1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported) SEPTEMBER 14, 2000.
CABLE LINK, INC. (DBA A NOVO BROADBAND, INC.)
(Name of Small Business Registrant in Its Charter)
OHIO 0-23111 31-1239657
(State or Other Jurisdiction of COMMISSION FILE NUMBER (I.R.S. Employer
Incorporation or Organization) Identification No.)
3015 GREENE STREET, HOLLYWOOD, FLORIDA 33020
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (954)-922-8776
1
2
ITEM 2. ACQUISITION OF ASSETS
On September 12, 2000, A Novo Canada Enterprises Inc. ("A Novo
Canada"), a Canadian corporation that is a newly-formed, indirect, wholly-owned
subsidiary of Cable Link, Inc., dba A Novo Broadband, Inc. ("A Novo"), entered
into an Asset Purchase Agreement, dated as of September 12, 2000, with Les
Telecommunications Valsysteme Inc. ("Valsysteme"), 9038-2847 Quebec Inc.
Valsysteme's sole stockholder) and Jacques Franco (the sole stockholder of
Valsysteme), pursuant to which A Novo Canada agreed to purchase substantially
all of the assets of Valsysteme (the "Assets"). The purchase of the Assets
under the Asset Purchase Agreement was consummated on September 14, 2000.
Valsysteme was engaged in the business of the maintenance and repair of
cable television equipment, microwave equipment, television and radio broadcast
equipment and optical and cable broadcasting equipment. The Assets consisted of
substantially all of Valsysteme's assets, including all of its inventory,
equipment, contracts and goodwill. A Novo Canada intends to use the Assets to
conduct the business previously conducted by Valsysteme.
The total consideration paid to complete the transaction was
$2,756,484, consisting of $2,611,665 paid in cash at closing to Valsysteme,
assumption of $75,545 of Valsysteme's liabilities, and $69,274 paid in fees and
expenses. The transaction was accounted for under the purchase method of
accounting, and as a result, A Novo recognized $2,714,294 in goodwill in
conjunction with this transaction in its September 30, 2000, financial
statements.
The historical audited statements for Valsysteme included in this
Report are presented in the local currency of the Canadian dollar. The following
tables provide a reconciliation of the net income and stockholders' equity of
Valsysteme from the Canadian dollar to the United States dollar. The translation
rates used represent the average currency exchange rate for each twelve month
period.
NET INCOME AUGUST 31, 2000 AUGUST 31, 1999
-------------------- ---------------------
Net income in Canadian dollars $Can 146,806 $Can 242,945
Foreign currency translation rate .6785 .6637
-------------------- --------------------
Net income in US dollars $ 99,608 $ 161,243
==================== ====================
STOCKHOLDERS' EQUITY
CANADIAN DOLLARS US DOLLARS
----------------------------------------------- ----------------------------------------
Common Stock Retained Common Retained
Earnings Total Stock Earnings Total
Balance 8/31/98 $Can 1,000 $Can 224,874 $Can 225,874 $651 $146,460 $ 147,111
Net income 242,945 242,945 161,243 161,243
Dividends (200,000) (200,000) (132,740) (132,740)
------------- --------------- ----------------- ------------ ------------ --------------
Balance 8/31/99 1,000 267,819 268,819 651 174,963 175,614
Net income 146,806 146,806 99,608 99,608
Dividends (200,000) (200,000) (135,700) (135,700)
------------- --------------- ----------------- ------------ ------------ --------------
Balance 8/31/00 $Can 1,000 $Can 214,625 $Can 215,625 $651 $ 138,871 $ 139,522
============= =============== ================= ============ ============ ==============
8/31/98 8/31/99 8/31/00
------- ------- -------
Foreign currency translation rate used .6513 .6637 .6785
2
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
See Appendix A attached hereto.
(b) Pro forma financial information.
See Appendix B attached hereto.
(c) Exhibits
2.1 Asset Purchase Agreement dated as of September 12, 2000, between A
Novo Canada Enterprises Inc., Les Telecommunications Valsysteme Inc.,
9038-2847 Quebec Inc. And Jacques Franco (translated from French and
duly certified in accordance with Rule 306(a) of Regulations S-T)
incorporated by reference to the registrant's Form 8-K filed on
September 25, 2000.
23.1 Consent of accountants
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: January 23, 2001
CABLE LINK, INC.
