<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-K/A-1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
-------------- --------------
Commission File No. 0-17118
Mark Solutions, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 112864481
------------------ -------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
Parkway Technical Center
1515 Broad Street, Bloomfield, New Jersey 07607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 893-0500
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .01 par value
Class A Common Stock Purchase Warrants
- --------------------------------------------------------------------------------
(Title of class)
<PAGE>
[Cover Page 1 of 2 Pages]
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 12 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. Yes X No.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of the 10,645,297 shares of Common Stock
held by non-affiliates of the Registrant on September 24, 1996 was $ 61,210,457
based on the closing sales price of $ 5-3/4 on September 24, 1996.
The number of shares of Common Stock outstanding as of September 24,
1996 was 13,472,463.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
[Cover Page 2 of 2 Pages]
<PAGE>
Mark Solutions, Inc. ("Mark") hereby amends its Form 10-K for the
year ended June 30, 1996 filed on September 27, 1997 as follows:
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
The following financial statements are amended to read in their entirety as
included in this Form 10-K/A-1
(a)(1) Consolidated Financial Statements
- Report of Independent Accountants F-1
- Consolidated Balance Sheets for
June 30, 1996 and 1995 F-2
- Consolidated Statements of Operations
for fiscal years ended June 30, 1996,
1995 and 1994 F-4
- Consolidated Statements of Stockholders
Equity for fiscal years ended June 30,
1996, 1995 and 1994 F-5
- Consolidated Statement of Cash Flows
for fiscal years ended June 30,
1996, 1995 and 1994 F-6
- Notes to Consolidated Financial Statements F-7
The Exhibit Index is amended to read in their entirety as
included in this Form 10-K/A-1
(a)(3) Exhibits.
Sequential
Exhibit Page No.if
Number Description applicable
- ------- ----------- ----------
2. a) -- Agreement and Plan of Reorganization
dated December 23, 1992, as amended,
between Mark, Showcase Cosmetics,
Inc. and Mark Acquisition Corp.
(Incorporated by reference to Exhibit
I to Mark's Proxy Statement/Prospectus,
under its former name "Showcase
Cosmetics, Inc., dated October 8, 1993
to Form S-4 Registration Statement
[File No. 33-61176], referred to
herein as "Mark's Form S-4").
4
<PAGE>
Sequential
Exhibit Page No.if
Number Description applicable
- ------- ----------- ----------
b) -- Stock Purchase Agreement between Mark
and Ian Baverstock, Jonathan Newth,
David Payne and Joanna Tubbs dated
April 5, 1996 regarding the acquisition
of Simis Medical Imaging, Limited
(Incorporated by reference to Exhibit
1. to Mark's Form 8-K -Event Date May
28, 1996, referred to herein as the
"SMI Form 8-K")
2. c) -- Stock Purchase Agreement between Mark
and Christopher Cummins and Moira
Addington dated April 24, 1996 regarding
the acquisition of Simis Medical Imaging,
Limited (Incorporated by reference to
Exhibit 2.to the "SMI Form 8- K")
3. a) -- Certificate of Incorporation, as
amended (Incorporated by reference to
Exhibit 3.a) to Mark's Form 10-K for
the fiscal year ended June 30, 1994)
b) -- By-laws (Incorporated by reference to
Showcase Exhibit 3 b) to Mark's Form
S-4)
4. a) -- Specimen Stock Certificate
(Incorporated by reference to Mark
Exhibit 4 a) to Mark's Form S-4)
b) -- Form of Warrant Certificate
(Incorporated by reference to Mark
Exhibit 4 b) to Mark's Form S-4)
10. Material Contracts
a) -- Employment Agreement between Mark and
Carl Coppola (Incorporated by reference
to Mark Exhibit 10 b) to Mark's Form
S-4)
b) -- Incentive Stock Option Plan
(Incorporated by reference to Exhibit
IV to Mark's Form S-4)
5
<PAGE>
Sequential
Exhibit Page No.if
Number Description applicable
- ------- ----------- ----------
c) -- Agreement between the State Prison
of Southern Michigan and Mark
dated September 20, 1994.
(Incorporated by reference to
Exhibit 10 h) to Mark's Form S-1)
d) -- Agreement between New York State
and Mark dated July 17, 1996.
e) -- Agreement between Data General
Corporation and Mark dated
March 18, 1996
----------
21. Subsidiaries of Mark
24. Power of Attorney (included on page
35)
27. Financial Data Schedule
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed by Mark during the
quarter ended June 30, 1996:
Date of Report Items Reported, Financial Statements Filed
May 28, 1996 Item 2. Acquisition or Disposition of Assets
Financial Statements of Simis Medical
Imaging, Ltd. ("SMI") for the years ended
December 31, 1995 and 1994
Financial Statements of SMI for the period
ended March 31, 1996
Pro Forma Financial Information of Mark
and SMI
6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARK SOLUTIONS, INC.
April 30, 1997 By: /s/ Carl Coppola
-----------------
(Carl Coppola, Chief
Executive Officer and
President)
7
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Mark Solutions, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Mark
Solutions, Inc. and Subsidiaries (a Delaware Corporation) as of June 30, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended June
30, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mark
Solutions, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the results
of its operations and cash flows for each of the years in the three year period
ended June 30, 1996 in conformity with generally accepted accounting principles.
