<PAGE> 1
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, 1999
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. [X]
The issuer's revenue for its most recent fiscal year was $10,606,235.
The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant on March 20, 2000 was $8,485,280.
The number of shares of Common Stock outstanding on March 20, 2000 was
1,697,056.
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
2000 Annual Meeting of Stockholders
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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 Services.
Subsequent to December 31, 1999, the Parent decided to close and
liquidate its subsidiary, Auro Computer Services. Auro ceased operations on
February 21, 2000 and its remaining assets are expected to be liquidated by
March 31, 2000.
Cable Link, Inc. is referred to herein as the "Parent". PC & Parts,
Inc. dba Auro Computer Services 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 sale of new, refurbished, and
upgraded cable television ("CATV") equipment to cable operators both domestic
and international. This equipment also includes cable modems and the most state
of the art fiber optics. The Parent has expanded its service programs offering
business to business applications to CATV operators to meet the needs and
demands of the changing industry. The additional services offered include asset
management, reclamation, warehousing programs and inventory services. The Parent
offers these services in conjunction with our e-commerce site, designed
exclusively to meet the CATV operators reporting needs. The Parent continues to
design and improve the coordination of inventory management to several of the
largest CATV operators in the United States. The Parent also repairs converters,
headend, linegear and power supplies for all major manufacturers of CATV
equipment. The Parent is under contract for distribution on new CATV equipment
for Scientific-Atlanta, Holland, Drake, Times Fiber, ADC and Alpha Technologies.
The Parent's line of refurbished equipment includes all major manufacturers of
CATV equipment including Scientific-Atlanta, General Instrument, C-Cor, Zenith,
Pioneer, Phillips Broadband-Magnavox and Alpha Technologies.
The Parent is approved as an "In Warranty Service Center" for
Scientific-Atlanta and Alpha Technologies and continues to repair all major
manufacturers "out of warranty" equipment for CATV operators. The repair line
has expanded to include cable modems and fiber optic equipment as well as
converters, headend, linegear and power supplies.
The Parent has developed an e-commerce site as an additional venue for
sales to CATV operators worldwide. The e-commerce site is currently being
expanded to include product offerings of all the new distributorships. The
e-commerce site offers a catalog of products with the ease of the shopping cart
to purchase the equipment.
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. In order to better service the international market the Parent
opened a branch facility in Hollywood, Florida on September 1, 1999.
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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 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.
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 its main administrative and manufacturing
operations from a leased facility at 280 Cozzins Street, Columbus, Ohio 43215.
Its telephone number is (614) 221-3131. The Parent opened a branch facility in
Hollywood, Florida on September 1, 1999. The Hollywood branch contains sales
offices, repair facilities and a warehouse and is located at 3284 N. 29th Court,
Hollywood, Florida 33020. The telephone number is (954) 922-8776.
The core business of the Subsidiary was a computer solutions provider.
The Subsidiary assembled high quality / high performance personal computers. In
addition, the Subsidiary provided 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 was a
large part of the Subsidiary's business. The network department consisted of
seven network engineers. The Subsidiary was capable of implementing small
business or departmental local area networks up to large multi-locations wide
area networks. The Subsidiary was known as a Value Added Reseller (VAR). The
Subsidiary did offer a wide variety of hardware and services to its customers.
These services included 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 operated 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 $3,300,000. The
credit line is secured by substantially all assets of the Company and is payable
on demand. The line matures on April 30, 2000, and interest is charged at prime
plus 1% (9.50% and 8.75% at December 31, 1999 and 1998, respectively)
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% (9.50% at
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December 31, 1999). The principal is due at maturity on April 30, 2000. 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 Services "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 new and 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, (c) increase the Parent's new product distributorship and (d)
further develop business to business (B2B) relationships within the industry
utilizing the Parent's e-commerce site.
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 was part of the computer reselling and services business
which included competitors such as computer dealers, chain stores, computer
super stores, and direct order.
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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.
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 customer visits 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 four bilingual individuals in the sales department
for the international market and ten domestic 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 system to coordinate the activity between the two departments. 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 additional
purchasing opportunities for certain equipment that was not previously available
for purchase. This competitive CATV market enables the Parent to acquire
additional inventory for sale to cable operators who are expanding with new
subscribers or who are upgrading their system with the newer, more expensive
technology. The Parent employs two purchasing agents.
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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 majority of the Subsidiary's sales activity was generated through
personal relationships developed by its sales personnel and executives. The
Subsidiary employed a staff of twelve sales people. The sales staff was trained
on technical solutions to support the customers need. The focus was on small to
medium size businesses as potential customers.
The Parent provides an internet web site for the wholesale and retail
purchase of CATV equipment, both new and refurbished.
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 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).
COMPETITION
There are a number of businesses similar to the Parent throughout the
United States engaged in buying and selling new and refurbished CATV equipment.
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 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.
EMPLOYEES AND TRAINING
As of December 31, 1999, the Parent had 71 full time employees, 39 of
whom work on the repair and refurbishment of converters and other cable TV
equipment. There are 8 employees in shipping and receiving, 16 employees in the
sales and purchasing department, and the remaining 8 are in finance and general
administration. New production employees are placed on a 6 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
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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, 1999, the Subsidiary had 50 full time employees, 27
of who worked in the networking, service, and production area. There were 16
employees in the sales and purchasing department, and the remaining 7 employees
were 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 refurbished 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 new products for
Scientific-Atlanta, Drake, Holland, Alpha Technologies, ADC and Times fiber. The
Parent also repairs converters, linegear, headend equipment and power supplies.
The following is a list of the products sold by the Parent with a brief
description of the application of each product line:
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.
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The Subsidiary provided both computer products and services to
accommodate the needs of small and medium sized businesses.
The Subsidiary provided 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 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 AT&T, MediaOne, and Time-Warner, Inc.
ITEM 7. DESCRIPTION OF PROPERTY
Plant and Facility
The Parent leases production and office space under an operating lease
expiring in May 2001 with a two-year renewal option. During 1999 and 1998,
modifications were made to the lease which increased the Company's occupancy
area and monthly rent. At December 31, 1999, monthly payments of $12,706 were
required, subject to increase in real estate taxes and rent increases each
November. The Parent also leases office space in Florida under an operating
lease expiring in August 2002 with a two-year renewal option. At December 31,
1999 monthly payments of $3,500 plus Florida sales tax were required, subject to
increase in real estate taxes and rent increases each September.
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. The Parent will use all possible resources to sublet
the building.