By: /s/ Louis Brunel
-----------------------------------------
Louis Brunel, Chief Executive Officer and
President
3
4
APPENDIX A
LES TELECOMMUNICATIONS VALSYSTEME INC.
ANNUAL FINANCIAL REPORT
YEAR ENDED AUGUST 31, 2000
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
YEAR ENDED AUGUST 31, 2000
- --------------------------------------------------------------------------------
AUDITOR'S REPORT A - 1
FINANCIAL STATEMENTS:
Statement of income A - 2
Statement of retained earnings A - 3
Balance sheet A - 4
Cash flow statement A - 5
Notes to the financial statements A-6- A-9
5
AUDITOR'S REPORT
To the Directors of
LES TELECOMMUNICATIONS VALSYSTEME INC.
I have audited the balance sheet of LES TELECOMMUNICATIONS VALSYSTEME INC. as at
August 31, 2000 and August 31, 1999 and the statements of income, retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
Except as explained in the following paragraph, I conducted my audit in
accordance with generally accepted auditing standards. Those standards require
that I plan and perform an audit to obtain reasonable assurance 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.
Because I was appointed auditor of the company after the current year end, I was
not able to observe the counting of physical inventories at the beginning and
end of each year nor satisfy myself concerning those inventory quantities by
alternative means. Since opening and ending inventories enter into the
determination of the results of operations and cash flows, I was unable to
determine whether adjustments to cost of sales, income taxes, net income for the
year, opening retained earnings and cash provided from operations might be
necessary.
In my opinion, except for the effect of adjustments, if any, which I might have
determined to be necessary had I been able to examine opening and ending
inventory quantities, as described in the preceding paragraph, the statements of
income, retained earnings and cash flows present fairly, in all material
respects, the results of operations and cash flows of the company for the years
ended August 31, 2000 and August 31, 1999 in accordance with generally accepted
accounting principles. Further, in my opinion, the balance sheet presents
fairly, in all material respects, the financial position of the company as at
August 31, 2000 and August 31, 1999 in accordance with generally accepted
accounting principles.
Chartered Accountant
Longueuil, January 2, 2001
A-1
6
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
STATEMENT OF INCOME
YEAR ENDED AUGUST 31, 2000 1999
- --------------------------------------------------------------------------------
REVENUES $ 1,471,272 $ 1,307,095
COST OF SERVICES RENDERED 707,744 601,524
------------------ ------------------
GROSS PROFIT 763,528 705,571
------------------ ------------------
OPERATING EXPENSES
Selling and administrative expenses 577,393 384,958
Depreciation of capital assets 6,158 7,513
Interest and bank charges 261 1,814
------------------ ------------------
583,812 394,285
------------------ ------------------
INCOME FROM OPERATIONS 179,716 311,286
INTEREST REVENUE 6,327 6,745
------------------ ------------------
INCOME BEFORE INCOME TAXES 186,043 318,031
CURRENT INCOME TAXES 39,237 75,086
------------------ ------------------
NET INCOME $ 146,806 $ 242,945
================== ==================
A-2
7
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
STATEMENT OF RETAINED EARNINGS
YEAR ENDED AUGUST 31, 2000 1999
- --------------------------------------------------------------------------------
BALANCE, BEGINNING OF YEAR $ 267,819 $ 224,874
Net income 146,806 242,945
------------------- ------------------
414,625 467,819
Dividends - class A shares ( 200,000 ) ( 200,000 )
------------------- ------------------
BALANCE, END OF YEAR $ 214,625 $ 267,819
=================== ==================
A-3
8
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
BALANCE SHEET
AUGUST 31, 2000 1999
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 110,914 $ 315,138
Accounts receivable 159,707 79,874
Grants receivable 2,887 -
Income taxes receivable 47,547 -
Inventories 20,645 17,541
Prepaid expenses 13,457 8,154
------------------- -----------------
355,157 420,707
CAPITAL ASSETS (Note 3) 25,371 28,078
------------------- -----------------
$ 380,528 $ 448,785
=================== =================
LIABILITIES
CURRENT LIABILITIES
Accounts payable (Note 5) $ 164,903 $ 137,142
Income taxes - 42,824
------------------- -----------------
164,903 179,966
------------------- -----------------
SHAREHOLDER'S EQUITY
Share capital (Note 6) 1,000 1,000
Retained earnings 214,625 267,819
------------------- ------------------
215,625 268,819
------------------- ------------------
$ 380,528 $ 448,785
=================== =================
A-4
9
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
