-----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, Qqat20LofAGEzvJe3Hl9DyK0zQaeaD7AjCrFtBqITKv7tAbQhYO5ONOM4vXmlt5F 4c7c9Pa2z/XgjNNBlDt1xQ== 0001125282-01-502561.txt : 20020410 0001125282-01-502561.hdr.sgml : 20020410 ACCESSION NUMBER: 0001125282-01-502561 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 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: 1934 Act SEC FILE NUMBER: 333-72099 FILM NUMBER: 1782603 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 b314660_10q.txt QUARTERLY REPORT 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, 2001 -------------------- 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.) 1135 Clifton Avenue Clifton, New Jersey 07013 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (973) 773-8100 --------------------- 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: 9,714,606 shares outstanding as of November 9, 2001. MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended September 30, 2001 Index
Page Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2001 and June 30, 2001.......................................................... 3 Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and 2000........................................ 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2001 and 2000........................................ 5 Notes to Consolidated Financial Statements...................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition............................................................................. 7-8 Part II Other Information Item 1. Legal Proceedings................................................................................. 9 Item 2 Changes in Securities and Use of Proceeds......................................................... 9 Item 3. Defaults Upon Senior Securities................................................................... 9 Item 4. Submission of Matters to a Vote of Security Holders............................................... 9 Item 5. Other Information................................................................................. 9 Item 6. Exhibits and Reports on Form 8-K.................................................................. 9 Signatures.................................................................................................. 10
MARK SOLUTIONS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, 2001 June 30, 2001 --------------- --------------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 815 $ 536 Notes receivable 842 613 Accounts receivable 2,461 2,969 Cost in excess of contract revenue earned 91 427 Inventories 25 25 Deferred tax asset 284 284 Prepaid expenses 43 41 --------------- --------------- Total Current Assets 4,561 4,895 --------------- --------------- PROPERTY AND EQUIPMENTS, NET: 430 485 OTHER ASSETS 44 44 --------------- --------------- Total Assets $ 5,035 $ 5,424 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 550 $ 1,566 Current portion of long-term debt 466 750 Current portion of obligations under capital leases 58 74 Billings in excess of contract revenue earned 671 500 Notes payable to officers/stockholders 97 97 Accrued liabilities 1,023 979 --------------- --------------- Total Current Liabilities 2,865 3,966 --------------- --------------- OTHER LIABILITIES: Long-term portion of obligations under capital leases 3 5 Long-term debt 250 -- Convertible notes -- 1,130 --------------- --------------- Total Other Liabilities 253 1,135 --------------- --------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $.01 par value, 50,000,000 shares authorized, 9,714,606 shares issued and outstanding at September 30, 2001 and June 30, 2001 97 97 Preferred stock, $1.00 par value, $10 liquidation value; 4,705,000 shares authorized: Additional paid-in capital 36,881 36,881 Deficit (35,010) (36,604) Treasury stock, at cost; 17,500 shares (51) (51) --------------- --------------- Total Stockholders' Equity 1,917 323 --------------- --------------- Total Liabilities and Stockholders' Equity $ 5,035 $ 5,424 =============== ===============
3 MARK SOLUTIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands)