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 2000 Annual Meeting of Shareholders (the "2000 Proxy
Statement") which information is incorporated herein by reference.
ITEM 9. RENUMERATION OF DIRECTORS AND OFFICERS.
The information required by this item is set forth at "RENUMERATION OF
DIRECTORS AND OFFICERS" in the 2000 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 2000 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 2000 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>
1999 4th $1.19 $0.69
3rd 1.13 0.75
2nd 1.25 0.88
1st 2.75 1.06
1998 4th 2.56 1.25
3rd 3.50 1.50
2nd 4.00 2.25
1st 4.13 3.25
</TABLE>
The above quotations reflect inter-dealer prices, without retail
mark-up, mark down or commission and may not represent actual transactions.
There are approximately 680 beneficial holders of common stock of record on
March 20, 2000. 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.
ITEM 5. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Security 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.
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Based upon a review of Forms 3, 4 and 5 and amendments thereto, to the
registrant, Michael Tsao, a Director of the Company, failed to timely
report purchases of shares by his wife on July 20, 1999, August 12,
1999, November 19, 1999 and December 21, 1999. Kenneth J. Warren, the
Secretary and Counselor of the Company, failed to timely report
purchases of shares into a retirement plan on August 26, 1999.
Each of these purchases was subsequently reported on Form 5's.
ITEM 6. REPORTS ON FORM 8-K.
The Company filed Form 8-K and Form 8-K/A on May 29, 1998 and November
6, 1998 respectively. The Company also filed a Form 8-K on March 9, 2000.
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CABLE LINK, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
* * * * * *
DECEMBER 31, 1999 AND 1998
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C O N T E N T S
---------------
Page
INDEPENDENT AUDITORS' REPORT 14
CONSOLIDATED BALANCE SHEETS 15
CONSOLIDATED STATEMENTS OF INCOME 17
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 18
CONSOLIDATED STATEMENTS OF CASH FLOWS 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21
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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 subsidiaries as of December 31, 1999 and 1998, 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 subsidiaries as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Columbus, Ohio
February 3, 2000
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<TABLE>
CABLE LINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
=====================================================================================
<CAPTION>
ASSETS
1999 1998
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 213,113 $ 61,418
Accounts receivable, net 2,060,469 3,228,285
Income taxes receivable 144,000 389,023
Inventories 1,557,257 2,368,694
Prepaid consulting -- 7,205
Prepaid and other assets 40,182 76,839
Covenants not to compete -- 182,498
Deferred income taxes 517,000 198,000
Property and equipment available for sale 50,000 --
Deposits 15,359 --
---------- -----------
Total current assets 4,597,380 6,511,962
---------- -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and fixtures 540,307 626,038
Equipment 619,812 1,094,043
Leasehold improvements 169,811 224,262
Rental equipment -- 78,244
Construction in progress 96,437 21,280
---------- -----------
1,426,367 2,043,867
Less accumulated depreciation (865,466) (1,108,912)
---------- -----------
Net property and equipment 560,901 934,955
---------- -----------
OTHER ASSETS
Covenants not to compete -- 45,116
Goodwill -- 530,857
Deferred income taxes 94,000 55,000
Deposits 27,238 44,123
Organization costs -- 42,246
---------- -----------
Total other assets 121,238 717,342
---------- -----------
TOTAL ASSETS $5,279,519 $ 8,164,259
========== ===========
</TABLE>
The accompanying notes are an integral
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<TABLE>
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term obligations $ 19,958 $ 45,186
Notes payable - bank 2,216,218 2,776,607
Accounts payable 1,251,975 2,180,117
Covenants not to compete 29,164 152,498
Accrued expenses
Payroll and related taxes 384,083 332,966
Accrued warranty -- 245,258
Acquisition bonus -- 30,000
Other 113,148 115,491
Accrued loss on disposal of discontinued operations 433,448 --
---------- ----------
Total current liabilities 4,447,994 5,878,123
---------- ----------
LONG-TERM LIABILITIES
Long-term obligations 7,106 27,063
Acquisition bonus -- 120,000
Other 17,749 29,166
---------- ----------
Total long-term liabilities 24,855 176,229
---------- ----------
Total liabilities 4,472,849 6,054,352
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value 1,472,357 1,463,387
Additional paid-in capital 136,136 136,136
Retained (deficit) earnings (801,823) 510,384
---------- ----------
Total stockholders' equity 806,670 2,109,907
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,279,519 $8,164,259
========== ==========
</TABLE>
part of the consolidated financial statements.
16
<PAGE> 17
<TABLE>
CABLE LINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999 and 1998
==================================================================================================
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues $10,606,235 $10,318,475
Cost of revenues 6,485,381 6,537,744
----------- -----------
Gross profit 4,120,854 3,780,731
Selling, general and administrative expenses 2,995,283 2,828,581
----------- -----------
Income from operations 1,125,571 952,150
Interest expense (74,947) (82,865)
----------- -----------
Net income before income taxes 1,050,624 869,285
Provision (benefit) for income taxes
Current 285,105 129,100
Deferred (34,000) (3,500)
----------- -----------
Total provision for income taxes 251,105 125,600
----------- -----------
Income from continuing operations 799,519 743,685
Discontinued operations
Loss from operations of discontinued division, net of tax
expense (benefit) of $(232,928) and $28,554, respectively (1,091,369) (536,656)
Loss on disposal of division, net of tax benefit of $(367,000) (994,111) --
----------- -----------
Net (loss) income before cumulative effect of
change in accounting principle (1,285,961) 207,029
Cumulative effect of change in accounting
principle, net of tax benefit of $16,000 (26,246) --
----------- -----------
Net (loss) income $(1,312,207) $ 207,029
=========== ===========
Basic EPS:
Income from continuing operations $ 0.47 $ 0.44
Loss on discontinued operations (1.23) (0.32)
Cumulative effect of change in accounting principle (0.01) --
----------- -----------
Net (loss) income $ (0.77) $ 0.12
=========== ===========
Weighted average shares outstanding 1,694,880 1,681,253
Diluted EPS:
Income from continuing operations $ 0.46 $ 0.38
Loss on discontinued operations (1.21) (0.27)
Cumulative effect of change in accounting principle (0.01) --
----------- -----------
Net (loss) income $ (0.76) $ 0.11
=========== ===========
Weighted average shares outstanding 1,725,360 1,932,790
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
17
<PAGE> 18
<TABLE>
CABLE LINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998
================================================================================================
<CAPTION>
Shares of
Issued and
Outstanding Additional Retained
Common Common Paid-In (Deficit)
Stock Stock Capital Earnings Total
--------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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
Exercise of options and
warrants 5,940 8,970 -- -- 8,970
Net loss -- -- -- (1,312,207) (1,312,207)