Sax Macy Fromm & Co., PC
Certified Public Accountants
<PAGE>
Clifton, New Jersey
September 12, 1996, except for Note 1, as
to which the date is September 19, 1996
F - 1
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
---------------------- ------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 263,922 $ 116,704
Restricted cash 181,781 359,250
Accounts receivable, less allowances of
$5,500 in 1996 and $5,500 in 1995 904,596 1,267,203
Costs and estimated earnings in excess of
billings on contract in progress - - - 66,485
Inventories 146,305 231,290
Other current assets 133,325 80,613
Total Current Assets $1,629,929 $2,121,545
Property and Equipment:
Machinery and equipment 1,472,528 1,263,563
Demonstration equipment 395,419 337,319
Office furniture and equipment 324,006 188,873
Leasehold improvements 14,254 95,830
Vehicles 68,783 38,882
Property held under capital lease 40,929 56,325
---------- ----------
Total 2,315,919 1,980,792
Less: Accumulated depreciation
and amortization 1,939,415 1,662,301
---------- ----------
Net Property and Equipment 376,504 318,491
Other Assets:
Costs in excess of net assets
of businesses acquired, less accumulated
amortization of $17,495 in 1996 and
$1,295,966 in 1995 1,032,196 1,295,864
Net assets of discontinued segment - - - 204,503
Other assets 45,134 37,980
---------- ----------
Total Other Assets 1,077,330 1,538,347
---------- ----------
Total Assets $3,083,763 $3,978,383
========== ==========
</TABLE>
The Accompanying Notes are an Integral
Part of these Consolidated Financial Statements.
F - 2
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------------------------- ------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 499,254 $ 1,672,222
Current maturities of long-term debt 80,558 3,932
Current portion of obligations
under capital leases 5,921 20,020
Due to related parties 45,194 206,923
Accrued liabilities 323,138 266,560
------------- ------------
Total Current Liabilities $ 954,065 $ 2,169,657
Other Liabilities:
Long-term debt excluding current maturities 19,989 4,382
Long-term portion of obligations under
capital leases 30,308 15,283
------------- ------------
Total Other Liabilities 50,297 19,665
Commitments and Contingencies - - - - - -
Stockholders' Equity:
Common stock, $.01 par value,
25,000,000 shares authorized,
13,576,315 and 11,734,801 shares
issued and outstanding at June 30, 1996
and 1995, respectively 135,762 117,347
Additional paid-in capital 24,260,299 18,773,312
Retained earnings (deficit) (22,316,660) (17,101,598)
------------- ------------
Total Stockholders' Equity 2,079,401 1,789,061
------------ ------------
Total Liabilities and Stockholders' Equity $ 3,083,763 $ 3,978,383
============ ============
</TABLE>
The Accompanying Notes are an Integral
Part of these Consolidated Financial Statements.
F - 3
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years Ended June 30
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 3,454,615 $ 6,125,573 $ 3,183,073
------------ ------------ ------------
Costs and Expenses:
Cost of sales 4,022,102 5,975,973 2,370,971
Selling, general, and administrative expenses 3,718,886 3,872,392 3,592,081
Research and development - - - 3,938 270,322
Reduction in carrying value of assets 777,495 - - - - - -
------------ ------------ ------------
Total Costs and Expenses 8,518,483 9,852,303 6,233,374
------------ ------------ ------------
Operating (Loss) (5,063,868) (3,726,730) (3,050,301)
------------ ------------ ------------
Other Income (Expenses):
Interest income 23,800 17,430 5,175
Interest expense (10,490) (103,335) (69,924)
Loss on disposal of property and equipment (60,001) - - - - - -
------------ ------------ ------------
Net Other (Expenses) (46,691) (85,905) (64,749)
------------ ------------ ------------
(Loss) Before Income Tax (5,110,559) (3,812,635) (3,115,050)
Income Tax - - - - - - 29,460
------------ ------------ ------------
(Loss) From Continuing Operations (5,110,559) (3,812,635) (3,144,510)
------------ ------------ ------------
Discontinued Operations:
Loss of Bar-Lor Subsidiaries (35,078) (277,438) (193,620)
Reduction in carrying value - - - (1,100,000) (800,000)
Loss on disposal of Bar-Lor Subsidiaries (69,425) - - - - - -
------------ ------------ ------------
Total Discontinued Operations (104,503) (1,377,438) (993,620)
------------ ------------ ------------
Net (Loss) $ (5,215,062) $ (5,190,073) $ (4,138,130)
============ ============ ============
(Loss) per Share $ (.41) $ (.48) $ (.47)
============ ============ ============
Weighted Average Number of Shares Outstanding 12,732,022 10,726,204 8,802,543
============ ============ ============
Dividends Paid $ - 0 - $ - 0 - $ - 0 -
============ ============ ============
</TABLE>
The Accompanying Notes are an Integral
Part of these Consolidated Financial Statements.
