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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from ______ to ______
Commission file number 0-23111
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, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
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 past 90 days.
Yes X No
--- ---
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenue for its most recent fiscal year was $20,567,249.
The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant on March 12, 1999 was $2,418,857.
The number of shares of Common Stock outstanding on March 12, 1999 was
1,695,076.
Transitional Small Business Disclosure Format (check one)
Yes X No
--- ---
The following documents have been incorporated by reference into this
Form 10-KSB:
Document Part of Form 10-KSB
Registrant's Proxy Statement for its Part I
1999 Annual Meeting of Shareholders
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PART I
ALTERNATIVE 2
ITEMS 6-11 OF MODEL B OF FORM 1-A
ITEM 6. DESCRIPTION OF BUSINESS
In 1998, Cable Link, Inc. purchased 100% of the stock of PC & Parts,
Inc., dba Auro Computer Systems.
Cable Link, Inc. is referred to herein as the "Parent". PC & Parts,
Inc. dba Auro Computer Systems is referred to herein as the "Subsidiary". The
consolidated Company is referred to herein as the "Registrant" or the "Company".
The core business of the Parent is the refurbishment, repair and sale
of previously owned cable television ("CATV") equipment. The Parent purchases
the equipment from cable operators who have surplus due to either an upgrade in
their system or an overstock in their warehouse. This equipment is sold both "as
is" and refurbished to CATV operators throughout North America, South America,
Mexico and the Pacific Rim. The Parent supplies virtually any type of electronic
equipment a cable operator would use, from the headend (receiving and
transmitting site) to the converter box at the customer's home. The Parent
distributes new equipment and acts as a consignment agent for new equipment, on
behalf of equipment manufacturers. The Parent has been recognized by
Scientific-Atlanta, Inc. ("SA") as an Authorized Part Distributor and a New
Products Distributor. The Parent entered into a Distribution Agreement with
Scientific-Atlanta, Inc. ("SA") effective as of March 1, 1997, whereby the
Company was appointed as a non-exclusive distributor to purchase products of SA
for its own account and resell to customers within the United States. Unless
terminated earlier as provided in the Agreement, the term will expire on
December 31, 1999. This Agreement is designed to enhance the Parent's agreement
with SA for the sale and distribution of refurbished equipment only. SA is the
second largest manufacturer of cable television equipment in the world.
The Parent has historically received a portion of its revenue from
sales in the international market. Because CATV penetration is low in many
foreign countries, management of the Parent believes that the international
market presents an additional opportunity for the sale of the Parent's products
and equipment. The Parent currently conducts foreign business in South America,
Mexico, and the Pacific Rim. The Parent's foreign operations are subject to the
usual risk inherent in situating operations abroad, including the risks with
respect to economic and political destabilization, currency fluctuations,
restrictive actions by foreign governments, nationalization, the law and
policies of the United States affecting trade, foreign investments and loans and
foreign tax laws.
The Parent has a small business credit insurance policy from the United
States Export Import Bank ("EX-IM Bank"). The EX-IM Bank is a United States
government agency established to promote export growth. This policy will allow
the Parent to extend credit terms to qualified international customers and have
guaranteed payment. The EX-IM Bank will insure the receivable against 100%
political risk and 95% commercial risk for terms up to one year. EX-IM Bank also
provides special capital goods project financing for terms of one to ten years
which will allow the Parent to provide long term financing for CATV capital
equipment and participation in large projects.
The Parent believes that there are significant opportunities for CATV
equipment sales both domestically and internationally. CATV operators are
offering an expanded menu of services to their subscribers and can increase
rates along with the service enhancements. The ability to increase rates to
subscribers provides the necessary incentive to CATV operators to upgrade
channel capacity and create additional tiers of programming. The Parent sells
equipment to allow CATV operators to increase channel capacity and better manage
subscriber services and rates. Further, CATV operators and suppliers, including
the Parent, are
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demonstrating that system upgrades with currently available equipment and system
architectures can be used as a basis to provide advanced subscriber services.
Management of the Parent believes that, for the most part, the international
CATV industry and markets are technologically behind the United States market
and that there will continue to be an increase of system upgrades and capital
spending to develop more advanced CATV systems abroad. The Management also
believes the Parent is well positioned to participate in the development of the
CATV industry abroad.
The Parent was incorporated under the laws of the State of Ohio on
December 28, 1987. The Parent operates both its administrative and manufacturing
operations from a single, leased facility at 280 Cozzins Street, Columbus, Ohio
43215. Its telephone number is (614) 221-3131.
The core business of the Subsidiary is a computer solutions provider.
The Subsidiary assembles high quality / high performance personal computers. In
addition, the Subsidiary provides system consulting and a full range of Novell
and Windows NT network services including design, installation, and support. The
design, installation, and support of both Novell and Windows NT networks are a
large part of the Subsidiary's business. The network department consists of
seven network engineers. The Subsidiary is capable of implementing small
business or departmental local area networks up to large multi-locations wide
area networks. As with personal computers, the Subsidiary will only specify
quality components is part of a total network solution. Novell and Microsoft
network operating systems, Cicso, Bay Networks, 3Com, and Adaptec/Cogent are a
few of the software and hardware manufacturers included. The Subsidiary's
services also include consultation services, project management, design and
installation of network systems, training and support, break/fix, staff
augmentation, procurement services, IMAC and asset management. The Subsidiary is
known as a Value Added Reseller (VAR). The Subsidiary continually offers a wide
variety of hardware and services to its customers. These services include
repairs of personal computers, network engineering, monitor repair, printer
repair, consultation services, and project management.
The Subsidiary was incorporated under the laws of the State of Ohio on
October 1, 1989. The Subsidiary operates its business from a single, leased
facility at 469 Westdale Avenue, Westerville, Ohio 43082. Its telephone number
is (614) 523-1733.
The Company has a revolving credit line with a bank for $2,500,000. The
credit line is secured by substantially all assets of the Company and is payable
on demand. The line matures on April 30, 1999, and interest is charged at prime
plus 1% (8.75% and 9.5% at December 31, 1998 and 1997, respectively).
Outstanding borrowings at December 31, 1998 and 1997 were $2,276,607 and
$290,957, respectively. Subsequent to year-end, the credit line was increased by
$800,000 to $3,300,000.
The Company has a note payable to a bank relating to the acquisition of
the Subsidiary. The face amount of the note is $500,000 and interest is due
monthly at prime plus 1%(8.75% at December 31, 1998). The principal is due at
maturity on April 30, 1999. The note is secured by substantially all of the
assets of the Company.
For segment information, refer to the Notes to Consolidated Financial
Statements for Reportable Segments of Cable Link, Inc. "Parent" and PC & Parts,
Inc. dba Auro Computer Systems "Subsidiary" included in this Annual Report.
STRATEGY
The basic strategy of the Parent is to: (a) maintain and expand its
current customer base in the United States for the sale of refurbished CATV
equipment while focusing on expanding the repair side of the United States
market, (b) continue to develop new markets in South America, Mexico, China, and
the Pacific Rim, and (c) increase the Parent's new product distribution.
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The Parent believes that the CATV industry is expanding from a home
entertainment service to providing telecommunications services to both homes and
businesses. Management believes that they are well positioned to thrive and
prosper in the industry.
The basic strategy of the Subsidiary is to transform from a typical
hardware sales organization to an information technology solutions provider. The
Subsidiary will continue to provide superior services, products and customer
satisfaction, with a continued emphasis on service, support, and staff
supplementation by developing PC support offerings and service contracts for its
customers. The Subsidiary will continue to maintain and expand its current
customer base and continue to develop additional relationships and strategic
alliances with major manufacturers of computer hardware.
The acquisition of the Subsidiary by the Company continues the strategy
to be involved in all facets of the telecommunications environment which it sees
integrating with telephony to change the composition of the residential and
business communication industry.