--------- ---------- -------- ----------- -----------
BALANCE -
DECEMBER 31, 1999 1,695,076 $1,472,357 $136,136 $ (801,823) $ 806,670
========= ========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
18
<PAGE> 19
<TABLE>
CABLE LINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
===========================================================================================================
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(1,312,207) $ 207,029
----------- -----------
Adjustments to reconcile net (loss) income to net cash provided by (used
in) operating activities:
Depreciation and amortization 575,093 343,364
Loss on disposal of property and equipment 28,173 --
Bad debts 30,583 61,245
Acquisition bonus (120,000) (30,000)
Deferred income taxes 9,000 92,721
Cumulative effect of change in accounting principle 42,246 --
Loss on discontinued operations/disposal of division 994,111 --
(Increase) decrease in operating assets:
Accounts receivable 876,537 (618,715)
Income tax receivable 245,023 (265,224)
Inventories 698,250 (597,484)
Prepaid and other assets 22,902 39,402
Increase (decrease) in operating liabilities:
Accounts payable (928,142) 268,605
Income tax payable -- (138,742)
Accrued warranty (105,753) (95,155)
Accrued expenses 18,774 (260,704)
Other 17,749 --
----------- -----------
Total adjustments 2,404,546 (1,200,687)
----------- -----------
Net cash provided by (used in) operating activities 1,092,339 (993,658)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (263,308) (240,789)
Proceeds from disposal of property and equipment 71,768 --
Cash acquired from Auro Computer Services -- 50,359
Operating reduction in covenant not to compete liability -- (50,000)
Acquisition of stock of Auro Computer Services -- (470,000)
----------- -----------
Net cash used in investing activities (191,540) (710,430)
----------- -----------
</TABLE>
The accompanying notes are an integral
19
<PAGE> 20
<TABLE>
========================================================================================
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and exercise of
stock options and warrants 8,970 13,681
Net borrowings on notes payable - bank (560,389) 2,485,650
Payments to former stockholder -- (1,302)
Principal payments on long-term obligations (15,895) (846,214)
Payments on covenants not to compete (152,500) (50,833)
Payments on capital lease obligations (29,290) (40,466)
--------- ----------
Net cash (used in) provided by financing activities (749,104) 1,560,516
--------- ----------
Net increase (decrease) in cash 151,695 (143,572)
Cash - beginning of year 61,418 204,990
--------- ----------
Cash - end of year $ 213,113 $ 61,418
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 214,413 $ 138,571
Income taxes -- 296,000
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
On May 18, 1998, the Company purchased 85.1% of the common stock of PC & Parts,
Inc. dba Auro Computer Services 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, Inc.
part of the consolidated financial statements.
20
<PAGE> 21
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
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. The Parent began leasing a facility in Florida
to house additional remanufacturing and international sales operations
during 1999.
In 1998, the Parent purchased 100% of the stock of PC & Parts, Inc. dba
Auro Computer Services (the "Subsidiary"). Subsequent to December 31,
1999, the Parent decided to close the Subsidiary. The Subsidiary was
located in a suburb of Columbus and resold computer hardware and assembled
computer hardware components into personal computers. The Subsidiary also
sold personal computer software and provided 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.
The Parent began a foreign sales corporation (FSC) during 1998 to handle
all foreign sales.
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 and the FSC
for 1999 and 1998, in entirety, and include the financial statements of
the 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.
CHANGE IN ACCOUNTING PRINCIPLE
On January 1, 1999, the Parent adopted Statement of Position (SOP) 98-5
"Reporting of Start-up Activities," which requires all start-up costs
previously capitalized by the Company to be expensed. The cumulative
effect of the change in accounting principle is reflected in the
(Continued)
21
<PAGE> 22
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CHANGE IN ACCOUNTING PRINCIPLE (continued)
consolidated statement of income net of tax effect. All start-up costs
incurred after adoption of the SOP will be expensed as incurred.
ACCOUNTS RECEIVABLE
The Parent, FSC and the Subsidiary utilize the allowance method of
accounting for accounts receivable and have provided for possible
uncollectible amounts in the accompanying financial statements. The
allowance for doubtful accounts was $48,708 and $35,647 for the years
ended December 31, 1999 and 1998, respectively.
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 weighted 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 or market, using the average-cost method. 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 Parent reserves and periodically writes down slow moving inventory by
category, such as, converters, linegear, parts, and head-ends. The
Subsidiary also reserves and periodically writes down slow moving and
potentially obsolete inventory.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of
the related assets. Furniture and fixtures, equipment, and rental
equipment are depreciated over lives ranging from three to seven years.
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
(Continued)
22
<PAGE> 23
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY AND EQUIPMENT (continued)
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 $303,526 and $198,836, respectively,
at December 31, 1999, and $320,800 and $186,850, respectively at December
31, 1998. Depreciation expense, which includes the amortization of assets
held under capital leases, was $352,217 and $241,180 for 1999 and 1998,
respectively.
GOODWILL
Goodwill was recorded to reflect the amount paid for the Subsidiary less
fair market value of assets acquired and liabilities assumed during 1998.
Goodwill is shown net of accumulated amortization of $75,989 and $39,063,
as of December 31, 1999 and 1998, respectively, which is calculated using
the straight-line method over 15 years. In the fourth quarter of 1998,
management determined that the Subsidiary's valuation allowance on
deferred tax assets of $210,968 could be utilized. Therefore, this amount
was applied to goodwill. The Company amended prior year income tax returns
of the Subsidiary for errors on returns previously filed by the
Subsidiary. This resulted in $98,020 in refunds. Because these refunds
related to periods before the acquisition date, this amount was applied to
goodwill. The Company decided to discontinue its operations of the
Subsidiary subsequent to year-end. The unamortized balance of goodwill,
$493,931, was written off as part of the disposal of the discontinued
operations.
COVENANTS NOT TO COMPETE
Under the terms of the purchase agreement, the Company is paying 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 had a not to compete agreement with the
Subsidiary's former president through December 31, 1999. The amount of
$82,500 was paid over six months. Accordingly, a short-term asset and
liability were recorded and amortized using the straight-line method
during 1999. The asset and liability were removed upon expiration of the
agreement during 1999. The amount of amortization expense for these
covenants was $182,500 and $58,336 for 1999 and 1998, respectively.
