciliation of the segments' total depreciation and amortization to the
consolidated total depreciation and amortization is as follows:
<TABLE>
<S> <C>
Segments total depreciation and
Amortization $ 122,507
Amortization of goodwill 14,648
------------
Consolidated total depreciation
And amortization $ 137,155
</TABLE>
PROFORMA OPERATIONS
The following unaudited consolidated results of operations of the Company for
the three months ended March 31, 1998 assumes that the acquisition of the
Subsidiary occurred on January 1, 1998. These proforma results are not necessary
indicative of the actual results of operations that would have been achieved nor
are they necessary indicative of future results of operations.
Net revenues $ 4,699,741
Net income 94,913
Basic net income per share .06
Diluted net income per share .05
NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 1999, the Company adopted Statement of Position (SOP) 98-5
"Reporting of Start-up Activities," which requires all start-up costs previously
capitalized by the Company to be expensed. The cumulative effect of the change
in accounting principles is reflected in the statement of operations net of tax
effects. All start-up costs incurred after adoption of the SOP will be expensed
as incurred.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires companies to recognize
all derivative contracts as either assets or liabilities in the balance sheet
and to measure them at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge, the object of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (I) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (II) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
Historically, the Company has not entered into derivative contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard to affect its financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
The following discussion should be read in conjunction with the financial
statements and footnotes appearing elsewhere herein. Fluctuations in annual
operating results may occur as a result of certain factors such as the size and
timing of customers' orders and competition. Due to such fluctuations,
historical results and percentage relationships are not necessarily indicative
of the results for any future period. Statements which are not historical facts
contained in this report are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results and are made pursuant to the "safe harbor provisions of the
Private Securities Litigation Act of 1995". Factors that could cause actual
results to differ materially include, but are not limited to, the following: the
ability to obtain new contracts at attractive prices; the size and timing of
customers orders; fluctuations in customer demand; competitive factors; the
timely completion of contracts; and general economic conditions, both
domestically and abroad. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements, which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
GENERAL
Cable Link, Inc. (Cable Link) sells new, used 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 singe, leased facility in Columbus, Ohio.
In 1998 the Company purchased 100% of the stock of PC & Parts, Inc. dba Auro
Computer Systems (the "Subsidiary"). The Subsidiary is located in a suburb of
Columbus and resells computer hardware and assembles computer hardware
components into personal computers. The Subsidiary also sells personal computer
software and provides both Wide Area Network (WAN) and Local Area Network (LAN),
year 2000 testing solutions, and many other service and support needs throughout
Central Ohio and the surrounding are. Beginning in February 1999, the Subsidiary
will outsource all computer hardware assembly.
RESULTS OF OPERATIONS
NET SALES
Net sales for the Company for the first quarter ending March 31, 1999 were
$5,934,651 compared to $2,712,166 for the first quarter ending March 31, 1998,
an increase of $3,222,485. This represents an increase of 118.8% over the
previous year for the same period. The increase in sales is primarily
attributable to the inclusion of sales of the Subsidiary. Sales for Cable Link
for the first quarter ending March 31, 1999 increased $450,900 or 16.6% as
compared to the same period in 1998.
COST OF GOOD SOLD
The cost of goods sold for the Company for the first quarter ending March 31,
1999 was $4,635,705, an increase of $2,806,768 as compared to same period for
1998. The increase in 1999 is primarily attributable to the inclusion of the
Subsidiary's cost of goods sold for 1999. Hardware and software sales for the
Subsidiary carry substantially higher cost of goods sold as compared to those
products sold by Cable Link. The Subsidiary is focusing efforts on the service
side of the business, which could contribute, to higher gross margins in the
future. Cable Link's cost of goods sold increased slightly due to the increase
in sales and the sale of new products, which carry a lower gross margin than its
refurbished equipment sales and repairs.
OPERATING EXPENSES
Operating Expenses increased to $1,387,822 for the first quarter ending March
31,1999 as compared to $678,510 for the same period in 1998. The increase in the
operating expenses is attributable in part to the inclusion of the Subsidiary's
operating expenses. Operating expenses decreased to 23.4% of sales for the first
quarter ending March 31,1999 from 25.0% for the same period in 1998. The
decrease in operating expenses as a percent of sales is due to the inclusion of
the sales of the Subsidiary and the increase in Cable Links sales. Cable Link
and the Subsidiary
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continue to implement procedures and review the Company's organizational
structure in an attempt to increase efficiencies and further reduce costs.
INCOME (LOSS) FROM OPERATIONS
The loss from operations for the first quarter ending March 31, 1999 was $88,876
as compared to a income of $204,719 for the same period in 1998, a decrease of
$293,595. The decrease in income from operations is a result of the Company's
increase in cost of goods sold and an increase in operating expenses. The
increase in hardware, software, and new products sales resulted in an increase
in the cost of goods sold for the Company. These product sales carry a higher
product cost than the service, repair, and refurbishing sales.
In the first quarter of 1999, the Subsidiary hired additional sales people in an
effort to increase the Subsidiary's service sales. The increase in the sales
force and costs otherwise associated with this change of focus contributed to
the Subsidiary's loss from operations.