INDUSTRY AND MARKET BACKGROUND
The Parent services the CATV industry. CATV is a service that delivers
multiple channels of television to subscribers who pay a monthly fee for the
services they receive. A CATV system consists of four principal components. The
first is the "up-link" where the programmer's signal is first scrambled and
addressed, and is then transmitted to a C-band satellite. The second, known as a
cable system "headend" facility, receives television signals from satellites and
other sources. The headend facility organizes and retransmits those signals
through the third component, the distribution network, to the subscriber. The
third principal component is the distribution network, which consists of fiber
optic and coaxial cables and associated electronic equipment, which originate at
the headend and extend throughout the CATV system. The fourth component of the
CATV system, the subscriber equipment, is comprised of a "dropwire" which
extends from the distribution network to the subscriber's home and connects
either directly to the subscriber's television set or to a converter box. An
addressable converter box is a home terminal device, which permits the efficient
delivery of premium CATV services, including pay-per-view programming, by
enabling the CATV operator to control CATV subscriber services from a central
headend computer.
CATV operators generally offer to subscribers a basic service package
and, for additional charges, additional tiers of services, including premium
services. Basic service programming typically includes broadcast network local
affiliates, independent television stations and other locally originated
programs. Additional tiers of service may consist of different
satellite-delivered services and premium services, such as HBO and ShowTime that
typically are offered to subscribers as a package for a separate monthly fee.
Successive tiers of programming include additional services for additional
monthly fees. In addition, movies and special entertainment events, such as
boxing matches and Olympic Games can be offered to subscribers with addressable
converters on a selective, pay-per-view basis. CATV operators are also
introducing digital cable audio services, which consist of multiple channels of
commercial-free, compact disc quality music and programming.
The Subsidiary is part of the computer reselling and services
business, which includes competitors such as computer dealers, chain stores,
computer super stores, and direct order. The Subsidiary will continue to attempt
to develop it's products and services to compete.
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CAPITAL EXPENDITURES
Construction, maintenance, expansion and upgrade of CATV systems
require significant capital expenditures by CATV operators for system
components, including coaxial and fiber optic cable, traditional radio frequency
("RF") amplifiers and fiber optic electronics, and addressable system
controllers and converters.
A major trend in the cable and satellite television industry has been
the continuing expansion of channel capacity in response to CATV operators'
desire to provide subscribers with more programming selections, including
pay-per-view and additional premium programming services.
The Parent expects that CATV operators will continue to spend to
upgrade the technological capabilities of their systems and increase channel
capacity in order to meet subscriber demand for more programming services, such
as expanded pay-per-view, premium services and digital cable audio, which, in
turn, provides opportunities for increased revenues for the CATV operators. In
addition, new technologies can improve a CATV operator's margins and customer
services by increasing the CATV system's reliability, picture quality and the
"user friendliness" of the converter. The Parent also expects CATV operators to
increase spending to meet governmental requirements for renewing franchises and
to position themselves to enter new and potential markets such as telephone and
personal communications networks.
With respect to technology, CATV operators and suppliers, including the
Parent, are demonstrating that system upgrades with currently available
equipment and system architectures can be used as a basis to provide advanced
subscriber services.
Moreover, the growing use of United States broadband system designs and
equipment in international markets, where CATV penetration is low, presents
another opportunity for sales of the Parent's systems and equipment.
The construction, maintenance and expansion of technological systems
will require substantial upgrades of existing networks of customers and
potential customers of the Subsidiary. Newer software programs are continually
being developed. These programs require larger more powerful computers and
servers to run at peak performance. The constant changes will lead to businesses
investing more capital in their information technology systems.
SALES AND MARKETING
The majority of the Parent's sales activity is generated through
personal relationships developed by its sales personnel and executives,
telemarketing and direct mail to cable operators both in the United States and
abroad. The Parent has developed contacts with the major CATV operators in the
United States and is constantly in touch with these operators regarding plans
for upgrading or expansion and their needs to either purchase or sell equipment.
The Parent employs two bilingual individuals in the sales department for the
international market and eight other sales persons to service the United States.
The Parent purchases a large amount of its inventory from cable operators who
have upgraded, or are in the process of upgrading their system. The sales and
purchasing functions operate under the same umbrella using a computerized
buy/sell board to coordinate the activity between the two. In addition, the
Parent has very close relationships with major manufacturers of CATV equipment
and purchases a large amount of such equipment from these original equipment
manufacturers.
The Purchasing Department buys previously used CATV equipment
throughout North America. As a result of competition in the communications
industry, cable operators are aggressively upgrading their system with newer,
technologically advanced equipment. This provides the Parent's purchasing
department opportunities to buy equipment, which were not normally available in
the past. This competitive CATV market enables the Parent to acquire additional
inventory for sale to cable operators who are expanding with new subscribers or
who
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are upgrading their system with the newer, more expensive technology. The Parent
employs three purchasing agents.
The Parent is not dependent on one or a few customers to support its
business. There are approximately 6,000 cable television systems within the
United States, each of which is a potential customer. The international market
continues to expand which creates additional potential customers.
The Parent is also not dependent on any one supplier.
The Parent entered into a two-year agreement with Fanch Communications
Inc. on September 15, 1997 whereby the Company agreed to assist Fanch
Communications in the transfer and repair of Fanch's converters, headend, test
equipment and amplification equipment. Fanch communications is the 18th largest
multi-system operator in the country with 508,000 customers in its cable
systems.
The majority of the Subsidiary's sales activity is generated through
personal relationships developed by its sales personnel and executives. The
Subsidiary employs a staff of ten sales people. The sales staff is trained on
technical solutions to support the customers need. The focus is on small to
medium size businesses as potential customers.
The Company will provide an Internet website for the wholesale and
retail purchase of CATV equipment, both new and used, as well as consumer
electronics for television applications. The product line will include a large
number of consumable products readily available from its web site. The
Subsidiary will commence selling computers, computer upgrade, servers, and
service tier one brands such as Compaq, IBM, Toshiba, and Hewlett Packard as
well as its own "Auro" brand to businesses and consumers. The new Internet
commerce will streamline the purchasing function of customers and ensure the
most current price available.
ENGINEERING
The Parent's engineers aggressively seek to implement existing
technological developments as they strive to meet the needs of the CATV
customers.
Recent advances in technology and new federal regulations have prompted
competitive upgrade activity among cable systems operators. The Parent's
engineering department is well equipped to handle the needs of systems
operators.
The engineering department strives to ensure the on-going commitment to
quality and service is upheld by continually upgrading linegear and converters
to higher channel capabilities for United States markets and to formats
necessary for international markets. The department has the ability to perform
required FCC systems tests, both in-house and on-site, and maintains a staff
that is experienced in analog video, digital, and radio frequency (RF).
The Subsidiary's network engineers continue to be trained and certified
in the latest technology available in the market. This will ensure the
Subsidiary's on-going commitment to quality and service and to support our
customers needs. The Subsidiary employs seven certified network engineers to
support the business and changing needs of the technology.
COMPETITION
There are a number of businesses similar to the Parent throughout the
United States engaged in buying and selling used CATV equipment. The two major
competitors of the Parent are Contec Limited Partnership in the repair area and
VueScan, Inc. in the sales area.
The CATV industry is highly competitive and is characterized by
numerous companies competing in various segments of the market. Many of the
Parent's competitors have greater name recognition, more extensive engineering,
production and marketing capabilities and greater
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financial, technological and personnel resources. In addition, certain companies
in the CATV industry have expanded their product lines in recent years as a
result of acquisitions. New and used inventory items are separately identified
as items of inventory. The weighted average cost is calculated per item of
inventory. Impairment and changes in market value are evaluated on a per item
basis. There can be no assurance that the Parent will be able to compete
successfully in the future with existing or new competitors.
The most significant competitor for the Subsidiary is the company that
chooses to do service and maintenance in-house. The Subsidiary's key advantage
to in-house service is that the Subsidiary professionals are knowledgeable in
new developments and applications. The Subsidiary can also provide additional
hardware resources to the customer. Another competitor is the company
specializing in network services only. The Subsidiary can provide a higher-level
of consulting services combined with the repair ability and hardware sales to
enhance the customer's complete package.
EMPLOYEES AND TRAINING
As of December 31, 1998, the Parent had 82 full time employees, 52 of
who work on the repair and refurbishment of converters and other cable TV
equipment. There are 10 employees in shipping and receiving, 12 employees in the
sales and purchasing department, and the remaining eight are in finance and
general administration. New production employees are placed on a six-week
training program during which they are paired with an experienced technician.
