-----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, DF7CpexKXkaEkJpQ50tIjnP+P/5g3YiMBA1yQXXrhq27cv/s8t3mqxJVlRdbxENa +LXQldcFfGlLOSCWc0uxnA== 0000889812-95-000665.txt : 19951119 0000889812-95-000665.hdr.sgml : 19951119 ACCESSION NUMBER: 0000889812-95-000665 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 112684481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17118 FILM NUMBER: 95592293 BUSINESS ADDRESS: STREET 1: 87 RTE 17 N CITY: MAYWOOD STATE: NJ ZIP: 07607 BUSINESS PHONE: 2013688118 MAIL ADDRESS: STREET 1: 87 ROUTE 17 NORTH CITY: MAYWOOD STATE: NJ ZIP: 07607 FORMER COMPANY: FORMER CONFORMED NAME: SHOWCASE COSMETICS INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 ___ 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 of (I.R.S. Employer incorporation) Identification No.) 87 Route 17 North, Maywood, New Jersey 07607 (Address of principal executive offices) (Zip Code) (201) 368-8118 (Registrant's telephone number, including area code) ------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the 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 twelve 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. (1) X Yes (2) ____ 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, $0.01 par value: 12,721,586 shares outstanding as of November 10,1995. Mark Solutions, Inc. Form 10-Q Quarter Ended September 30, 1995 Index Part I Financial Information Page No. Item 1 Financial Statements Consolidated Balance Sheets as of September 30,1995 and June 30,1995............ 3 Consolidated Statements of Operations for the Three Months ended September 30, 1995 and September 30, 1994.................... 5 Consolidated Statements of Cash Flows for the Three Ended September 30, 1995 and September 30,1994............................ 6 Notes to Financial Statements................ 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 9 Part II Other Information 12 Signature 13 Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Assets September 30, 1995 June 30, 1995 --------------------- --------------------- Current Assets: Cash and cash equivalents $ 912,240 $ 116,704 Restricted cash 160,989 359,250 Accounts receivable 944,802 1,267,203 Costs and estimated earnings in excess of billings on contract in progress 472,563 66,485 Inventories 336,424 231,290 Other current assets 96,806 80,613 ---------- ---------- Total Current Assets $2,923,824 $2,121,545 Property and Equipment: Machinery and equipment 1,263,563 1,263,563 Demonstration equipment 337,319 337,319 Office furniture and equipment 188,874 188,873 Leasehold improvements 95,830 95,830 Vehicles 38,882 38,882 Property held under capital lease 56,325 56,325 ---------- ---------- Total 1,980,793 1,980,792 Less: Accumulated depreciation and amortization 1,686,606 1,662,301 ---------- ---------- Net Property and Equipment 294,187 318,491 Other Assets: Costs in excess of net assets of businesses acquired, less accumulated amortization of $1,419,810 and $1,295,966 at September 30, 1995 and June 30, 1995, respectively 1,172,019 1,295,864 Net assets of discontinued segment 100,000 204,503 Other assets 37,980 37,980 ---------- ---------- Total Other Assets 1,309,999 1,538,347 ---------- ---------- Total Assets $4,528,010 $3,978,383 ========== ========== The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. -3- Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Liabilities and Stockholders' Equity September 30, 1995 June 30, 1995 ----------------------- ----------------------- Current Liabilities: Accounts payable $ 1,755,932 $ 1,672,222 Current maturities of long-term debt 4,039 3,932 Current portion of obligations under capital leases 13,597 20,020 Due to related parties 27,596 206,923 Accrued liabilities 283,349 266,560 ------------ ------------ Total Current Liabilities $2,084,513 $2,169,657 Other Liabilities: Long-term debt excluding current maturities 3,332 4,382 Long-term portion of obligations under capital leases 14,661 15,283 ------------ ------------ Total Other Liabilities 17,993 19,665 Commitments and Contingencies - - - - - - Stockholders' Equity: Common stock, $.01 par value, 25,000,000 shares authorized, 12,495,737 and 11,734,801 shares issued and outstanding at September 30, 1995 and June 30, 1995, respectively 124,957 117,347 Additional paid-in capital 20,647,692 18,773,312 Retained earnings (deficit) (18,347,145) (17,101,598) ------------ ------------ Total Stockholders' Equity 2,425,504 1,789,061 ---------- ---------- Total Liabilities and Stockholders' Equity $4,528,010 $3,978,383 ========== ========== The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. -4- Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended Three Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------ Revenues: Sales $ 1,967,056 $ 712,434 ----------- ---------- Costs and Expenses: Cost of sales 2,108,892 592,397 Selling, general and administrative expenses 1,002,647 888,578 Research and development - - - 3,938 ----------- ---------- Total Costs and Expenses 3,111,539 1,484,913 ----------- ---------- Operating (Loss) (1,144,483) (772,479) ----------- ---------- Other Income (Expenses): Interest expense (2,881) (655) Interest income 6,320 686 Miscellaneous income - - - 3,463 ----------- ---------- Net Other Income 3,439 3,494 ----------- ---------- (Loss) From Continuing Operations (1,141,044) (768,985) Discontinued Operations: Loss of cosmetics segment (35,078) (34,120) Estimated loss on disposal of cosmetics segment (69,425) - - - ----------- ---------- Net (Loss) $(1,245,547) $ (803,105) =========== ========== (Loss) Per Share $ (.10) $ (.08) =========== ========== Weighted Average Number of Shares Outstanding 11,880,417 9,875,726 =========== ========== Dividends Paid $ -0- $ -0- =========== ========== The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. -5- Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Cash Flows Three Months Ended Three Months Ended September 30, 1995 September 30, 1994 ---------------------- ------------------- Cash Flows From Operating Activities: Net (loss) $(1,245,547) $(803,105) Adjustments to reconcile net (loss) to net cash (used for) operating activities: Depreciation and amortization $ 148,148 $ 160,427 (Increase) decrease in assets: Restricted cash 198,261 - - - Accounts receivable 322,401 (159,352) Cost and estimated earnings in excess of billings on contract in progress (406,078) - - - Inventory (105,134) 347,896 Other current assets (16,193) 16,065 Other assets - - - (3,048) Increase (decrease) in liabilities: Accounts payable and customer deposits 83,711 53,768 Due to related parties (179,327) 19,748 Accrued liabilities 16,789 56,881 ---------- --------- Net adjustments to reconcile net (loss) to net cash (used for) operating activities 62,578 492,385 ----------- --------- Net Cash (Used for) Operating Activities (1,182,969) (310,720) Cash Flows From Investing Activities: Net assets of discontinued segment 104,503 31,271 Cash Flows From Financing Activities: Repayment of notes payable for equipment (7,988) (2,735) Proceeds from issuance of common stock 1,881,990 278,350 Payment of offering costs and commissions - - - (27,510) ---------- --------- Net Cash Provided by Financing Activities 1,874,002 248,105 ----------- --------- Net Increase (Decrease) in Cash 795,536 (31,344) Cash and Cash Equivalents at Beginning of Year 116,704 39,757 ----------- --------- Cash and Cash Equivalents at End of Period $ 912,240 $ 8,413 =========== ========= The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. -6- Mark Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 - Financial Statement Presentation: In the opinion of management, the accompanying consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of Mark Solutions, Inc. and Subsidiaries (the Company) as of September 30, 1995 and June 30, 1995 and the results of operations and cash flows for the three months ended September 30, 1995 and 1994. The accounting policies followed by the Company are set forth in the Notes to Financial Statements included in the company's Annual Reports on Form 10-K for the fiscal year ended June 30, 1995, respectively, and such notes are incorporated herein by reference. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to the current and prior year amounts to conform to the current period presentation. Note 2 - Inventories: Inventories at September 30, 1995 and June 30, 1995 consist of the following: September 30, 1995 June 30, 1995 ------------------ ------------- Raw materials $208,894 $112,060 Finished goods 127,530 119,230 -------- -------- $336,424 $231,290 ======== ======== Note 3 - Common Stock and Additional Paid-In Capital: During the three months ended September 30, 1995, the Company issued 760,936 shares of common stock as a result of exercise of warrants, receiving gross proceeds of $1,881,990. Note 4 - Discontinued Operations: Subsequent to September 30, 1995, the Company disposed of its cosmetics segment, (the Bar-Lor Subsidiaries), whose principal services were the packaging and distribution of cosmetics products. The assets of the segment to be sold consist primarily of cash, accounts receivable, inventories, and machinery and equipment. The estimated loss on the disposal of the discontinued segment of $69,425 represents the estimated