F - 4
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
--------------------------- Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balances June 30, 1993 8,322,870 $ 83,230 $ 11,195,359 $ (7,773,395) $ 3,505,194
Net effect of November 10, 1993
Reorganization 347,139 3,470 2,057,600 - - - 2,061,070
Issuance of stock through private
placements 1,079,768 10,797 2,932,388 - - - 2,943,185
Commissions and related fees - - - - - - (335,674) - - - (335,674)
Net loss for the year ended
June 30, 1995 - - - - - - - - - (4,138,130) (4,138,130)
------------ ------------ ------------ ------------- ------------
Balances June 30, 1994 9,749,777 97,497 15,849,673 (11,911,525) 4,035,645
Issuance of stock through
private placements 1,985,024 19,850 3,252,672 - - - 3,272,522
Commissions and related fees - - - - - - (329,033) - - - (329,033)
Net loss for the year ended
June 30, 1995 - - - - - - - - - (5,190,073) (5,190,073)
------------ ------------ ------------ ------------- ------------
Balances June 30, 1995 11,734,801 117,347 18,773,312 (17,101,598) 1,789,061
Acquisition of Simis Medical
Imaging, Limited on May 28, 1996 204,850 2,048 1,247,952 - - - 1,250,000
Issuance of stock through
private placements 1,636,664 16,367 4,247,210 - - - 4,263,577
Commissions and related fees - - - - - - (8,175) - - - (8,175)
Net loss for the year ended
June 30, 1996 - - - - - - - - - (5,215,062) (5,215,062)
------------ ------------ ------------ ------------- ------------
Balances June 30, 1996 13,576,315 $ 135,762 $ 24,260,299 $ (22,316,660) $ 2,079,401
============ ============ ============ ============= ============
</TABLE>
The Accompanying Notes are an Integral
Part of these Consolidated Financial Statements.
F - 5
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended June 30
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) $(5,215,062) $(5,190,073) $(4,138,130)
----------- ----------- -----------
Adjustments to reconcile net (loss) to
net cash (used for) operating activities:
Depreciation and amortization 637,169 654,155 701,624
Loss from discontinued operations 104,503 - - - - - -
Reduction in carrying value of assets 777,495 - - - - - -
Net assets of discontinued segment - - - 1,377,438 993,620
Value of warrants issued for services - - - - - - 2,000
Loss on disposition of property and equipment 60,001 - - - - - -
(Increase) decrease in assets:
Restricted cash 177,469 (359,250) - - -
Accounts receivable 666,445 (895,127) 9,101
Costs and estimated earnings in excess of billings
on contract in progress 66,485 (66,485) - - -
Inventories 3,334 402,174 (219,553)
Other current assets (16,032) 418 (45,169)
Other assets (7,153) 1,718 (3,871)
Increase (decrease) in liabilities:
Accounts payable (1,336,488) 976,164 200,690
Due to related parties (161,763) 30,408 94,332
Accrued liabilities 56,558 237,501 (106,285)
----------- ----------- -----------
Net adjustments to reconcile net (loss)
to net cash (used for) operating activities 1,028,023 2,359,114 1,626,489
----------- ----------- -----------
Net Cash (Used for) Operating Activities (4,187,039) (2,830,959) (2,511,641)
----------- ----------- -----------
Cash Flows From Investing Activities:
Additions to property and equipment (51,451) (6,500) (36,666)
Proceeds from disposition of segment 100,000 - - - - - -
Proceeds from sale of assets 12,500 - - - - - -
----------- ----------- -----------
Net Cash Provided by (Used for) Investing
Activities 61,049 (6,500) (36,666)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from related party notes payable - - - - - - 1,530,000
Repayment of related party notes payable - - - - - - (1,530,000)
Repayment of notes payable for equipment and vehicles (29,283) (29,085) (185,714)
Borrowings on line of credit 38,668 - - - - - -
Advances from officers and stockholders - - - 400,000 - - -
Repayment of advances from officers and stockholders - - - (400,000) - - -
Payment of offering costs and commissions (8,175) (329,033) (258,080)
Payment of registration costs - - - - - - (361,316)
Proceeds from issuance of common stock 4,263,577 3,272,524 2,943,185
Cash acquired in business combination 8,421 - - - - - -
----------- ----------- -----------
Net Cash Provided by Financing Activities 4,273,208 2,914,406 2,138,075
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 147,218 76,947 (410,232)
Cash and Cash Equivalents at Beginning of Year 116,704 39,757 449,989
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 263,922 $ 116,704 $ 39,757
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral
Part of these Consolidated Financial Statements.
F - 6
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Management Plans and Subsequent Events:
Mark Solutions, Inc.'s (the Company) modular cell 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.
In May 1996, the Company acquired Simis Medical Imaging, Limited, the
entity which developed the IntraScan II software, to more effectively control
the development and marketing strategy. In addition, 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 will
include the IntraScan II PACS software program in proposals to health care
institutions. Although no assurances can be given, management believes that
these actions will improve the effectiveness of its marketing plan and will
enable the Company to generate revenues.
The Company's working capital requirements have historically exceeded its
working capital from operations. 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. From
July 1, 1995 through September 19, 1996, the Company sold 1,636,664 shares of
Common Stock pursuant to the exercise of warrants, resulting in gross proceeds
of $4,263,626. In addition, on August 23, 1996, the Company sold $2,200,000
principal amount 7% convertible debentures due August 22, 1998.
The Company has an effective registration statement relating to 3,368,880
shares of Common Stock issuable upon the exercise of warrants and options. 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 consider additional private sales of its
securities.
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 the three year period ending December 31, 1999, although there
is no minimum or maximum contract amount. Management believes that the
additional exposure resulting from the completion of the Jackson, Michigan
project and the projects generated from the New York State contract will be
beneficial in the Company's market penetration efforts.
In addition to the New York State agreement, as of September 19, 1996 the
Company has uncompleted modular cell contracts of $2,619,362. Furthermore, the
Company has outstanding bids for five modular cell projects aggregating
approximately $ 4,490,000 and is scheduled to bid on 19 modular cell projects
aggregating approximately $40,400,000 through December 31, 1996, although no
assurances can be given that any of these projects will be awarded to the
Company.