None of the Parent's employees is covered by a collective bargaining agreement
and management believes that the relationship with its employees is good. Key
employees may be eligible to participate in the Company's stock option plan.
As of December 31, 1998, the Subsidiary had 55 full time employees, 33
of who work in the networking, service, and production area. There are 13
employees in the sales and purchasing department, and the remaining nine
employees are in finance and general administration.
CONTROL AND INFORMATION SYSTEMS
The Company uses a personal computer based network system to control
customer orders, sales orders, shipments, accounts receivable, inventory,
general ledger and accounts payable. All payrolls are prepared by an outside
service. The current configuration of hardware and software meets the present
needs of the Company, and is flexible enough to allow for expansion in the
future. The Parent upgraded its version of the Macola software system in 1998
and the Subsidiary installed the same version of Macola also in 1998.
PRODUCTS
The majority of the Parent's business is the sale of used CATV
equipment. The Parent purchases the equipment from cable operators and equipment
manufacturers who have surplus inventory due to either an upgrade in their
system, an overstock in their warehouse, or due to overruns or cancellations of
orders or trade-ins or upgrades. This equipment is sold both "as is" and
refurbished to CATV operators throughout North America, South America, Mexico
and the Pacific Rim. The Parent supplies virtually any type of electronic
equipment a cable operator would use, from the headend (receiving and
transmitting site) to the converter box in the customer's home. In addition to
the refurbished products, the Parent also distributes some new products and
repairs converters, linegear and headend equipment.
The following is a list of the products sold by the Parent with a brief
description of the application of each product line:
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Converters. Converters come in many different forms (addressable,
descrambling and non-descrambling or "plain-Jane") and bandwidths from 300 MHz
(36 channels) to 750 MHz (115 channels). The majority of cable operators in the
world use some type of converter in their system. The Parent specializes in
sales and repair of the Jerrold, Scientific Atlanta, Zenith, Hamlin, Pioneer and
Oak lines of converters and also sells and repairs most other manufacturers'
products.
Linegear. Linegear encompasses all products, which are actually placed
on the cable line. This includes active electronics, trunk stations and line
extenders, which amplify and distribute the cable signal, and passive equipment
such as taps, splitters and directional couplers, which simply pass the signal
through for delivery to additional lines and the customer's home. The Parent
sells and repairs all manufacturers' linegear products.
Headend. The headend is perhaps the most important part of the cable
system since this is where the signal is received, processed and transmitted to
the customer's home. For that reason, this particular product requires the most
technical expertise. This product line includes satellite receivers, modulators,
processors, encoders and videociphers, all of which are used to provide cable
delivered signal. If the cable operator's headend equipment is not calibrated
and maintained properly, the customer will receive poor picture quality. The
Parent specializes in refurbishing and repairing various manufacturers' lines of
headend products as well as modifying these for use in different video formats.
The Subsidiary provides both computer products and services to
accommodate the needs of small and medium sized businesses. The Subsidiary
focuses on providing network systems and services to include both personal
computer based local area networks and microcomputer server-based systems. These
services include consultation services, project management, design and
installation of network systems, training and support, staff augmentation,
procurement services, IMAC, and asset management.
The Subsidiary provides most brands of tier one computers including
Compaq, IBM, Toshiba, and Hewlett Packard along with network equipment and
servers.
CONSIGNMENT INVENTORY PROGRAM
In addition to the Parent's own inventory assets, it also has recently
achieved access to CATV equipment through a consignment program which does not
require payment for the equipment until 30 days after the sale. This is done
through both stocking of consignment inventory as well as having access to
excess inventory at a vendor's location. Consignment programs have been
established with Tele Communications, Inc., Scientific Atlanta, Inc., MediaOne,
and Time-Warner, Inc.
ITEM 7. DESCRIPTION OF PROPERTY
Plant and Facility
The Company leases production and office space from a former director
of the Company under an operating lease expiring in October 1999 with a two-year
renewal option. During 1998 and 1997, modifications were made to the lease which
increased the Company's occupancy area and monthly rent. At December 31, 1998,
monthly payments of $12,619 were required, subject to increase in real estate
taxes and rent increases each November. The Subsidiary leases office space from
its former owners under a non-cancelable lease agreement. The lease for the
building is $11,573 per month and expires in May 2001.
Rent expense for the Company was $287,090 and $165,888 for the years
ended December 31, 1998 and 1997, respectively.
The Company believes that its current facilities are adequate to meet
its needs.
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ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Information regarding the Registrant's directors, officers and
significant employees is set forth at "ELECTION OF DIRECTORS; Nominees for
Election as Directors" and "Executive Officers" in the Registrant's Proxy
Statement for its 1999 Annual Meeting of Shareholders (the "1999 Proxy
Statement") which information is incorporated herein by reference.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS.
The information required by this item is set forth at "COMPENSATION OF
MANAGEMENT" in the 1999 Proxy Statement which information is incorporated herein
by reference.
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
The information required by this item is set forth at "SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS"
in the 1999 Proxy Statement which information is incorporated herein by
reference.
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
The information required by this item is set forth at "CERTAIN
TRANSACTIONS" in the 1999 Proxy Statement which information is incorporated
herein by reference.
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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 quarter during its past two fiscal years is as follows:
<TABLE>
<CAPTION>
Year Quarter High Low
---- ------- ---- ----
<S> <C> <C> <C>
1998 4th 2.56 1.25
3rd 3.50 1.50
2nd 4.00 2.25
1st 4.13 3.25
1997 4th 4.13 2.88
3rd 3.29 2.44
2nd 3.16 1.74
1st 4.63 1.37
</TABLE>
The above quotations reflect inter-dealer prices, without retail
mark-up, mark down or commission and may not represent actual transactions.
Cable Link, Inc. had approximately 850 beneficial holders of common stock of
record on March 12, 1999. 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.
ITEM 2. LEGAL PROCEEDINGS
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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ITEM 5. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities and Exchange Act of 1934 requires the
company's officers and directors, and persons who own more than 10% of the
company's common stock to file reports of ownership and changes of ownership
with the SEC.
Richard Rozic, a former officer and director of the company, filed a
late report for his exercise of an option in September 1998 to purchase 13,750
shares of common stock.
ITEM 6. REPORTS ON FORM 8-K.
The Company filed a Form 8-K and a Form 8-K/A on May 29, 1998 and
November 6, 1998 respectively to report the acquisition of PC & Parts, Inc. dba
Auro Computer Systems.
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
* * * * * *
DECEMBER 31, 1998 AND 1997
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C O N T E N T S
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT 3
CONSOLIDATED BALANCE SHEETS 4
CONSOLIDATED STATEMENTS OF INCOME 6
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 7
CONSOLIDATED STATEMENTS OF CASH FLOWS 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10
</TABLE>
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[LOGO]
To the Board of Directors and Stockholders
Cable Link, Inc.
