-----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, NcSbRorph56K21nq6M1P6IBVBE0NP0KtqfMviNrap5Gf0h/dlPTRgxTMB3SPiTzl cgqp0mH9YhdHyBbTz7gNEg== 0000889812-96-001723.txt : 19961118 0000889812-96-001723.hdr.sgml : 19961118 ACCESSION NUMBER: 0000889812-96-001723 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96665425 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: September 30, 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: 13,501,159 shares outstanding as of November 13, 1996. MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended September 30, 1996 Index Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 and June 30, 1996 ........ 3 Consolidated Statements of Operations for the Three Months Ended September 30, 1996 and September 30, 1995 ...................... 5 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1996 and September 30, 1995 ................. 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 6. Exhibits and Reports on Form 8-K ............. 11 Signatures 11 -2- Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Assets
September 30, 1996 June 30, 1996 ---------------------- ---------------------- Current Assets: Cash and cash equivalents $1,555,879 $ 263,922 Restricted cash 183,688 181,781 Accounts receivable 862,100 904,596 Inventories 334,872 146,305 Other current assets 161,805 133,325 ---------- ---------- Total Current Assets $3,098,344 $1,629,929 Property and Equipment: Machinery and equipment 1,472,528 1,472,528 Demonstration equipment 436,349 395,419 Office furniture and equipment 340,978 324,006 Leasehold improvements 14,254 14,254 Vehicles 62,283 68,783 Property held under capital lease - - - 40,929 ---------- ---------- Total 2,326,392 2,315,919 Less: Accumulated depreciation and amortization 1,966,697 1,939,415 ---------- ---------- Net Property and Equipment 359,695 376,504 Other Assets: Costs in excess of net assets of businesses acquired, less accumulated amortization of $69,980 as of September 30, 1996 and $17,495 as of June 30, 1996 979,711 1,032,196 Debt issue costs, less accumulated amortization of $6,780 as of September 30, 1996 155,920 - - - Other assets 79,549 45,134 ---------- ---------- Total Other Assets 1,215,180 1,077,330 ---------- ---------- Total Assets $4,673,219 $3,083,763 ========== ==========
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, 1996 June 30, 1996 --------------------------- ---------------------------- Current Liabilities: Accounts payable $ 554,135 $ 499,254 Short term borrowings 107,431 69,414 Current maturities of long-term debt 16,533 11,144 Current portion of obligations under capital leases - - - 5,921 Due to related parties 150,123 45,194 Accrued liabilities 325,503 323,138 ------------ ------------ Total Current Liabilities $ 1,153,725 $ 954,065 Other Liabilities: Long-term debt excluding current maturities 2,246,794 19,989 Long-term portion of obligations under capital leases - - - 30,308 ------------ ------------ Total Other Liabilities 2,246,794 50,297 Commitments and Contingencies - - - - - - Stockholders' Equity: Common stock, $.01 par value, 25,000,000 shares authorized, 13,603,857 shares issued and outstanding at September 30, 1996 and 13,576,315 shares issued and outstanding at June 30, 1996 136,037 135,762 Additional paid-in capital 24,287,495 24,260,299 Retained earnings (deficit) (23,150,832) (22,316,660) ------------ ------------ Total Stockholders' Equity 1,272,700 2,079,401 ------------ ------------ Total Liabilities and Stockholders' Equity $ 4,673,219 $ 3,083,763 ============ ============
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, 1996 September 30, 1995 ------------ ------------ Revenues: Sales $ 309,358 $ 1,967,056 ------------ ------------ Costs and Expenses: Cost of sales 241,552 2,097,099 Selling, general and administrative expenses 886,043 1,014,440 ------------ ------------ Total Costs and Expenses 1,127,595 3,111,539 ------------ ------------ Operating (Loss) (818,237) (1,144,483) ------------ ------------ Other Income (Expense) Interest expense (23,997) (2,881) Interest income 9,682 6,320 Loss on disposal of asset (1,620) - - - ------------ ------------ Net Other Income (Deductions) (15,935) 3,439 ------------ ------------ (Loss) From Continuing Operations (834,172) (1,141,044) ------------ ------------ Discontinued Operations: Loss of cosmetics segment - - - (35,078) Estimated loss on disposal of cosmetics segment - - - (69,425) ------------ ------------ Total Discontinued Operations - - - (104,503) ------------ ------------ Net (Loss) $ (834,172) $ (1,245,547) ============ ============ (Loss) Per Share $ (.06) $ (.10) ============ ============ Weighted Average Number of Shares Outstanding 13,584,604 11,880,417 ============ ============ 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, 1996 September 30, 1995 ------------------------- ------------------------- Cash Flows From Operating Activities: Net (loss) $ (834,172) $(1,245,547) Adjustments to reconcile net (loss) to net cash (used for) operating activities: Depreciation and amortization $ 89,927 $ 148,148 Loss on disposal of asset 1,620 - - - (Increase) decrease in assets: Restricted cash (1,907) 198,261 Accounts receivable 42,496 322,401 Cost and estimated earnings in excess of billings on contract in progress - - - (406,078) Inventory (188,567) (105,134) Other current assets (28,480) (16,193) Other assets (34,415) - - - Increase (decrease) in liabilities: Accounts payable 54,881 83,711 Due to related parties 104,929 (179,327) Accrued liabilities 2,365 16,789 ----------- ----------- Net adjustments to reconcile net (loss) to net cash (used for) operating activities 42,849 62,578 ----------- ----------- Net Cash (Used for) Operating Activities (791,323) (1,182,969) Cash Flows From Investing Activities: Net assets of discontinued segment - - - 104,503 Acquisition of property and equipment (16,973) - - - Proceeds from sale of property and equipment 1,500 - - - ----------- ----------- Net Cash Provided by (Used for) Investing Activities (15,473) 104,503 Cash Flows From Financing Activities: Proceeds from issuance of convertible debt 2,200,000 - - - Increase of short term borrowings 38,017 - - - Repayment of notes payable for equipment (4,035) (7,988) Proceeds from issuance of common stock 48,750 1,881,990 Payment of debt issue costs (162,700) - - - Payment of offering costs and commissions (21,279) - - - ----------- ----------- Net Cash Provided by Financing Activities 2,098,753 1,874,002 ----------- ----------- Net Increase in Cash 1,291,957 795,536 Cash and Cash Equivalents at Beginning of Year 263,922 116,704 ----------- ----------- Cash and Cash Equivalents at End of Period $ 1,555,879 $ 912,240 =========== ===========
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, 1996 and June 30, 1996 and the results of operations and cash flows for the three months ended September 30, 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, 1996 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, 1996 and June 30, 1996 consist of the following: September 30, 1996 June 30, 1996 ----------- ---------- Raw materials $ 267,898 $ 127,477 Finished goods 66,974 18,828 ----------- ---------- $ 334,872 $ 146,305 =========== ========== Note 3 - Convertible Debentures: On August 23, 1996, the Company sold $ 2,200,000 principal amount 7% convertible debentures due August 22, 1998 (the "Debentures"). The Debentures are convertible into shares of common stock at a conversion price which is the lesser of (i) $ 5-3/16 or (ii) 80% of the average closing bid price on the five trading days immediately preceding the date(s) of conversion. Interest on the Debentures is payable in cash or common stock at the Company's option. The outstanding balance of $ 2,200,000 as of September 30, 1996 is included in long-term debt excluding current maturities on the accompanying balance sheet. In connection with the issuance of these debentures, the Company incurred $ 162,700 of debt issue costs. These costs have been capitalized and are amortized over the term of the debentures. Note 4 - Common Stock and Additional Paid-In Capital: During the three months ended September 30, 1996, the Company issued 15,000 shares of common stock as a result of exercise of warrants, receiving gross proceeds of $ 48,750. -7- 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 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 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 office staff. In addition, from January 1, 1996 until September 1996, the Company reduced factory staff and decided not to occupy factory space, but outsourced the manufacturing of its small modular cell projects to third party manufacturers, including related parties, in order to minimize losses and maintain the continuity of manufacturing products until significant orders were obtained. Management believed there was not sufficient work to justify the cost and expense of renting, maintaining and operating such space. As of October 1996 the Company reoccupied new factory facilities. 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 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 July 17, 1996, the Company was awarded a contract from the State of New York which management anticipates will generate revenues of approximately $ 50,000,000 over three years. In addition to the New York State agreement, the Company currently has bids pending on approximately $ 14,400,000 in projects. For the three months ended September 30, 1996, the Company submitted bids on approximately $10,950,000 in projects and continues to be under consideration for approximately $990,000 of these projects. Since October 1, 1996, the Company has submitted bids on approximately $12,800,000 in additional projects and continues to be under consideration for all of these projects. -8- Through its subsidiary, MarkCare Medical Systems, Inc. ("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. Consistent with this marketing approach, the Company has entered into 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. Management anticipates that the sale of the IntraScan II systems will begin to generate revenues in the calendar year ending December 31, 1997, 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 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 