-----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, HlIkNAc2eBPsk0+31ZPCqPYMBA3HY0h6riwm70/QlslkWKdVtpz1cqjQoXiTz6rb wwdZnQHlU771P1WYCNJU2g== 0000807397-98-000041.txt : 19980507 0000807397-98-000041.hdr.sgml : 19980507 ACCESSION NUMBER: 0000807397-98-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK SOLUTIONS INC CENTRAL INDEX KEY: 0000807397 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 112864481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17118 FILM NUMBER: 98611213 BUSINESS ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 BUSINESS PHONE: 9738930500X119 MAIL ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 FORMER COMPANY: FORMER CONFORMED NAME: SHOWCASE COSMETICS INC DATE OF NAME CHANGE: 19920703 10-Q 1 MARK SOLUTIONS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1998 -------------------------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ---------------- Commission File Number: 0-17118 --------------- Mark Solutions, Inc. - ---------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2864481 - ----------------- ----------------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation) Identification No.) Parkway Technical Center 1515 Broad Street Bloomfield, New Jersey 07003 - ---------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (973) 893-0500 ---------------------- ------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by check whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: Common Stock, $ .01 par value: 17,036,674 shares outstanding as of May 4, 1998. 1 MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended March 31, 1998 Index Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1998 and June 30, 1997 ....................... 3-4 Consolidated Statements of Operations for the Nine Months and Three Months Ended March 31, 1998 and March 31, 1997 .............. 5 Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1998 and March 31, 1997................................. 6 Notes to Consolidated Financial Statements ................ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K ........................... 12 Signatures 12 2
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets March 31, 1998 June 30, 1997 ---------------- --------------- Current Assets: Cash and cash equivalents $ 948,319 $ 422,457 Accounts receivable, less allowance of $5,500 at March 31, 1998 and June 30,1997 3,256,072 3,178,928 Inventories 396,762 336,287 Other current assets 106,186 230,748 ----------- ----------- Total Current Assets $4,707,339 $4,168,420 Property and Equipment, net 509,878 347,259 Other Assets: Cost in excess of net assets of business acquired less accumulated amortization of $384,887 and $227,433 at March 31,1998 and June 30, 1997, respectively 664,804 822,258 Other assets 74,549 94,340 ----------- ----------- Total Other Assets 739,353 916,598 ----------- ----------- Total Assets $5,956,570 $5,432,277 ========== ==========
3 Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets March 31, 1998 June 30, 1997 ---------------- --------------- Current Liabilities: Accounts payable $ 1,516,991 $ 1,638,288 Short-term borrowings - 435,225 Current maturities of long-term debt 19,167 448,729 Current portion of obligations under capital leases 4,465 8,276 Due to related parties 103,050 296,472 Notes payable to officer 50,000 160,000 Accrued liabilities 278,439 257,973 ----------- ----------- Total Current Liabilities $1,972,112 $3,244,963 Other Liabilities: Long-term debt excluding current maturities 1,073,758 2,312,556 Long-term portion of obligations under capital leases 11,266 27,911 ----------- ----------- Total Other Liabilities 1,085,024 2,340,467 Commitments and Contingencies - - - - - - Stockholders' Equity (Impairment): Common stock, $.01 par value, 50,000,000 shares authorized, 16,972,212 and 14,779,085 shares issued and outstanding at March 31, 1998 and June 30, 1997, respectively 169,722 147,790 Additional paid-in capital 30,377,778 27,454,982 Deficit (27,648,066) (27,755,925) ----------- ----------- Total Stockholders' Equity (Impairment) 2,899,434 (153,153) ----------- ----------- Total Liabilities and Stockholders' Equity (Impairment) $5,956,570 $5,432,277 ========== ==========
4
Mark Solutions, Inc. and Subsidiaries Consolidated Statement of Operations Nine Months Nine Months Three Months Three Months Ended Ended Ended Ended March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997 -------------- -------------- -------------- -------------- Revenues: Sales $ 12,719,161 $ 3,276,578 $ 5,075,930 $ 1,581,371 Costs and Expenses: Cost of sales 9,256,183 2,665,643 3,376,283 1,307,268 Selling, general, and administrative expenses 2,950,210 2,899,160 842,217 1,076,520 ------------- ------------- ------------- ------------- Total Costs and Expenses 12,206,393 5,564,803 4,218,500 2,383,788 -------------- ------------- ------------- ------------- Operating Income(Loss) 512,768 (2,288,225) 857,430 (802,417) Other Income (Expenses): Interest income 5,960 21,272 5,114 4,126 Interest expense (250,712) (728,728) (21,519) (643,145) Imputed Int. on convertible debenture (160,157) -- -- 439,997 Loss on disposal of assets -- (3,120) -- -- ------------ ------------ ------------- ------------- (404,909) (710,576) (16,405) (199,022) ------------- ------------- ------------- ------------- Net Income(Loss) $ 107,859 $ (2,998,801) $ 841,025 $ (1,001,439) ============= ============= ============= ============= BASIC EARNINGS PER SHARE Income(Loss) per Share $ 0.01 $ (0.21) $ 0.05 $ (0.07) ============= ============= ============= ============= Weighted Average Number of Shares Outstanding 16,310,982 13,974,665 16,972,212 14,475,378 ============= ============= ============= ============= DILUTED EARNINGS PER SHARE Income(Loss) per Share $ 0.01 $ (0.21) $ 0.05 $ (0.07) ============= ============= ============= ============= Weighted Average Number of Shares Outstanding 17,471,547 13,974,665 18,132,777 14,475,378 ============= ============= ============= ============
5
Mark Solutions, Inc. and Subsidiaries Consolidated Statement of Cash Flows Nine Months Nine Months Ended Ended March 31, 1998 March 31, 1997 ------------------- ------------------- Cash Flows From Operating Activities: Net Income(loss) $ 107,859 $ (2,998,801) ------------------- ------------------- Adjustments to reconcile net income(loss) to net cash provided by (used for) operating activities: Depreciation and amortization 257,950 316,453 Loss on disposal of assets - 3,120 Imputed interest expense on convertible debt 188,199 637,810 (Increase) decrease in assets: Restricted cash - 162,920 Accounts Receivables (77,144) (1,394,543) Inventory (60,475) (797,660) Other current assets 124,562 23,200 Other assets 19,791 (34,415) Increase (decrease) in liabilities: Accounts payable (121,297) 831,646 Due to related parties (193,422) 158,882 Accrued liabilities 20,466 (157,765) ------------------- ------------------- Net adjustments to reconcile net (loss) to net cash provided by (used for) operating activities 158,630 (250,352) ------------------- ------------------- Net Cash Provided by (Used for) Operating Activities 266,489 (3,249,153) ------------------- ------------------- Cash Flows From Investing Activities: Acquisition of property and equipment (263,202) (97,629) ------------------- ------------------- Net Cash (Used for) Investing Activities (263,202) (97,629) ------------------- ------------------- Cash Flows From Financing Activities: Proceeds from issuance of convertible debt - 2,950,000 Repayment of long term debt (420,277) - Increase(decrease) of short term borrowings (435,225) 250,088 Proceeds of equipment loans less repayments (20,456) - Repayment of notes payable officer (110,000) - Proceeds from issuance of common stock 1,510,450 105,894 Debt issue costs (1,917) (162,700) Payment of issuance costs - (22,498) ------------------- ------------------- Net Cash Provided by Financing Activities 522,575 3,120,784 ------------------- ------------------- Net Increase (Decrease) in Cash 525,862 (225,998) Cash and Cash Equivalents at Beginning of Period 422,457 263,922 ------------------- ------------------ Cash and Cash Equivalents at End of Period $ 948,319 $ 37,924 =================== ===================
6 Mark Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 INTERIM FINANCIAL INFORMATION The consolidated balance sheet of the Company as of March 31, 1998, the consolidated statements of operations for the nine months and three months ended March 31, 1998 and 1997 and the consolidated statements of cash flows for the nine months ended March 31, 1998 and 1997 are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows have been included. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The June 30, 1997 balance sheet data is derived from the audited consolidated financial statements. The attached financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1997. Certain reclassifications have been made to the current and prior year amounts to conform to the current period presentation. Note 2 INVENTORIES Inventories consist of the following: March 31, 1998 June 30, 1997 -------------- ------------- Raw Materials $ 396,762 $ 300,888 Finished Goods - 35,399 --------- --------- Total 396,762 $ 336,287 ========== ========== 7 Note 3 Common Stock and Additional Paid-In Capital a. Warrant Exercise -------------------- During the nine months ended March 31, 1998, the Company issued 580,000 shares of common stock as a result of the exercise of warrants, receiving gross proceeds of $1,516,250. b. Debt Conversion -------------------- During the nine months ended March 31, 1998, Convertible Debentures in the amount of $1,250,000 were converted into 1,562,500 shares of common stock. In addition, the Company issued 33,237 shares of common stock as payment of accrued interest on the debentures up to the date of conversion. c. Earnings Per Share ---------------------- During the quarter ended March 31, 1998 the Company adopted Financial Accounting Standards Board ("FASB") Statement No. 128, "Earnings Per Share." Basic earnings per common share is computed by dividing the net earnings by the weighted average number of shares of common stock outstanding during the period. Dilutive earnings per share gives effect to stock options and warrants which are considered to be dilutive common stock equivalents. Earnings per share have been retroactively restated to reflect FASB No. 128 for all prior periods presented. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Mark Solutions, Inc.'s (the "Company") results of operations, liquidity, and working capital position have been historically impacted by sporadic sales of its principal products, modular steel cells. This sales pattern is primarily the result of the construction industry's unfamiliarity with the Company's products and the emergence of competition. The Company's modular steel products represent an alternative to traditional concrete construction methods, and penetration into the construction market has met resistance typically associated with an unfamiliar product. Accordingly, the Company has been, and will continue to be, subject to significant sales fluctuations until its modular steel cell technology receives greater acceptance in the construction market, which management believes will occur as new projects are awarded and completed. In an attempt to achieve greater acceptance in the architectural, engineering and construction communities, the Company's internal sales and engineering personnel and its network of independent sales representatives conduct sales presentations and participate in trade shows and other promotional activities. The Company has expanded its marketing efforts to more aggressively pursue domestic and international joint venture and design/build development opportunities to obtain projects and improve its results of operations in efforts to become profitable. In addition, the Company is promoting the incorporation of its modular cell products to State prison industries to capitalize on its New York State agreement. From January 1996 to September 1996, the Company decided not to occupy factory space, but outsourced the manufacturing of its small modular cell projects to third party manufacturers. The Company occupied new factory facilities in October 1996. The Company will continue to review its overhead and personnel expenses based on operating results and prospects. The Company is continually bidding on and soliciting joint venture opportunities regarding construction projects. The anticipated revenues from any major project, would substantially improve the Company's operating results and cash flow, although no assurances can be given that any of these projects will be awarded to the Company. Under a three-year contract expiring in December 1999 with the State of New York, the Company provides modular steel cells and components to the State's prison industry program for the final assembly. Through March 31, 1998, revenues from this contract were approximately $11,900,000. The Company believes it will be awarded additional projects under its New York State contract and anticipates additional prison projects will be awarded in New York State by July 1998. The Company currently has bids pending on approximately $10,000,000 in projects. In addition to the $12 million in New York State orders, of the approximately $23,000,000 in bids submitted by the Company for the nine months ended March 31, 1998, the Company was awarded $430,000 in projects and remains under consideration for approximately $10,000,000 in projects. 9 Through its subsidiaries, MarkCare Medical Systems, Inc. and MarkCare Medical Systems, Ltd. (collectively "MarkCare"), the Company continues to market its IntraScan II PACS and teleradiology systems and is forming strategic alliances with other companies with related medical products. The Company has a master supplier agreement with Data General Corporation, a large computer hardware and systems integration provider with a client base of over 1,000 institutions, pursuant to which Data General will include the IntraScan II PACS and teleradiology software applications in proposals to healthcare institutions. The Company has recently signed additional IntraScan distributor agreements with SANTAX A/S, a leading supplier of medical equipment in Scandinavia and WorldCare UK, Ltd., a worldwide telemedicine network provider. Management anticipates that the sale of the IntraScan II systems will begin to generate revenues in the calendar year ending December 31, 1998, although no assurances can be given in this regard. If the IntraScan marketing plan is successful, management believes that the revenues from resulting sales will be more constant then those of the modular steel products presently and will reduce fluctuations in the Company's results of operations and financial condition. Results of Operations The substantial majority of the Company's operating revenues for the reported periods was derived from the sale of modular cells for correctional institutions. Management believes that the sale of these modular steel products will continue to represent the substantial majority of the Company's operating revenues through June 30, 1998. For the three months ended March 31, 1998 sales of the modular steel products represented 98.5% of total