Columbus, Ohio
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Cable Link,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity, 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cable Link,
Inc. and Subsidiary as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Groner, Boyle & Quillin LLP
Columbus, Ohio
February 18, 1999
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CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 61,418 $ 204,990
Accounts receivable, net 3,228,285 1,135,607
Income taxes receivable 389,023 -
Inventories 2,368,694 1,332,619
Prepaid consulting 72,955
7,205
Prepaid and other assets 88,489
76,839
Covenants not to compete 182,498 -
Deferred income taxes 198,000 36,500
--------- ---------
Total current assets 6,511,962 2,871,160
--------- ---------
PROPERTY AND EQUIPMENT, at cost
Furniture and fixtures 626,038 585,740
Equipment 1,094,043 683,767
Leasehold improvements 224,262 175,425
Rental equipment -
78,244
Construction in progress 21,832
21,280
--------- ---------
2,043,867 1,466,764
Less accumulated depreciation (1,108,912) (774,125)
--------- ---------
Net property and equipment 934,955 692,639
--------- ---------
OTHER ASSETS
Covenants not to compete
45,116 8,235
Goodwill 530,857 -
Deferred tax asset -
55,000
Deposits 25,895
44,123
Organization costs -
42,246
--------- ---------
Total other assets 717,342 34,130
--------- ---------
TOTAL ASSETS $ 8,164,259 $ 3,597,929
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(4)
<PAGE> 17
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term obligations $ 45,186 $ 82,354
Short-term obligations 2,776,607 290,957
Accounts payable 2,180,117 765,269
Income taxes payable - 138,742
Covenants not to compete 152,498 -
Accrued expenses:
Payroll and related taxes 332,966 299,857
Accrued warranty 245,258 -
Acquisition bonus -
30,000
Other 115,491 30,141
--------- ---------
Total current liabilities 5,878,123 1,607,320
--------- ---------
LONG-TERM LIABILITIES
Covenants not to compete -
29,166
Long-term obligations 53,412
27,063
Acquisition bonus 120,000 -
Deferred income taxes - 48,000
--------- ---------
Total long-term liabilities 176,229 101,412
--------- ---------
Total liabilities 6,054,352 1,708,732
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, no par value 1,463,387 1,449,706
Additional paid-in capital 136,136 136,136
Retained earnings 510,384 303,355
--------- ---------
Total stockholders' equity 2,109,907 1,889,197
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,164,259 $ 3,597,929
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(5)
<PAGE> 18
CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues $20,567,249 $10,094,178
Cost of revenues 15,944,600 6,277,709
---------- ---------
Gross profit 4,622,649 3,816,469
Selling, general and administrative expenses 4,125,499 2,746,073
---------- ---------
Income from operations 497,150 1,070,396
---------- ---------
Other (expense) income
Interest expense (139,539) (60,541)
Reconciliation with vendors - 112,197
Other
3,572 2,824
---------- ---------
Total other (expense) income (135,967) 54,480
---------- ---------
Income before income taxes 361,183 1,124,876
Provision for income taxes
Current 61,433 246,049
Deferred 92,721 11,500
---------- ---------
Total provision for income taxes 154,154 257,549
---------- ---------
Net income $ 207,029 $ 867,327
========== =========
Basic earnings per share $ 0.12 $ 0.54
Weighted average shares outstanding used
to compute basic earnings per share 1,681,253 1,591,976
Diluted earnings per share $ 0.11 $ 0.45
Weighted average shares outstanding used
to compute diluted earnings per share 1,932,790 1,913,958
</TABLE>
The accompanying notes are an integral part of the financial statements.
(6)
<PAGE> 19
CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31,1998 and 1997
<TABLE>
<CAPTION>
Shares of
Issued and
Outstanding Additional
Common Common Paid-In Retained
Stock Stock Capital Earnings Total
----- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE -
DECEMBER 31,1996 1,384,652 $ 1,093,662 $ 136,136 $ (563,972) $ 665,826
Issuance of common
stock, net of issuance
cost of $50,893 165,000 149,107 - - 149,107
Exercise of options and
warrants 124,150 206,937 - - 206,937
Net income - - - 867,327 867,327
--------- --------- --------- ------- ---------
BALANCE -
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 -
DECEMBER 31, 1998 1,689,136 $ 1,463,387 $ 136,136 $ 510,384 $ 2,109,907
========= ========= ======= ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(7)
<PAGE> 20
CABLE LINK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 207,029 $ 867,327
---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 343,364 174,599
Bad debts
61,245 29,450
Deferred income taxes
92,721 11,500
(Increase) decrease in operating assets:
Accounts receivable (618,715) (428,494)
Income tax receivable (265,224) 102,422
Inventories (597,484) (156,310)
Prepaid and other assets 39,402 (70,750)
Increase (decrease) in operating liabilities:
Accounts payable 268,605 (548,075)
Income tax payable (138,742) 138,742
Accrued warranty (95,155) -
Acquisition bonus (30,000) -
Accrued expenses (260,704) 144,895
---------- ----------
Total adjustments (1,200,687) (602,021)
---------- ----------
Net cash (used in) provided by operating activities (993,658) 265,306
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (240,789) (107,685)
Cash acquired from Auro Computer Systems 50,359 -
Operating reduction in covenant not to compete liability (50,000) -
Acquisition of stock of Auro Computer Systems (470,000) -
---------- ----------
Net cash used in investing activities (710,430) (107,685)
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
(8)
<PAGE> 21
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and exercise of
stock options and warrants 13,681 356,044
Net borrowings on short-term obligations 2,485,650 (316,133)
Payments to former stockholder (1,302) (8,000)
Principal payments on debt (846,214) (28,345)
Payments on covenants not to compete (50,833) -
Payments on capital lease obligations (40,466) (71,993)
---------- ---------
Net cash provided by (used in) financing activities 1,560,516 (68,427)
---------- ---------
Net (decrease) increase in cash (143,572) 89,194
Cash - beginning of year 204,990 115,796
---------- ---------
Cash - end of year $ 61,418 $ 204,990
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 138,571 $ 60,541
Income taxes 296,000 5,836
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred for equipment $ - $ 35,640
</TABLE>
On May 18, 1998, the Company purchased 85.1% of the common stock of PC &
Parts, Inc. dba Auro Computer Systems for $370,000 in cash. On December
28, 1998, the Company purchased the remaining minority interest for
$100,000 in cash. In conjunction with the acquisition, the assets
acquired and liabilities assumed are as follows:
<TABLE>
<S> <C>
Total current assets acquired $ 2,401,501
Net property and equipment 245,102
Intangibles and other assets 115,084
Total current liabilities assumed (1,976,114)
Total long-term liabilities assumed (1,096,461)
Purchase of goodwill 780,888
-----------
$ 470,000
===========
</TABLE>
The Company recorded a non compete asset and liability each in the amount of
$82,500 in 1998, representing an agreement with the former president of PC &
Parts.
The accompanying notes are an integral part of the financial statements.
(9)
<PAGE> 22
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NATURE AND SCOPE OF BUSINESS
Cable Link, Inc. (the "Parent") 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 Parent operates both
its administrative and manufacturing operations from a single, 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 Networking (WAN) and
Local Area Networking (LAN), year 2000 testing and solutions, and many
other service and support needs throughout Central Ohio and the surrounding
area. Beginning in February 1999, the Subsidiary will outsource all
computer hardware assembly.
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 amounts of revenues and expenses
during the reporting periods. Actual results could differ from these
estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are on the accrual basis of
accounting and include the financial statements of the Parent for 1998 and
1997, in entirety, and include the financial statements of its wholly owned
Subsidiary after the acquisition closing date of May 5, 1998. The
Subsidiary was purchased for $470,000. The acquisition of the Subsidiary
has been accounted for under the purchase method of accounting based on the
Subsidiary's balance sheet as of May 5, 1998. The allocation of the
purchase price to the fair market of assets acquired and liabilities
resulted in $780,888 of goodwill. All material intercompany balances and
transactions are eliminated in consolidation.
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
$35,647 and $20,360 for the years ended December 31, 1998 and 1997,
respectively. Bad debt expense was $61,245 and $29,450 for the years ended
December 31, 1998 and 1997, respectively.
(Continued)
(10)
<PAGE> 23
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INVENTORIES
The Parent's inventories consist of new and used cable TV equipment and
parts used to refurbish and repair cable TV equipment. Inventory is valued
at the lower of cost or market, using the average-cost method. New and used
inventory items are separately identified as items of inventory. The
weighted average cost is calculated per item of inventory. Impairment and
changes in market value are evaluated on a per item basis.
The Subsidiary's inventories consist of purchased computer systems,
peripherals, software and 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.
If the cost of the inventory exceeds the market value evaluation based on
total inventory, 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.
The Company reserves and periodically writes down slow moving inventory by
category, such as, converters, linegear, parts, and head-ends.
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, equipment, and rental 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 that
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 $320,800 and $186,850, respectively,
at December 31, 1998, and $254,156 and $94,665, respectively at December
31, 1997. Depreciation expense, which includes the amortization of assets
held under capital leases, was $299,932 and $169,815 for 1998 and 1997,
respectively.
