-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B7EkcwwemkTDnnE1fHHpwiF1RO4Tao62mG1J4xXU4TAcodQck4yfBmA59nXEJeyk upLWw7bziM6GJFzTFf8oPQ== 0000950152-98-006279.txt : 19980803 0000950152-98-006279.hdr.sgml : 19980803 ACCESSION NUMBER: 0000950152-98-006279 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980518 ITEM INFORMATION: FILED AS OF DATE: 19980730 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE LINK INC CENTRAL INDEX KEY: 0000893139 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 311239657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-23111 FILM NUMBER: 98674297 BUSINESS ADDRESS: STREET 1: 280 COZZINS ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142213131 8-K/A 1 CABLE LINK, INC. 8-K/AMENDMENT NO. 1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AMENDMENT NO. 1 Date of report May 18, 1998 --------------------------------------------------------- Cable Link, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Ohio - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-23111 31-1239657 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 280 Cozzins Street 43215 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (614) 221-3131 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) This Amendment No. 1 is being filed to submit the financial statements required to be filed pursuant to Item 7 of Form 8-K within 60 days after the initial report on Form 8-K was due. (1) 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a)-(b) Financial Statements. Financial Statements of PC & Parts, Inc. dba Auro Computer Systems, for fiscal years ended December 31, 1997 and 1996 Interim Financial Statements of PC & Parts, Inc. dba Auro Computer Systems for the three months ended March 31, 1998. Cable Link, Inc. Pro Forma Consolidated Balance Sheet for Cable Link, Inc. and Subsidiary at March 31, 1998 Cable Link, Inc. Consolidated Statement of Operations for the quarter ended March 31, 1998 and the year ended December 31, 1997. (c) Exhibits. (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession. 2.1. Stock Purchase and Non-Compete Agreement among PC & Parts, Inc., its Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998.* 2.2. Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian Berger dated May 18, 1998.* (23) Consent of experts and Counsel 23.1 Consent of Groner, Boyle & Quillin, LLP (27) Financial Data Schedule (filed electronically for SEC information only) * Previously filed (2) 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CABLE LINK, INC. Dated: July 29, 1998 By s/ Bob Binsky -------------------- Bob Binsky, Chairman of the Board (3) 4 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS FINANCIAL STATEMENTS * * * * * * DECEMBER 31, 1997 AND 1996 (4) 5 C O N T E N T S ---------------
Page INDEPENDENT ACCOUNTANTS' REPORT 6 BALANCE SHEETS 7 STATEMENTS OF INCOME 9 STATEMENTS OF RETAINED EARNINGS 10 STATEMENTS OF CASH FLOWS 11 NOTES TO FINANCIAL STATEMENTS 13
(5) 6 To the Shareholders PC & Parts, Inc., dba Auro Computer Systems Westerville, Ohio We have audited the accompanying balance sheets of PC & Parts, Inc. dba Auro Computer Systems as of December 31, 1997 and 1996, and the related statements of income and changes in retained earnings (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PC & Parts, Inc. dba Auro Computer Systems as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Groner, Boyle & Quillin, LLP Columbus, Ohio April 29, 1998 (except for the subsequent event and stock options footnotes as to which are dated May 18, 1998) (6) 7 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS BALANCE SHEETS December 31, 1997 and 1996 ================================================================================ ASSETS
1997 1996 ---------------- ---------- CURRENT ASSETS Cash $ 121,744 $ 70,800 Accounts receivable Trade (less allowance for doubtful accounts of $29,526 in 1997 and $0 in 1996) 1,413,629 1,249,546 Officers 40,220 64,220 Employees - 3,013 Income tax refunds 36,381 50,741 Inventory 355,083 385,895 Deferred tax asset 174,323 121,185 Prepaid expenses 5,500 32,000 --------------- -------------- Total current assets 2,146,880 1,977,400 ------------ ------------ PROPERTY AND EQUIPMENT Furniture and equipment 61,385 47,439 Computer equipment 272,978 178,573 Capital lease assets 47,610 47,610 Leasehold improvements 46,094 - -------------- ------------ 428,067 273,622 Less: Accumulated depreciation and amortization ( 156,861) ( 70,583) ------------- -------------- Net property and equipment 271,206 203,039 ------------- ------------- OTHER ASSETS Deposits 14,300 14,300 -------------- -------------- Total other assets 14,300 14,300 -------------- -------------- TOTAL ASSETS $ 2,432,386 $ 2,194,739 =========== ===========
