1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (Mark One) |X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly period ended September 30, 1998 |_| Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from __________ to ___________ Commission File Number 0-23111 Cable Link, Inc. - ------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter Ohio 31-1239657 - ------------------------------ ------------------------------ (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 280 Cozzins Street, Columbus, Ohio - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (614) 221-3131 - ------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) - ------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 1,689,136 shares of Common Stock as of October 30, 1998 Transitional Small Business Disclosure Format (check one): Yes X No ------- ------- 2 CABLE LINK, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS 1998 1997 September 30 December 31 (Unaudited) (Audited) ------------ ----------- CURRENT ASSETS Cash $246,083 $204,990 Accounts receivable Trade 3,764,544 1,135,607 Income tax 66,688 - Inventories 2,686,388 1,332,619 Prepaid expenses 202,621 161,444 Deferred income tax 210,823 36,500 Covenant not to compete 58,333 - ----------- --------- Total current assets 7,235,480 2,871,160 PROPERTY AND EQUIPMENT 2,091,456 1,466,764 Accumulated depreciation (1,149,711) (774,125) ----------- --------- Net property and equipment 941,745 692,639 OTHER ASSETS Covenant not to compete 112,979 - Goodwill 854,494 - Organization costs 59,974 - Deposits 45,587 34,130 ----------- --------- 1,073,034 34,130 TOTAL ASSETS $9,250,259 $3,597,929 ========== ========== See accompanying notes to unaudited consolidated financial statements. 3 CABLE LINK, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Continued) 1998 1997 September 30 December 31 (Unaudited) (Audited) ------------ ----------- CURRENT LIABILITIES Accounts payable, trade $3,744,854 $765,269 Current portion of long-term obligation 23,699 82,354 Revolving line of credit 1,196,281 290,957 Income taxes payable - 138,742 Accrued expenses 647,300 329,998 Accrued warranty expense 280,413 - ---------- -------- - Total current liabilities 5,892,547 1,607,320 LONG-TERM LIABILITIES Covenant not to compete 46,666 - Acquisition bonus 120,000 - Long-term debt 571,967 53,412 Deferred income taxes 50,291 48,000 ---------- -------- Total long-term liabilities 788,924 101,412 MINORITY INTEREST 100,000 - STOCKHOLDERS' EQUITY Common stock 1,463,387 1,449,706 Additional paid-in capital 136,136 136,136 Retained earnings 869,265 303,355 ---------- -------- Total stockholders' equity 2,468,788 1,889,197 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,250,259 $3,597,929 ========== ========== See accompanying notes to unaudited consolidated financial statements. 4 CABLE LINK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 3 months ended September 30 9 months ended September 30 1998 1997 1998 1997 ----------- ---------- ----------- ---------- Net Sales $7,580,466 $2,720,514 $14,624,097 $7,574,049 ---------- ---------- ----------- ---------- Cost of goods sold 6,041,123 1,619,053 11,138,868 4,852,959 Operating Expenses 1,243,811 664,386 2,704,781 1,935,648 ---------- ---------- ----------- ---------- Total expenses 7,284,934 2,283,439 13,843,649 6,788,607 Income from operations 295,532 437,075 780,448 785,442 Interest expense (41,981) (14,354) (76,954) (49,747) Other income $3,832 493 5,169 2,552 ---------- ---------- ----------- ---------- Income before taxes 257,383 423,214 708,663 738,247 Provision for taxes 54,251 135,000 142,753 135,000 ---------- ---------- ----------- ---------- Net Income $203,132 $288,214 $565,910 $603,247 ========== ========== =========== ========== Basic earnings per share $0.12 $0.18 $0.34 $0.38 Weighted average shares outstanding 1,681,516 1,622,438 1,676,478 1,569,469 Diluted earnings per share $0.11 $0.13 $0.29 $0.27 Weighted average shares outstanding 1,908,964 2,291,535 1,958,465 2,210,656 See accompanying notes to unaudited consolidated financial statements. 5 CABLE LINK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) Nine months ended September 30, 1998 and the year ended December 31,1997 Shares of Issued Additional and Outstanding Common Paid-In Retained Common Stock Stock Capital Earnings Total ---------------- ---------- ----------- ----------- ------------ Balance at December 31, 1996 1,384,652 $1,093,662 $136,136 ($563,972) $665,826 Issuance of common stock, net 165,000 149,107 - - 149,107 of cost of $50,893 Exercise of options and warrants 124,150 206,937 - - 206,937 Net income - - - 867,327 867,327 --------- ---------- -------- ---------- ---------- Balance at December 31,1997 1,673,802 1,449,706 136,136 303,355 1,889,197 Exercise of options and warrants 15,334 13,681 - - 13,681 Net income - - - 565,910 565,910 --------- ---------- -------- ---------- ---------- Balance at September 30, 1998 1,689,136 $1,463,387 $136,136 $869,265 $2,468,788 ========= ========== ======== ========== ========== See accompanying notes to unaudited consolidated financial statements. 