(Continued)
(11)
<PAGE> 24
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOODWILL
Goodwill has been recorded to reflect the amount paid for the Subsidiary
less fair market value of assets acquired and liabilities assumed. Goodwill
is shown net of accumulated amortization of $39,306, which is calculated
using the straight-line method over 15 years. In the fourth quarter,
management determined that the Subsidiary's valuation allowance on deferred
tax assets of $210,968 could now be utilized. Therefore, this amount was
applied to goodwill. Also, in the fourth quarter, the Company amended prior
year income tax returns of the Subsidiary for errors on returns previously
filed. This resulted in $98,020 in refunds. Because these refunds related
to periods before the acquisition date, this amount was applied to
goodwill.
COVENANTS NOT TO COMPETE
Under the terms of the purchase agreement, the Company will pay the sellers
$150,000 in monthly installments 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. The
amount of amortization expense and accumulated amortization expense for
these covenants was $58,333 and $0 for 1998 and 1997, respectively.
REVENUE RECOGNITION
Revenues are recognized when the related products are completed and
delivered or services are performed. Revenues from service contracts are
recognized over the terms of the contract as services are provided.
WARRANTY
Estimated future warranty obligations related to certain products,
primarily computer hardware and systems, are provided by charges to
operations in the period in which the related revenue is recognized.
Warranties are extended for periods up to three years on computer hardware
and systems. Warranties are also extended on new, repaired and refurbished
cable products for periods up to one year. The Company's expense for cable
product warranties is not significant. Warranties are not extended for used
cable equipment.
(Continued)
(12)
<PAGE> 25
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
For the year ended:
------------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
----------------------------------------------- ----------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
common
stockholders $207,029 1,681,253 $0.12 $867,327 1,591,976 $0.54
-------- --------- ----- -------- --------- -----
Effect of dilutive
securities,
warrants and
options - 251,537 0.01 - 321,982 0.09
-------- --------- ----- -------- --------- -----
Diluted EPS
Income available to
common
stockholders $207,029 1,932,790 $0.11 $867,327 1,913,958 $0.45
======== ========= ===== ======== ========= =====
</TABLE>
Options to purchase 34,630 and 11,880 shares for the years ended December
31,1998 and 1997, respectively, were not included in the computation of
diluted EPS because the options exercise price was greater than the average
market price of common shares. During 1998, options to purchase 36,500
shares were issued contingent on certain earnings levels. Of these shares,
9,720 were canceled during 1998. During 1998 8,250 of the prior year's
contingent shares canceled and another 8,250 became vested. The total
contingent shares not included in the computation of diluted EPS at
December 31, 1998 were 48,380. In August 1997, options to purchase 38,500
shares were issued contingent on certain earnings levels. These options
were not included in the computation of diluted EPS.
Earnings per share is 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 a three for two stock split
and an eleven for ten stock dividend, that was effective January 31, 1997
and August 11, 1997 for stockholders of record as of January 21, 1997 and
August 1, 1997, respectively.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses
were $99,235 and $33,926 for the years ended December 31, 1998 and 1997,
respectively.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash includes cash on hand and
demand deposits held by banks.
(Continued)
(13)
<PAGE> 26
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Parent and its Subsidiary file a consolidated federal income tax
return. Income taxes are allocated to each company based on the earnings of
each company.
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.
INVENTORIES
Inventories at December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------------------------
New Used Total New Used Total
--- ---- ----- --- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Parts $ 239,654 $ - $ 239,654 $ 242,956 $ - $ 242,956
Convertors 398,705 426,034 824,739 21,350 449,550 470,900
Linegear 268,938 405,418 674,356 317,030 313,702 630,732
Head-ends 13,106 38,232 51,338 2,400 55,931 58,331
Computer hardware,
software & peripherals 627,791 - 627,791 - - -
---------- -------- ---------- ---------- --------- ---------
Total $1,548,194 $ 869,684 2,417,878 $ 583,736 $ 819,183 1,402,919
========== ========= ========== ==========
Reserve for inventory
write-down (49,184) (70,300)
---------- ---------
Net inventory $2,368,694 $1,332,619
========== ==========
</TABLE>
SHORT-TERM OBLIGATIONS
The Company has a revolving credit line with a bank for $2,500,000. The
credit line is secured by substantially all assets of the Company and is
payable on demand. The line matures on April 30, 1999, and interest is
charged at prime plus 1% (8.75% and 9.5% at December 31, 1998 and 1997,
respectively). Outstanding borrowings at December 31, 1998 and 1997 were
$2,276,607 and $290,957, respectively. Subsequent to year end, the credit
line was increased by $800,000 to $3,300,000.
The Company has a note payable to a bank relating to the acquisition of
the Subsidiary. The face amount of the note is $500,000 and interest is
due monthly at prime plus 1% (8.75% at December 31, 1998). The principal
is due at maturity on April 30,1999. The note is secured by substantially
all of the assets of the Company.
(Continued)
(14)
<PAGE> 27
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Amounts due under capital leases, net of $14,683 and $12,123
representing interest at December 31, 1998 and 1997,
respectively.
$ 56,354 $ 88,889
Non-interest bearing note payable, 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, 1998 and 1997 was $3,417 and $9,009,
respectively. The note is secured by the related equipment.
15,895 45,575
Amount payable to stockholder - 1,302
-------- --------
Total 72,249 135,766
Less: Current maturities (45,186) (82,354)
-------- --------
Long-term obligations $ 27,063 $ 53,412
======== ========
</TABLE>
<TABLE>
<CAPTION>
Long-term Capital Lease
Maturities of long-term obligations are as follows: Obligations Obligations
----------- -----------
<S> <C> <C>
1999 $ 15,895 $ 34,772
2000 - 26,645
2001 - 9,085
2002 - 535
-------- --------
Less amount representing interest - (14,683)
-------- --------
Total $ 15,895 $ 56,354
======== ========
</TABLE>
(Continued)
(15)
<PAGE> 28
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
RETIREMENT PLANS
The Company began a 401(k) retirement plan for the benefit of its employees
during 1997. The employees must have attained age 21 and completed at least
one year of service to be eligible. The Company's contribution is
discretionary and was $0 in 1998 and $5,000 in 1997.
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current expense
Federal $ 58,000 $ 210,000
State and local 3,433 36,049
-------- ---------
Income tax expense $ 61,433 $ 246,049
========= =========
</TABLE>
The components of the net deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Assets:
Accounts receivable $ 13,546 $ 7,737
Inventories 53,519 49,983
Accrued franchise tax - 6,460
Net operating loss 57,000 -
Acquisition bonus 57,000 -
Covenants not to compete 25,130 -
Accrued warranty and prepaid service contracts 113,922 -
Other 8,829 4,659
-------- --------
Gross deferred tax assets 328,946 68,839
-------- --------
Liabilities:
Property and equipment 46,208 52,616
Prepaid asset 2,738 27,723
-------- --------
Gross deferred tax liabilities 48,946 80,339
-------- --------
Net deferred tax asset (liability) 280,000 (11,500)
Less: Valuation allowance (27,000) -
-------- --------
Total net deferred tax asset (liability) $253,000 $ (11,500)
======== =========
</TABLE>
(Continued)
(16)
<PAGE> 29
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
INCOME TAXES (continued)
A reconciliation of the Company's effective tax values is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Income tax at statutory rates $136,083 $382,458
State and local taxes, net of federal benefit 2,266 43,431
Surtax and other rate differences 753 2,214
Permanent differences 12,652 15,591
Change in valuation allowance - (186,951)
State tax credits earned 2,400 3,257
Refunds from prior years state returns, net of federal tax
- (2,451)
-------- --------
$154,154 $257,549
======== ========
</TABLE>
WARRANTY LIABILITY
The Subsidiary 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 Subsidiary is responsible for
installing the replacement parts. The Subsidiary has estimated the future
labor costs to install replacement parts for systems that remain under
warranty as of December 31, 1998 and 1997. In 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.
Estimated future warranty costs of $245,258 have been accrued as of
December 31, 1998.