revenues. Revenues for the three months ended March 31, 1998 increased 221.0% to $5,075,930 from $1,581,371 for the comparable 1997 period. This increase is solely attributed to the previously awarded New York State project. Cost of sales for the three months ended March 31, 1998, which consists primarily of materials, labor, supplies, and fixed factory overhead expense, increased 158% to $3,376,283 from $1,307,268 for the comparable 1997 period, reflecting the increase in sales. Cost of sales as a percentage of revenues was 66.5% for the three months ended March 31, 1998 as compared to 82.7% for the comparable 1997 period. This decrease is attributable to efficiencies of running such a large project. Management expects to achieve increased gross margins in its steel business due to additional operating efficiencies implemented over the last nine months in the Company's new manufacturing facility. Selling, general and administrative expenses for the three months ended March 31, 1998 decreased 22% to $842,396 from $1,076,520 for the comparable 1997. This decrease is primarily attributable to the successful implementation by management of cost controls, including reductions in office expense, consulting and professional fees. Revenues for the nine months ended March 31, 1998 increased 288% to $12,719,161 from $3,276,578 for the comparable 1997 period. This increase is attributed to the progress on five previously awarded projects, including $11,931,000 on the most recent New York State purchase order. 10 Cost of sales for the nine months ended March 31, 1998, increased 247% to $9,256,183 from $2,665,643 for the comparable 1997 period reflecting the increase in sales. Cost of sales as a percentage of revenues was 72.8% for the nine months ended March 31, 1998 as compared to 81.3% for the comparable 1997 period. This decrease is attributable to efficiencies associated with the New York State Project. Selling, general and administrative expenses for the nine months ended March 31, 1998 increased less than1% to $2,921,017 from $2,899,160 for the comparable 1997. Liquidity and Capital Resources The Company's working capital requirements result principally from staff and management overhead, office expense and marketing efforts. Cash and cash equivalents increased from $422,457 at June 30, 1997 to $948,319 at March 31, 1998 primarily due to proceeds from the exercise of warrants and options. Working capital increased to $2,735,227 at March 31, 1998 from $923,457 at June 30, 1997 primarily due to profits generated and warrant and option proceeds during the nine months ended March 31, 1998. The Company believes its present available working capital and anticipated cash from its existing contracts is sufficient to meet its operating requirements through December 31, 1998. In addition, the Company has renewed a $400,000 revolving line of credit collateralized by substantially all of its assets and has no outstanding borrowings at May 5, 1998. The Company's inventory increased to $396,762 at March 31, 1998 from $336,287 at June 30, 1997 due to raw material purchases and component purchases for the increased production volume. The Company presently has an effective registration statement relating to 763,425 shares of Common Stock issuable upon the exercise of warrants and options, the majority of which have exercise prices ranging from $ 2.00 to $ 5.00 per share. In the event working capital from operations is insufficient to finance growth in the Company's business or to meet cyclical working capital shortfalls, the Company will initially look to the exercise of presently outstanding warrants and options to meet working capital needs, however, if sufficient securities are not exercised, the Company will seek additional private sales of its securities, which, if available, would most likely be at discounts to the current trading price of the Company's Common Stock. Forward Looking Statements Except for the historical information contained herein, the matters discussed in this report are forward looking statements under the Federal securities laws that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among other things, collection risks, meeting financial requirements, ability to obtain materials and the uncertainty of sales of the IntraScan II product line. 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Exhibit Description - --------------- -------------------- 27.1 Financial Data Schedule (b) Reports on Form 8-K for the Quarter Ending March 31, 1998 Date of Report Item(s) Reported - --------------- -------------------- April 15, 1998 Item 4. Change in Registrant's Certifying Accountant SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. Date: May 4, 1998 MARK SOLUTIONS, INC. By:/s/ Michael Nafash -------------------------- Chief Financial Officer 12 EX-27 2 FDS 27.1
5 9-MOS JUN-30-1998 MAR-31-1998 948,319 0 3,261,572 5,500 396,762 4,707,339 2,411,737 1,901,859 5,956,570 1,972,112 1,085,024 0 0 169,722 2,729,712 5,956,570 12,719,161 12,719,161 9,256,183 12,206,393 0 0 250,712 107,859 0 107,859 0 0 0 107,859 .01 .01
-----END PRIVACY-ENHANCED MESSAGE-----