CASH FLOW STATEMENT
YEAR ENDED AUGUST 31, 2000 1999
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 146,806 $ 242,945
Adjustments for:
Depreciation of capital assets 6,158 7,513
Loss on disposal of capital assets 2,439 -
------------------ ------------------
155,403 250,458
Net changes in non-cash working
capital items ( 153,737 ) 135,377
------------------ ------------------
1,666 385,835
------------------ ------------------
FINANCING ACTIVITIES
Dividends ( 200,000 ) ( 200,000 )
------------------ ------------------
( 200,000 ) ( 200,000 )
------------------ ------------------
INVESTING ACTIVITIES
Acquisition of capital assets ( 5,890 ) ( 1,480 )
------------------ ------------------
CASH INCREASE (DECREASE) ( 204,224 ) 184,355
CASH, BEGINNING OF YEAR 315,138 130,783
------------------ ------------------
CASH, END OF YEAR $ 110,914 $ 315,138
================== ==================
A-5
10
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
- --------------------------------------------------------------------------------
1. STATUTES OF INCORPORATION AND NATURE OF ACTIVITIES
The company is incorporated under Part 1A of the Quebec Companies Act and
operates mainly in the sector of calibrating and repairing of communication
and telecommunication equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are evaluated at lower of cost and replacement cost, the cost
being determined using the first in, first out method.
CAPITAL ASSETS AND DEPRECIATION
Capital assets are recorded at cost and are amortized following the
declining balance method over their estimated useful lives at the following
rates:
Equipment and tools 20%
Office furniture 20%
Computers 30%
INCOME TAX CREDITS AND GOVERNMENT ASSISTANCE
The income tax credits and government grants are accounted for in reduction
of the asset cost or operating expenses they relate to.
3. CAPITAL ASSETS
2000 1999
----------------------------------------------------------------- --------------------
CUMULATED NET Net
COST DEPRECIATION VALUE Value
--------------------- ------------------- ------------------- --------------------
Equipment and tools $ 106,224 $ 92,051 $ 14,173 $ 17,716
Office furniture 18,905 14,723 4,182 5,228
Computers 10,286 3,270 7,016 5,134
--------------------- ------------------ ------------------ --------------------
$ 135,415 $ 110,044 $ 25,371 $ 28,078
===================== ================== ================== ====================
A-6
11
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
- --------------------------------------------------------------------------------
4. BANK OVERDRAFT
The company has an authorized line of credit of $100,000, at a rate of
prime plus 1%, secured by the accounts receivable and renewable on December
31, 2000.
5. ACCOUNTS PAYABLE
2000 1999
------------------ -------------------
Trade and accrued charges $ 62,915 $ 15,399
Salaries and vacations 71,501 83,058
Withholding taxes 6,013 11,151
Sales taxes 24,474 27,534
------------------ -------------------
$ 164,903 $ 137,142
================== ===================
6. SHARE CAPITAL
AUTHORIZED
Unlimited number of Class A shares, voting and participating, each Class A
share is exchangeable for one Class D share, without par value;
Unlimited number of Class B shares, voting and participating, without par
value;
Unlimited number of Class C shares, voting and non-participating,
redeemable at the company's option at a price equal to the paid-up amount,
without par value;
Unlimited number of Class D shares, non-voting, non-cumulative monthly
dividend of 1% calculated on the redemption price, redeemable at the
holder's option at a price equal to the fair value of the consideration
received at their issuance, without par value;
A-7
12
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONT'D)
AUTHORIZED
Unlimited number of Class E shares, non-voting, non-cumulative monthly
dividend of 1% calculated on the redemption price, redeemable at the
holder's option at a price equal to the fair value of the consideration
received at their issuance, without par value;
Unlimited number of Class F shares, non-voting, non-cumulative dividend of
1$ per share, redeemable at the holder's option at a price equal to the
paid-up amount, without par value;
Unlimited number of Class G shares, non-voting, non-cumulative dividend of
1$ per share, redeemable at the company's option at a price equal to the
paid-up amount, without par value;
2000 1999
------------------ -----------------
ISSUED
100 Class A shares $ 1,000 $ 1,000
================== =================
7. COMMITMENTS
The company leases business premises under a lease expiring October 31,
2000. The future minimum lease payments amount to $ 6,392.
8. RELATED PARTY TRANSACTIONS
During the year, the company paid to its shareholder management fees
amounting to $ 329,000 ($120,000 in 1999).