STOCKHOLDERS' EQUITY
At December 31, 1998 and 1997, the Company had authorized common shares, no
par value, of 10,000,000, and authorized preferred shares, no par value, of
200,000. No preferred stock is issued or outstanding at December 31, 1998
or 1997.
(Continued)
(17)
<PAGE> 30
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
STOCKHOLDERS' EQUITY (continued)
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 Parent'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. A 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 a 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 a SAR tandem to an Option shall cancel the related Option
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 a
SAR may be made in cash, shares of the company's common stock or any
combination thereof. No options granted during 1998 were granted in tandem
with SARs and 19,250 SARs were granted in tandem with options for an
identical number of common shares in 1997.
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>
1998 1997
---- ----
<S> <C> <C>
Net income (loss):
As reported $ 207,029 $ 867,327
Pro forma 134,576 825,136
Basic earnings (loss) per share:
As reported 0.12 0.54
Pro forma 0.08 0.52
Diluted earnings (loss) per share:
As reported 0.11 0.45
Pro forma 0.07 0.43
</TABLE>
(Continued)
(18)
<PAGE> 31
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
STOCKHOLDERS' EQUITY (continued)
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 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Dividend yield 0 0
Expected volatility 129% 112%
Risk-free interest rates 5.50%, 5.55%, 5.56% & 5.65% 5.89%, 5.92%, 5.96% & 6.25%
Expected lives 5 years 5, 4 and 1 years
</TABLE>
A summary of the status of the Company's employee stock option plan as of
December 31, 1998 and 1997 and changes for the years then ended are
presented below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
January 1 $ 236,302 $ 1.82 $ 210,342 $ 1.53
Granted 57,780 3.20 53,350 2.53
Exercised ( 15,334) 0.89 - -
Canceled ( 70,770) 2.03 (27,390) 1.66
--------- ------ --------- ------
December 31 $ 207,978 $ 2.17 $ 236,302 $ 1.82
========== ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Options exercisable at year-end 128,560 130,276
Weighted-average fair value of options granted during the year $ 2.63 $ 1.93
</TABLE>
(Continued)
(19)
<PAGE> 32
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
STOCKHOLDERS' EQUITY (continued)
The following table summarizes information about employee stock options at
December 31, 1998:
<TABLE>
<CAPTION>
Weighted Average
Number Remaining Weighted Number Weighted
Range of Exercise Outstanding Contractual Life Average Exercisable Average
Prices December 31, 1998 (In Years) Exercise Price December 31, 1997 Exercise Price
----------------- ----------------- ---------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
$1.33 - $3.50 207,978 7.02 $2.17 236,302 $1.82
</TABLE>
As of December 31, 1998, the director had weighted average options
outstanding at an average exercise price of $1.64. The stock options and
SARs expire at various dates through 2006. No new options were granted
under these agreements in 1998 or 1997.
At December 31, 1998 and 1997, the director held warrants to purchase
19,800 shares of stock for $0.93 per share. The warrants expire in 2004.
At December 31, 1998 and 1997, outside Board of Directors members held
options to purchase 44,040 and 40,040 shares of common stock, respectively,
with exercise prices ranging from $0.79 to $3.50. At December 31, 1998 and
1997, all of the options were vested and the options expire at various
dates through 2008.
ACQUISITION BONUS
In 1998, the Company's Board of Directors approved a $180,000 bonus payable
to the Chief Executive Officer of Cable Link, Inc. related to the
acquisition of the Subsidiary. The bonus is payable in equal monthly
installments of $5,000. The payments, which commence 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 percentage of earnings of the Subsidiary is equal to or
greater than 15% of the capital invested in the Subsidiary by the Company.
The amount remaining to be paid at December 31, 1998 is $150,000.
(Continued)
(20)
<PAGE> 33
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
OPERATING LEASE OBLIGATIONS
The Company leases production and office space from a former director of
the Company under an operating lease expiring in October 1999 with a
two-year renewal option. During 1998 and 1997, modifications were made to
the lease which increased the Company's occupancy area and monthly rent. At
December 31,1998, monthly payments of $12,619 were required, subject to
increase in real estate taxes and rent increases each November. The
Subsidiary leases office space from its former owners under a
non-cancelable lease agreement. The lease for the building is $11,573 per
month and expires in May 2001. Also, the Company and the Subsidiary lease
vehicles and various office equipment.
Rent expense was $287,090 and $165,888 for the years ended December 31,
1998 and 1997, respectively. Future minimum lease payments are as follows:
1999- $158,093; 2000 - $149,239; 2001 - $63,820.
RECONCILIATION WITH VENDORS
During 1997, the Company reconciled amounts owed to various vendors. These
reconciliations resulted in a reduction of expenses of $112,197 in 1997.
The Company had no such reconciliations in 1998.
STOCKHOLDER TRANSACTIONS
In October 1994, the Company entered into a separation, noncompetition 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 $1,110; 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 $16,765 and $11,981 for 1998
and 1997, 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 1998 and 1997.
The annual payment due under these agreements was $19,547 for 1998.
(Continued)
(21)
<PAGE> 34
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
CONCENTRATIONS OF CREDIT RISK
The Company grants credit to cable operations in the United States and
Canada. In most cases, sales terms for products sold in international
markets other than Canada are cash in advance or cash on delivery.
Additionally, the Company carries insurance on all significant
international accounts receivable. Sales are denominated principally in
U.S. dollars and, therefore, the Company does not have a significant
foreign exchange rate risk. Sales to customers outside the United States
were $936,300 and $1,135,483 and the corresponding accounts receivable
were $207,654 and $28,636 at December 31, 1998 and 1997, respectively.
REPORTABLE SEGMENTS
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 reportable segments is as follows:
<TABLE>
<CAPTION>
Auro
Cable Link Computer
Inc. Systems Total
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 10,318,475 $ 10,248,774 $ 20,567,249
Cost of sales 6,537,744 9,406,856 15,944,600
------------ ------------ ------------
Gross margin 3,780,731 841,918 4,622,649
Operating expenses 2,829,723 1,256,713 4,086,436
------------ ------------ ------------
Operating income (loss) 951,008 (414,795) 536,213
Interest expense (82,865) (56,674) (139,539)
Other income (expense) 1,142 2,430 3,572
------------ ------------ ------------
Operating income (loss) $ 869,285 $ (469,039) $ 400,246
------------ ------------ ------------
Total assets $ 5,495,095 $ 2,758,307 $ 8,253,402
------------ ------------ ------------
Depreciation and amortization expense $ 186,307 $ 117,994 $ 304,301
------------ ------------ ------------
</TABLE>
A reconciliation of the segments' operating income to the consolidated net
loss is as follows:
<TABLE>
<S> <C>
Segments operating income $ 400,246
Less:
Income tax expense 154,154
Goodwill amortization 39,063
---------
Consolidated net income $ 207,029
=========
</TABLE>
(Continued)
(22)
<PAGE> 35
CABLE LINK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
REPORTABLE SEGMENTS (continued)
A reconciliation of the segments' total assets to the consolidated total
assets is as follows:
<TABLE>
<S> <C>
Segments total assets $ 8,253,402
Plus:
Goodwill 530,857
Less:
Investment in subsidiary at cost (470,000)
Intercompany receivables (150,000)
------------
Consolidated total assets $ 8,164,259
===========
</TABLE>
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 $ 304,301
Amortization of goodwill 39,063
---------
Consolidated total depreciation and
amortization $ 343,364
=========
</TABLE>
PROFORMA OPERATIONS
The following unaudited proforma consolidated results of operations of the
Company for the year ended December 31, 1998 and 1997 assumes that the
acquisition of the Subsidiary occurred on January 1, 1997. These proforma
results are not necessarily indicative of the actual results of operations
that would have been achieved nor are they necessarily indicative of future
results of operations.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net revenues $ 24,830,369 $ 23,630,759
Net income (221,724) 554,957
Basic net income per share (.13) .34
Diluted net income per share (.11) .29
</TABLE>
MAJOR CUSTOMERS AND SUPPLIERS
In 1998, approximately 10% of the Company's total revenues were from one
customer and approximately 19% of total purchases were from one vendor. The
Company had no major customers or suppliers in 1997.
(23)
<PAGE> 36
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR 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 customer's 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.