(7) 8 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1997 1996 --------------- ---------- CURRENT LIABILITIES Current portion long-term debt $ 56,407 $ 70,304 Line of credit 780,000 490,000 Accounts payable 818,985 694,844 Accrued expenses Payroll and related taxes 133,630 123,640 Warranty expense 340,413 332,968 Other 219,354 60,966 ------------- -------------- Total current liabilities 2,348,789 1,772,722 ------------ ------------ LONG-TERM LIABILITIES Notes payable - stockholders 202,026 202,026 Note payable - bank 41,667 91,667 Capital lease obligations 3,237 9,644 Deferred income taxes 2,291 - --------------- ----------- Total long-term liabilities 249,221 303,337 ------------- ------------- Total liabilities 2,598,010 2,076,059 STOCKHOLDERS' EQUITY (DEFICIT) Common stock authorized, issued and outstanding, 21,000 shares in 1997 and 20,000 shares in 1996, no par value 210,000 200,000 Additional paid-in capital 5,000 - Retained deficit ( 380,624) ( 81,320) -------------- -------------- Total stockholders' equity (deficit) ( 165,624) 118,680 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,432,386 $ 2,194,739 =========== ===========
The accompanying notes are an integral part of the financial statements. (8) 9 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS STATEMENTS OF INCOME Years Ended December 31, 1997 and 1996 ================================================================================
1997 1996 ----------------- ----------- Net revenues $ 13,536,581 $ 12,243,014 Cost of sales 12,432,014 11,284,246 ------------- ------------- Gross profit 1,104,567 958,768 Operating expenses 1,370,613 892,138 -------------- --------------- Income (loss) from operations ( 266,046) 66,630 Other income (expense) Interest and finance income 19,173 31,044 Interest expense ( 82,928) ( 84,591) Miscellaneous income 1,997 11,171 Loss on disposal of assets ( 20,175) ( 18,415) ---------------- ---------------- Income (loss) before income taxes ( 347,979) 5,839 Provision (benefit) for income taxes Current 2,055 37,624 Deferred ( 50,730) ( 108,950) ---------------- --------------- Total ( 48,675) ( 71,326) ---------------- ---------------- Net income (loss) $( 299,304) $ 77,165 ============== =============== Basic and diluted earnings (loss) per share $( 14.91) $ 3.86 ================ ================= Weighted average shares outstanding 20,071 20,000 ================ ================
The accompanying notes are an integral part of the financial statements. (9) 10 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS STATEMENTS OF CHANGES IN RETAINED EARNINGS (DEFICIT) Years Ended December 31, 1997 and 1996 ================================================================================
BALANCE AT DECEMBER 31, 1995, as previously reported $ 59,323 Prior period adjustments: Correction of errors (217,808) ----------- BALANCE AT DECEMBER 31, 1995, as restated (158,485) Net income year ended December 31, 1996 77,165 ----------- BALANCE AT DECEMBER 31, 1996 ( 81,320) Net loss year ended December 31, 1997 (299,304) ---------- BALANCE AT DECEMBER 31, 1997 $(380,624) =========
The accompanying notes are an integral part of the financial statements. (10) 11 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS STATEMENTS OF CASH FLOWS Years Ended December 31, 1997 and 1996 ================================================================================
1997 1996 --------------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $( 299,304) $ 77,165 ------------ ------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 120,326 44,362 Deferred tax benefit ( 50,730) ( 108,950) Loss on disposal of assets 20,175 18,415 (Increase) decrease in operating assets: Accounts receivable ( 122,710) 995,113 Inventory 30,812 5,973 Prepaid expenses 26,500 ( 32,000) Increase (decrease) in operating liabilities: Accounts payable 124,141 92,021 Accrued expenses 168,261 ( 125,572) Accrued warranty 7,445 189,656 --------------- ------------- Total adjustments 324,220 1,079,018 ------------- ------------ Net cash provided by operating activities 24,916 1,156,183 -------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets ( 208,668) ( 87,810) Decrease in deposits - 1,090 ------------------- --------------- Net cash used in investing activities ( 208,668) ( 86,720) ------------- --------------
(11) 12 ================================================================================
1997 1996 --------------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of 1,000 shares of common stock 15,000 - Reduction of long-term debt ( 50,000) ( 50,000) Borrowing on capital lease obligations - 47,610 Reduction of capital lease obligations ( 20,304) ( 17,662) Net change in line of credit 290,000 ( 623,780) ------------- ------------- Net cash provided by (used in) financing activities 234,696 ( 643,832) ------------- ------------- Net increase in cash 50,944 425,631 Cash at beginning of year 70,800 ( 354,831) -------------- ------------- Cash at end of year $ 121,744 $ 70,800 ============ ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Income taxes $ 8,365 $ 112,000 Interest 88,849 78,570