loss of the disposal of the assets of the segment. Operating results of the segment for the three months ended September 30, 1995 are shown separately in the accompanying Statement of Operations. The Statement of Operations for September 30, 1994 has been restated and the operating results of the segment are shown separately. -7- Note 4 - Discontinued Operations (Continued): Revenues of the segment for the three months ended September 30, 1995 and 1994 were $166,989 and $335,611, respectively. These amounts are not included in the accompanying Statements of Operations. Assets and liabilities of the segment to be disposed of consisted of the following: September 30, 1995 June 30, 1995 ------------------ -------------- Cash $ 16,513 $ 50,580 Accounts receivable, net 6,291 (10,485) Inventories 346,104 363,093 Other current assets 11,434 5,251 Machinery and equipment, net 29,335 33,499 Other 17,880 17,880 -------- --------- Total Assets 427,557 459,818 -------- --------- Accounts payable 234,145 239,199 Accrued expenses 8,987 16,116 Notes payable 15,000 - - - -------- --------- Total Liabilities 258,132 255,315 -------- --------- Net Assets of Discontinued Segment 169,425 $ 204,503 Less: Estimated loss on ========= disposition of segment 69,425 -------- Net Proceeds from Disposition of Segment $100,000 ======== Assets and liabilities are shown at their expected net realizable values. Net assets to be disposed of, at their expected net realizable values, have been separately classified in the accompanying balance sheet at September 30, 1995. The June 30, 1995 balance sheet has been restated to conform with the current year's presentation. Note 5 - Subsequent Events: Subsequent to September 30, 1995, the Company issued 219,850 shares of its common stock through the exercise of warrants, receiving net proceeds of $708,900. -8- Management's Discussion and Analysis of Financial Condition and Results of Operations General Mark Solutions, Inc. ("Mark") results of operations, liquidity, and working capital position have been acutely affected by sporadic sales of its principal products, modular steel cells and infectious disease isolation units. This sales pattern is primarily the result of the construction industry's unfamiliarity with Mark's products and the emergence of competition. Mark's products represent a radical alternative to traditional construction methods, and penetration into the construction market has met resistance typically associated with a new, unfamiliar product. Accordingly, Mark has been and will continue to be subject to significant sales fluctuations until its modular cell technology receives greater acceptance in the construction market, which management believes will occur as new projects are awarded and completed by Mark. In order to achieve greater acceptance in the architectural, engineering and construction communities, Mark has established a nationwide network of independent sales representatives who conduct sales presentations and participate in trade shows and other promotional activities. Mark will rely on its existing marketing efforts and seek joint ventures in its attempt to obtain projects and improve its results of operations in efforts to return to profitability. To the extent practicable, Mark will reduce overhead and personnel expenses and review its options regarding the sale or suspension of some of its products lines if it is unable to improve its operating results or prospects by December 31, 1995. Mark is continually bidding on and soliciting joint venture opportunities regarding construction projects. The anticipated revenues from any of these projects 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 quarter ended September 30, 1995, Mark has submitted bids on approximately $17,903,000 in projects of which $93,000 were awarded to Mark. Mark continues to be under consideration for $12,305,000 of the remaining projects. Mark anticipates that the sale of the IntraScan systems, primarily IntraScan II, will begin to generate revenues in the fiscal year ending June 30, 1996, although no assurances can be given in this regard. If the IntraScan marketing plan is successful, management believes that the revenue stream from resulting sales will be more constant and will significantly reduce fluctuations in Mark's results of operations and financial condition. As previously announced on October 13, 1995 Mark disposed of its cosmetics business for $100,000 in cash, pursuant to the sale of all of the stock of the Bar-Lor Cosmetics subsidiaries. Accordingly the statement of operations contained in this report segregate the results of Bar-Lor