PC & Parts, Inc. dba Auro Computer Systems (the Subsidiary) a wholly-owned
subsidiary substantially acquired by Cable Link in the 2nd quarter of 1998, (the
consolidated company consisting of Cable Link and the Subsidiary is referred to
herein as the Company) located in Westerville, Ohio, assembles computer hardware
components into personal computers for a number of customers located in Ohio.
The Subsidiary also sells its products and provides computer and network
services throughout central Ohio and the surrounding area.
RESULTS OF OPERATIONS
Net Sales
Net sales for the Company for 1998 were $20,567,249 compared to $10,094,178 for
1997, an increase of $10,473,071. This represents an increase of 103.8% 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 1998 were substantially the same when compared to sales for 1997.
Cost of Good Sold
The cost of goods sold for the Company for 1998 was $15,944,600, an increase of
$9,666,891 as compared to 1997. The majority of the increase for 1998 is
attributable to the inclusion of the Subsidiary's cost of goods sold for 1998.
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 sale of new products which carry a lower gross margin than
its refurbished equipment sales and repairs.
Operating Expenses
Operating Expenses increased to $4,125,499 for 1998 as compared to $2,746,073
for the same period in 1997. The increase in the operating expenses is
attributable in part to the inclusion of the Subsidiary's operating expenses.
The Subsidiary also incurred approximately $250,000 in expenses for temporary
service, accounting, support, and clerical employees, as well as the
25
<PAGE> 37
expenses associated with using recruiting firms. The increase is also
attributable to an increase in Cable Link's sales and administrative salaries
during 1998. Operating expenses increased from 27.2% of sales for 1998 to 20.1%
for 1997. The decrease in operating expenses as a percent of sales is due to the
inclusion of the sales of the Subsidiary. Cable Link and the Subsidiary continue
to implement procedures and review the Company's organizational structure in an
attempt to increase efficiencies and further reduce costs.
Income from Operations
Income from operations for 1998 was $497,150 as compared to $1,070,396 for 1997,
a decrease of $573,246. 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 1998, the Subsidiary hired additional sales people in an effort to increase
the Subsidiary 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.
Income Tax Provision
The effective tax rate increased to 42% in 1998 from 22% in 1997 due to
increased nondeductible items related to the acquisition of the Subsidiary by
purchase of its stock. These nondeductible items or permanent differences are
related to amortization of goodwill, non-compete agreements, officers life
insurance, net operating losses of the Subsidiary and nondeductible meals and
entertainment.
The following are management's discussion and analysis of material changes in
financial position during 1998.
Accounts Receivable
Accounts Receivable increased 184.3% from December 31, 1997 as compared to
December 31, 1998 balance of $3,228,285. This increase in Accounts Receivable is
due to the inclusion of the Accounts Receivable of the Subsidiary, and an
increase in Cable Link's sales for the fourth quarter of 1998 versus the fourth
quarter of 1997.
Inventories
Inventory increased 77.7% or $1,036,075 from December 31, 1997 as compared to
December 31, 1998. Approximately one half of the increase is attributable to the
inclusion of the inventory of the Subsidiary and the balance is attributable to
an increase of Cable Link's inventory due to management's decision to stock more
new products inventory.
Property and Equipment
The increase in property of $577,103 or 39.3% from December 31, 1997 is due
primarily to the acquisition of the Subsidiary in 1998. The increase in
accumulated depreciation of $334,787 or 43.2% from December 31, 1997 is directly
related to the increase in property and equipment. Cable Link had a decrease in
property and equipment due to the removal of retired assets its financial
records.
Covenant 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-
26
<PAGE> 38
term asset and liability have been recorded and will be amortized using the
straight-line method during 1999.
Goodwill
Goodwill has been recorded to reflect the amount paid for the Subsidiary less
the fair market of assets acquired and liabilities assumed. Goodwill is shown as
net accumulated amortization, which is calculated using the straight-line method
over 15 years. In the 4th quarter of 1998, Management determined that the
Subsidiary's valuation allowance on deferred tax assets of $210,968 could now be
utilized due to the acquisition by Cable Link, Inc. and the election to file
consolidated federal income tax returns. Generally accepted accounting
principles require the elimination of this valuation allowance after the
acquisition date to be applied as a reduction of goodwill. Also in the 4th
quarter, the Subsidiary amended prior year's income tax returns of the
Subsidiary for errors on returns previously filed. This resulted in $98,020 in
refunds. Because these refunds related to periods before the acquisition date,
this amount was applied to goodwill.
Accounts Payable
Accounts Payable increased 184.9% or $1,414,848 from December 31, 1997 as
compared to December 31, 1998. The majority of the increase is attributable to
the inclusion of the Subsidiary's accounts payable and the remaining portion is
attributable to Cable Link. Cable Link's accounts payable increased as a direct
result of the increase in inventory.
Short Term Obligations
Short-term obligations increased by $2,485,650 from December 31, 1997 as
compared to December 31, 1998. This increase is due to the acquisition of the
Subsidiary. Of this increase, $500,000 was used to directly finance the
acquisition; and of the remaining balance, approximately $1,000,000 of
short-term obligations of the Subsidiary were assumed on the date of
acquisition. The remaining increase in line-of-credit has been used to finance
the build-up in inventory and receivables.
Accrued Expenses
Accrued Expenses increased $393,717 or 119.3% from December 31, 1997 as compared
to December 31, 1998. The increase is primarily due to the inclusion of the
Subsidiary's accrued expenses for payroll expense and the accrued warranty
expense.
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, therefore the entire liability is
classified as short term. In 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.
Long-term Liabilities
The increase of $74,817 or 73.7% in long-term liabilities is attributable
long-term portion of the covenant not to compete and the long-term portion of
the acquisition bonus.
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
27
<PAGE> 39
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 $2,500,000. Bank borrowings increased in 1998
compared to December 31, 1997 as a result of the acquisition of the Subsidiary.
As a result of the increase in sales and the acquisition, accounts receivable
increased $2,092,678 in 1998 over the December 31, 1997 balance. Inventory
increased $1,036,075 in 1998 over the December 31, 1997 balance. Accounts
payable increased $1,414,848 and accrued expenses increased $393,717 from 1997
due to the acquisition related liabilities and the liabilities assumed by the
Company. Capital expenditures in 1998 consisted of ordinary expenditures for
equipment replacement and upgrades. The Subsidiary converted its existing
computer software to the accounting software package that is currently being
used by Cable Link. The capital expenditures were financed by the bank lines of
credit.
Subsequent to year-end, the Company signed a line of credit facility increasing
the credit line to $3,300,000. The external sources of cash include the bank
line of credit increase and the $500,000 term note. The increase in the line of
credit facility was prompted by the increase in inventory and operations as a
result of the acquisition of the Subsidiary. 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 has 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 required
modifications or upgrades have been needed.
Sales and service order systems - 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
28
<PAGE> 40
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
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, 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 necessary to
develop extensive contingency plans for those systems. There can be no
assurances, 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 a any plan could have a material
adverse effect on the Company's business, financial condition 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 systems
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 plans 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.
New Accounting Pronouncements
In 1999, the Company will adopt Statement of Position (SOP) 98-5 "Reporting of
Start-up Activities." This SOP required that costs of start-up activities,
including organization costs, be expensed as incurred. Initial application of
the SOP will be reported as a cumulative effect of a change in accounting
principle of $42,246 in the first quarter of 1999.
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 or risk or (II) the earnings
effect of the hedged forecasted transaction. For a derivative not designated as
a hedging
29
<PAGE> 41
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 on January 1, 2000 to affect its
financial statements.