Accumulated amortization amounted to $158,336 for 1999 and $58,336 for
1998. The unamortized balance of the covenants not to compete, $41,664,
was written off as part of the disposal of the discontinued operations.
(Continued)
23
<PAGE> 24
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 of up to three years on computer
hardware and systems. Warranties are also extended on new, repaired and
refurbished cable products for periods of up to one year. The Company's
expense for cable product warranties is not material. Warranties are not
extended for used cable equipment.
EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
For the year ended:
-------------------------------------------------------------------------
DECEMBER 31, 1999 December 31, 1998
----------------------------------- ------------------------------------
NET INCOME SHARES PER SHARE Net Income Shares Per Share
(NUMERATOR) (DENOMINATOR) AMOUNT (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income from continuing
operations and before
the cumulative effect
of the change in
accounting principle,
available to common
stockholders $799,519 1,694,880 $0.47 $743,685 1,681,253 $0.44
Effect of dilutive
securities, warrants
and options -- 30,480 0.01 -- 251,537 0.06
-------- --------- ----- -------- --------- -----
DILUTED EPS
Income from continuing
operations and before
the cumulative effect
of the change in
accounting principle,
available to common
stockholders $799,519 1,725,360 $0.46 $743,685 1,932,790 $0.38
======== ========= ===== ======== ========= =====
</TABLE>
Options to purchase 537,394 and 34,630 shares for the years ended December
31, 1999 and 1998, 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 1999 and 1998, options to
purchase 140,000 and 36,500 shares were issued contingent on certain
(Continued)
24
<PAGE> 25
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE (EPS) (continued)
earnings levels. During 1999, 47,280 options were canceled and another
2,750 options became vested. During 1998, 9,720 options were canceled and
another 8,250 became vested. The total contingent shares not included in
the computation of diluted EPS at December 31, 1999 and 1998 were 138,750
and 48,380, respectively. In addition, another 125,000 contingent options
have been granted as of December 31, 1999 pending an increase in the
number of options allowed under the current stock option plan.
Earnings per share is computed on the weighted average number of common
shares outstanding including any dilutive options and warrants.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses
were $107,919 and $99,235 for the years ended December 31, 1999 and 1998,
respectively.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash includes cash on hand and
demand deposits held by banks.
INCOME TAXES
The Parent and its subsidiaries 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.
(Continued)
25
<PAGE> 26
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
INVENTORIES
Inventories at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------- --------------------------------------
NEW USED TOTAL New Used Total
---------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Parts $249,070 $ -- $ 249,070 $ 239,654 $ -- $ 239,654
Converters 283,679 271,291 554,970 398,705 426,034 824,739
Linegear 106,456 550,415 656,871 268,938 405,418 674,356
Head-ends 7,130 38,267 45,397 13,106 38,232 51,338
Computer hardware,
software and
peripherals 126,270 -- 126,270 627,791 -- 627,791
-------- -------- ---------- ---------- -------- ----------
Total $772,605 $859,973 1,632,578 $1,548,194 $869,684 2,417,878
======== ======== ========== ========
Reserve for inventory
obsolescence (75,321) (49,184)
---------- ----------
Net inventory $1,557,257 $2,368,694
========== ==========
</TABLE>
NOTES PAYABLE
The Company has a revolving credit line with a bank for $3,300,000. The
credit line is secured by substantially all assets of the Company and is
payable on demand. The line matures on April 30, 2000, and interest is
charged at prime plus 1% (9.50% and 8.75% at December 31, 1999 and 1998,
respectively). Outstanding borrowings at December 31, 1999 and 1998 were
$1,782,885 and $2,276,607, respectively.
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% (9.50% and 8.75% at December 31, 1999 and
1998, respectively). The principal balances were $433,333 and $500,000 at
December 31, 1999 and 1998, respectively. The principal is due at maturity
on April 30, 2000. The note is secured by substantially all of the assets
of the Company.
The agreement provides for certain covenants and restrictions including
maintenance of certain minimum financial requirements. The Company was in
violation of several of the covenants and restrictions, however the bank
has waived the loan covenants through December 31, 1999.
(Continued)
26
<PAGE> 27
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1999 and 1998 consist of the
following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Amounts due under capital leases, net of $8,006 and $14,683
representing interest at December 31, 1999 and 1998,
respectively. The capital leases include purchase options
upon expiration $ 27,064 $ 56,354
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, 1999 and 1998 was $0 and $3,417,
respectively. The note is secured by the
related equipment -- 15,895
-------- --------
Total 27,064 72,249
Less current maturities (19,958) (45,186)
-------- --------
Long-term obligations $ 7,106 $ 27,063
======== ========
</TABLE>
Maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
Capital Lease
Obligations
-----------
<S> <C>
2000 $25,450
2001 9,085
2002 535
-------
Less amount representing interest (8,006)
-------
Total $27,064
=======
</TABLE>
RETIREMENT PLAN
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 1999 and 1998.
(Continued)
27
<PAGE> 28
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Current expense (benefit)
Federal $(33,887) $58,000
State and local 27,064 3,433
-------- -------
Income tax expense (benefit) $ (6,823) $61,433
======== =======
</TABLE>
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Assets:
Accounts receivable $ 18,509 $ 13,546
Inventories 55,270 53,519
Net operating loss 398,724 57,000
Acquisition bonus -- 57,000
Covenants not to compete 88,002 25,130
Accrued warranty and prepaid service contracts 83,084 113,922
Other -- 8,829
-------- --------
Gross deferred tax assets 643,589 328,946
-------- --------
Liabilities:
Property and equipment 589 46,208
Prepaid asset -- 2,738
-------- --------
Gross deferred tax liabilities 589 48,946
-------- --------
Net deferred tax asset 643,000 280,000
Less valuation allowance (32,000) (27,000)
-------- --------
Total net deferred tax asset $611,000 $253,000
======== ========
</TABLE>
(Continued)
28
<PAGE> 29
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
INCOME TAXES (continued)
A reconciliation of the Company's effective tax values is as follows:
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Income tax at statutory rates $(570,190) $136,083
State and local taxes, net of federal benefit 17,862 2,266
Surtax and other rate differences (113) 5,553
Permanent differences 185,013 12,652
Change in valuation allowance 5,000 --
State tax credits earned (2,395) (2,400)
--------- --------
$(364,823) $154,154
========= ========
</TABLE>
As of December 31, 1999, the Company had approximately $1,090,500 of tax
net operating loss carry forwards remaining to be utilized. The loss on
the disposal of discontinued operations accounted for $1,007,000 of the
amount. The remaining amount, $83,500, are losses carried forward by the
Subsidiary. The carry forwards begin to expire in 2017. A valuation
allowance has been recognized against the deferred tax asset as a result
of the net operating loss carryforward from the Subsidiary.
