-----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, Lty38vPJOCj1ZmsfggGU5Nxf+zuvpiQ3YF8jqEY4hV47WZApagRwsLIsNYMlv55v EvTIlFvo9ii8lwpS3vERRg== 0000807397-99-000031.txt : 19991117 0000807397-99-000031.hdr.sgml : 19991117 ACCESSION NUMBER: 0000807397-99-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 333-72099 FILM NUMBER: 99751486 BUSINESS ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 BUSINESS PHONE: 9738930500 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 SEPTEMBER 1999 FORM 10-Q 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: September 30, 1999 ------------------ _____ 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: 5,629,997 shares outstanding as of November 12, 1999. MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended September 30,1999 Index Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1999 and June 30, 1999. . . 3-4 Consolidated Statements of Operations for the Three Months Ended September 30, 1999 and 1998 . . . . . . . . 5 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1999 and 1998 . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . 8 Part II. Other Information Item 2. Changes in Securities and Use of Proceeds . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 14 Signatures 14 2
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheet Assets September 30, 1999 June 30, 1999 ------------------ ------------- Current Assets: Cash and cash equivalents $ 117,189 $ 298,167 Note receivable 250,000 250,000 Account receivable 4,476,594 4,744,459 Costs and estimated earnings in excess of billings on uncompleted contracts 713,826 1,006,955 Deferred tax asset 500,000 500,000 Prepaid expenses 69,810 64,706 ---------- ---------- Total Current Assets 6,127,419 6,864,287 Property and equipment, net 1,385,784 1,224,110 Other Assets: Cost in excess of net assets of business acquired less accumulated amortization of $699,798 and $647,313 at September 30 and June 30, 1999, respectively 349,893 402,378 Deferred tax asset 500,000 500,000 Other assets 80,804 79,939 --------- ---------- Total Other Assets 930,697 982,317 ---------- ----------- Total Assets $8,443,900 $9,070,714 ========== ===========
3
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheet Liabilities and Stockholders' Equity September 30, 1999 June 30, 1999 ------------------ ------------------- Current Liabilities: Accounts payable $ 3,192,615 $ 3,617,608 Current maturities of long-term debt 577,590 365,000 Current portion of obligations under capital leases 80,544 87,292 Due to related parties 159,546 177,977 Notes payable to officers/stockholders 100,000 375,000 Deferred revenues - 655,874 Litigation settlement 300,000 300,000 Accrued liabilities 253,026 253,299 ----------- ----------- Total Current Liabilities 4,663,321 5,832,050 Other Liabilities: Long-term debt excluding current maturities 154,891 369,961 Long-term portion of obligations under capital leases 131,197 135,017 ----------- ----------- Total Other Liabilities 286,088 504,978 Commitments and Contingencies 275,000 - Stockholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 5,629,997 and 5,525,296 shares issued and outstanding at September 30, and June 30, 1999, respectively 56,300 55,253 Preferred stock, $1.00 par value, $10 liquidation value; 5,000,000 shares authorized: Series A; authorized and issued 122,000 shares; 21,686 and 24,000 outstanding at September 30, 1999 and June 30, 1999 respectively 22,321 24,000 Series B; authorized and issued 153,000 shares; 6,000 outstanding at September 30, 1999 and June 30, 1999 respectively 6,000 6,000 Series D; authorized and issued 20,000 shares; 20,000 and -0- outstanding at September 30, 1999 and June 30, 1999 respectively 20,000 - Additional paid-in capital 34,736,284 34,432,927 Deficit (31,783,838) (31,916,792) Accumulated other comprehensive income 213,126 183,000 Treasury stock, at cost; 17,500 shares at September 30 and June 30, 1999 (50,702) (50,702) ----------- ----------- Total Stockholders' Equity 3,219,491 2,733,686 Total Liabilities and Stockholders' Equity $8,443,900 $9,070,714 ========== ==========
4
Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Three Months Ended Ended September 30, 1999 June 30, 1999 ------------------ ------------------- Revenues: Sales $ 3,997,441 $ 688,861 ----------- ----------- Costs and Expenses: Cost of sales 2,166,194 347,552 General, and administrative expenses 675,006 350,443 Marketing costs 318,163 198,593 Software costs 275,526 158,743 Amortization expense 52,485 52,485 Litigation settlement 275,000 2,000 Consulting fees 72,168 42,825 ----------- ----------- Total Costs and Expenses 3,834,542 1,152,641 ----------- ----------- Operating Income(Loss) 162,899 (463,780) ----------- ----------- Other Income (Expenses): Interest income 6,453 28,224 Interest expense (36,398) (11,426) Imputed Interest expense on convertible debentures - (54,833) ----------- ----------- (29,945) (38,035) ----------- ------------ Net Income(Loss) $ 132,954 $ (501,815) =========== ============ Basic Income(Loss) per Share $ 0.02 $ (0.10) =========== ============ Fully Diluted Income (Loss) per Share $ 0.02 $ (0.10) =========== ============ Weighted Average Number of Basic Shares Outstanding 5,535,999 4,820,419 =========== ============ Weighted Average Number of Fully Diluted Shares Outstanding 6,498,742 4,820,419 =========== ============ Dividends Paid $ - $ - =========== ============