30
<PAGE> 42
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
NO. OF NUMBERED
EXHIBITS INSTRUMENT PAGES COPY
- - -------- ---------- ----- ----
<S> <C> <C> <C>
2.1 Articles of Incorporation 7 *
2.2 Code of Regulations 7 *
3.1 Articles IV, V and VI of the Articles of
Incorporation (see Exhibit 2.1 above) *
3.2 Articles I, IV and VII of the Code of Regulations
(see Exhibit 2.2 above) *
6.1 1995 Stock Option Plan dated October 17, 1995 20 *
6.2 Warrant Agreement for Axxess International Group,
Inc. dated January 8, 1997 2 *
6.3 Non-Competition and Consulting Agreement dated
October 18, 1994 6 *
6.4 First Amendment Agreement to Non-Competition and
Consulting Agreement dated June 1, 1995 2 *
6.5 Second Amendment Agreement to Non-Competition and
Consulting Agreement dated November 16, 1995 3 *
6.6 Consulting Agreement dated October 1, 1996 5 *
6.7 Eric S. Newman Independent Consulting Letter
Agreement dated August 1, 1994 2 *
6.8 Loan and Security Agreement dated November 27, 1996 23 *
6.9 Promissory Note dated April 30, 1997 3 *
6.10 Lease dated November 4, 1992 and Lease Modification
Agreement dated October 26, 1995 for Suite 201,
280 Cozzins, Columbus,Ohio 11 **
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
Exhibits 2.1 to this Form 8-K of Registrant filed on
May 18, 1998; Registration No. 0-23111). 44
8.2 Reserved
8.3 Amendment No. 1 to Stock Purchase and Non-Compete
Agreement among PC & Parts, Inc., its Shareholders,
Brian Berger and Cable Link, Inc. dated , 1998
(incorporated by reference to the Form 8-K of
Registrant filed on November 6, 1998;
Registration No. 0-23111). 2
10.1 Consent of Groner, Boyle & Quillin,LLP 1 *
12.1 Powers of Attorney. 35
12.2 Certified resolution of the Registrant's Board
of Directors authorizing officers and directors
signing on behalf of the Company to sign
pursuant to a power of attorney. 42
</TABLE>
13
<PAGE> 43
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
NO. OF NUMBERED
EXHIBITS INSTRUMENT PAGES COPY
- - -------- ---------- ----- ----
<S> <C> <C> <C>
27. Financial Data Schedule (submitted electronically
for SEC purpose only)
</TABLE>
* Incorporated by reference to Form 10-SB of Registrant, Registration
No. 0-23111
** Incorporated by reference to Form 10-SB/A of Registrant, Registration
No. 0-23111.
The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Shareholders upon payment of a
fee of fifty cents ($.50) per page.
ITEM 2. DESCRIPTION OF EXHIBITS.
The following documents are filed as exhibits to the registration statement.
(2) Charter and By-Laws. 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 issuer agrees to provide to the Commission upon
request instruments defining the rights of holders of
long-term debt of the issuer and all of its
subsidiaries for which consolidated financial
statements are required to be filed.
(4) None.
(5) 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.
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.
14
<PAGE> 44
See Exhibit 6.10 - Lease dated November 4, 1992 and Lease
Modification Agreement dated October 26, 1995 for Suite 201,
280 Cozzins, Columbus, Ohio.
See Exhibit 10.1 - Consent of Groner, Boyle & Quillin, LLP
(7) None.
(8) Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession.
(8.1) Stock Purchase and Non-Compete Agreement among PC & Parts,
Inc., its Shareholders, Brian Berger and Cable Link, Inc.
dated May 18, 1998.
(8.2) Reserved.
(8.3) Amendment No. 1 to Stock Purchase and Non-Compete Agreement
among PC & Parts, Inc., its Shareholders, Brian Berger and
Cable Link, Inc. dated _________, 1998.
(10) Consents. The consent of Groner, Boyle & Quillin, LLP.
(12.1) Powers of Attorney.
(12.2) Certified resolution of the Registrant's Board of Directors
authorizing officers and directors signing on behalf of the
Company to sign pursuant to a power of attorney.
(27) Financial Data Schedule
15
<PAGE> 45
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: March 29, 1999
CABLELINK, INC.
(the "Registrant")
By: /s/ Bob Binsky
----------------------------------
Bob Binsky, Chairman of the Board
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
29th day of March, 1999.
SIGNATURE TITLE
--------- -----
/s/ Bob Binsky
Bob Binsky Director, Chairman of
the Board, Chief
Executive Officer
(principal executive
officer
Zaida Wahlberg* Treasurer (principal
Zaida Wahlberg accounting officer)
Brenda L. Castle* President and Director
Brenda L. Castle
Eric S. Newman* Director
Eric S. Newman
Sherry J. Rothfield* Director
Sherry J. Rothfield
Michael Tsao* Director
Michael Tsao
*By: /s/ Bob Binsky
Bob Binsky, Attorney-in-fact
16
<PAGE> 1
Exhibit 10.1
We hereby consent to the use in the Form 10-KSB, of our report dated
February 18, 1999 related to the financial statements of Cable Link, Inc
and Subsidiary.
Groner, Boyle & Quillin LLP
March 27, 1999
<PAGE> 1
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of
February, 1999.
/s/ Bob Binsky
------------------------------
Bob Binsky
17
<PAGE> 2
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of
February, 1999.
/s/ Brenda L. Castle
------------------------------
Brenda L. Castle
18
<PAGE> 3
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of
February, 1999.
/s/ Zaida Wahlberg
------------------------------
Zaida Wahlberg
19
<PAGE> 4
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
March, 1999.
/s/ Eric S. Newman
------------------------------
Eric S. Newman
20
<PAGE> 5
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
March, 1999.
/s/ Sherry J. Rothfield
------------------------------
Sherry J. Rothfield
21
<PAGE> 6
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
March, 1999.
/s/ Michael Tsao
------------------------------
Michael Tsao
22
<PAGE> 7
POWER OF ATTORNEY
The undersigned who is a director or officer of Cable Link, Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Bob Binsky and Brenda L. Castle to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-KSB or other appropriate form and any amendments
or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such
Annual Report, and generally to act for and in the name of the undersigned
with respect to such filings as fully as could the undersigned if then
personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred
upon him herein shall be exercised and the terms and conditions of any
instrument, certificate or document which may be executed by him pursuant
to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
March, 1999.
/s/ Kenneth J. Warren
------------------------------
Kenneth J. Warren
23
<PAGE> 1
CERTIFICATE
I, KENNETH J. WARREN, hereby certify that I am the duly elected Secretary of
Cable Link, Inc. an Ohio corporation (the "Corporation"), and do further certify
that the following resolutions were duly adopted by the Board of Directors of
the Corporation at a meeting duly called and held on February 19th, 1999, and
that such resolutions have not been amended or rescinded, and are in full force
and effect:
RESOLVED, that each officer and director who may be required to execute
an annual report on Form 10-KSB or any amendment or supplement thereto ( whether
on behalf of the Company or as an officer or director thereof or otherwise) be,
and each of them hereby is, authorized to execute a power of attorney appointing
Bob Binsky and Brenda L. Castle and each of them severally, his or her true and
lawful attorneys and agents to execute in his or her name, place and stead (in
any such capacity) said Form 10-KSB and all instruments or reports necessary or
in connection therewith, and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power to act with or
without the other, to have full power and authority to do and to perform in the
name and on behalf of each of said officers and directors, or both, as the case
may be, every act which is necessary or advisable to be done as fully, and to
all intents and purposes, as any such officer or director might or could do in
person; and further
Dated this 29th day of March, 1999.
/s/ Kenneth J. Warren
Kenneth J. Warren
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 61,418
<SECURITIES> 0
<RECEIVABLES> 3,263,932
<ALLOWANCES> 35,647
<INVENTORY> 2,368,694
<CURRENT-ASSETS> 6,511,962
<PP&E> 2,043,867
<DEPRECIATION> 1,108,912
<TOTAL-ASSETS> 8,164,259
<CURRENT-LIABILITIES> 5,878,123
<BONDS> 0
0
0
<COMMON> 1,463,387
<OTHER-SE> 646,520
<TOTAL-LIABILITY-AND-EQUITY> 8,164,259
<SALES> 20,567,249
<TOTAL-REVENUES> 20,570,821
<CGS> 15,944,600
<TOTAL-COSTS> 20,070,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 61,245
<INTEREST-EXPENSE> 139,539
<INCOME-PRETAX> 361,183
<INCOME-TAX> 154,154
<INCOME-CONTINUING> 207,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,029
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