A-8
13
LES TELECOMMUNICATIONS VALSYSTEME INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
- --------------------------------------------------------------------------------
9. FINANCIAL INSTRUMENTS
CREDIT RISK
The company provides credit to its clients in the normal course of its
operations. It carries out, on a continuing basis, credit checks on its
clients and maintains provisions for contingent credit losses which, once
they materialize, are consistent with management's forecasts. The company
does not normally require a guarantor. For the other debts, the company
determines, on a continuing basis, the probable losses and sets up a
provision for losses based on the estimated realizable value.
FAIR VALUE
The fair values of cash, accounts receivable, accounts payable, client
deposits and dividends payable correspond approximately to their carrying
amount because of their short-term maturity dates.
10. SUBSEQUENT EVENT
On September 14, 2000, the company sold all its inventories, capital assets
and intangible assets, including mainly goodwill, permits and contracts, for
a cash consideration of $4,000,000.
A-9
14
APPENDIX B
CABLE LINK, INC. DBA A NOVO BROADBAND, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
CONTENTS
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2000
(Unaudited).............................................................. B-2
Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1999 (Unaudited)...................................... B-3
Pro Forma Condensed Consolidated Statement of Income for the six months
ended June 30, 2000 (Unaudited).......................................... B-4
Notes to Pro Forma Condensed Consolidated Financial Information
(Unaudited).............................................................. B-5
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION (UNAUDITED)
On September 14, 2000, Cable Link Inc., dba A Novo Broadband, Inc, ("A
Novo") acquired 100 percent of the assets of Les Telecommunications Valsysteme,
Inc. ("Valsysteme"). The purchase was conducted through A Novo Canada
Enterprises, Inc., a wholly owned subsidiary of A Novo. The purchase price of
the assets was $2,756,484, all of which was paid in cash. The acquisition will
be accounted for using the purchase method, and accordingly, goodwill of
$2,714,294 was recorded as part of the transaction in A Novo's September 30,
2000, financial statements.
The unaudited pro forma condensed consolidated balance sheet of A Novo
and Valsysteme as of June 30, 2000, reflects adjustments as if the acquisition
had occurred on that date. The unaudited pro forma condensed consolidated
statement of income for the year ended December 31, 1999, and for the six months
ending June 30, 2000, reflect adjustments as if the acquisition had occurred on
January 1, 1999, and January 1, 2000, respectively.
The unaudited pro forma condensed consolidated balance sheet and
statement of income should be read in conjunction with the separate historical
audited financial statements of A Novo and Valsysteme and the related notes
appearing elsewhere in this report. The pro forma financial information is not
necessarily indicative of the results that would have been reported had such
events actually occurred on the dates specified, nor is it necessarily
indicative of the future results of the combined company.
B-1
15
CABLE LINK, INC. DBA A NOVO BROADBAND, INC. AND
LES TELECOMMUNICATIONS VALSYSTEME, INC.
PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)
JUNE 30, 2000
ASSETS
A NOVO PRO FORMA PRO FORMA
BROADBAND VALSYSTEME ADJUSTMENTS COMBINED
--------- ---------- ----------- --------
CURRENT ASSETS
Cash and cash equivalents..................... $ 42,647 $ 82,008 (a) $ 7,808,255 $7,932,910
Accounts receivable, net...................... 1,415,879 83,819 -- 1,499,698
Inventories................................... 1,313,417 23,746 -- 1,337,163
Income tax receivable......................... 70,000 48,316 -- 118,316
Prepaid and other assets...................... 92,962 40,728 -- 133,690
Deferred income taxes......................... 517,000 -- -- 517,000
Deposits...................................... 11,850 -- -- 11,850
--------------- -------------- -------------- ----------------
Total current assets........................ 3,463,755 278,617 7,808,255 11,550,627
--------------- -------------- -------------- ----------------
PROPERTY AND EQUIPMENT, at cost 641,305 17,279 658,584
--------------- -------------- -------------- ----------------
OTHER ASSETS
Goodwill...................................... (a) 2,590,472 2,590,472
Deferred income taxes......................... 94,000 -- -- 94,000
Other assets.................................. 26,739 -- -- 26,739
--------------- -------------- -------------- ----------------
Total other assets ......................... 120,739 2,590,472 2,711,211
--------------- -------------- -------------- ----------------
TOTAL ASSETS $4,225,799 $ 295,896 $10,398,727 $ 14,920,422
=============== ============== ============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term obligations $ 4 ,980 -- (a) (4,980) $ --
Notes payable - bank 1,382,431 -- (a) (1,382,431) --
Accounts payable.............................. 1,579,052 129,884 1,708,936
Accrued expenses.............................. 148,750 -- 148,750
--------------- -------------- -------------- ----------------
Total current liabilities................... 3,115,213 129,884 (1,387,411) 1,857,686
--------------- -------------- -------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, no par value 1,496,864 668 (a) 11,951,482 13,449,014
Additional paid-in-capital.................... 159,136 -- 159,136
Retained (deficit) earnings................... (545,414) 165,344 (a) (165,344) (545,414)
--------------- -------------- -------------- ----------------
Total stockholders' equity 1,110,586 166,012 11,786,738 13,062,736
--------------- -------------- -------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $ 4,225,799 $ 295,897 $10,398,727 $ 14,920,422
=============== ============== ============== ================
See accompanying notes to the unaudited pro forma
consolidated financial information.
B-2
16
CABLE LINK, INC. DBA A NOVO BROADBAND, INC. AND
LES TELECOMMUNICATIONS VALSYSTEME, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1999
A NOVO PRO FORMA PRO FORMA
BROADBAND VALSYSTEME ADJUSTMENTS COMBINED
--------- ---------- ----------- --------
Revenues...................................... $ 10,606,235 $ 1,031,702 $ 11,637,937
Cost of sales................................. 6,485,381 454,782 6,940,163
------------------ ---------------- -------------- -----------------
Gross profit............................... 4,120,854 576,920 4,697,774
(a) 129,524
Selling, general and administrative expenses.. 2,995,283 238,357 (c) (47,142) 3,316,022
------------------ ---------------- -------------- -----------------
Income from operations..................... 1,125,571 338,563 (82,382) 1,381,752
Interest income............................... -- 1,151 (b) 510,860 512,011
Interest expense.............................. 74,947 -- (b) (74,947) --
------------------ ---------------- -------------- -----------------
Income before income taxes.................... 1,050,624 339,714 503,425 1,893,763
Provision for income taxes.................... 251,105 88,647 (d) 215,203 554,955
------------------ ---------------- -------------- -----------------
Income from continuing operations............. $ 799,519 $ 251,067 $288,223 $ 1,338,809
================== ================ ============== =================
Basic Earnings Per Share
Income from continuing operations $ 0.47 $ 0.28
================== =================
Weighted average shares outstanding 1,694,880 3,040,666 4,735,546
================== ============== =================
Diluted Earnings Per Share
Income from continuing operations $ 0.46 $ 0.28
================== =================
Weighted average shares outstanding 1,725,360 3,040,666 4,766,026
================== ============== =================
See accompanying notes to unaudited pro forma
consolidated financial information.
B-3
17
CABLE LINK, INC. DBA A NOVO BROADBAND, INC. AND
LES TELECOMMUNICATIONS VALSYSTEME, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 2000
A NOVO PRO FORMA PRO FORMA
BROADBAND VALSYSTEME ADJUSTMENTS COMBINED
--------- ---------- ----------- --------
Revenues...................................... $ 4,612,124 $ 429,815 $5,041,939
Cost of sales................................. 2,933,437 237,802 3,171,239
------------------ --------------- --------------- -----------------
Gross profit............................... 1,678,687 192,013 1,870,700
(a) 64,762
Selling, general and administrative expenses.. 1,659,792 275,736 (c) (158,800) 1,841,490
------------------ --------------- --------------- -----------------
Income (loss) from operations.............. 18,895 (83,723) 94,038 29,210
Interest Income -- 7,906 (b) 267,646 275,552
Interest expense.............................. 30,153 -- (b) (30,153) --
------------------ --------------- --------------- -----------------
Income (loss) before income taxes............. (11,258) (75,817) 391,837 304,762
Total benefit (provision) for income taxes.... (3,060) 16,680 (d) (155,244) (141,624)
------------------ --------------- --------------- -----------------
Income (loss) from continuing operations...... $ (14,318) $ (59,137) 236,593 $ 163,138
================== =============== =============== =================
Basic Earnings Per Share
Income (loss) from continuing operations $ (0.01) $ 0.03
================== =================
Weighted average shares outstanding 1,702,963 3,040,666 4,743,629
================== =============== =================
Diluted Earnings Per Share
Income (loss) from continuing operations $ (0.01) $ 0.03
================== =================
Weighted average shares outstanding 1,925,972 3,040,666 4,966,638
================== =============== =================
See accompanying notes to the unaudited pro forma
consolidated financial information.