The accompanying notes are an integral part of the financial statements (12) 13 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================ NATURE AND SCOPE OF BUSINESS PC & Parts, Inc. dba Auro Computer Systems (the "Company"), located in Westerville, Ohio, was incorporated in August, 1989 and assembles computer hardware components into personal computers for a number of customers located in Ohio. The Company also sells personal computer software and provides software service and consulting services. The Company sells its products and provides service support throughout central Ohio and the surrounding area. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. ACCOUNTS RECEIVABLE The Company provides credit to businesses and government entities in the normal course of business. Bad debt expense was $30,853 and $890 for the years ended December 31, 1997 and 1996, respectively. INVENTORY Inventory consists of purchased computer components for assembly and resale and is stated at the lower of cost (first-in, first-out) or market value. Assembly in process is not significant and is not recorded as work in progress inventory. PROPERTY AND EQUIPMENT Property and equipment are carried at cost, less accumulated depreciation computed using the straight-line method over the estimated useful lives of the related assets. Furniture, fixtures, and equipment are depreciated over lives ranging from three to seven years, and leasehold improvements are depreciated over the shorter of the lease term or useful life of the improvement, generally six to seven years. Major renewals and betterments are capitalized and depreciated; maintenance and repairs which neither improve nor extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. WARRANTY Estimated future warranty obligations related to certain products are provided by charges to operations in the period in which the related revenue is recognized. (Continued) (13) 14 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) REVENUE RECOGNITION Revenues are recognized when the related products are completed and shipped, or services are performed. Revenues from service contracts are recognized over the terms of the contract. INCOME TAXES Deferred income taxes are recognized for the tax consequences in future years of differences between the financial reporting and tax basis of assets and liabilities at each year-end based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense represents the taxes currently payable and the net change during the period in deferred tax assets and liabilities. ADVERTISING Advertising costs are expensed in the period in which the costs are incurred. Advertising expense for the years ended December 31, 1997 and 1996 was $44,665 and $49,122. STATEMENT OF CASH FLOWS For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. NOTES PAYABLE - STOCKHOLDERS Certain stockholders have made interest free loans to the Company. The amount of loans from stockholders is $202,026 as of December 31, 1997 and 1996. Repayment of these loans is restricted by a subordination agreement related to certain bank loans. NOTES PAYABLE - BANK The Company has a $1,000,000 revolving line of credit that is due on November 30, 1998. Interest is payable monthly at prime plus 1/2% (the interest rate was 9% per annum at December 31, 1997 and 1996). The Company owed $780,000 on this note as of December 31, 1997 and 1996, respectively. For the years ended December 31, 1997 and 1996, the amount owed during the periods on this revolving line of credit ranged from $490,000 to $940,000. Also, the Company has a $200,000 installment note that matures on October 31, 1999 payable in monthly installments of $4,167 plus interest at prime plus 1/2% (the interest rate was 9% per annum at December 31, 1997 and 1996). The balance due was $91,667 and $141,667 as of December 31, 1997 and 1996, respectively. (Continued) (14) 15 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================ NOTES PAYABLE - BANK (continued) Both notes are collateralized by all business assets, subordination of all stockholder debt, and personal guarantees of certain stockholders. Maturities of the installment note payable are:
1998 $50,000 1999 41,667 -------- $91,667
CAPITAL LEASE AGREEMENTS The Company leases a vehicle and various types of equipment accounted for as capital leases. The cost of the leased assets is $47,610 at December 31, 1997 and 1996. Accumulated amortization of the leased assets is $15,223 and $7,434 for 1997 and 1996, respectively. At December 31, 1997, the future minimum lease payments under capital leases are as follows:
1998 $ 7,134 1999 3,346 ---------- Total 10,480 Less amount representing interest (836) Total $ 9,644 Less current portion (6,407) ---------- $ 3,237 =========
