-----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, Mml8eZvUFg/+knIW9VSmfS70kKA1Hiu4FxMDNbxDmgXgJ4HofmyDm6IWyd4+bYg1 lnmiqFx50JCHKiXiCGKeFg== 0000889812-96-000492.txt : 19960517 0000889812-96-000492.hdr.sgml : 19960517 ACCESSION NUMBER: 0000889812-96-000492 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 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: 96565862 BUSINESS ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 BUSINESS PHONE: 2013688118 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 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: March 31, 1996 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: (201) 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: 13,372,463 shares outstanding as of May 13, 1996. MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended March 31, 1996 Index Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1996 and June 30,1995 ..................... 3 Consolidated Statements of Operations for the Nine Months and Three Months Ended March 31, 1996 and March 31, 1995 .................................. 5 Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1996 and March 31, 1995 .................................. 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 1. Legal Proceedings ..................................... 12 Item 5. Other Information ..................................... 12 Item 6. Exhibits and Reports on Form 8-K ...................... 12 Signatures 13 2 Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Assets
March 31, 1996 June 30, 1995 ------------------------- ------------------------- Current Assets: Cash and cash equivalents $ 15,100 $ 116,704 Restricted cash 300,981 359,250 Accounts receivable 923,187 1,267,203 Costs and estimated earnings in excess of billings on contract in progress 162,199 66,485 Inventories 285,014 231,290 Other current assets 189,838 80,613 ---------- ---------- Total Current Assets $ 1,876,319 $ 2,121,545 Property and Equipment: Machinery and equipment 1,249,137 1,263,563 Demonstration equipment 395,418 337,319 Office furniture and equipment 186,528 188,873 Leasehold improvements 14,254 95,830 Vehicles 68,784 38,882 Property held under capital lease 40,929 56,325 ---------- ---------- Total 1,955,050 1,980,792 Less: Accumulated depreciation and amortization 1,698,163 1,662,301 ---------- ---------- Net Property and Equipment 256,887 318,491 Other Assets: Costs in excess of net assets of businesses acquired, less accumulated amortization of $1,684,741 and $1,295,965 at March 31, 1996 and June 30, 1995, respectively 907,088 1,295,864 Net assets of discontinued segment -- 204,503 Other assets 105,134 37,980 ---------- ---------- Total Other Assets 1,012,222 1,538,347 --------- --------- Total Assets $ 3,145,428 $ 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
March 31, 1996 June 30, 1995 -------------------------- ------------------------- Current Liabilities: Accounts payable $ 802,421 $1,672,222 Current maturities of long-term debt 10,868 3,932 Current portion of obligations under capital lease 5,584 20,020 Due to related parties 44,887 206,923 Accrued liabilities 215,628 266,560 ---------- ---------- Total Current Liabilities $ 1,079,388 $ 2,169,657 Other Liabilities: Long-term debt excluding current maturities 22,882 4,382 Long-term portion of obligations under capital lease 31,920 15,283 ---------- ---------- Total Other Liabilities 54,802 19,665 Commitments and Contingencies -- -- Stockholders' Equity: Common stock, $.01 par value, 25,000,000 shares authorized, 13,085,465 and 11,734,801 shares issued and outstanding at March 31, 1996 and June 30, 1995, respectively 130,853 117,347 Additional paid-in capital 22,393,191 18,773,312 Retained earnings (deficit) (20,512,806) (17,101,598) ----------- ----------- Total Stockholders' Equity 2,011,238 1,789,061 --------- --------- Total Liabilities and Stockholders' Equity $ 3,145,428 $ 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
Nine Months Ended Three Months Ended March 31 March 31 ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Sales $ 3,206,371 $ 2,749,847 $ 655,879 $ 1,320,028 ------------ ------------ ------------ ------------ Cost and Expenses: Cost of sales 3,656,949 2,462,786 749,210 1,273,634 Selling, general and administrative 2,807,949 2,761,765 808,724 989,858 Research and development -- 3,938 -- -- ------------ ------------ ------------ ------------ Total Costs and Expenses 6,464,898 5,228,489 1,557,934 2,263,492 ------------ ------------ ------------ ------------ Operating (Loss) (3,258,527) (2,478,642) (902,055) (943,464) ------------ ------------ ------------ ------------ Other Income (Expense): Interest earned 20,167 10,781 8,123 7,493 Interest expense (8,344) (8,332) (3,365) (7,140) Loss on abandonment of leasehold improvements (72,117) -- (72,117) -- Gain on sale of equipment 12,116 3,537 12,116 -- ------------ ------------ ------------ ------------ Net Other Income (Expense) (48,178) 5,986 (55,243) 353 ------------ ------------ ------------ ------------ (Loss) From Continuing Operations (3,306,705) (2,472,656) (957,298) (943,111) ------------ ------------ ------------ ------------ Discontinued Operations: Loss of Bar-Lor Subsidiaries (35,078) -- -- -- Loss on disposal of Bar-Lor Subsidiaries (69,425) (111,841) -- (23,354) ------------ ------------ ------------ ------------ Loss From Discontinued Operations (104,503) (111,841) -- (23,354) ------------ ------------ ------------ ------------ Net (Loss) $ (3,411,208) $ (2,584,497) $ (957,298) $ (966,465) ============ ============ ============ ============ (Loss) Per Share $ (.27) $ (.25) $ (.07) $ (.09) ============ ============ ============ ============ Weighted Average Shares Outstanding 12,500,250 10,418,715 12,923,356 11,111,989 ============ ============ ============ ============ Dividends Paid $ -0- $ -0- $ -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
Nine Months Ended Nine Months Ended March 31, 1996 March 31, 1995 ---------------------------- ---------------------------- Cash Flows From Operating Activities: Net (loss) $ (3,411,208) $ (2,584,497) Adjustments to reconcile net (loss) to net cash (used for) operating activities: Net asset of discontinued segment $ -- $ 111,841 Depreciation and amortization 466,350 481,217 Loss from discontinued operations 104,503 -- Loss on disposition of assets 60,001 -- (Increase) decrease in assets: Restricted cash 58,269 -- Accounts receivable 344,016 (723,501) Billings in excess of contract revenue recognized (95,714) (108,507) Inventories (53,724) 343,347 Other current assets (109,226) (74,145) Other (67,154) 1,718 Increase (decrease) in liabilities: Accounts payable (869,801) 291,018 Due to related parties (162,036) (33,239) Accrued liabilities (50,934) 174,170 ------------ ------------ Net adjustments to reconcile net (loss) to net cash (used for) operating activities (375,450) 463,919 ------------ ------------ Net Cash (Used for) Operating Activities (3,786,658) (2,120,578) Cash Flows From Investing Activities: Additions to property and equipment (35,437) -- Proceeds from disposition of segment 100,000 -- Proceeds on sale of assets 12,500 -- ------------ ------------ Net Cash Provided by Investing Activities 77,063 -- Cash Flows From Financing Activities: Repayment of notes payable for equipment (25,394) (7,146) Advances from stockholders -- (400,000) Repayment of advances from stockholders -- 400,000 Payment of offering costs and commissions (6,092) (321,683) Proceeds from issuance of common stock 3,639,477 3,272,524 ------------ ------------ Net Cash Provided by Financing Activities 3,607,991 2,943,695 ------------ ------------ Net Increase (Decrease) in Cash (101,604) 823,117 Cash at Beginning of Year 116,704 39,757 ------------ ------------ Cash at End of Period $ 15,100 $ 862,874 ============ ============
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 March 31, 1996 and December 31, 1995 and the results of operations and cash flows for the nine months ended March 31, 1996 and 1995. The accounting policies followed by the Company are set forth in the Notes to Financial Statements included in the Company's Annual Report 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 prior year amounts to conform to the current period presentation. Note 2 - Inventories: Inventories at March 31, 1996 and June 30, 1995 consist of the following: March 31, 1996 June 30, 1995 -------------- ------------- Raw materials $157,484 $112,060 Finished goods 127,530 119,230 -------- -------- $285,014 $231,290 ======== ======== Note 3 - Common Stock and Additional Paid-In Capital: During the nine months ended March 31, 1996, the Company issued 1,350,664 shares of common stock as a result of exercise of warrants, receiving gross proceeds of $3,639,477. Note 4 - Discontinued Operations: On October 13, 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. Operating results of the segment for the period July 1, 1995 through October 13, 1995 are shown separately in the accompanying Statement of Operations. The Statement of Operations for March 31, 1995 has been restated and the operating results of the segment are shown separately. Revenues of the segment for the period July 1, 1995 through October 13, 1995 and the nine months ended March 31, 1995 were $166,989 and $918,508, respectively. These amounts are not included in the accompanying Statements of Operations. 7 Note 4 - Discontinued Operations (Continued): Assets and liabilities of the segment disposed of consisted of the following: October 13, 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: Loss on disposition of segment 69,425 ========= -------- Net Proceeds from Disposition of Segment $100,000 ======== Note 5 - Subsequent Events: Subsequent to March 31, 1996, the Company issued 286,000 shares of its common stock through the exercise of warrants, receiving net proceeds of $624,100. 