6 CABLE LINK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Nine months ended September 30 1988 1997 ------------ ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $565,910 $603,247 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 221,312 124,504 (Increase) decrease in operating assets: Accounts receivable (1,093,729) (533,765) Inventories (915,178) (2,292) Prepaid expenses (36,177) 67,184 Other assets (62,190) - Increase (decrease) in operating liabilities: Accounts payable 1,833,342 (423,706) Accrued expenses (540,625) 170,367 --------- --------- Net cash provided by (used in) operating activities (27,335) 5,539 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of stock of Auro Computer Systems (470,000) - Cash acquired from Auro Computer Systems 50,359 - Purchase of property and equipment (166,371) (119,506) -------- --------- Net cash used in investing activities (586,012) (119,506) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sales of common stock 13,681 308,437 Net increase in line of credit 905,324 (222,005) Minority interest 100,000 - Proceeds from issuance of long-term debt - 29,655 Principal payments on debt (364,565) (74,382) -------- --------- Net cash provided by financing activities 654,440 41,705 -------- --------- Net decrease in cash 41,093 (72,262) Cash - beginning of period 204,990 115,796 -------- --------- Cash - end of period $246,083 $43,534 ======== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $40,721 $49,747 Cash paid for income taxes during the period $348,183 $0 On May 18, 1998, the Company purchased 85.1% of the common stock of PC & Parts, Inc. dba Auro Computer Systems for $370,000 in cash. In conjunction with the acquisition, the assets acquired and liabilities assumed are as follows: Total current assets acquired $2,303,481 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 878,908 Minority interest contribution (100,000) ---------- Cash paid for common stock $370,000 ========== See accompanying notes to unaudited consolidated financial statements. 7 CABLE LINK, INC. AND SUBSIDIARY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NATURE AND SCOPE On May 18, 1998, Cable Link, Inc. (the Company) pursuant to a Stock Purchase and Non-Compete Agreement, acquired all the outstanding equity securities of PC & Parts, Inc. dba Auro Computer Systems (Subsidiary) for $670,000, of which $470,000 was paid in cash and $150,000 will be paid to two former stockholders under non-compete agreements. Simultaneously with the foregoing acquisition, the Company entered into a Stock Agreement with Brian Berger, an employee of the Subsidiary, whereby Mr. Berger contributed $100,000 toward the purchase of the shares of Subsidiary and the Company has transferred to Mr. Berger 14.9% of the shares purchased. The interim consolidated financial statements have been prepared by the Company without an audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the consolidated financial position of the Company as of September 30, 1998, the consolidated results of operations for the three months and nine months ended September 30, 1998 and 1997 and consolidated cash flows for the nine months ended September 30, 1998 and 1997. Interim results are not necessarily indicative of results for a full year. The balance sheet as of December 31, 1997 has been derived from the financial statements that have been audited by the Company's independent public accountants. The financial statements and notes are condensed as permitted by Form 10-QSB and do not contain certain information included in the annual financial statements and notes of the Company. The financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's annual report and the audited statements of the Subsidiary filed with Form 8-K/A on July 30, 1998. BASIS OF PRESENTATION The acquisition has been accounted for under the purchase method of accounting based on the Subsidiary's balance sheet as of May 5, 1998, the agreed upon closing date. The consolidated financial statements are on the accrual basis of accounting and include the financial statements of its majority-owned Subsidiary (85.1%) after the acquisition closing date of May 5, 1998. All significant intercompany balances and transactions have been eliminated in consolidation. The amounts related to minority interest are not reflected in the accompanying statement of income as the Subsidiary reflected a deficit in equity as of acquisition and as of September 30, 1998. The following unaudited proforma results of operations of the Company for the nine months ended September 30, 1998 assumes that the acquisition of PC & Parts, Inc. occurred on January 1, 1998. 