INCOME TAXES The components of the deferred tax asset and liability are as follows:
1997 1996 ----------- -------- Assets: Accrued warranty expense $115,740 $113,209 Accrued vacation 7,939 5,086 Allowance for doubtful accounts 10,039 - Depreciation carryover - 2,890 Net operating loss carryforward 40,605 - -------- -------- Deferred tax assets $174,323 $121,185 ======== ========
(Continued) (15) 16 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================
Liability: Property and equipment $ 2,291 $ - ========== ========
(Continued) (16) 17 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================ INCOME TAXES (continued) A reconciliation of the Company's effective tax values is as follows:
1997 1996 ----------- -------- Income tax at statutory rates $ - $ 11,835 State and local taxes, net of federal benefit - 4,600 Temporary differences (48,675) (87,761) --------- --------- $(48,675) $(71,326) ======== ========
As of December 31, 1997, the Company has approximately $120,000 in tax net operating loss carryforwards remaining to be utilized that expire in the year 2007. No valuation allowance is recorded because management feels it is more likely than not that all net deferred tax assets will be realized. WARRANTY LIABILITY The Company provides a three-year on-site parts and labor warranty on hardware sold. Replacement hardware components are generally provided by the original equipment manufacturer. The Company is responsible for installing the replacement parts. The Company has estimated the future labor costs to install replacement parts for systems that remain under warranty as of December 31, 1997 and 1996. Estimated future warranty costs of $340,413 and $332,968 have been accrued as of December 31, 1997 and 1996, respectively. RETIREMENT PLAN The Company maintains a qualified salary deferral plan. Employees are eligible to participate upon attaining age nineteen and completion of one-half year of service. The Company made a matching contribution to the plan in the amount of $6,743 for 1997 and no contribution was made for 1996. OPERATING LEASE AGREEMENTS The Company has entered into various non-cancelable lease agreements for vehicles, furniture and equipment. The Company's facility lease agreement expired during 1996. The current facility lease agreements are with a related party (see Related Party Transaction note below). Lease agreements for vehicles, furniture and equipment have terms from two to five years. Rent expense under these leases was $71,599 and $45,998 for the years ended December 31, 1997 and 1996, respectively. The future minimum lease payments due over the terms of the leases are as follows:
1998 $39,137 1999 16,568 --------
(Continued) (17) 18 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS NOTES TO FINANCIAL STATEMENTS December 31, 1997 and 1996 ================================================================================
$55,705 =======
RELATED PARTY TRANSACTION In January, 1997 the Company began leasing a new operating facility from an entity owned, in part, by certain stockholders that are also stockholders in the Company. The Company paid the construction loan interest (on a monthly basis), in lieu of rent during 1996 and part of 1997. For the remainder of 1997, the Company began paying the entity's monthly principal and interest mortgage obligation which estimates fair market value. The Company recorded these payments as rent expense. There is no written lease agreement, however, the Company anticipates entering into a long-term lease agreement with the entity sometime during 1998. The Company recorded $95,459 and $48,392 as rent expense during 1997 and 1996, respectively. CORRECTION OF AN ERROR The Company's retained earnings as of December 31, 1995 have been restated to reflect liabilities that existed for accrued warranty cost, deferred taxes, deferred service contract revenue, accrued wages, vacation and commissions. The net effect of these adjustments was a reduction in retained earnings of $217,808. STOCK OPTIONS The Company granted options to purchase 1,000 shares of common stock to an employee at an exercise price of $15 per share. As of December 31, 1997, all remain outstanding. According to the purchase agreement signed on May 18, 1998, the sellers have agreed to reimburse the Company for any liability incurred if any options are exercised. SUBSEQUENT EVENT On May 18, 1998, the outstanding common stock of the Company was acquired by another company. All assets and certain liabilities of the Company have been assumed by the purchaser. As part of the purchase agreement, the Company contributed notes payable to stockholders of $202,026 to equity. (18) 19 PC & PARTS, INC. DBA AURO COMPUTER SYSTEMS CONDENSED BALANCE SHEET (UNAUDITED) MARCH 31, 1998 ================================================================================ ASSETS CURRENT ASSETS CASH $ 83,781 ACCOUNTS RECEIVABLE TRADE (LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $29,526) 1,661,582 OFFICERS 3,850 INCOME TAX REFUNDS 36,881 INVENTORY 261,505 DEFERRED TAX ASSET 174,323 PREPAID EXPENSES 5,000 ----------- TOTAL CURRENT ASSETS 2,226,922 ----------- PROPERTY AND EQUIPMENT FURNITURE AND EQUIPMENT 61,385 COMPUTER EQUIPMENT 272,978 CAPITAL LEASE ASSETS 71,006 LEASEHOLD IMPROVEMENTS 52,951 ----------- 458,320 LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION (198,865) ----------- NET PROPERTY AND EQUIPMENT 259,455 ----------- OTHER ASSETS DEPOSITS 15,384 ----------- TOTAL OTHER ASSETS 15,384 ----------- TOTAL ASSETS $ 2,501,761 =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. (19) 20 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES CURRENT PORTION LONG-TERM DEBT $ 60,295 LINE OF CREDIT 730,000 ACCOUNTS PAYABLE 999,275 ACCRUED EXPENSES PAYROLL AND RELATED TAXES 180,502 WARRANTY EXPENSE 340,413 OTHER 214,822 ----------- TOTAL CURRENT LIABILITIES 2,525,307 ----------- LONG-TERM LIABILITIES NOTES PAYABLE - STOCKHOLDERS 202,026 NOTE PAYABLE - BANK 29,167 CAPITAL LEASE OBLIGATIONS 20,489 DEFERRED INCOME TAXES 2,291 ----------- TOTAL LONG-TERM LIABILITIES 253,973 ----------- TOTAL LIABILITIES 2,779,280 STOCKHOLDERS' EQUITY (DEFICIT) COMMON STOCK AUTHORIZED, ISSUED AND OUTSTANDING, 21,000 SHARES, NO PAR VALUE 210,000 ADDITIONAL PAID-IN CAPITAL 5,000 RETAINED DEFICIT (492,519) ------------ TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (277,519) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,501,761 =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. (20) 21 PC & PARTS, INC. DBA AURO COMPUTER SYSTEMS CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1998 ================================================================================ NET REVENUES $ 3,020,454 COST OF SALES 2,812,746 ----------- GROSS PROFIT 207,708 OPERATING EXPENSES 294,708 ----------- INCOME (LOSS) FROM OPERATIONS (87,000) OTHER INCOME (EXPENSE) INTEREST AND FINANCE INCOME 6,887 INTEREST EXPENSE (32,341) MISCELLANEOUS INCOME 559 ----------- INCOME (LOSS) BEFORE INCOME TAXES (111,895) PROVISION (BENEFIT) FOR INCOME TAXES CURRENT DEFERRED -- ----------- TOTAL -- ----------- NET INCOME (LOSS) $ (111,895) =========== BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (5.33) =========== WEIGHTED AVERAGE SHARES OUTSTANDING 21,000 =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. (21) 22 PC & PARTS, INC. DBA AURO COMPUTER SYSTEMS CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) MARCH 31, 1998 ================================================================================ CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $(111,895) --------- ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: 145,545 --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 33,650 --------- CASH FLOWS FROM INVESTING ACTIVITIES: PURCHASE OF FIXED ASSETS (30,253) --------- NET CASH USED IN INVESTING ACTIVITIES (30,253) --------- CASH FLOWS FROM FINANCING ACTIVITIES: BORROWING ON CAPITAL LEASE OBLIGATIONS 23,396 REDUCTION OF CAPITAL LEASE OBLIGATIONS (6,144) NET CHANGE IN LINE OF CREDIT (58,612) --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (41,360) --------- NET DECREASE IN CASH (37,963) CASH AT BEGINNING OF YEAR 121,744 --------- CASH AT END OF YEAR $ 83,781 ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: CASH PAID DURING THE YEAR FOR: INCOME TAXES $ -- INTEREST 32,341 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. (22) 23 PC & PARTS, INC. DBA AURO COMPUTER SYSTEMS NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 ================================================================================ GENERAL THE INTERIM FINANCIAL STATEMENTS HAVE BEEN PREPARED BY PC & PARTS, INC. WITHOUT AN AUDIT AND, IN THE OPINION OF THE MANAGEMENT, REFLECT ALL ADJUSTMENTS OF A NORMAL RECURRING NATURE NECESSARY FOR A FAIR STATEMENT OF THE FINANCIAL POSITION OF PC & PARTS, INC. AS OF MARCH 31, 1998; THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDING MARCH 31, 1998; AND CASH FLOWS FOR THE THREE MONTHS ENDING MARCH 31, 1998. INTERIM RESULTS ARE NOT NECESSARILY INDICATIVE OF RESULTS FOR A FULL YEAR. THE FINANCIAL STATEMENTS ARE CONDENSED AS PERMITTED AND DO NOT CONTAIN INFORMATION INCLUDED IN THE ANNUAL FINANCIAL STATEMENTS AND NOTES. THE FINANCIAL STATEMENTS AND NOTES INCLUDED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES INCLUDED IN THE FINANCIAL STATEMENTS. (23) 24 CABLE LINK, INC. PRO FORMA CONDENSED FINANCIAL STATEMENTS (Unaudited) The following unaudited pro forma condensed financial statements include the historical and pro forma effects of the May 18, 1998 acquisition of PC & Parts, Inc. dba Auro Computer Systems (Auro Computer Systems). The following unaudited pro forma condensed financial statements have been prepared