WARRANTY LIABILITY
For certain products, 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 and hardware costs to install replacement parts
for systems that remain under warranty as of December 31, 1999 and 1998.
The warranty liability is an estimate. Actual results could differ from
the estimate. The estimated future warranty costs of $139,505 have not
been accrued as it has been determined that the Subsidiary as a result of
closing will not be able to fulfill this obligation.
STOCKHOLDERS' EQUITY
At December 31, 1999 and 1998, the Company had authorized common shares,
no par value, of 10,000,000, and authorized preferred shares, no par
value, of 200,000. There were 1,695,076 and 1,689,136 common shares
outstanding at December 31, 1999 and 1998, respectively. No preferred
stock is issued or outstanding at December 31, 1999 or 1998.
(Continued)
29
<PAGE> 30
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
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 1999
and 1998 were granted in tandem with SAR's.
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>
1999 1998
----------- --------
<S> <C> <C>
Net income (loss):
As reported $(1,312,207) $207,029
Pro forma $(1,373,661) $134,576
Basic earnings (loss) per share:
As reported $ (0.77) $ 0.12
Pro forma $ (0.81) $ 0.08
Diluted earnings (loss) per share:
As reported $ (0.76) $ 0.11
Pro forma $ (0.80) $ 0.07
</TABLE>
(Continued)
30
<PAGE> 31
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
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 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
-------------------- ---------------------
<S> <C> <C>
Dividend yield 0 0
Expected volatility 113% 129%
Risk-free interest rates 4.70%, 4.88%, 5.16%, 5.50%, 5.55%, 5.56% &
4.97%, & 5.41% 5.65%
Expected lives 3 TO 5 YEARS 5 years
</TABLE>
A summary of the status of the Company's employee stock option plan as of
December 31, 1999 and 1998 and changes for the years then ended are
presented below:
<TABLE>
<CAPTION>
1999 1998
------------------------- ------------------------
WEIGHTED Weighted
AVERAGE Average
EXERCISE Exercise
SHARES PRICE Shares Price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
January 1 207,978 $2.17 236,302 $1.82
Granted 174,000 0.97 57,780 3.20
Exercised (5,940) 1.51 (15,334) 0.89
Canceled (76,114) 2.42 (70,770) 2.03
-------- ----- -------- -----
December 31 299,924 $1.40 207,978 $2.17
======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Options exercisable at year-end 125,442 128,560
Weighted-average fair value of options granted during the year $ 0.40 $ 2.63
</TABLE>
(Continued)
31
<PAGE> 32
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
STOCKHOLDERS' EQUITY (continued)
The following table summarizes information about employee stock options at
December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Number Average Weighted Weighted
Outstanding Remaining Average Number Average
Range of Exercise December 31, Contractual Exercise Exercisable Exercise
Prices 1999 Life (In Years) Price December 31, 1998 Price
- ---------------------- ----------------- ----------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
$0.8125 - $3.50 299,924 7.53 $1.40 207,978 $2.17
</TABLE>
The Chief Executive Officer held options and warrants issued to him prior
to employment by the Parent. As of December 31, 1999, the Chief Executive
Officer had 401,280 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
1999 or 1998.
At December 31, 1999 and 1998, the Chief Executive Officer held warrants
to purchase 19,800 shares of stock for $0.93 per share. The warrants
expire in 2004.
At December 31, 1999 and 1998, the Chief Executive Officer held vested
warrants and options to purchase 409,880 and 408,880 shares, respectively,
in total granted to him under his consulting agreement and as an employee
of the Company.
At December 31, 1999 and 1998, outside Board of Directors members held
options to purchase 48,040 and 44,040 shares of common stock,
respectively, with exercise prices ranging from $0.84 to $3.50. At
December 31, 1999 and 1998, all of the options were vested and the options
expire at various dates through 2009.
During 1999, a consultant was given options to purchase 10,000 shares at
$4.50 per share. The options expire in 2001.
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. During 1999, the Company's Chief Executive Officer relinquished
his rights to the remaining $120,000 of the acquisition bonus. The bonus
reversal was included in the loss from operations of the discontinued
division.
(Continued)
32
<PAGE> 33
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
OPERATING LEASE OBLIGATIONS
The Company leases production and office space. The Company also leases
office space in Florida for its international operations. The Subsidiary
leases office space from its former owners. Rent expense was $363,194 and
$287,090 for the years ended December 31, 1999 and 1998, respectively.
Future minimum lease payments are as follows: 2000 - $359,857; 2001 -
$272,442; 2002 - $97,477; 2003 - $2,320.
STOCKHOLDER TRANSACTIONS
In October 1994, the Company entered into a separation, non-competition
and consulting agreement with the former president. The Separation
Agreement required the Company to pay the former president $100,000.
Consulting services were 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 expired during 1999. The covenant not to compete became fully
amortized and was removed from the balance sheet as of December 31, 1999.
The related obligation was paid in full during 1999. The total accumulated
amortization in relation to the covenant not to compete was $21,550 as of
December 31, 1998. The consulting services were expensed over the term of
the Agreement. Under this agreement, the Company recognized expenses of
$7,205 and $84,000 in 1999 and 1998.
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 $1,079,550 and $936,300 and the corresponding accounts receivable
were $22,055 and $207,654 at December 31, 1999 and 1998, respectively.
REPORTABLE SEGMENTS
Management has elected to identify the Company's reportable segments based
on operating units: Cable Link, Inc., including the FSC, and PC & Parts,
Inc. dba Auro Computer Services.