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. Net revenues $12,784,614 Net Income $ 417,385 Basic net income per share $ 0.24 Diluted net income per share $ 0.21 The Company declared a 3 for 2 stock split on January 21, 1997 and a 10% stock dividend on August 1, 1997. 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 8 the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from these estimates. AMORTIZATION OF GOODWILL Purchased goodwill is amortized using the straight-line method over 15 years. EARNINGS PER SHARE During 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share." The new standard simplifies the standards for computing earnings per share and requires presentation of two new amounts, basic and diluted earnings per share. The Company was required to retroactively adopt this standard for all periods presented. Three Months Ended Nine Months Ended Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30,1997 Weighted average shares 1,681,516 1,622,438 1,676,478 1,569,469 Diluted effect of options 227,448 669,097 281,987 641,187 --------- --------- --------- --------- Weighted average common shares outstanding and potential common shares 1,908,964 2,291,535 1,958,465 2,210,656 ========= ========= ========= ========= NOTES PAYABLE - BANK As a part of the acquisition, the Company borrowed $500,000 which bears interest at the prime interest rate plus one. This note matures on April 30, 1999. PURCHASE ADJUSTMENT During the third quarter of 1998, as provided by Amendment No. 1 to the Stock Purchase and Non-Compete Agreement included as Exhibit 2.3 of the Form 8-K/A filed on November 6, 1998 the Company has received a refund of the overpayment of purchase consideration of $350,000. INCOME TAXES For the three and nine months ended September 30, 1998, income tax expense is less than the amounts calculated by applying the statutory federal income tax rate to income before taxes due primarily to the anticipated use of net operating loss carry-forwards of the Subsidiary of approximately $600,000. ACQUISITION BONUS In 1998, the Company Board of Directors approved a $180,000 bonus payable to the Chief Executive Officer of Cable Link related to the acquisition of the Subsidiary. The bonus is payable in equal monthly installments of $5,000. The payments which 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 condition 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. NEW ACCOUNTING PRONOUNCEMENTS In June, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 131 "Disclosures about Segments of an Enterprise and Related Information." This statement is effective for fiscal years beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. This statement need not be applied to interim statements in the initial year of application. The Company will adopt this statement in the annual statements for the year ending December 31, 1998. In June 1998, the Financial Accounting Standards Board Issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 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 objective of which is to match the 9 timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The following discussion should be read in conjunction with the condensed financial statements included elsewhere within this quarterly report. Fluctuations in annual and quarterly 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. 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 customer 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. The Company further directs readers to the factors discussed in the Company's Form 10-KSB for the year ended December 31, 1997 and Forms 10-QSB for the quarters ending March 31 and June 30, 1998. GENERAL Cable Link, Inc. (Cable Link) sells new, used and refurbished cable TV equipment in addition to repairing equipment for cable companies within the United States and various international markets. The Company operates both its administrative and manufacturing operations from a single, leased facility in Columbus, Ohio. PC & Parts, Inc. dba Auro Computer Systems, (the Subsidiary), a majority-owned subsidiary recently acquired by Cable Link, (the consolidated company consisting of Cable Link and the Subsidiary is referred to herein as the Company) located in Westerville, Ohio, assembles computer hardware components into personal computers for a number of customers located in Ohio. The Subsidiary also sells its products and provides service support throughout central Ohio and the surrounding area. RESULTS OF OPERATIONS Net Sales Net sales for the Company for the third quarter ending September 30, 1998 were $7,580,466 compared to $2,720,514 for the third quarter ending September 30, 1997, an increase of $4,859,952. This represents an increase of 178.6% over the previous year for the same period. Sales for the nine months ending September 30, 1998 were $14,624,097 as compared to $7,574,049 or 93.1% over the same nine-month