the substantial majority of the Company's operating revenues through March 31, 1997. For the three months ended September 30, 1996 sales of the modular steel products represented 79.4% of total revenues. Revenues for the three months ended September 30, 1996 decreased 84.3% to $309,358 from $1,967,056 for the comparable 1995 period. This decrease is attributed to the continued sporadic sales of its modular steel cell products as discussed in "General" and the completion of the Jackson, Michigan project. Cost of sales for the three months ended September 30, 1996 which consists primarily of materials, labor, supplies, and fixed factory overhead expense, decreased 88.5% to $ 241,552 from $ 2,097,099 for the comparable 1995 period due to the decrease in sales. Cost of sales as a percentage of revenues was 78.1% for the three months ended September 30, 1996 as compared to 106.6% for the comparable 1995 period. This decrease is attributable to the relatively low costs of sales of the Company's MarkCare product lines (18.0% as a percentage of revenues) as compared to the modular cell product line (74.4% as a percentage of revenues). The substantial majority of the revenues of the MarkCare line are attributable to software sales and support services which have virtually no costs of sales. The high cost of sales associated with the modular cell products was the result of lower gross profit margins on construction contracts and losses incurred in connection with the outsourcing of projects for the three months ended September 30, 1996. For the three months ended September 30, 1996 there was relatively no fixed factory overhead expenses due to the decision not to maintain a factory for such period as compared to $ 77,866 in such expenses for the comparable 1995 period. Selling, general and administrative expenses for the three months ended September 30, 1996 decreased 12.7% to $ 886,043 from $ 1,014,440 for the comparable 1995. This decrease is attributable to a decrease of 33.3 % in such expenses for the three months ended September 30, 1996 as compared to the comparable 1995 period which resulted from reductions in office staff, trade show expenses, professional fees and the elimination of amortization expenses related to the IntraScan I acquisition, partially offset by the inclusion of $ 165,185 of selling, general and administrative expenses of Simis Medical Imaging, Ltd. which was acquired in May 1996. -9- Liquidity and Capital Resources The Company's working capital requirements result principally from staff and management overhead, office expense and marketing efforts. The Company's working capital requirements have historically exceed 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 although no assurance can be given that such finacing will be available. The Company expects to meet its working capital requirements from these sources through July 30, 1997. 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. The Company's working capital deficits have been met through the private placement of its securities. On August 23, 1996, the Company sold $ 2,200,000 principal amount 7% convertible debentures due August 22, 1998 (the "Debentures"). The Debentures are convertible into shares of Common Stock at a conversion price which is the lesser of (i) $ 5-3/16 or (ii) 80% of the average closing bid price on the five trading days immediately preceding the date(s) of conversion. Interest on the Debentures is payable in cash or Common Stock at the Company's option. The Company presently has an effective registration statement relating to 3,368,880 shares of Common Stock issuable upon the exercise of warrants and options, the majority of which are exercise prices ranging from $ 2.00 to $ 5.00 per share. The Company will initially look to the exercise of presently outstanding warrants and options to meet working capital deficits, 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. The Company's inventory increased to $ 334,872 at September 30, 1996 from $ 146,305 at June 30, 1996 as the Company increased purchases to satisfy its raw materials needs for certain projects beginning production. Cash and cash equivalents increased from $ 263,922 at June 30, 1996 to $ 1,555,879 at September 30, 1996 primarily due to proceeds from the Debenture placement. Working capital increased to $ 1,944,619 from $ 675,864 at June 30, 1996 primarily due to proceeds from the Debenture placement. -10- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Exhibit Description - ----------- ------------------------- 27.1 Financial Data Schedule 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 14, 1996 MARK SOLUTIONS, INC. By: /s/ Carl Coppola ------------------------------------- Carl Coppola- President, Chief Executive Officer and Chief Financial Officer -11- EX-27.1 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-30-1997 SEP-30-1996 1,555,879 0 862,100 0 334,872 3,098,344 2,326,392 1,966,697 4,673,219 1,153,725 2,246,794 0 0 136,037 1,136,663 4,673,219 309,358 319,040 241,552 1,127,595 1,620 0 23,997 (834,172) 0 (834,172) 0 0 0 (834,172) (.06) (.06)
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