(Continued)
33
<PAGE> 34
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
REPORTABLE SEGMENTS (continued)
Information related to the Company's reportable segments for 1999 is as
follows:
<TABLE>
<CAPTION>
Auro
Cable Link, Computer
Inc. Services Total
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $10,606,235 $11,019,789 $21,626,024
Cost of revenues 6,485,381 9,661,637 16,147,018
----------- ----------- -----------
Gross profit 4,120,854 1,358,152 5,479,006
S, G & A expenses 2,953,283 2,626,057 5,579,340
----------- ----------- -----------
Income (loss) from operations 1,167,571 (1,267,905) (100,334)
Interest expense (74,947) (181,466) (256,413)
Other income -- 120,000 120,000
----------- ----------- -----------
Income (loss) 1,092,624 (1,329,371) (236,747)
Parent/Subsidiary interest (income) expense (42,000) 42,000 --
Income tax (expense) benefit (251,105) 232,928 (18,177)
Goodwill amortization -- (36,926) (36,926)
Loss on disposal of segment -- (994,111) (994,111)
Cumulative effect of change in accounting
principle, net of tax benefit (26,246) -- (26,246)
----------- ----------- -----------
Consolidated net income (loss) $ 773,273 $(2,085,480) $(1,312,207)
=========== =========== ===========
Total assets $ 4,729,350 $ 1,708,105 $ 6,437,455
Goodwill -- 493,931 493,931
Investment in subsidiary at cost (470,000) -- (470,000)
Intercompany receivables (458,671) (23,028) (481,699)
Discontinued operations 367,000 (1,067,168) (700,168)
----------- ----------- -----------
Consolidated total assets $ 4,167,679 $ 1,111,840 $ 5,279,519
=========== =========== ===========
Depreciation and amortization expense $ 202,160 $ 336,007 $ 538,167
=========== =========== ===========
</TABLE>
A reconciliation of the segments' total depreciation and amortization to
the consolidated total depreciation and amortization is as follows:
<TABLE>
<CAPTION>
<S> <C>
Segments' total depreciation and amortization $538,167
Amortization of goodwill 36,926
--------
Consolidated total depreciation and
amortization $575,093
========
</TABLE>
(Continued)
34
<PAGE> 35
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
REPORTABLE SEGMENTS (continued)
Information related to the Company's reportable segments for 1998 is as
follows:
<TABLE>
<CAPTION>
Auro
Cable Link, Computer
Inc. Services Total
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $10,318,475 $10,248,774 $20,567,249
Cost of revenues 6,537,744 9,406,856 15,944,600
----------- ----------- -----------
Gross profit 3,780,731 841,918 4,622,649
S, G & A expenses 2,829,723 1,256,713 4,086,436
----------- ----------- -----------
Income (loss) from operations 951,008 (414,795) 536,213
Interest expense (82,865) (56,674) (139,539)
Other income (expense) 1,142 2,430 3,572
----------- ----------- -----------
Income (loss) 869,285 (469,039) 400,246
Income tax expense (125,600) (28,554) (154,154)
Goodwill amortization -- (39,063) (39,063)
----------- ----------- -----------
Consolidated net income (loss) $ 743,685 $ (536,656) $ 207,029
=========== =========== ===========
Total assets $ 5,495,095 $ 2,758,307 $ 8,253,402
Goodwill -- 530,857 530,857
Investment in subsidiary at cost (470,000) -- (470,000)
Intercompany receivables (150,000) -- (150,000)
----------- ----------- -----------
Consolidated total assets $ 4,875,095 $ 3,289,164 $ 8,164,259
=========== =========== ===========
Depreciation and amortization expense $ 186,307 $ 117,994 $ 304,301
=========== =========== ===========
</TABLE>
A reconciliation of the segments' total depreciation and amortization to
the consolidated total depreciation and amortization is as follows:
<TABLE>
<CAPTION>
<S> <C>
Segments' total depreciation and amortization $304,301
Amortization of goodwill 39,063
--------
Consolidated total depreciation and
amortization $343,364
========
</TABLE>
(Continued)
35
<PAGE> 36
CABLE LINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
================================================================================
PROFORMA OPERATIONS
The following unaudited proforma consolidated results of operations of the
Company for the year ended December 31, 1998 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
-----------
<S> <C>
Net revenues $24,830,369
Net loss (221,724)
Basic and diluted net loss per share (.13)
</TABLE>
MAJOR CUSTOMERS AND SUPPLIERS
In 1999, approximately 21% of the Company's total revenues were from one
of the Subsidiary's customers and approximately 38% of total purchases
were from two of the Subsidiary's vendors. In 1998, approximately 10% of
the Company's total revenues were from one of the Subsidiary's customers
and approximately 19% of total purchases were from one of the Subsidiary's
vendors.
SUBSEQUENT EVENT
Subsequent to December 31, 1999, the Company decided to close and
liquidate its subsidiary, Auro Computer Services. Auro ceased operations
on February 21, 2000 and its remaining assets are expected to be
liquidated by March 31, 2000. As a result of this action, the Company has
reflected Auro Computer Services' results from operations as discontinued
in the accompanying statement of operations. Interest on the bank debt
related to Auro's acquisition is recorded as an expense in determining the
loss on discontinued operations.
The Company also recorded a charge for the expected loss on disposal, net
of tax. Included in this loss is $1,067,168 for the write-down of assets
to their estimated net realizable value upon collection and liquidation;
$139,505 from the release of recorded warranty that Auro will not be able
to fulfill; $212,448 in costs to liquidate and $221,000 operating losses
prior to the cessation of operations.
The remaining assets consist of accounts receivable yet to be collected
and inventory and equipment expected to be sold. The net realizable value
of these remaining assets is estimated at $1,007,937, including a deferred
tax asset of $367,000. However, the actual amount realized may differ. The
Company anticipates assuming Auro's bank debt by fulfilling its guarantee
of the debt.
36
<PAGE> 37
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 customers' orders and competition. Due to such fluctuations,
historical results and percentage relationships are not necessarily indicative
of the results for any future period. Statements which are not historical facts
contained in this report are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results and are made pursuant to the "safe harbor provisions of the
Private Securities Litigation Act of 1995". Factors that could cause actual
results to differ materially include, but are not limited to, the following: the
ability to obtain new contracts at attractive prices; the size and timing of
customers orders; fluctuations in customer demand; competitive factors; the
timely completion of contracts; and general economic conditions, both
domestically and abroad. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements, which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
GENERAL
Cable Link, Inc. (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 Company operates its main
administrative and manufacturing operations from a leased facility in Columbus,
Ohio. The Parent began leasing a facility in Florida to house additional
re-manufacturing and international sales operation during 1999.
In 1998, the Parent purchased 100% of the stock of PC & Parts, Inc, d.b.a. Auro
Computer Services (the "Subsidiary"). Subsequent to December 31, 1999, the
Parent decided to close the Subsidiary. The Subsidiary was located in a suburb
of Columbus and resold computer hardware and assembled computer hardware
components into personal computers. The Subsidiary also sold personal computer
software and provided 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. As noted, the Subsidiary was
closed in February 2000. Management is in the process of liquidating the
remaining assets and liabilities of the Subsidiary.