by the management of Cable Link, Inc. (the Company) from its historical financial statements and the historical financial statements of Auro Computer Systems which are included in this Current Report on Form 8-K/A. The unaudited pro forma condensed statements of operations reflect adjustments as if the transactions had occurred on January 1, 1997. The unaudited pro forma condensed balance sheet reflects adjustments as if the transactions had occurred on March 31, 1998. See footnote for "Nature and Scope." The pro forma adjustments described in the accompanying notes are based upon preliminary estimates and certain assumptions that management believes are reasonable in the circumstances. The unaudited pro forma condensed financial statements are not necessarily indicative of what the financial position or results of operations actually would have been if the transaction had occurred on the applicable dates indicated. Moreover, they are not intended to be indicative of future results of operations or financial position. The unaudited pro forma condensed financial statements should be read in conjunction with the historical consolidated financial statements of the Company and the related notes thereto which are included in the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998, which was filed with the Securities and Exchange Commission (the Commission) on May 15, 1998, and the Company's Annual Report on Form 10-KSB filed with the Commission on March 31, 1998. The unaudited pro forma condensed financial statements should be read in conjunction with the historical financial statements of Auro Computer Systems which are included in this Current Report on Form 8-K/A. (24) 25 CABLE LINK, INC. AND PC & PARTS, INC. dba AURO COMPUTER SYSTEMS PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 1998 ================================================================================ ASSETS
PC & Parts, Inc. Cable dba Auro PRO FORMA Link, Inc. Computer Systems Pro Forma CONSOLIDATED (Historical) (Historical) Total Adjustments TOTAL ------------- -------------- ------------- ------------- ------------ CURRENT ASSETS Cash $ 84,665 $ 83,781 $ 168,446 $ 100,000 (a) $ 68,446 500,000 (b) (700,000)(c) Cash held in escrow 100,000 (c) 100,000 Accounts receivable Trade, net 1,529,573 1,661,582 3,191,155 3,191,155 Officers 0 3,850 3,850 3,850 Income tax refunds 0 36,881 36,881 36,881 Inventory 1,150,391 261,505 1,411,896 1,411,896 Deferred tax asset 36,500 174,323 210,823 17,438 (f) 228,261 Covenant not to compete 0 0 100,000 (d) 100,000 Prepaid expenses and other assets 177,072 5,000 182,072 182,072 ------------- -------------- ------------- ------------- ------------ Total current assets 2,978,201 2,226,922 5,205,123 117,438 5,322,561 ------------- -------------- ------------- ------------- ------------ PROPERTY AND EQUIPMENT 1,477,645 458,320 1,935,965 1,935,965 ------------- -------------- ------------- ------------- ------------ 1,477,645 458,320 1,935,965 0 1,935,965 Less accumulated depreciation (823,270) (198,865) (1,022,135) (1,022,135) ------------- -------------- ------------- ------------- ------------ Net property and equipment 654,375 259,455 913,830 0 913,830 ------------- -------------- ------------- ------------- ------------ OTHER ASSETS Covenant not to compete 0 0 0 100,000 (d) 100,000 Goodwill 0 0 0 683,598 (c) 632,308 (51,290)(e) Deposits 0 15,384 15,384 15,384 ------------- -------------- ------------- ------------- ------------ Total other assets 0 15,384 15,384 732,308 747,692 ------------- -------------- ------------- ------------- ------------ TOTAL ASSETS $ 3,632,576 $ 2,501,761 $ 6,134,337 $ 849,746 $ 6,984,083 ============= ============== ============= ============= ============
The accompanying notes are an integral part of the pro forma consolidated financial statements. (25) 26 ================================================================================ LIABILITIES AND STOCKHOLDER'S EQUITY
PC & Parts, Inc. Cable dba Auro PRO FORMA Link, Inc. Computer Systems Pro Forma CONSOLIDATED (Historical) (Historical) Total Adjustments TOTAL ----------- ----------- ----------- ----------- ----------- CURRENT LIABILITIES Current portion of long-term obligations $ 54,913 $ 60,295 $ 115,208 $ $ 115,208 Accounts payable 672,390 999,275 1,671,665 1,671,665 Income taxes payable 80,077 80,077 80,077 Revolving line of credit 516,197 730,000 1,246,197 1,246,197 Accrued expenses 153,641 735,737 889,378 100,000 (d) 989,378 ----------- ----------- ----------- ----------- ----------- Total current liabilities 1,477,218 2,525,307 4,002,525 100,000 4,102,525 ----------- ----------- ----------- ----------- ----------- LONG-TERM LIABILITIES Other long-term obligations 53,412 49,656 103,068 500,000 (b) 603,068 Notes payable to sellers of PC & Parts, Inc. 120,000 (c) 120,000 Due to minority interest in PC & Parts, Inc. 100,000 (a) 100,000 Notes payable stockholders 0 202,026 202,026 (202,026)(c) 0 Covenant not to compete 0 0 0 100,000 (d) 100,000 Acquisition bonus 16,560 (g) 16,560 Deferred income taxes 48,000 2,291 50,291 50,291 ----------- ----------- ----------- ----------- ----------- Total long-term liabilities 101,412 253,973 355,385 634,534 989,919 ----------- ----------- ----------- ----------- ----------- Total liabilities 1,578,630 2,779,280 4,357,910 734,534 5,092,444 ----------- ----------- ----------- ----------- ----------- STOCKHOLDERS' EQUITY Common stock, authorized, issued and outstanding shares, no par value 1,452,507 210,000 1,662,507 (210,000)(c) 1,452,507 Additional paid-in capital 136,136 5,000 141,136 (5,000)(c) 136,136 Retained earnings (deficit) 465,303 (492,519) (27,216) 380,624 (c) 302,996 (51,290)(e) 17,438 (f) (16,560)(g) ----------- ----------- ----------- ----------- ----------- Total stockholders' equity 2,053,946 (277,519) 1,776,427 115,212 1,891,639 ----------- ----------- ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,632,576 $ 2,501,761 $ 6,134,337 $ 849,746 $ 6,984,083 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the pro forma consolidated financial statements. (26) 27 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1998 ================================================================================
PC & Parts, Inc. Cable dba Auro PRO FORMA Link, Inc. Computer Systems Pro Forma CONSOLIDATED (Historical) (Historical) Total Adjustments TOTAL ----------- ----------- ----------- ----------- ----------- Net revenues $ 2,712,166 $ 3,020,454 $ 5,732,620 $ $ 5,732,620 Cost of revenues 1,828,937 2,812,746 4,641,683 4,641,683 ----------- ----------- ----------- ----------- ----------- Gross profit 883,229 207,708 1,090,937 0 1,090,937 Selling, general and administrative expenses 678,510 294,708 973,218 51,290 (e) 1,024,508 0 0 0 ----------- ----------- ----------- ----------- ----------- Income (loss) from operations 204,719 (87,000) 117,719 (51,290) 66,429 ----------- ----------- ----------- ----------- ----------- Other income Interest expense (8,846) (32,341) (41,187) 0 (41,187) Interest income 0 6,887 6,887 0 6,887 Miscellaneous income 327 559 886 0 886 ----------- ----------- ----------- ----------- ----------- Income (loss) before taxes 196,200 (111,895) 84,305 (51,290) 33,015 Provision (benefit) for income taxes Current 34,251 0 34,251 34,251 Deferred 0 0 0 (17,438)(f) (17,438) Total ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 161,949 (111,895) 50,054 $ (33,852) $ 16,202 =========== =========== =========== =========== =========== Basic earnings per common share $ 0.097 $ 0.010 =========== =========== Weighted average shares outstanding used to compute basic earnings per share 1,673,889 1,673,889 =========== =========== Diluted earnings per common share $ 0.081 $ 0.008 =========== =========== Weighted average shares outstanding used to compute diluted earnings per share 2,008,605 2,008,605 =========== ===========
The accompanying notes are an integral part of the pro forma consolidated financial statements (27) 28 PC & PARTS, INC. dba AURO COMPUTER SYSTEMS PRO FORMA STATEMENT OF INCOME (UNAUDITED) YEAR ENDED DECEMBER 31, 1997 ================================================================================
PC & Parts, Inc. Cable dba Auro PRO FORMA Link, Inc. Computer System Pro Forma CONSOLIDATED (Historical) (Historical) Total Adjustments TOTAL ------------ ------------ ------------ ------------ ------------ Net revenues $ 10,094,178 $ 13,536,581 $ 23,630,759 $ $ 23,630,759 Cost of revenues 6,277,709 12,432,014 18,709,723 18,709,723 ------------ ------------ ------------ ------------ ------------ Gross profit 3,816,469 1,104,567 4,921,036 0 4,921,036 Selling, general and administrative expenses 2,633,876 1,370,613 4,004,489 34,180 (e) 4,038,669 0 0 0 ------------ ------------ ------------ ------------ ------------ Income (loss) from operations 1,182,593 (266,046) 916,547 (34,180) 882,367 ------------ ------------ ------------ ------------ ------------ Other income Interest expense (60,541) (82,928) (143,469) (143,469) Loss on disposal of assets 0 (20,175) (20,175) (20,175) Interest income 0 19,173 19,173 19,173 Miscellaneous income 2,824 1,997 4,821 4,821 ------------ ------------ ------------ ------------ ------------ Income (loss) before taxes 1,124,876 (347,979) 776,897 (34,180) 742,717 Provision (benefit) for income taxes Current 246,049 2,055 248,104 248,104 Deferred 11,500 (50,730) (39,230) (11,621)(f) (50,851) Total ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 867,327 (299,304) 568,023 $ (22,559) $ 545,464 ============ ============ ============ ============ ============ Basic earnings per common share $ 0.545 $ 0.343 ============ ============ Weighted average shares outstanding used to compute basic earnings per share 1,591,976 1,591,976 ============ ============ Diluted earnings per common share $ 0.453 $ 0.285 ============ ============ Weighted average shares outstanding used to compute diluted earnings per share 1,913,958 1,913,958 ============ ============