period the previous year. The increase in sales is primarily attributable to the inclusion of sales of the Subsidiary. Sales for Cable Link for the three-months and nine-months period ending September 30, 1998 were substantially the same for the corresponding period in 1997. Cost of Good Sold 10 The cost of goods sold for the Company for the third quarter ending September 30, 1998 was $6,041,123 and $11,138,868 for the nine months ending September 30, 1998, an increase of $4,422,070 and $6,285,909 respectively. The majority of the increase for the third quarter ending September 30, 1998 is attributable to the inclusion of the Subsidiary's cost of goods sold for the quarter ending. Hardware and software sales for the Subsidiary carry substantially higher cost of goods sold as compared to those products sold by Cable Link. The Subsidiary is focusing efforts on the service revenue side of the business which could contribute a higher gross margin in the future. Cable Link's cost of goods sold increased due to the sale of new products which carry a lower margin than its refurbished equipment sales. In comparison to the third quarter ending September 30, 1997 Cable Link's cost of goods sold was unusually low due to the economies of a large purchase. Operating Expenses Operating expenses increased to $1,243,811 for the three-month period ending September 30, 1998 as compared to $664,387 for the same period ending in 1997. The operating expenses for the nine-month period ending September 30, 1998 were $2,704,781 as compared to $1,935,649 for the 1997 comparable period. The increase in the operating expenses is attributable in part to the inclusion of the Subsidiary's operating expenses. The increase is also attributable to an increase in Cable Link's sales and administrative salaries during the period. Operating expenses decreased from 24.4% of sales for the three months ending September 30, 1997, to 16.4% of sales for the comparable period ending, September 30, 1998. The operating expenses for the nine-month period ending September 30, 1998 decreased from 25.6% of sales to 18.5% of sales for the same period ending in 1998. The decrease in operating expenses as a percent of sales is due to the inclusion of sales of the Subsidiary. Cable Link and the Subsidiary continue to implement job procedures in an attempt to increase efficiencies and further reduce costs. Income from Operations Income from operations for the three-month period ending September 30, 1998 was $295,532 as compared to $437,074 for the same period ending in 1997. For the nine-month period ending September 30, 1998, income from operations was $780,448 as compared to $785,442 for the same period in 1997. Income from operations decreased $141,542 for the three-month period ending September 30, 1998 and decreased $4,994 for the nine-month period ending September 30, 1998 as compared to the same periods ending in 1997, respectively. The decrease in income from operations is a result of the Company's increase in the cost of goods sold and an increase in operating expenses. The increase in hardware, software, and new product sales resulted in an increase in the cost of goods sold for the Company. These product sales carry a higher product cost than the service, repair and refurbishing sales. Operating expenses increased due to the inclusion of the Subsidiary's expenses. Income Tax Provision The Company's income tax provision was $54,251 for the quarter ending September 30, 1998 and $142,753 for the nine-months ending September 30, 1998. A provision of $135,000 was recorded for the third quarter ending September 30, 1997, resulting in a $135,000 tax provision for the nine-month period ending September 30, 1997. No prior tax provision was recorded in 1997 due to net operating loss carryforwards of the Company that were fully utilized in 1997. The following are management's discussion and analysis of material changes in financial position during the interim period. Accounts Receivable Accounts Receivable increased 231.5% from December 31, 1997 as compared to September 30, 1998 Accounts Receivable balance of $3,764,544. This increase in Accounts Receivable is due to the inclusion of the Accounts Receivable of the Subsidiary, and an increase in Cable Link's sales for the third quarter of 1998 versus the fourth quarter of 1997. Inventories 11 Inventory increased 101.6% or $1,353,769 from December 31, 1997 as compared to September 30, 1998. Approximately one half of the increase is attributable to the inclusion of the inventory of the Subsidiary and the balance is attributable to an increase of Cable Link's inventory resulting from a major volume purchase. Property & Equipment The increase in property and equipment of $624,692 or 42.6% from December 31, 1997 is due primarily to the acquisition of the Subsidiary in 1998. The increase in accumulated depreciation of $375,586 or 48.5% from December 31, 1997 is directly related to the increase in property and equipment. Covenant not to Compete Under the terms of Amendment No. 1 of the Stock Purchase and Non-Compete Agreement included as exhibit 2.3 of the Form 8-K/A filed on November 6, 1998, the Company will pay the sellers of the Subsidiary $150,000 in monthly installments over two years. 