<PAGE>
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.
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
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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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
PART II - OTHER INFORMATION
NO INFORMATION REQUIRED
-12-
<PAGE>
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
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 912,240
<SECURITIES> 0
<RECEIVABLES> 944,802
<ALLOWANCES> 0
<INVENTORY> 336,424
<CURRENT-ASSETS> 2,923,824
<PP&E> 1,980,793
<DEPRECIATION> 1,686,606
<TOTAL-ASSETS> 4,528,010
<CURRENT-LIABILITIES> 2,084,513
<BONDS> 0
<COMMON> 124,957
0
0
<OTHER-SE> 2,300,547
<TOTAL-LIABILITY-AND-EQUITY> 4,528,010
<SALES> 1,967,056
<TOTAL-REVENUES> 1,967,056
<CGS> 2,108,892
<TOTAL-COSTS> 3,111,539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,881
<INCOME-PRETAX> (1,245,547)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,141,044)
<DISCONTINUED> (104,503)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,245,547)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