5
Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Three Months Ended Ended September 30, 1999 June 30, 1999 ------------------ ------------------- Cash Flows From Operating Activities: Net Income(loss) $ 132,954 $ (501,815) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 162,614 74,827 Deferred Imputed interest on convertible debentures - 54,833 Securities issued for services 120,982 - (Increase) decrease in assets: Restricted cash - 1,234,005 Accounts Receivable 267,865 (583,398) Inventory - (743,840) Billing in excess of contract revenue recognized 293,129 - Other current assets (5,104) (119,829) Other assets (865) (351) Increase (decrease) in liabilities: Accounts payable (424,993) 363,206 Due to related parties (18,431) 65,216 Deferred revenue (655,874) 206,082 Accrued liabilities (273) (26,369) Commitments and contingencies 275,000 - Net adjustments to reconcile net income(loss) to ----------- ---------- net cash (used for) provided by operating activities 14,050 524,382 Net Cash Provided by ----------- ---------- Operating Activities 147,004 22,567 ----------- ---------- Cash Flows From Investing Activities: Acquisition of property and equipment (241,767) (171,403) Net Cash (Used for) ----------- ---------- Investing Activities (241,767) (171,403) ----------- ---------- Cash Flows From Financing Activities: Collection of subscriptions receivable - 1,231,000 Proceeds from sale of Stock 200,000 - Proceeds of equipment loans less repayments (13,048) 18,567 Repayment of notes payable officer (375,000) - Proceeds from notes payable officer 100,000 - Refund of stock related costs 1,833 (34,410) Purchase of treasury stock - (10,218) ----------- ---------- Net Cash (Used for) Provided by Financing Activities (86,215) 1,204,939 ----------- ---------- Net (decrease)increase in Cash (180,978) 1,056,103 Cash and Cash Equivalents at Beginning of Period 298,167 564,577 ----------- ---------- Cash and Cash Equivalents at End of Period $ 117,189 $1,620,680 =========== ==========
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 September 30, 1999, the consolidated statement of operations for the three months ended September 30, 1999 and 1998 and the consolidated statements of cash flows for the three months ended September 30, 1999 and 1998 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, 1999 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 hereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1 Certain reclassifications have been made to the current and prior year amounts to conform to the current period presentation. Note 2 COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL Basic earnings (loss) 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. 7 Note 3 SEGMENT INFORMATION The company's two industry segments are modular steel cells for the corrections industry and software applications for the medical industry. The following is a summary of selected consolidated financial information for the Company's industry segments:
Modular Steel Medical Intersegment Products Products Charges Total ----------- ----------- ----------- ----------- Quarter Ended September 30, 1999 Revenues $ 3,038,253 $ 959,188 $ - $ 3,997,441 Interest income 161,357 85 (154,989) 6,453 Interest expense 35,917 155,470 (154,989) 36,398 Depreciation and amortization 71,164 38,965 52,485 162,614 Segment pre-tax profit 338,059 (152,621) (52,485) 132,953 Segment assets 15,962,235 1,114,027 (8,632,362) 8,443,900 Capital expenditures 136,161 25,513 - 161,674 Quarter Ended September 30, 1998 Revenues $ 573,041 $ 115,820 $ - $ 688,861 Interest income 139,242 464 (111,482) 28,224 Interest expense 64,026 113,715 (111,482) 66,259 Depreciation and amortization 4,407 17,935 52,485 74,827 Segment pre-tax profit 88,018 (537,348) (52,485) (501,815) Segment assets 10,662,746 764,991 (6,118,544) 5,309,193 Capital expenditures 171,403 - - 171,403
The following table presents revenues by country based on the location of the use of the product or service: 9/30/99 9/30/98 ------- ------- United States $ 3,138,253 $ 688,861 Norway 667,500 - Other 191,688 - ----------- ----------- $ 3,997,441 $ 688,861 =========== =========== The following table presents long-lived assets by country based on the location of the assets: 9/30/99 9/30/98 ------- ------- United States $ 1,120,324 $ 540,399 United Kingdom 279,904 47,275 ----------- ----------- $ 1,400,228 $ 587,674 =========== =========== 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Mark's results of operations, liquidity, and working capital position have been historically impacted by sporadic sales of its principal products, modular steel cells and IntraScan II PACS software. Mark's modular steel cell is an alternative to traditional construction methods, and penetration into the construction market has met resistance typically associated with an unfamiliar product. Accordingly, Mark has been, and will continue to be, subject to sales fluctuations until its modular cell technology obtains broader acceptance in the construction market. Based on the increase in the number of projects