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. Goodwill Goodwill has been recorded to reflect the amount paid for the Subsidiary less the fair value of the assets acquired. Goodwill is shown net of accumulated amortization of $24,414, which is calculated using the straight-line method over 15 years. Accounts Payable Accounts Payable increased 389.4% or $2,979,585 from December 31, 1997 as compared to September 30, 1998. The majority of the increase is attributable to the inclusion of the Subsidiary's accounts payable and the remaining portion of the increase is attributable to Cable Link. Cable Link's Accounts Payable increased as a direct result of the increase in inventory. Approximately $600,000 of the Cable Link's Accounts Payable is with one vendor for a major volume purchase of inventory that has extended payment terms up to December 26, 1998. Accrued Expenses Accrued Expenses increased $317,302 or 96.2% from December 31, 1997 as compared to September 30, 1998. The increase is primarily due to acquisition costs and fees related to the acquisition of the Subsidiary. Accrued Warranty Expense The Subsidiary provides a three year on-site parts and labor warranty on hardware sold. Replacement hardware components are generally provided by the original equipment manufacturer. The Subsidiary is responsible for installing the replacement parts. The Subsidiary has estimated the future labor costs to install replacement parts for the system that remain under warranty as of September 30, 1998 to be $280,413. Based on past experience the majority of warranty calls are made during the first few months of ownership, therefore the entire liability is classified as short term. The Company's management is currently reviewing its warranty policy and comparing it to policies within the industry to determine if policy revisions are necessary. Long-term Debt The increase in long-term debt is attributable to the debt assumed by acquiring the Subsidiary. The debt assumed was paid off with proceeds from a newly established term loan. 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, a contribution from minority interest of $100,000 and operating cash. In September, 1998 the Company signed Amendment No. 1 to the Stock Purchase and Non-Compete Agreement to resolve differences in the original purchase 12 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 payments. The Company finances its operations primarily through internally generated funds and bank lines of credit totaling $2,500,000. Bank borrowings increased in the third quarter of 1998 compared to December 31, 1997 as a result of the acquisition of the Subsidiary. As a result of the increase in sales and the acquisition, accounts receivable increased $2,628,937 the third quarter in 1998 over the December 31, 1997 balance. Inventory increased $1,353,769 in the first nine months over the December 31, 1997 balance. Accounts payable increased $2,979,585 and accrued expenses increased $202,302 due to the acquisition related liabilities and the liabilities assumed by the Company. Capital expenditures in 1998 of $166,371 consist of ordinary expenditures for equipment replacement and upgrades. The capital expenditures were financed by bank lines of credit. On October 26th, 1998, the Company signed a line of credit facility increasing the credit line to $2,500,000. The external sources of cash include the bank line of credit increase and the $500,000 term note. The increase in the line of credit facility was prompted by the increase in inventory and operations as a result of the acquisition of the Subsidiary. As of October 30, 1998 the Company had approximately $1,300,000 available on the line of credit. The Company anticipates no material capital expenditures at this time. The Company believes that its available financial resources including the line of credit facility and operating cash flow will be adequate to meet its foreseeable working capital, debt service and capital expenditure requirements. 13 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. (2) Charter and Bylaws. The Articles of Incorporation and Code of Regulations of the Issuer as presently in effect. (3) Instruments Defining the Rights of Security Holders. (a) See Exhibit 2.1 - Articles of Incorporation; Articles IV, V and VI. See Exhibit 2.2 - Code of Regulations; Articles I, IV and VII (b) The registrant agrees to provide to the Commission upon request instruments defining the rights of holders of long-term debt of the registrant and all of its subsidiaries for which consolidated financial statements are required to be filed. (5) Voting Trust Agreement. None. (6) Material Contracts. See Exhibit 6.1 - 1995 Stock Option Plan dated October 17, 1995. See Exhibit 6.2. - Warrant Agreement for Axxess International Group, Inc. dated January 8, 1997. See Exhibit 6.3. Non-Competition and Consulting Agreement dated October 18, 1994. See Exhibit 6.4. First Amendment Agreement to Non- Competition and Consulting Agreement dated June 1, 1995. 