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 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 the Company's products and the emergence of competition. The Company's products represent an alternative to traditional construction methods, and penetration into the construction market has met resistance typically associated with a new, unfamiliar product. Accordingly, the Company 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 the Company. In an attempt to achieve greater acceptance in the architectural, engineering and construction communities, the Company's internal sales and engineering personnel and its nationwide 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 return to profitability. Since January 1, 1996, the Company has reduced factory staff, office staff and factory overhead, including the decision not to occupy manufacturing facilities until sufficient work is obtained to justify the cost and expense of renting, equipping, maintaining and operating such space. In the interim, management has and will continue to outsource the manufacturing of its small modular cell projects to third party manufacturers, including related parties. Management has identified several available manufacturing facilities and believes that the Company will be able to lease adequate space on economically viable terms when and if sales warrant. To the extent practicable, the Company will further 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. The Company is continually bidding on and soliciting joint venture opportunities regarding construction projects. The anticipated revenues from any of these projects 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. On April 10, 1996, the Company announced that it was the low bidder on several modular cell projects, including a project with the State of New York. Management anticipates that, if formally awarded, these projects would generate revenues of approximately $ 50,000,000 over three years, primarily from the New York State project. In addition to the New York State project, for the nine months ended March 31, 1996, the Company submitted bids on approximately $ 33,800,000 in projects of which $ 1,837,346 were awarded to the Company. The Company continues to be under consideration for approximately $ 5,521,000 of the remaining projects. The Company continues to market its IntraScan medical image systems and is analyzing the benefits of alliances with other companies with related products. Consistent with this marketing approach, the Company has entered into a software supplier agreement with Data General Corporation, a large computer hardware and integration provider, pursuant to which Data General may 9 include the IntraScan II PACS software program in proposals to healthcare institutions. On April 29, 1996, the Company announced that it had entered into definitive agreements to purchase Simis Medical Imaging, Ltd., the developer of the IntraScan II software programs as described in Part II- Item 5 of this report. Management anticipates that the sale of the IntraScan system products, primarily IntraScan II, will begin to generate revenues in the calendar year ending December 31, 1996, 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. On October 13, 1995, the Company disposed of its cosmetics business, Bar-Lor Cosmetics. Accordingly, the statement of operations contained in this report segregate the results of Bar-Lor Cosmetics and the following discussion addresses only the continuing operations. Results of Operations Substantially all of the Company'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 the Company's operating revenues through September 30, 1996. Revenues for the nine months ended March 31, 1996 increased 16.6% to $ 3,206,371 from $ 2,749,847 for the comparable 1995 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 $ 2,195,000 in revenues. Cost of sales for the nine months ended March 31, 1996 which consists primarily of materials, labor, supplies and fixed factory overhead expense, increased 48.5% to $ 3,656,949 from $ 2,462,786 for the comparable 1995 period due to the increase in sales. Cost of sales as a percentage of revenues was 114.0% for the period ended March 31, 1996 as compared to 89.6% for the comparable 1995 period. This increase was the result of lower gross profit margins on construction contracts and costs associated with maintaining factory operations absent anticipated sales levels. Fixed factory overhead expenses for the nine months ended March 31, 1996 such as rent, real estate taxes, depreciation and repairs and maintenance decreased 16.0% to $ 154,090 from $ 183,508 for the comparable 1995 period. This decrease is primarily attributed to the elimination of factory rent and related taxes since January 1, 1996 and the suspension of depreciation on idle factory equipment since January 1, 1996. Selling, general and administrative expenses remained relatively constant for the nine months ended March 31, 1996 as compared to the comparable 1995 period increasing 1.7% to $ 2,807,949 from $ 2,761,765. The Company incurred increased promotional and travel expenses during the six month period ended December 31, 1995, which were offset by the reduction of office staff since January 1, 1996. 