The Company believes the existing modular cell contracts, presently
available working capital, projected modular cell contracts and other financial
developments will result in improved operating results and generate sufficient
working capital through fiscal 1997.
F - 7
<PAGE>
Note 2 - Summary of Significant Accounting Policies:
A. Nature of Business - The Company is a Delaware corporation which
operates its various businesses through wholly-owned subsidiaries
and a division.
The Company is engaged in the design, manufacture, assembly and/or
distribution of (i) modular steel cells for housing of the general
prison population as well as for use as infectious disease
isolation units for correctional institutions and health care
facilities, (ii) a self-contained treatment booth for communicable
diseases, and (iii) diagnostic support and archiving computer
systems marketed under the name "IntraScan".
B. Basis of Consolidation - The consolidated financial statements
include the accounts of Mark Solutions, Inc. and all of its wholly
owned Subsidiaries, MarkCare Medical Systems, Inc., and Simis
Medical Imaging, Limited. The operations of Simis Medical Imaging,
Limited are included in the accompanying consolidated financial
statements from the date it was acquired, May 28, 1996.
C. Revenue Recognition - Revenues are recorded at the time services are
performed or when products are shipped except for manufacturing
contracts which are recorded on the percentage-of-completion method
which measures the percentage of costs incurred over the estimated
total costs for each contract. This method is used because
management considers incurred costs to be the best available measure
of progress on these contracts. Contract costs include all direct
material and labor costs and those indirect costs related to
contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses
are determined. The Company provides an allowance for bad debts and
returns based upon its historical experience. The allowance for bad
debts is charged as a general and administrative expense.
D. Cash Equivalents - For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
E. Inventories - Inventories are valued at the lower of cost or market
on a first-in, first-out basis. The Company evaluates the levels of
inventory based on historical movement and current projections of
usage of the inventory. If this evaluation indicates obsolescence
and or slow movement, the Company would record a reduction in the
carrying value by the amount the cost basis exceeded the estimated
net realizable value of the inventory.
F - 8
<PAGE>
Note 2 - Summary of Significant Accounting Policies (Continued):
F. Property and Depreciation - All property and equipment items are
stated at cost. Leasehold improvements are amortized under the
straight-line method. Substantially all other items are depreciated
under straight line and accelerated methods. Depreciation and
amortization is provided in amounts sufficient to write-off the cost
of depreciable assets, less salvage value, over the following
estimated useful lives:
Machinery and equipment 7 years
Demonstration equipment 5 - 7 years
Office furniture and equipment 5 - 7 years
Leasehold improvements 31 - 39 years
Vehicles 5 years
Property held under capital lease 5 years
Since January 1, 1996 the Company did not maintain a manufacturing
facility and outsourced its manufacturing to third party
manufacturers. As a result, the Company's manufacturing equipment,
with a cost of $1,261,637, was not utilized. The accompanying
financial statements do not include a charge for the depreciation of
the manufacturing equipment from January 1, 1996 to June 30, 1996.
G. Costs in Excess of Net Assets of Businesses Acquired - In connection
with the acquisition of MarkCare Medical Systems, Inc. and Simis
Medical Imaging, Limited (see Note 3), the excess acquisition cost
over the fair value of net assets of businesses acquired is being
amortized using the straight-line method over five years.
The Company periodically reviews the carrying amounts of costs in
excess of net assets of businesses acquired. If events or changes in
circumstances indicate that the amount of the net assets may not be
recoverable, based on information available to the Company at that
time, including current and projected cash flows, an appropriate
adjustment is charged to operations (see Note 4).
H. Income Taxes - Deferred income taxes are recognized for tax
consequences of "temporary differences" by applying enacted
statutory tax rates, applicable to future years, to differences
between the financial reporting and the tax basis of existing assets
and liability. Deferred taxes are also recognized for operating
losses that are available to offset future taxable income.
I. Loss Per Share of Common Stock - Loss per share is based on the
weighted average number of shares of common stock outstanding during
each year. Outstanding stock options and warrants are not included
in the computation since such items are anti-dilutive. Loss per
share for periods prior to the reorganization (see Note 3) have been
restated to reflect the number of shares received. A single
presentation of loss per share is shown on the accompanying
financial statements since there is no difference between the
primary and fully diluted computations.
J. Research and Development Expenses - Research and development
expenses consist of expenditures for research conducted by the
Company and payments made under contracts with consultants. All
research and development costs are expensed as incurred.
F - 9
<PAGE>
Note 2 - Summary of Significant Accounting Policies (Continued):
K. Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the report period. The
estimates involve judgments with respect to, among other things,
various future factors which are difficult to predict and are beyond
the control of the Company. Therefore, actual amounts could differ
from these estimates.
L. Reclassifications - Certain prior year amounts have been
reclassified to conform with the current year's presentation.
Note 3 - Acquisition:
On May 28, 1996, the Company acquired all of the capital stock of Simis
Medical Imaging, Limited, a privately held British company (SMI) for $1,250,000
payable in the Company's common stock. This acquisition has been accounted for
using the purchase method of accounting. SMI is the developer of the IntraScan
II system which the Company has been marketing under an exclusive dealer
agreement covering North and South America. The common stock will be issued
pursuant to Regulation S promulgated under the Securities Act of 1933. The
consideration paid by the Company was established through arms-length
negotiations between the Company and the SMI shareholders and was based on the
potential revenues management believes SMI and the related IntraScan II system
sales will generate.