The following are management's discussion and analysis of material changes in
financial position during the first quarter ending March 31,1999.
ACCOUNTS RECEIVABLE
Accounts Receivable decreased $341,199 or 10.6% from December 31, 1998 as
compared to the March 31, 1999 balance of $2,887,166. This decrease in Accounts
Receivable is due to improved collections on accounts and the decrease in sales
for the first quarter for the Subsidiary.
INVENTORIES
Inventory decreased 27.4% or $649,747 from December 31, 1998 as compared to
March 31, 1999. Approximately one third of the decrease is attributable to the
non-replenishment of inventory of the Subsidiary due to outsourcing the assembly
of the computers sold. The remaining two third decrease is attributable to the
sale of new products from Cable Link's inventory.
COVENANTS NOT TO COMPETE
Under the terms of Amendment No. 1 of the Stock Purchase and Non-Compete
Agreement included as exhibit 2.3 of the Form 8-K/A filed on November 6, 1998,
the Company will pay the sellers of the Subsidiary $150,000 in monthly
installments over two years and the sellers agreed to not compete with the
Subsidiary for two years. A short-term and a long-term liability have been
recognized. The Company allocated $200,000 of the purchase price to the covenant
to not compete to be amortized using the straight-line method over the same two
year period. The Company has a non-compete agreement with the Subsidiary's
former president through December 31, 1999. The amount of $82,500 will be paid
over six months. Accordingly, a short-term asset and liability have been
recorded and will be amortized using the straight-line method during 1999.
ACCOUNTS PAYABLE
Accounts Payable decreased 36.8% or $803,249 from December 31, 1998 as compared
to March 31, 1999. The majority of the decrease is attributable to decline in
the Subsidiary's inventory stocking level and the decrease in the inventory
level of Cable Link. The inventory of Cable Link was purchased on negotiated
dated terms.
SHORT TERM OBLIGATIONS
Short-term obligations decreased by $302,569 from December 31, 1998 as compared
to March 31, 1999. This decrease is due to improved cash flow generated by
higher sales by Cable Link and improvement in accounts being received within
terms.
ACCRUED WARRANTY EXPENSE
The Subsidiary provides a three year on-site parts and labor warranty on
hardware sold. Replacement components are generally provided by the original
equipment manufacturer. The Subsidiary is responsible for installing the
replacement parts. The Subsidiary has estimated the future labor costs to
install replacement parts for the systems that remain under this warranty as of
December 31, 1998. Based on past experience the majority of warranty calls are
made during the first few months of ownership, and therefore the entire
liability is classified as short term. In
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August 1998, the Subsidiary revised its warranty policy to provide for on-site
parts and labor service for thirty days. After thirty days, the customer will be
charged for all travel time, unless an extended warranty is purchased.
LIQUIDITY AND CAPITAL RESOURCES
On May 18, 1998, the Company purchased 85.1% of the common stock of the
Subsidiary. Based on the unadjusted purchase price, the Company used net cash of
approximately $700,000 to purchase this common stock. The cash came from an
issuance of long-term debt of $500,000. In September, 1998 the Company signed
Amendment No.1 to the Stock Purchase and Non-Compete Agreement to resolve
differences in the original purchase price. The Amendment provided for a
$350,000 reduction in the original purchase price of $820,000. The $350,000
overpayment was refunded as follows: 1) a cash refund of $80,000, 2)
cancellation of the notes payable to former stockholders of $120,000 3)
repayment to the Company of $100,000 previously held in escrow and 4) a pro rata
reduction of $50,000 in non-compete agreements. On December 18, 1998 the Company
purchased the remaining minority interest for $100,000.
The Company finances its operations primarily through internally generated funds
and bank lines of credit totaling $3,300,000. Bank borrowings decreased by
$302,569 in the first quarter ending March 31,1999 compared to December 31,
1998. Accounts receivable decreased $341,199 or 10.6% from December 31, 1998 as
compared to March 31, 1999. Inventory decreased $649,747 from December 31, 1998
to March 31, 1999 or 27.4%. Accounts Payable decreased $803,249 from December
31, 1998 as compared to March 31, 1999
As the need for additional capital arises from the increase in business, the
company has made arrangements with the lender through the existing bank credit
facility to meet its needs.
The external sources of cash include the bank line of credit increase and the
$500,000 term note. The Company anticipates no material capital expenditures at
this time. The Company believes that its available financial resources including
the line of credit facility and operating cash flow will be adequate to meet its
foreseeable working capital, debt service and capital expenditures requirements.
YEAR 2000
Cable Link and its Subsidiary ("the Company") have in place detailed programs to
address Year 2000 readiness in its internal control systems and with its key
customers and suppliers. The Year 2000 issue is a result of computer logic that
was written using two digits rather than four to define the applicable year. Any
computer logic that processes date-sensitive information may recognize the date
using "00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors such as heating and cooling systems) in
use by both Cable Link and the Subsidiary, including accounting, repair
equipment, service orders and sales order processing have been addressed. In
addition the plans developed by the Company for information technology systems
and non-information technology systems have been implemented and the required
systems have been modified or replaced. The Company has taken the following
actions regarding its critical areas:
Accounting - The Company purchased and installed new accounting system
software and hardware or upgrades from outside vendors that are Year 2000
compliant. These upgrades and new systems were required to implement reporting
enhancements and were not purchased solely to become year 2000 compliant.