14 See Exhibit 6.5. Second Amendment Agreement to Non- Competition and Consulting Agreement dated November 16, 1995. See Exhibit 6.6. Consulting Agreement dated October 1, 1996. See Exhibit 6.7. Eric S. Newman Independent Consulting Letter Agreement dated August 1, 1994. See Exhibit 6.8. Loan and Security Agreement dated November 27, 1996. See Exhibit 6.9. Promissory Note dated April 30, 1997. See Exhibit 6.10. Lease dated November 4, 1992 and Lease Modification Agreement dated October 26, 1995 for Suite 201, 280 Cozzins, Columbus, Ohio. (7) Material Foreign Patents. None. (8) Plan of Acquisition, Reorganization, etc. See Exhibit 8.1. Stock Purchase and Non-Compete Agreement among PC & Parts, Inc., its Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998. See Exhibit 8.2. Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian Berger dated May 18, 1998. See Exhibit 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 September _____, 1998. (b) Reports on Form 8-K. A report on Form 8-K was filed on May 29, 1998 reporting the acquisition of PC & Parts, Inc. and an amendment thereto was filed on July 30, 1998 containing financial statements required pursuant to Item 7 of the Form 8-K. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CABLE LINK, INC. Dated November 12, 1998 By s/ Bob Binsky ----------------------------- --------------------------------- Bob Binsky, Chairman of the Board (duly authorized officer) By s/ Zaida Wahlberg --------------------------------- Zaida Wahlberg, Treasurer (chief accounting officer) 16 EXHIBIT INDEX PAGE IN SEQUENTIALLY NUMBERED EXHIBIT COPY 2.1. Articles of Incorporation of Cable Link, Inc., as amended (incorporated by reference to Exhibit 2.1 of 10-SB, as amended. filed December 23, 1997 (the "Form 10-SB"); Commission File No. 0-23111). * 2.2. Code of Regulations of Cable Link, Inc., as amended (incorporated by reference to Exhibit 2.2 to the Form 10-SB). * 3.1. See Articles IV, V and VI of the Articles of Incorporation of the Registrant (see Exhibit 3.1). 3.2. See Articles I, IV and VII of the Code of Regulations of the Registrant (see Exhibit 3.2). 6.1. 1995 Stock Option Plan dated October 17, 1995 (incorporated by reference to Exhibit 6.1 to the Form 10-SB). * 6.2. Warrant Agreement for Axxess International Group, Inc. dated January 8, 1997 (incorporated by reference to Exhibit 6.2 to the Form 10-SB). * 6.3. Non-Competition and Consulting Agreement dated October 18, 1994 (incorporated by reference to Exhibit 6.3 to the Form 10-SB). * 6.4. First Amendment Agreement to Non-Competition and Consulting Agreement dated June 1, 1995 (incorporated by reference to Exhibit 6.4 to the Form 10-SB). * 6.5. Second Amendment Agreement to Non-Competition and Consulting Agreement dated November 16, 1995 (incorporated by reference to Exhibit 6.5 to the Form 10-SB). * 6.6. Consulting Agreement dated October 1, 1996 (incorporated by reference to Exhibit 6.6 to the Form 10-SB). * 6.7. Eric S. Newman Independent Consulting Letter Agreement dated August 1, 1994 (incorporated by reference to Exhibit 6.7 to the Form 10-SB). * 6.8. Loan and Security Agreement dated November 27, 1996 (incorporated by reference to Exhibit 6.8 to the Form 10-SB). * 6.9. Promissory Note dated April 30, 1997 (incorporated by reference to Exhibit 6.9 to the Form 10-SB). * 6.10. Lease dated November 4, 1992 and Lease Modification Agreement dated October 26, 1995 for Suite 201, 280 Cozzins, Columbus, Ohio (incorporated by reference to Exhibit 6.10 to the Form 10-SB/A of * Registrant, Registration No. 0-23111)). 8.1 Stock Purchase and Non-Compete Agreement among PC & Parts, Inc., 17 its Shareholders, Brian Berger and Cable Link, Inc. dated May 18, 1998 (incorporated by reference to Exhibit 2.1 to the Form 8-K of Registrant filed May 29, 1998, Registration No. 0-23111) * 8.2 Stock Agreement among Cable Link, Inc., PC & Parts, Inc. and Brian Berger dated May 18, 1998 (incorporated by reference to Exhibit 2.2 to the Form 8-K of Registrant filed May 29, 1998, Registration No. 0-23111) * 8.3 Amendment No. 1 to Stock Purchase & Non-Compete Agreement among PC & Parts, Inc., its Shareholders, Brian Berger and Cable Link, Inc. dated September ______, 1998 (incorporated by reference to Exhibit 2.3 to the form 8-K/A of Registrant filed November 6, 1998, Registration No. 0-23111) * 27. Financial Data Schedule (submitted electronically for SEC purposes only) *Incorporated by reference