The accompanying notes are an integral part of the pro forma consolidated financial statements (28) 29 CABLE LINK, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited) NATURE AND SCOPE The accompanying unaudited pro forma statements of operations present the historical results of operations of the Company and Auro Computer Systems for the three months ended March 31, 1998 and for the year ended December 31, 1997 with pro forma adjustments as if the transaction had taken place on January 1, 1997. The unaudited pro forma statement of operations for the year ended December 31, 1997, is presented using the combined audited historical results of the Company and Auro Computer Systems for the respective period. The unaudited pro forma statement of operations for the three months ended March 31, 1998, is presented using the combined unaudited historical results of the Company and Auro Computer Systems for the respective period. The unaudited pro forma balance sheet presents the historical balance sheets of the Company and Auro Computer Systems as of March 31, 1998, with adjustments as if the transaction had been consummated as of January 1, 1997 in a transaction accounted for as a purchase in accordance with generally accepted accounting principles. Certain reclassifications have been made to the historical financial statements of the Company and Auro Computer Systems to conform to the pro forma financial statement presentation. PRO FORMA ADJUSTMENTS The following adjustments give pro forma effect to the transaction: (a) To record cash received from Brian Berger for minority interest of $100,000. (b) To record loan from Provident Bank for $500,000 used to finance purchase. (c) To record purchase price consideration and goodwill. As part of the purchase agreement the seller contributed the notes payable to stockholders to capital. (d) To record non-compete agreement for $200,000 to be paid monthly over two years. (e) To record amortization of goodwill using the straight-line method over 20 years. (f) To record deferred tax effect for pro forma adjustments. (g) To record portion of acquisition bonus payable to minority interest. (29) 30 CABLE LINK, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited) CONTINGENCY As outlined in Section 1.7 of the Stock Purchase and Non-Compete Agreement included herein as Exhibit 2.1, the buyers have requested a refund of the overpayment of purchase consideration of $522,106. The sellers have a period to dispute the overpayment and the dispute will be submitted to the CPA firm of Winterset CPA for resolution. The effect of the contingent overpayment refund would be to increase net income by $17,230, basic earnings per share by $.011 and diluted earnings per share by $.009. ACQUISITION BONUS The Board approved a $180,000 bonus payable to Cable Link related to the acquisition of Auro. The amount will be reported as an expense in the 10-QSB for the six months ended June 30, 1998, and therefore is not reflected in the accompanying financial statements. (30) 31 EXHIBIT INDEX
PAGE NO. IN SEQUENTIALLY NUMBERED EXHIBIT NO. DOCUMENT COPY 2.1 Stock Purchase and Non-Compete Agreement among PC & Parts, Inc., its Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998 * 2.2 Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian Berger dated May 18, 1998 * 23.1 Consent of Groner Boyle & Quillin, LLP 32 27 Financial Data Schedule 33
* Previously filed. (31) EX-23.1 2 EXHIBIT 23.1 1 EXHIBIT 23.1 We hereby consent to the use in the Form 8-K/A of our report dated April 29, 1998 relating to the financial statements of PC & Parts, Inc. dba Auro Computer Systems. /s/ Groner, Boyle & Quillin, LLP (32) EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PC & PARTS, THE DBA AURO COMPUTER SYSTEMS UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 3-MOS YEAR YEAR DEC-31-1998 DEC-31-1997 DEC-31-1996 JAN-01-1998 JAN-01-1997 JAN-01-1996 MAR-31-1998 DEC-31-1997 DEC-31-1996 1 1 1 83,781 121,744 70,800 0 0 0 1,731,839 1,519,756 1,367,520 29,526 29,526 0 261,505 36,381 385,895 2,226,922 2,146,880 1,977,400 458,320 428,067 273,622 (198,865) 156,861 70,583 2,501,761 2,432,386 2,194,739 2,525,307 2,348,789 1,772,722 0 0 0 0 0 0 0 0 0 210,000 210,000 200,000 (487,519) (375,624) (81,320) 2,501,761 2,432,386 2,194,739 3,020,454 13,536,581 12,243,014 3,027,900 13,557,751 12,285,229 2,812,746 12,432,014 11,284,246 3,107,454 13,802,627 12,176,384 0 20,175 18,415 0 0 0 32,341 82,928 84,591 (111,895) (347,979) 5,839 0 (48,675) (71,326) (111,895) (299,304) 77,165 0 0 0 0 0 0 0 0 0 (111,895) (299,304) 77,165 (5.33) (14.91) 3.86 (5.33) (14.91) 3.86
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