Three Months Ended Three Months Ended September 30, 2001 September 30, 2000 ------------------ ------------------ Revenues $ 3,292 $ 199 --------------- --------------- Costs and Expenses: Cost of sales 2,163 584 General and administrative expenses 625 350 --------------- --------------- Total Costs and Expenses 2,788 934 --------------- --------------- Operating Income (Loss) 504 (735) --------------- --------------- Other Income (Expenses): Interest income 8 5 Interest expense (39) (52) --------------- --------------- Total Other Expenses (31) (47) --------------- --------------- Income (Loss) from Continuing Operations before extraordinary gain 473 (782) Discontinued Operations: Loss from operations of discontinued segment -- (107) Extraordinary gain on extinguishment of debt 1,121 -- --------------- --------------- Net Income (Loss) $ 1,594 $ (889) =============== =============== Basic Income (Loss) per Share Income (loss) per share from continuing operations $ 0.05 $ (0.11) Loss from operations of discontinued segment -- (0.01) Extraordinary gain on extinguishment of debt 0.11 -- --------------- --------------- Income (loss) per share $ 0.16 $ (0.12) =============== =============== Fully Diluted Income (Loss) per Share Income (loss) per share from continuing operations $ 0.05 $ (0.11) Loss from operations of discontinued segment -- (0.01) Extraordinary gain on extinguishment of debt 0.11 -- --------------- --------------- Income (loss) per share $ 0.16 $ (0.12) =============== =============== Weighted Average Number of Basic Shares Outstanding 9,697,106 7,297,723 =============== =============== Weighted Average Number of Fully Diluted Shares Outstanding 9,697,106 7,297,723 =============== =============== Dividends Paid $ -- $ -- =============== ===============
4 MARK SOLUTIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Three Months Ended Three Months Ended September 30, 2001 September 30, 2000 ------------------ ------------------ Cash Flows From Operating Activities: Net income (loss) $ 1,594 $ (889) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 72 126 Gain on extinguishment of debt (1,121) -- Deferred tax asset -- (1) Net Assets of discontinued segment -- (757) (Increase) decrease in assets: Accounts receivable 508 484 Billing in excess of contract revenue recognized 336 -- Other current assets (2) (3) Other assets -- (1) Increase (decrease) in liabilities: Accounts payable (1,016) (58) Billings in excess of contract revenue earned 171 -- Accrued liabilities 251 (14) --------------- --------------- Net adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities (801) (224) --------------- --------------- Net Cash Provided by (Used for) Operating Activities 793 (1,113) --------------- --------------- Cash Flows From Investing Activities: Acquisition of property and equipment (17) -- Repayment of note receivable 21 -- Note receivable (250) -- Marketable securities -- 406 --------------- --------------- Net Cash Provided by (Used for) Investing Activities (246) 406 --------------- --------------- Cash Flows From Financing Activities: Repayments of long-term debt -- (402) Proceeds from notes payable for equipment and vehicles -- 140 Repayment of convertible debt (250) -- Repayment of notes payable for equipment and vehicles (18) (69) Repayment of short term borrowings -- (31) Other -- (49) --------------- --------------- Net Cash Provided by (Used for) Financing Activities (268) (411) --------------- --------------- Net increase (decrease) in Cash 279 (1,118) Cash and Cash Equivalents at Beginning of Period 536 1,138 --------------- --------------- Cash and Cash Equivalents at End of Period $ 815 $ 20 =============== ===============
5 MARK SOLUTIONS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 INTERIM FINANCIAL INFORMATION The consolidated balance sheet of the Company as of September 30, 2001, the consolidated statements of operations and cash flows for the three months ended September 30, 2001 and 2000 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 included 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, 2001 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, 2001. Certain reclassifications have been made to the current and prior years 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 earning 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 equivalents. Note 3 CONVERTIBLE NOTES PAYABLE In September 2001, the Company entered into a compromise agreement with the holder of the convertible notes payable in the amount of $1,880,000. Under the terms of the agreement the Company will pay $1,000,000 in full satisfaction of the outstanding indebtedness and accrued interest. The compromise amount is payable in four (4) equal installments of $250,000 due upon the execution of the agreement, November 30, 2001, February 28, 2002 and March 1, 2003. The initial payment was made in September 2001. As a result of this transaction the Company realized a gain of $1,121,000 from the extinguishment of debt. Note 4 INCOME TAXES The company has a federal net operating loss carry forward of approximately $30,000,000 available to offset future taxable income. Accordingly, as of September 30, 2001, the Company was not required to record an income tax provision. Note 5 NOTES RECEIVABLE The Company has recorded as Notes Receivable, $250,000 of Convertible Promissory Notes with interest at 8% due in amounts of $100,000, $100,000 and $50,000 on July 1, 2002, August 6, 2002 and October 1, 2003, respectively. These notes are convertible at the option of the Company, prior to maturity, into 1% of the outstanding common stock of the maker. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues from continuing operations, for the three months ended September 30, 2001, increased to $3,292,000 from $199,000 for the comparable period. This increase is attributable to more modular steel cell projects. Cost of sales, from continuing operations, for the three months ended September 30, 2001, consisting of materials, labor and fixed factory overhead expense increased to $2,163,000 from $584,000 for the comparable period. Cost of sales as a percentage of revenues was 65.7% for the three months ended September 30, 2001 as compared to 293.5% for the prior comparable period. The dollar amount increase is also due to the increase in the number of active projects in the modular steel cell business. General and administrative expenses, from continuing operations for the three months ended September 30, 2001, increased to $625,000 from $350,000 for the comparable period primarily due to increased payroll expenses in 2001. Liquidity and Capital Resources Our working capital requirements result principally from staff and management overhead, office expense and marketing efforts. Our working capital requirements have historically exceeded our working capital from operations due to sporadic sales. With the sale of the MarkCare subsidiary in March of 2001 we have increased our efforts to obtain new modular steel cell contracts with more favorable margins and are concentrating on obtaining these contracts on a more continuous basis. We believe our present available working capital from existing and anticipated contracts and, if required, investments from private sources, will be sufficient to meet our operating requirements through June 30, 2002. For the three months ended September 30, 2001, we had a positive cash flow from operating activities of $793,000, which is primarily attributable to the net operating profit for the period. For the three months ended September 30, 2000 operating activities utilized $1,113,000 of cash primarily as a result of an operating loss. For the three months ended September 30, 2001, we utilized $246,000 of cash for investing activities. For the same period in 2000 we generated cash in the amount of $406,000 as a result of the sale of marketable securities. For the three months ended September 30, 2001 and 2000, financing activities used $268,000 and $411,000 in cash, principally due to the repayment of convertible debt, equipment loans and long-term debt. Cash and cash equivalents increased to $815,000 at September 30, 2001 from $536,000 at June 30, 2001 due primarily our operating profit. Working capital increased to $1,696,000 at September 30, 2001 from $929,000 at June 30, 2001 primarily due the compromise agreement reached with the holder of convertible notes payable and operating profits for the period. 7 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 the Company 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 projects are awarded to us, and the timing of their completion, meeting current and future financial requirements and competition. 8 PART II OTHER INFORMATION Item 1. Legal Proceedings On June 28, 2001, the Company was scheduled to receive payment of the $500,000 promissory note for the sale of the assets of the MarkCare Medical Systems segment from MMSI Acquisition Corp. ("MMSI"). Prior to the due date of the promissory note, we were advised by MMSI that they were evaluating the value of the net assets transferred and that they might be entitled to an offset against the promissory note for differences in the valuation of the net assets. Under a 30-day standstill agreement, dated July 3, 2001, and extended through September 3, 2001, both parties agreed to take no action until supporting documentation is prepared. The Company requested written substantiation of the claims and as of October 22, 2001 had not received such substantiation. As a result, on October 26, 2001 the Company filed a complaint for an accounting, the imposition of a constructive trust and other relief in the Superior Court of New Jersey, Chancery Division, for Essex County. The defendant, MMSI, has 30 days to file its answer. Item 2. Changes In Securities and Use Of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K On October 3, 2001 the Company filed a Report on Form 8-K detailing the Compromise Agreement of Outstanding debt. 9 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 9, 2001 MARK SOLUTIONS INC. By: /s/ Carl Coppola ------------------------- President and Chief Executive Officer 10 -----END PRIVACY-ENHANCED MESSAGE-----