being designed for steel cells, management believes its cell are receiving greater market acceptance as a viable alternative to concrete. Mark continues to promote it steel cells to the architectural, engineering, and construction communities by making sales presentations, participating in trade shows, conducting selected direct mail campaigns and engaging in other marketing activities. Mark has increased its cell marketing spending to more aggressively pursue projects and to persuade the construction industry to increase the use of steel cells. Mark believes this investment has been successful to date and is necessary to achieve profitability. Mark will continue to review its overhead and personnel expenses based on operating results and prospects. Mark is continually bidding on and soliciting joint venture opportunities regarding construction projects. Mark currently has bids pending on approximately $2,000,000 in modular cell projects. Mark also expects to bid on approximately $50,000,000 in additional cell projects, which are specified steel only, and $20,000,000, which include steel as an equal to concrete during the fiscal year ended June 30, 2000. Revenues from any major project would substantially improve Mark's operating results and cash flow, although no assurances can be given that any of these projects will be awarded to Mark. For the three months ended September 30, 1999, Mark was awarded all of the $856,440 in correctional cell projects it bid on. Mark currently has bids pending on $1,153,845 in additional correctional cell projects through September 30, 1999. MarkCare markets the IntraScan II PACS software as part of comprehensive PACS proposals made by MarkCare's strategic partners. MarkCare's principal marketing partner is Data General Corporation, a subsidiary of EMC Corporation. In response to increased interest from its strategic partners and prospective customers, MarkCare accelerated its development and marketing efforts. Sales of the IntraScan II PACS software began to generate material revenues in the fiscal year ended June 30, 1999 and management expects these revenues to increase during fiscal 2000 although no assurances can be given in this regard. If the IntraScan marketing plan is successful, management believes 9 that the revenues will be more constant then those presently generated by modular steel cell sales, and will reduce fluctuations in Mark's consolidated results of operations and financial condition. Results of Operations The substantial majority of Mark's operating revenues for the reported periods were derived from the sale of its modular steel cells. For the quarter ended September 30, 1999, modular steel cells represented 76% of total operating revenue. Management believes that the sale of cells will continue to represent a majority of Mark's operating revenues through June 30, 2000. Revenues from sales for the three months ended September 30, 1999, increased 480.3% to $3,997,441 from $688,861 for the comparable period. This increase is attributable to increases in both modular steel cell and IntraScan II PACS software projects. Cost of sales for the three months ended September 30, 1999, consisting of materials, labor and fixed factory overhead expense increased by 803.6% to $2,166,194 from $347,552 for the comparable period. Cost of sales as a percentage of revenues was 54.1% for the quarter ended September 30, 1999 as compared to 50.5% for the prior comparable period. This change is due to lower margins in its modular steel cell business, which represented a larger percentage of revenue for the quarter ended September 30, 1999 as compared to the prior year. General and administrative expenses for the three months ended September 30, 1999, increased 92.6% to $675,006 from $350,443 for the comparable period. The increase is attributable to the additional staffing in response to sales growth and prospects in both business segments. Marketing costs for the three months ended September 30, 1999, increased 60.2% to $318,163 from $198,593 for the comparable period. This increase in due to the expanded marketing efforts for its two products, modular steel cells and IntraScan II PACS software Development costs for the three months ended September 30, 1999 related to IntraScan II PACS software, increased 73.6% to $275,526 from $158,743 for the comparable period. This increase is due to management's decision to focus working capital on IntraScan II PACS software and related items in response to increased interest from distributors and potential customers. 