10 Liquidity and Capital Resources The Company's working capital requirements result principally from office expense, staff and management overhead and marketing efforts. The Company's working capital requirements have historically exceeded its working capital from operations due to the sporadic sales of its products. Accordingly, the Company 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. The Company expects to meet its working capital requirements from these sources through the fiscal year end 1996. The Company has been unable to secure bank financing and, to the extent it requires additional capital, will continue to principally look to private sources. Warrants and options to purchase approximately 4,400,000 of the Company's Common Stock are presently outstanding, the majority of which are at exercise prices ranging from $ 2.00 to $ 5.00 per share. In order to raise additional working capital, the Company intends to file a post effective amendment to its registration statement covering the sale of these shares of Common Stock to encourage the exercise of the warrants and options. The Company will initially look to the exercise of presently outstanding warrants and options for working capital, however, if sufficient securities are not exercised, the Company will be required to 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. For the nine months ended March 31, 1996 the Company sold 1,350,664 shares of Common Stock pursuant to the exercise of warrants, resulting in gross proceeds of $ 3,639,477. Since March 31, 1996, the Company has sold an additional 286,000 shares of Common Stock through the exercise of warrants resulting in gross proceeds of $ 624,100. Cash and cash equivalents decreased from $ 116,704 at June 30, 1995 to $ 15,100 at March 31, 1996 primarily due to losses associated with operating activities. Working capital increased from ($48,112) at June 30, 1995 to $ 796,931 at March 31, 1996 due primarily to the application of the proceeds from the exercise of warrants to reduce accounts payable. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings. In January 1996, the Company settled its litigation with Maris Equipment Company, Inc. ("Maris") (Mark Solutions, Inc. v. Maris Equipment Company, Inc. Docket No. BER-L-8193-94). Pursuant to the settlement, the Company received $ 25,000 from Maris's bonding company and the foregoing action was dismissed with prejudice by both parties. Item 5. Other Information. On April 26, 1996, the Company announced that it entered into a nonexclusive Master Supplier Agreement with Data General Corporation ("DG") pursuant to which the Company has agreed to provide IntraScan II software and related services to DG to be incorporated into PACS sales proposals and bids to healthcare facilities. The products and services to be provided by the Company will be negotiated on a project by project basis with DG and no assurances can be given that significant sales will be achieved. On April 29, 1996, the Company announced that it entered into definitive agreements to acquire 100% of Simis Medical Imaging, Ltd., a United Kingdom corporation ("SMI") for $ 1,250,000 payable in the Company's Common Stock. The consummation of the agreements are subject to the satisfaction of certain conditions, including the completion of due diligence on the financial condition and operations of SMI. The Company anticipates that, subject to satisfactory results of its due diligence, the acquisition will be consummated by May 31, 1996. SMI is the developer of the IntraScan II software which the Company has been marketing under an exclusive dealer agreement covering North and South America. For the fiscal year ended December 31, 1995, SMI had revenues of U.K. L 365,253 and losses of U.K. L 124,674. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Exhibit Description ----------- ------------------- 27.1 Financial Data Schedule 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. Date: May 14, 1996 MARK SOLUTIONS, INC. By: /s/ Carl Coppola ------------------------ Carl Coppola, President, Chief Executive Officer 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. 9-MOS JUN-30-1996 MAR-31-1996 15,100 0 923,187 0 285,014 1,876,319 1,955,050 1,698,163 3,145,428 1,079,388 0 0 0 130,853 1,880,385 3,145,428 3,206,371 3,238,654 3,656,949 6,464,898 72,117 0 8,344 (3,306,705) 0 (3,306,705) (104,503) 0 0 (3,411,208) (.27) (.27)
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