RESULTS OF OPERATIONS
NET SALES
Net sales for the Parent for 1999 were $10,606,235 as compared to $10,318,475
for 1998, an increase of $287,760. This represents an increase of 2.8% over the
previous year for the same period. The increase in sales is primarily due to an
increase in the repair business and the expanded customer base.
COST OF GOODS SOLD
The cost of goods sold for the Parent for 1999 were $6,485,381 as compared to
$6,537,744 for 1998, a decrease of $52,363. The decrease is primarily due to a
reduction in production labor expense. The decrease in labor cost is primarily
the result of a reduction in labor force as well as increased efficiencies and
new procedures that have led to improved productivity of employees.
37
<PAGE> 38
OPERATING EXPENSES
Operating Expenses for the Parent for 1999 were $2,995,283 as compared to
$2,828,581 for the same period in 1998 or an increase of $166,702. The increase
is a result of hiring additional sales people for the Columbus, Ohio and
Hollywood, Florida locations. The Parent will continue to implement procedures
and review the organizational structure in an attempt to increase efficiencies
and reduce costs.
INCOME FROM OPERATIONS
Income from operations for the Parent for 1999 was $1,125,571 as compared to
$952,150 for 1998, an increase of $173,421. The increase in income from
operations is a result of the Parent's decrease in cost of goods sold and the
increase in sales during 1999.
INCOME TAX PROVISION
The effective tax rate on continuing operations increased to 24% in 1999 from
14% in 1998 due to an increase in the nondeductible items and an increase in the
allocation of the tax expense to the Parent based on its ratio of pretax income
to the total consolidated loss. The tax benefit rate increase for the
discontinued operations due to the fact the discontinued operations' loss will
be utilized to offset the continuing operations in full and are not limited as
in the case of prior losses. In order for these benefits to be realized in full,
the continuing operations must have taxable income of $1,460,000 in future
years. It is management's belief that these tax benefits will be realized based
on the continuing operations pretax income levels of $1,050,624 and $869,285 in
1999 and 1998, respectively.
DISCONTINUED OPERATIONS
During the year ended December 31, 1999, the Subsidiary incurred operating
losses of $1,267,905 versus a loss of $414,795 in 1998. The increase in the loss
was due to increased operating expenses incurred by the Subsidiary. The increase
in the operating expenses was a result of efforts to increase sales through
increased marketing and promotional effort's, changes in management, sales and
administrative staffing as well as changes in other expenses. Additionally, the
Subsidiary incurred higher interest costs related to increased debt as a result
of the larger operating losses.
In February 2000, Management decided to close and liquidate the Subsidiary and
operations ceased on February 21, 2000. All but a few of the employees were
terminated as of that date. The remaining employees are in the process of
winding up the Subsidiary's activities by collecting remaining accounts
receivable and selling of the remaining inventory and equipment. In addition,
Management has had discussions with trade vendors explaining the bank's exertion
of its priority claim on the assets of the Subsidiary and that the bank's
priority is in excess of the available assets.
The bank has first security on all assets of the Subsidiary and all proceeds
from the sale of assets will be used to make payment on the loan whose proceeds
were used to acquire the Subsidiary and the line of credit. To the extent bank
debt of the Subsidiary is not fully retired as a result of the sales of assets
and collection of receivables, the Parent will assume the remaining balance as a
result of its guarantee.
The Company recorded a charge for the expected loss on disposal of the assets,
net of tax effects. The assets were written down $1,067,168 to their estimated
net realizable value, $139,505 was reversed due to Management's estimation that
it will not be able to fulfill warranty contracts, $212,448 of future costs to
liquidate the assets and honor lease commitments and $221,000 of operating
losses incurred prior to cessation of operations. It is anticipated that there
will be no further financial impact to the Company as a result of the cessation
of operations of the Subsidiary.
38
<PAGE> 39
The following are management's discussion and analysis of material changes in
financial position during 1999.
ACCOUNTS RECEIVABLE
Accounts Receivable for the Company were $2,060,469 at December 31, 1999 as
compared to $3,228,285 for December 31, 1998, a decrease of 36.2% or $1,167,816.
This decrease in Accounts Receivable is due to a decrease in sales for the
Parent and the Subsidiary for the fourth quarter of 1999 versus the fourth
quarter of 1998. Additionally, the write-off for uncollectible accounts was
increased by $260,676 as a result of the closing of the Subsidiary.
INVENTORIES
The inventory for the Company was $1,557,257 at December 31, 1999 as compared to
$2,368,694 for December 31, 1998, a decrease of 34.3% or $811,437. The Parent's
decrease in inventory of $ 303,685 was due to sales from existing inventory
during 1999. The decrease of $507,752 for the Subsidiary was due to the reduced
purchasing of inventory during 1999 and the write down of the realized value of
$113,187 as a result of the closing of the Subsidiary
PROPERTY AND EQUIPMENT
The property and equipment for the Company was $1,426,367 at December 31, 1999
as compared to $2,043,867 for December 31, 1998, a decrease of $617,500 or
30.2%. The decrease is primarily due to the closing of the Subsidiary. The
Subsidiary removed $537,000 in gross book value and $402,000 at cost for
accumulated depreciation and $50,000 was booked at realizable sales value. The
Parent's change in property and equipment was net $15,510 for additions and
disposals during 1999.
GOODWILL
The unamortized balance of goodwill, $493,931, was written off as part of the
disposal of the discontinued operations of the Subsidiary.
ACCOUNTS PAYABLE
The accounts payable for the Company were $1,251,975 at December 31, 1999 as
compared to $2,180,117 at December 31, 1998, a decrease of 42.6% or $928,142.
The decrease for both the Parent and the Subsidiary was a direct result of the
decrease in inventory and purchases at year-end.
SHORT TERM OBLIGATIONS
The short-term obligations for the Company includes a term note of $500,000. The
note was converted on May 1, 1999 and is being amortized on equal monthly
payments on a five-year schedule and the principle balance was $433,333 at
December 31, 1999.
The bank line of credit for the Company decreased by $493,722 as of December 31,
1999 as compared to December 31, 1998. The Parent's decrease of $995,714 was due
to improved cash flow generated by higher sales during 1999 and reduced cost of
labor and reduced inventory purchase. The Subsidiary's increase of $501,992 was
due to supporting the operation loss.
ACCRUED EXPENSES
Accrued expenses for the Company increased $48,774 or 10.9% from December 31,
1998 as compared to December 31, 1999. The increase is primarily due to the
Parent's accrued expenses for payroll.