B-4
18
CABLE LINK, INC. DBA A NOVO BROADBAND, INC. AND
LES TELECOMMUNICATIONS VALSYSTEME, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Note 1 - Significant Accounting Policies and Basis of Presentation
The accompanying historical financial statements of Cable Link, Inc. dba A Novo
Broadband, Inc. (" A Novo"), and Les Telecommunications Valsysteme, Inc.
("Valsysteme") have been derived from financial statements prepared in
accordance with generally accepted accounting principles. A Novo's historical
financial statements as of and for the year ended December 31, 1999, used in the
pro forma financial statements are derived from A Novo's audited financial
statements for the fiscal year then ended. The Valsysteme historical financial
statements as of and for the twelve months ended December 31, 1999, used in the
pro forma financial statements are based on the unaudited financial statements
of Valsysteme at December 31, 1999, and on the audited financial statements for
the years ended August 31, 1998 and August 31, 1999, adjusted using interim
financial statements to reflect the twelve months ended December 31, 1999.
A Novo's historical financial statements as of and for the six months ended June
30, 2000, used in the pro forma financial statements are derived from A Novo's
unaudited financial statements for the six months ended June 30, 2000. The
Valsysteme historical financial statements as of June 30, 2000 are based on the
unaudited financial statements of Valsysteme at June 30, 2000, and December 31,
1999, adjusted to reflect the six months ended June 30, 2000. Valsysteme's
interim financial statements are prepared on the basis of generally accepted
accounting principles and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such financial
information.
The pro forma adjustments are based on A Novo's allocation of the purchase price
of Valsysteme to the net assets acquired as if the transaction occurred on June
30, 2000.
Note 2 - Foreign Currency Translation
Valsysteme conducts its business in Montreal, Canada. All financial statements
provided herein have been adjusted from the local currency, the Canadian dollar.
For the balance sheet presentation, amounts were translated to the U. S. dollar
by using the exchange rate in place as of June 30, 2000. For the income
statement presentations, amounts were translated to the U.S. dollar using the
average exchange rate for the period presented on the statements of income.
Note 3 - Pro Forma Condensed Consolidated Balance Sheet Adjustment
This column reflects the following adjustments:
(a) To record the consideration paid and the net assets acquired at their
fair market value. The consideration paid by A Novo to acquire
Valsysteme was $2,756,484 in cash. Of this consideration, the
following allocation was made based on the net assets of Valsysteme as
of June 30, 2000:
Net assets $ 166,012
Goodwill 2,590,472
------------------
$ 2,756,484
==================
To record the $12 million private placement of common stock with A
Novo Americas LLC, which occurred on August 7, 2000. This private
placement provided the cash which was used to purchase the assets from
Valsysteme.
Certain of the proceeds of the private placement were assumed to be
used to repay A Novo's bank debt as of June 30, 2000.
B-5
19
Note 4 - Pro Forma Consolidated Statement of Income Adjustments
This column reflects the following adjustments:
(a) To record amortization of amounts allocated to goodwill using an
estimated life of 20 years.
(b) To record the interest income realized utilizing the excess cash
available from the $12 million private placement, net of the cash used
to conduct the purchase transaction and repay the bank debt of A Novo.
To eliminate interest expense no longer incurred because the long-term
debt was prepaid at the beginning of the period.
(c) To eliminate management fee charged by previous owners of Valsysteme,
which will not be charged by A Novo.
(d) To record the income tax effect of the pro forma adjustments after
consideration of the nondeductible intangible asset amortization.
B-6