10 Liquidity and Capital Resources Mark's working capital requirements result principally from staff and management overhead, office expense and marketing efforts. Mark's working capital requirements have historically exceeded its working capital from operations due to sporadic sales. Accordingly, Mark has depended on and, absent continued improvements in operations, will depend on new capital in the form of equity or debt financing to meet its working capital deficiencies, although no assurances can be given that such financing will be available. Mark believes its present available working capital from existing contracts and from anticipated contracts is sufficient to meet its operating requirements through June 30, 2000. If Mark requires additional capital, it will continue to principally look to private sources. Mark did not maintain any inventory at September 30, 1999 or June 30, 1999. Mark currently accounts for all materials as project costs as reflected by the recording of Costs and estimated earnings in Excess of Billings. While Mark presently does not have any material commitments for capital expenditures, management believes that its working capital requirements for inventory and other manufacturing related costs will significantly increase with increases in product orders. For the three months ended September 30, 1999, Mark had cash flow from operating activities of $147,004. For the three months ended September 30, 1999, Mark had negative cash flow from investing activities of $241,767 the majority of which is attributable to the purchase of property and equipment. Mark has no present intention of making any acquisition, which would have a material negative or positive effect on cash flow. For the three months ended September 30, 1999, financing activities used $86,215 in cash, principally to repay short-term loans from officers on September 1, 1999. Cash and cash equivalents decreased from $298,167 at June 30, 1999 to $117,189 at September 30, 1999 due to the repayment of short-term loans from officers. Working capital increased to $1,464,098 at September 30, 1999 from $1,032,237 at June 30, 1999 primarily due to profits recorded by Mark during the period. On July 1, 1999, Mark borrowed $200,000 payable on or before September 1, 1999 at an annual interest rate of 10%. The loan agreement provided that upon failure to repay, the loan would be converted into a Preferred Stock which is convertible into shares of Common Stock at a rate of 70% of the average closing bid price the five trading days immediately preceding the conversion dates. (See Part II - Item 2). 11 Forward Looking Statements Except for the historical information contained herein, the matters discussed in this report are forward looking statements under the federal securities law. These statements are based on current plans and expectations of Mark and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include whether cell and PACS projects are awarded to Mark and the timing of their completion, meeting current and future financial requirements, competition and changes in PACS related technology. Year 2000 Disclosure After an evaluation and analysis of its operations, including its financial and operational computer systems applications, Mark has concluded no material adverse effect on its operations will occur due to Year 2000 software failures. To the extent modifications are required, management believes the related costs will not materially affect Mark's financial position. PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On September 23, 1999, Mark agreed to issue 20,000 shares of Series D Preferred Stock ("D Preferred Stock") to one investor in exchange for a $200,000 convertible promissory note. The terms of the Series D Preferred Stock are as follows: Conversion Rights. Each share of D Preferred Stock is convertible, at the option of the holder, into shares of Common Stock equal to $10.00 per share divided by 70% of the average per share closing bid price of the Common Stock for the five trading days immediately preceding the conversion date(s). Redemption Rights. Mark has the option to redeem all or part of the D Preferred Stock any time after September 30, 2000 at $10.00 per share plus accrued dividends, if such shares are not previously converted into Common Stock. Voting Rights. Except as otherwise required by law, the holders of shares of Preferred Stock have no voting rights. Dividends. Each share of Preferred Stock receives a quarterly dividend with an annual rate of $1.00 per share. The dividends of the Preferred Stock are payable in cash or Common Stock, at the option of Mark. 12 Liquidation Rights. In the event of any liquidation, the holders of the Preferred Stock will share equally in any balance of Mark's assets available for distribution to them up to $10.00 per share plus unpaid dividends, after satisfaction of creditors and the holders of Mark's senior securities, if any. Anti-dilution Provisions. The D Preferred Stock contains anti-dilution provisions in the event of stock dividends, stock splits, reverse stock splits and similar transactions. Restriction of Acquiring in Excess of Five (5%) percent of the Outstanding Common Stock. The D Preferred Stock include a provision prohibiting the holder from acquiring beneficial ownership of over five (5%) percent of Mark's Common Stock through the conversion of D Preferred Stock. 13 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 September 30, 1999 None 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: November 12, 1999 MARK SOLUTIONS INC. By:/s/ Michael Nafash ----------------------- Chief Financial Officer 14 EX-27 2 FDS SEPTEMBER 30,1999
5 3-MOS JUN-30-2000 SEP-30-1999 117,189 0 4,476,594 0 0 6,127,419 3,871,762 2,485,978 8,443,900 4,663,321 286,088 0 48,321 56,300 3,114,870 8,443,900 3,997,441 3,997,441 2,166,194 3,834,542 0 0 36,398 132,954 0 132,954 0 0 0 132,954 .02 .02
-----END PRIVACY-ENHANCED MESSAGE-----