At the initial closing, the Company issued an aggregate of 108,696 shares
of common stock representing $625,000 of the purchase price. The balance of the
purchase price will be paid in common stock on November 28, 1996 and the number
of shares to be issued will be calculated by dividing $625,000 by the closing
sales price of the common stock on November 25, 1996; provided, however, the
maximum number of shares to be issued by the Company is 1,000,000. The June 30,
1996 consolidated financial statements reflect the balance of the purchase price
at the market value of the Company's common stock at June 30, 1996. The number
of shares issued will be adjusted for any fluctuation in the market price.
The following unaudited proforma information presents a summary of
consolidated results of operations of the Company and the acquired business as
if the acquisition had occurred July 1, 1994:
June 30
----------------------------
1996 1995
----------- -----------
Net Sales $ 4,034,791 $ 6,931,367
=========== ===========
Net (Loss) $(5,366,966) $(5,465,884)
=========== ===========
Earnings Per Share $ (.42) $ (.50)
=========== ===========
These unaudited proforma results have been prepared for comparative
purposes only. They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect on July 1,
1994, or of future results of operations of the consolidated entities. The
operations of SMI, are included in the accompanying consolidated financial
statements from the date it was acquired, May 28, 1996.
F - 10
<PAGE>
Note 4 - Reduction in Carrying Value of Assets:
As discussed in Note 3, the Company acquired the stock of SMI, the
developer of the Intrascan II system. In connection with this acquisition, the
Company has determined to focus its marketing efforts on the Intrascan II
technology. In November 1992, the Company acquired Diversified Imaging
Technology, a company which developed the Intrascan I Technology which
subsequently was integrated with the Intrascan II product. As a result, during
the fourth quarter the Company charged operations with approximately $777,000 to
write off the excess net assets of businesses acquired as resulting from its
acquisition of the Intrascan I technology.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
prescribes the accounting treatments for long-lived assets, identifiable
intangibles and goodwill related to those assets when there are indications that
the carrying values of those assets may not be recoverable. Management believes
that the adoption of SFAS No. 121 in 1996 will not have a material adverse
effect on the Company's results of operations or financial condition.
Note 5 - Costs in Excess of Net Assets of Business Acquired:
The components of costs in excess of net assets of businesses acquired as
of June 30, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Beginning balance $ 1,295,864 $ 2,337,467 $ 2,332,648
Acquisition of Bar-Lor Subsidiaries - - - - - - 1,336,604
Acquisition of Simis Medical Imaging, Ltd. 1,049,691 - - - - - -
Amortization expense for the year (535,864) (539,878) (531,785)
Reduction in carrying value:
Discontinued operation - - - (501,725)b (800,000)
Intrascan I Technology (777,495) - - - - - -
----------- ----------- -----------
$ 1,032,196 $ 1,295,864 $ 2,337,467
=========== =========== ===========
</TABLE>
(b) During June 30, 1995 the Company charged operations of the
Bar-Lor Subsidiaries with $1,100,000 of reduction in carrying value
which consisted of a reduction of costs in excess of net assets
acquired of $501,725 and a reduction of the carrying value of
inventory of $598,275.
Note 6 - Related Party Transactions:
The Company purchases materials and is reimbursed for various expenses
from Mark Lighting Fixture Co., Inc. (Mark Lighting), an entity owned by the
Company's president, and Metalite, Inc. (Metalite), an entity owned by the
brother of the Company's president. In addition, the Company has engaged the
consulting service of Laborstat, Inc. (Laborstat), an entity owned by the
Company's president.
F - 11
<PAGE>
Note 6 - Related Party Transactions (Continued):
The following related party transactions are included in the Company's
operations:
Year Ended June 30
--------------------------------------------
1996 1995 1994
-------- -------- --------
Purchases $105,512 $162,291 $ 72,684
Expense reimbursement $ 93,125 $ 48,734 $ 48,432
Consulting services $ - - - $ 6,615 $103,342
As a result of current and prior years' transactions, the Company has net
balances due to (from) the following related parties which will be settled in
the ordinary course of business:
June 30
---------------------------
1996 1995
-------- --------
Mark Lighting Fixture Co., Inc. $(16,225) $ 64,461
Metalite, Inc. (27,078) 687
Laborstat, Inc. (1,505) 52,095
Brookehill Equities - - - 45,000
Other shareholders 90,002 44,680
-------- --------
Due to Related Parties $ 45,194 $206,923
======== ========
The Company utilizes the underwriting and financial consulting services
of Brookehill Equities (Brookehill), a company affiliated with a shareholder of
the Company. For the years ended June 30, 1996, 1995 and 1994 fees paid to
Brookehill were $-0-, $321,683, and $142,680, respectively. In February 1995
this shareholder, participated in a private placement by the Company and
purchased 91,071 units for $3.50 per unit. Each unit consists of two shares of
common stock and one two-year warrant to purchase an additional share of common
stock for $2.00.
On January 16, 1995 the Company received $400,000 and issued 10%
promissory notes payable to its chief executive officer with principal and
interest due on March 31, 1995. These notes were secured by a first priority
security interest in the Company's assets. As further consideration for the
promissory notes, the Company issued warrants to purchase 200,000 shares of the
Company's common stock at $2.50 (the closing sales price on the date of grant)
per share with the warrants expiring on January 20, 1997. On February 23, 1995,
these promissory notes were repaid with interest.