39
<PAGE> 40
LIQUIDITY AND CAPITAL RESOURCES
On May 18, 1998, the Company purchased 85.1% of the common stock of the
Subsidiary. Based on the unadjusted purchase price, the Company used net cash of
approximately $700,000 to purchase this common stock. The cash came from an
issuance of long-term debt of $500,000. In September 1998 the Company signed
Amendment No.1 to the Stock Purchase and Non-Compete Agreement to resolve
differences in the original purchase price. The Amendment provided for a
$350,000 reduction in the original purchase price of $820,000. The $350,000
overpayment was refunded as follows: 1) a cash refund of $80,000, 2)
cancellation of the notes payable to former stockholders of $120,000, 3)
repayment to the Company of $100,000 previously held in escrow and 4) a pro rata
reduction of $50,000 in non-compete agreements. On December 18, 1998 the Company
purchased the remaining minority interest for $100,000.
The Company finances its operations primarily through internally generated funds
and bank lines of credit totaling $3,300,000. As a result of the closing of the
Subsidiary the Company will assume the bank debt related to the Subsidiary. As
of March 28, 2000 the balance outstanding was $928,000 but could decrease by
future liquidation of assets. This will have a negative impact to the future
cash flow of the Company. Future liquidity of capital will come only as a result
of profitability of the Company. The Company does not at this time anticipate
the need for additional capital unless a significant increase in its operation
causes it to have needs for additional equipment and working capital.
As of December 31, 1999 and as a result of the loss on disposal of the
Subsidiary, the Company was in violation of several loan covenants relating to
its loan agreements with the bank. The bank has agreed to waive the loan
covenants through December 31, 1999. The bank and the Company are in the process
of negotiating new terms for the loan agreement.
YEAR 2000
The Parent and its Subsidiary ("the Company") had 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 was 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 the Parent 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 communicated with its major customers, suppliers and financial
institutions to assess the potential impact on the Company's operations if those
third parties failed to become Year 2000 compliant in a timely manner. Risk
assessment, readiness evaluation, and contingency plans were completed by
December 31, 1999. The Company's key financial institutions have been surveyed
and they were Year 2000 compliant on or before December 31, 1999. The Subsidiary
did not take responsibility for any software purchased from the Subsidiary that
does not allow for the year 2000 rollover. The Subsidiary did provide all major
customers with information to assist them in evaluating processing systems.
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 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.
40
<PAGE> 41
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.
The costs incurred related to its Year 2000 activities were not material to the
Company and the Company does not believe that the total cost of its Year 2000
readiness programs had a material adverse impact on the Company's results of
operations or financial condition.
Subsequent to December 31, 1999 the Company has not experienced miscalculations
or systems failures as a result of the Year 2000 issues. Also, no customers,
suppliers or financial institutions have informed the Company of any Year 2000
issues that effected the Company.
NEW ACCOUNTING PRONOUNCEMENTS
In 1999, the Company adopted 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 was reported as a cumulative effect of a change in accounting principle,
net of tax of $26,246 for 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 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.
41
<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 May 18, 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 46
12.1 Powers of Attorney. 47
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIALLY
NO. OF NUMBERED
EXHIBITS INSTRUMENT PAGES COPY
- -------- ---------- ----- ----
<S> <C> <C> <C>
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. 55
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.
43
<PAGE> 44
See Exhibit 6.7 - Eric S. Newman Independent Consulting Letter
Agreement dated August 1, 1994.
See Exhibit 6.8 - Loan and Security Agreement dated November
27, 1996.
See Exhibit 6.9 - Promissory Note dated April 30, 1997.
See Exhibit 6.10 - Lease dated November 4, 1992 and Lease
Modification Agreement dated October 26, 1995 for
Suite 201, 280 Cozzins, Columbus, Ohio.
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 May 18, 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.
(15.1) See Acknowledgment by Coopers & Lybrand L.L.P.
(27) Financial Data Schedule
44
<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: February 25, 2000
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
25th day of February, 2000.
SIGNATURE TITLE
--------- -----
/s/ Bob Binsky
Bob Binsky Director, Chairman of the Board,
Chief Executive Officer
(principle executive officer)
Gerald S. Blaskie* Controller
Gerald S. Blaskie
Brenda L. Castle* President and Director
Brenda L. Castle
Carla Cole* Director
Carla Cole
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
45
<PAGE> 1
Exhibit 10
We hereby consent to the use in Form 10-KSB of our report dated February 3, 2000
relating to the financial statements of Cable Link, Inc., which appears in such
Form 10-KSB.
March 29, 2000
Groner, Boylle & Quillin LLP
46
<PAGE> 1
Exhibit 12.1
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 25th day of
February, 2000.
-----------------------------------------
Bob Binsky
47
<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 25th day of
February, 2000.
-----------------------------------------
Brenda L. Castle
48
<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 25th day of
February, 2000.
-----------------------------------------
Carla Cole
49
<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 25th day of
February, 2000.
-----------------------------------------
Gerald Blaskie
50
<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 25th day of
February, 2000.
-----------------------------------------
Eric S. Newman
51
<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 25th day of
February, 2000.
-----------------------------------------
Sherry J. Rothfield
52
<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 25th day of
February, 2000.
-----------------------------------------
Michael Tsao
53
<PAGE> 8
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 25th day of
February, 2000.
-----------------------------------------
Kenneth J. Warren
54
<PAGE> 1
Exhibit 12.2
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 25th, 2000, 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 25th day of February, 2000.
/s/ Kenneth J. Warren
Kenneth J. Warren
55
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 213,113
<SECURITIES> 0
<RECEIVABLES> 2,109,177
<ALLOWANCES> 48,708
<INVENTORY> 1,557,257
<CURRENT-ASSETS> 4,597,380
<PP&E> 1,426,367
<DEPRECIATION> 865,466
<TOTAL-ASSETS> 5,279,519
<CURRENT-LIABILITIES> 4,447,994
<BONDS> 0
0
0
<COMMON> 1,472,357
<OTHER-SE> (665,687)
<TOTAL-LIABILITY-AND-EQUITY> 5,279,519
<SALES> 10,606,235
<TOTAL-REVENUES> 10,606,235
<CGS> 6,485,381
<TOTAL-COSTS> 9,480,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,947
<INCOME-PRETAX> 1,050,624
<INCOME-TAX> 251,105
<INCOME-CONTINUING> 799,519
<DISCONTINUED> (2,085,480)
<EXTRAORDINARY> 0
<CHANGES> (26,246)
<NET-INCOME> (1,312,207)
<EPS-BASIC> (0.77)
<EPS-DILUTED> (0.76)
</TABLE>