Repair equipment - All repair equipment has been tested and the
required modification or upgrades have been completed.
Sales and service order system - All modifications to software have
been made to be year 2000 compliant. These modifications have been tested.
The Company is also communicating with its major customers, suppliers and
financial institutions to assess the potential impact on the Company's
operations if those third parties fail to become Year 2000 compliant in a timely
manner. While this process is not complete, based on responses to date, it
appears that many of those customers and
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suppliers have only indicated that they have in place Year 2000 readiness
programs, without specifically confirming that they will be Year 2000 compliant
in a timely manner. Risk assessment, readiness evaluation, and contingency plans
are expected to be completed by December 31, 1999. The Company's key financial
institutions have been surveyed and it is the Company's understanding that they
are or will be Year 2000 compliant on or before December 31, 1999. The
Subsidiary does not take responsibility for any software purchased from the
Subsidiary that does not allow for the year 2000 rollover. The Subsidiary is
providing all major customers with information to assist them in evaluating
processing systems.
The costs incurred to date related to its Year 2000 activities have not been
material to the Company and based upon estimates, the Company does not believe
that the total cost of its Year 2000 readiness programs will have a material
adverse impact on the Company's results of operations or financial condition.
Based on the Company's current assessment of its information and
non-informational technology systems, it does not believe it is necessary to
develop extensive contingency plans for those systems. There can be no
assurance, however, that any of the Company's plans will be sufficient to handle
all problems or issues that may arise.
The Company believes that it is taking reasonable steps to identify and address
those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the implementation of new
systems, a failure to fully identify all Year 2000 deficiencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of any plan could have a material
adverse effect on the Company's business, financial conditions and results of
operations. For example, the Company would experience a material adverse impact
on its business if significant suppliers' systems fail to timely provide the
Company with necessary inventories or services due to Year 2000 system failures.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time frame in which the Company plan to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
13
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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.
14
<PAGE> 15
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.
(8) Plan of Acquisition, Reorganization, etc.
See Exhibit 8.1. Stock Purchase and Non-Compete Agreement
among PC & Parts, Inc., its Shareholders, Brian Berger and
Cable Link, Inc. dated May 18, 1998.
See Exhibit 8.2. Stock Agreement among Cable Link, Inc., PC &
Parts, Inc. and Brian Berger dated May 18, 1998.
(10) Consents. The consent of Groner, Boyle & Quillin, LLP
(b) Reports on Form 8-K.
A report on Form 8-K was filed on May 29, 1998 reporting the
acquisition of PC & Parts, Inc. and an amendment thereto was
filed on July 30, 1998 containing financial statements
required pursuant to Item 7 of the Form 8-K.
15
<PAGE> 16
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 14, 1999 By s/ Bob Binsky
------------------------------ -----------------------------------
Bob Binsky, Chairman of the Board
(principal executive officer)
By s/ Zaida Wahlberg
-----------------------------------
Zaida Wahlberg, Treasurer
(principal accounting officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<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)).
8.1 Stock Purchase and Non-Compete Agreement among PC & Parts, Inc., its
Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998
(incorporated by reference to Exhibit 2.1 to the Form 8-K of Registrant
filed May 29, 1998, Registration No. 0-23111) *
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C> <C>
8.2 Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian
Berger dated May 18, 1998 (incorporated by reference to Exhibit 2.2 to
the Form 8-K of Registrant filed May 29, 1998, Registration No. 0-23111)
*
10.1 Consent of Groner, Boyle & Quillin, LLP (incorporated by reference to *
Exhibit 10.1 to the Form 10-KSB40 of Registrant filed March 31, 1999,
Registration No. 0-23111)
27. Financial Data Schedule (submitted electronically for SEC purposes only)
</TABLE>
*Incorporated by reference
18
<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,
1999 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 104,099
<SECURITIES> 0
<RECEIVABLES> 3,078,693
<ALLOWANCES> 62,851
<INVENTORY> 1,718,947
<CURRENT-ASSETS> 5,235,337
<PP&E> 1,914,350
<DEPRECIATION> 1,071,476
<TOTAL-ASSETS> 6,736,463
<CURRENT-LIABILITIES> 4,642,256
<BONDS> 0
0
0
<COMMON> 1,472,357
<OTHER-SE> 445,622
<TOTAL-LIABILITY-AND-EQUITY> 6,736,463
<SALES> 5,934,651
<TOTAL-REVENUES> 5,934,651
<CGS> 4,635,705
<TOTAL-COSTS> 6,023,527
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 63,019
<INCOME-PRETAX> (156,501)
<INCOME-TAX> 2,152
<INCOME-CONTINUING> (158,653)
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<EXTRAORDINARY> 0
<CHANGES> (42,246)
<NET-INCOME> (200,899)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
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