A member of the Company's Board of Directors provided bonding services
for the Company's Michigan contract. As consideration for these services, the
Director's company, Bergen Engineering, Co. received a 5% commission on the
gross revenue of the contract and warrants to purchase 150,000 shares of the
Company's common stock at $2.625 per share (the closing sales price on the date
of grant) with the warrants expiring on November 3, 1996. As of June 30, 1996
and 1995, fees paid to Bergen Engineering Co., were $120,061 and $213,076,
respectively.
F - 12
<PAGE>
Note 6 - Related Party Transactions (Continued):
In October 1994, a director participated in a private placement by the
Company and purchased 50,000 shares of common stock for an aggregate of
$131,250, subject to adjustment based upon subsequent private placements. Based
on sale of units in January and February 1995 the director received an
additional 15,000 shares of common stock.
On April 26, 1995, each of the Company's non-employee directors were
granted two-year options to purchase 25,000 shares of common stock at $3.25 per
share (the closing sales price on the date of grant). In addition, on November
15, 1995 a recently elected director was granted two-year options to purchase
25,000 of common stock at $5.375 per share
On May 9, 1994, Salvani Investments, Inc., a company owned by a
shareholder of the Company, was granted warrants to purchase 150,000 shares of
common stock at a purchase price of $5.00 per share (the closing sales price on
the date of grant) as compensation for investment banking and consulting
services. In February 1995, the owner participated in a private placement by the
Company and purchased 91,071 units for $3.50 per unit. Each unit consists of two
shares of common stock and one two-year warrant to purchase an additional share
of common stock for $2.00.
Note 7 - Inventories:
Inventories consist of the following:
June 30
--------------------------
1996 1995
-------- --------
Raw materials $127,477 $112,060
Finished goods 18,828 119,230
-------- --------
Total Inventories $146,305 $231,290
======== ========
Note 8 - Contract in Progress:
Costs, estimated earnings, and billings on the contract in progress is
summarized as follows:
<TABLE>
<CAPTION>
June 30
--------------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cost incurred on uncompleted contract $ - - - $4,125,591
Estimated earnings - - - 202,410
----------- ----------
Total - - - 4,328,001
Less: Billings to date - - - 4,261,516
----------- ----------
Cost and estimated earnings in excess of
billings on contract in progress $ - - - $ 66,485
=========== ==========
</TABLE>
F - 13
<PAGE>
Note 9 - Other Current Assets:
The other current assets consist of:
June 30
--------------------------
1996 1995
-------- --------
Prepaid expenses $ 97,755 $ 60,357
Loans and exchanges 35,570 20,256
-------- --------
Total $133,325 $ 80,613
======== ========
Note 10 - Long-Term Debt:
A. Long-term debt consist of the following:
<TABLE>
<CAPTION>
June 30
----------------------
1996 1995
------ ------
<S> <C> <C>
Note payable, due in monthly installments of $387,
including interest at 10.9%; due June 1997; secured
by a vehicle $4,383 $8,314
Less: Current Portion 4,383 3,932
------ ------
Long-term debt excluding current portion $- - - $4,382
====== ======
</TABLE>
B. Line of Credit - SMI has available a U.K. Pound 70,000
line of credit agreement for working capital requirements.
The line is collateralized by the personal residence of
SMI's managing director. Outstanding borrowing accrue
interest at 10.5%. In connection with the acquisition of
SMI, the Company has agreed to negotiate with the lender
to remove the managing director's personal liability under
this credit facility. Outstanding borrowings as of June
30, 1996 were $69,414. The exchange rate for U.K. Pounds
into U.S. dollars was 1.5520 as of June 30, 1996.
Note 11 - Accrued Liabilities:
The accrued liabilities consist of:
June 30
--------------------------
1996 1995
-------- --------
Salaries $166,190 $206,651
Other 156,950 59,909
-------- --------
Total $323,140 $266,560
======== ========
F - 14
<PAGE>
Note 12 - Stockholders' Equity:
1993 Stock Option Plan:
On November 10, 1993 the Company adopted a Stock Option Plan. The Plan is
administered and terms of option grants are established by the Board of
Directors. Under the terms of the plan, options to purchase 1,000,000 shares of
common stock may be granted to key employees. Options become exercisable as
determined by the Board of Directors and expire over terms not exceeding ten
years from the date of grant, three months after termination of employment, six
months after death or one year in the case of permanent disability of the
optionee. The option price for all shares granted under the Plan is equal to the
fair market value of the common stock at the date of grant, as determined by the
Board of Directors, except in the case of a ten percent shareholder where the
option price shall not be less than 110% of the fair market value at the date of
grant.