Cosmetics and the following discussion addresses only the remaining business operations. -9- Results of Operations Substantially all of Mark's operating revenues for the reported periods were derived from the sale of its modular cells for correctional institutions. Management believes that the sale of these modular steel products will continue to represent substantially all of Mark's operating revenues through June, 1996. Revenues for the three months ended September 30, 1995 increased 276% to $1,967,056 from $712,434 for the comparable 1994 period. This increase is attributed to the amount of work completed under modular steel product contracts during the period, of which the Jackson, Michigan project represented approximately $1,796,000 in revenues. Cost of sales for the three months ended September 30, 1995 which consists primarily of materials, labor, supplies and fixed overhead expense, increased 356% to $2,108,892 from $592,397 for the comparable 1994 period due to the increase in sales. Cost of sales as a percentage of revenues increased for the quarter ended September 30, 1995 as compared to the comparable 1994 period as a result of lower profit margins on construction contracts and a significant increase in factory overhead allocated to cost of sales. Fixed overhead expenses for the three months ended September 30, 1995 such as rent, real estate taxes, depreciation and repairs and maintenance decreased 11.8% to $77,866 from $88,242 for the comparable 1994 period. This decrease is primarily attributed to the decrease in rent and depreciation of machinery and equipment between the two periods. Selling, general and administrative expenses for the three months ended September 30, 1995 increased 12.8% to $1,002,647 from $888,578 for the comparable 1994 period. This increase is primarily due to the hiring of additional office personnel, and an increase in consulting fees and traveling expenses. Liquidity and Capital Resources Mark's working capital requirements result principally from office expense, staff and management overhead, marketing efforts, and adaptation of its modular steel products to other uses. Mark's working capital requirements have historically exceeded its working capital from operations due to the sporadic sales of its products. Accordingly, Mark has been dependent and, absent significant improvements in operations will continue to be dependent on the infusion of new capital in the form of equity or debt financing. Mark expects to meet its working capital requirements from these sources through the fiscal year end 1996. Mark is attempting, but to date has been unable, to secure bank financing and, to the extent it requires additional capital, will continue to principally look to private sources. Mark presently has an effective registration statement relating to approximately 3,200,000 shares of Common Stock issuable upon the exercise of warrants and options, the majority of which are at exercise prices ranging from $1.00 to $5.00 per share. Mark is not actively seeking additional private sales but will initially look to the exercise of the warrants covered by the registration statement for working capital. -10- For the quarter ended September 30, 1995 Mark sold 760,936 shares of Common Stock through the exercise of a portion of the foregoing warrants, resulting in gross proceeds of $1,881,990. Since September 30, 1995, Mark has sold an additional 219,850 shares of Common Stock through the exercise of these warrants resulting in gross proceeds of $708,900. Cash and cash equivalents increased from $116,704 at June 30, 1995 to $912,240 at September 30, 1995 primarily due to the proceeds of the exercise of warrants offset by operating activities. Working capital increased from ($48,112) at June 30, 1995 to $839,311 at September 30, 1995 due to the proceeds from the exercise of warrants. -11- PART II - OTHER INFORMATION NO INFORMATION REQUIRED -12- 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. November 13, 1995 Mark Solutions, Inc. (Registrant) /s/ Carl Coppola (Signature) CARL COPPOLA, President and Chief Executive Officer /s/ Joseph Ferraro (Signature) JOSEPH L. FERRARO, VP Finance and Chief Financial Officer -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the consolidated financial statements and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-1996 SEP-30-1995 912,240 0 944,802 0 336,424 2,923,824 1,980,793 1,686,606 4,528,010 2,084,513 0 124,957 0 0 2,300,547 4,528,010 1,967,056 1,967,056 2,108,892 3,111,539 0 0 2,881 (1,245,547) 0 (1,141,044) (104,503) 0 0 (1,245,547) (.10) (.10)
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