The following information relates to shares under option and shares
available for grant under the Plan:
<TABLE>
<CAPTION>
June 30
--------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Outstanding at beginning of year 523,000 367,500 - - -
Granted - - - 200,500 367,500
Cancelled (76,000) (45,000) - - -
Exercised (80,000) - - - - - -
----------- ----------- ----------
Outstanding at end of year 367,000 523,000 367,500
=========== =========== ==========
Available for issuance under the Plan 432,500 432,500 632,500
Per Share prices of outstanding options $3.25-$4.00 $3.25-$4.00 $ 4.00
Shares subject to exercisable option 367,000 523,000 -0-
</TABLE>
Stock Warrants:
Outstanding warrants are as follows:
<TABLE>
<CAPTION>
June 30
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Warrants outstanding at beginning of year 4,848,859 3,147,838 1,452,118
Issued during the year 615,000 1,702,021 2,240,666
Exercised (1,456,979) (1,000) (408,875)
Expired (73,000) - - - (136,071)
------------ ------------ ------------
Warrants Outstanding at End of Year 3,933,880 4,848,859 3,147,838
============ ============ ============
Exercise Price $2.00-$15.00 $1.00-$15.00 $1.00-$15.00
</TABLE>
The above warrants are currently exercisable into 3,933,880 shares of the
Company's common stock.
F - 15
<PAGE>
Note 12 - Stockholders' Equity (Continued):
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). SFAS No. 123 established financial accounting and
reporting standards for stock-based compensation plans and to transactions in
which an entity issues its equity instruments to acquire goods and services from
nonemployees. The new accounting standards prescribed by SFAS 123 are optional,
and the Company may continue to account for its plans under previous accounting
standards. The Company does not expect to adopt the new accounting standards,
consequently, SFAS No. 123 will not have a material impact on the Company's
consolidated results of operations or financial position. However, SFAS No. 123
does require that pro forma disclosures of net earnings and earnings per share
must be presented as if the accounting standard had been adopted. These
disclosures of SFAS No. 123 are required by the Company beginning fiscal year
June 30, 1997.
Note 13 - Leases:
A. Facility Leases:
The Company occupies its offices pursuant to a lease expiring in
December 1998. Beginning October 1, 1996, the Company will conduct
its manufacturing operations pursuant to an operating lease expiring
November 15, 2004. Under the terms of these leases, the Company is
obligated to pay maintenance, insurance, and its allocable share of
real estate taxes.
Future minimum rental payments under these operating leases are as
follows:
Year Ended June 30
------------------
1997 $ 216,805
1998 260,365
1999 217,302
2000 174,240
2001 and thereafter 217,800
-----------
$ 1,086,512
===========
Rent expense for the years ending June 30, 1996, 1995, and 1994, was
$205,586, $179,976, and $144,556, respectively.
B. Capital Leases:
The Company leases certain equipment under capital leases with
expiration dates ranging from February 1996 through April 2000.
F - 16
<PAGE>
Note 13 - Leases (Continued):
Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year Ended June 30
------------------
<S> <C>
1997 $ 13,857
1998 13,857
1999 13,857
2000 12,823
2001 2,551
---------
Total future minimum lease payments 56,945
Less: Amount representing interest 20,716
---------
Present value of net future minimum lease payments 36,229
Less: Current portion of obligations under capital leases 5,921
---------
Long-term portion of obligations under capital leases $ 30,308
=========
</TABLE>
Note 14 - Commitments and Contingencies:
The Company has entered into an employment agreement with its chief
executive officer which expires on March 18, 1997. In connection with the
acquisition of SMI (see Note 3), a former shareholder of SMI has entered into a
three-year employment agreement with SMI which provides (i) an annual salary of
U.K. Pounds 60,000 in the initial year with U.K. Pounds 5,000 increases in the
succeeding two years and (ii) an amount bonus equal to 10% of the post tax
profits of SMI. The remaining aggregate commitment for future salaries as of
June 30, 1996, excluding bonuses, is approximately $539,000. The exchange rate
for U.K. Pounds into U.S. dollars was 1.5520 as of June 30, 1996.
The Company maintains cash balances at several financial institutions
located in New Jersey. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. As of June 30, 1996 and 1995, the
Company's uninsured cash balances totalled $417,000 and $672,000, respectively.
The Company has restricted cash of $181,781 and $359,250 at June 30, 1996
and 1995, respectively, to support open letters of credit and certain contract
commitments. These restrictions will lapse within the current period.
In January 1995, the Company and Mark Lighting, as co-defendants, were
served with a summons and complaint filed in the Supreme Court of New York
State, Westchester County. Plaintiffs allege damages in the sum of $10,000,000
based upon breach of sales and consulting agreements regarding modular steel
cells.
The Company believes the suit is totally without merit, both in terms of
the facts of the case and the damages alleged, and is defending the action
vigorously. The Company has answered and counterclaimed for $2,200,000 in
damages based upon fraud and misrepresentations, by plaintiffs. Discovery in
this case has been completed and the case has been placed on the trial calendar.
The ultimate outcome of the litigation cannot presently be determined.
Accordingly, no provision for any loss that may result from the resolution of
this matter has been made in the accompanying financial statements.
F - 17
<PAGE>
Note 15 - Income Taxes:
As of June 30, 1996, the Company has Federal net operating loss
carryforwards of approximately $16,000,000. Such carryforwards begin to expire
in 2009 if not previously used. The $16,000,000 carryforward is comprised of
approximately $14,000,000 which is available for utilization in the tax year
ending June 30, 1997. The remaining $2,000,000 carryforward is restricted as to
utilization subject to the provisions of Internal Revenue Code Section 382.
Since realization of the tax benefits associated with these carryforwards is not
assured, a full valuation allowance was recorded against these tax benefits as
required by SFAS No. 109.
Note 16 - Discontinued Operations:
On November 10, 1993, Showcase Cosmetics, Inc. (Showcase), the parent
company of the Bar-Lor Subsidiaries, and the Company consummated a
Reorganization (the "Reorganization") pursuant to a Plan of Reorganization dated
December 23, 1992, as amended.
Pursuant to the Reorganization, Showcase acquired all of the assets,
subject to substantially all of the liabilities of the Company for 8,363,836
shares of common stock which represented 96% of the outstanding shares of common
stock of Showcase. The Reorganization was, in substance, an acquisition of
Showcase by the Company, as the control of Showcase transferred from the
management of Showcase to the management of the Company.
The Reorganization was accounted for using the purchase method of
accounting. The purchase price of $2,613,292 plus expenses associated with the
transaction exceeded the net assets acquired, resulting in $1,336,604 which was
assigned to costs in excess of net assets of businesses acquired. The Company
charged operations with $1,100,000 and $800,000 as a reduction in the segments
carrying value of its assets in the quarters ended June 30, 1995 and 1994,
respectively.
On October 13, 1995, the Company disposed of the Bar-Lor Subsidiaries,
whose principal services were the packaging and distribution of cosmetics
products. The assets of the segment sold consist primarily of cash, accounts
receivable, inventories, and machinery and equipment.
Operating results of the segment for the period July 1, 1994 through
October 13, 1995 are shown separately in the accompanying consolidated
statements of operations. The consolidated statements of operations for June 30,
1995 and 1994 have 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 for the years ended June 30, 1995 and 1994 were $166,989, $917,934, and
$812,374, respectively. These amounts are not included in the accompanying
consolidated statements of operations.
F - 18
<PAGE>
Note 16 - Discontinued Operations (Continued):
Assets and liabilities of the segment disposed of consisted of the
following:
<TABLE>
<CAPTION>
June 30
October 13, ----------------------------
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash $ 16,513 $ 50,580 $ 64,207
Accounts receivable, net 6,291 (10,485) 76,270
Inventories 346,104 363,093 1,083,118
Other current assets 11,434 5,251 62,798
Machinery and equipment, net 29,335 33,499 67,140
Other 17,880 17,880 24,864
----------- ----------- -----------
427,557 459,818 1,378,397
----------- ----------- -----------
Accounts payable 234,145 239,199 259,616
Accrued expenses 8,987 16,116 38,563
Notes payable 15,000 - - - - - -
----------- ----------- -----------
258,132 255,315 298,179
----------- ----------- -----------
Net Assets of Discontinued Segment 169,425 $ 204,503 $ 1,080,218
=========== ===========
Less: Loss on disposition of segment 69,425
-----------
Net Proceeds From Disposition of Segment $ 100,000
===========
</TABLE>
Note 17 - Supplemental Cash Flow Information:
A. Cash paid during the year:
Year Ended June 30
------------------------------------
1996 1995 1994
------- -------- ---------
Interest $ 9,581 $ 12,615 $ 91,254
======= ======== =========
Income taxes $ - - - $ - - - $ 29,460
======= ======== =========
B. During the year ending June 30, 1995 the Company acquired
certain equipment with an aggregate cost of $56,325 under
capital lease obligations.
F - 19
<PAGE>
Note 18 - Segment Information:
The Company's two industry segments are the design and manufacture of
modular steel prison cells for the corrections industry and the distribution of
treatment booths and IntraScan Systems to the medical industry. The following is
a summary of selected consolidated financial information for the Company's
industry segments:
June 30
---------------------------------------------
1996 1995 1994
----------- ----------- -----------
Revenues:
Modular steel products $ 3,256,574 $ 5,949,490 $ 2,938,051
Medical products 198,041 176,083 245,022
----------- ----------- -----------
Total $ 3,454,615 $ 6,125,573 $ 3,183,073
=========== =========== ===========
Operating Loss:
Modular steel products $(4,508,406) $(3,055,631) $(2,368,708)
Medical products (555,462) (671,099) (681,593)
----------- ----------- -----------
Total $(5,063,868) $(3,726,730) $(3,050,301)
=========== =========== ===========
Identifiable Assets:
Modular steel products $ 1,317,620 $ 3,505,085 $ 3,533,195
Medical products 1,766,143 268,795 340,238
Discontinued operation - - - 204,503 1,080,218
----------- ----------- -----------
Total $ 3,083,763 $ 3,978,383 $ 4,953,651
=========== =========== ===========
For the year ended June 30, 1996, one customer accounted for 70% of total
revenues. Revenues from one customer accounted for 60% of total revenues during
the year ended June 30, 1995. For the year ended June 30, 1994, one customer
accounted for 71% of total revenues. As of June 30, 1996, one customer accounted
for 34% of trade receivables.
F - 20
<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>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 263,922
<SECURITIES> 0
<RECEIVABLES> 904,596
<ALLOWANCES> 0
<INVENTORY> 146,305
<CURRENT-ASSETS> 1,629,929
<PP&E> 2,315,919
<DEPRECIATION> 1,939,415
<TOTAL-ASSETS> 3,083,763
<CURRENT-LIABILITIES> 954,065
<BONDS> 0
0
0
<COMMON> 135,762
<OTHER-SE> 1,943,639
<TOTAL-LIABILITY-AND-EQUITY> 3,083,763
<SALES> 3,454,615
<TOTAL-REVENUES> 3,454,615
<CGS> 4,022,102
<TOTAL-COSTS> 8,518,483
<OTHER-EXPENSES> 36,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,490
<INCOME-PRETAX> (5,110,559)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,110,559)
<DISCONTINUED> (104,503)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,215,062)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
