<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 0-17118
Mark Solutions, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-2864481
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
Parkway Technical Center
1515 Broad Street
Bloomfield, New Jersey 07003
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (201) 893-0500
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check whether registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past 90 days. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
Common Stock, $ .01 par value: 14,616,282 shares outstanding as of
February 13, 1997.
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Mark Solutions, Inc. ("Mark") hereby amends its Form 10-Q for
the period ended December 31, 1996 filed on February 14, 1997
as follows:
Part I. Financial Information
Item 1. Financial Statements
The following financial statements are amended to read in their entirety as
included in this Form 10-Q/A-1.
Consolidated Balance Sheets as of
December 31, 1996 and June 30, 1996 ........ 3
Consolidated Statements of Operations
for the Six Months Ended December 31, 1996
and December 31, 1995 ...................... 5
Consolidated Statements of Cash Flows
for the Six Months Ended December 31, 1996
and December 31, 1995 ...................... 6
Notes to Consolidated Financial Statements ... 7
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets
December 31, 1996 June 30, 1996
--------------------------- ------------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 107,394 263,922
Restricted cash 183,688 181,781
Accounts receivable 1,778,769 904,596
Inventories 683,980 146,305
Other current assets 201,645 133,325
------------ ----------
Total Current Assets $2,955,476 $1,629,929
Property and Equipment:
Machinery and equipment 1,486,087 1,472,528
Demonstration equipment 436,348 395,419
Office furniture and equipment 368,763 324,006
Leasehold improvements 40,084 14,254
Vehicles 62,283 68,783
Property held under capital lease - - - 40,929
------------ ----------
Total 2,393,565 2,315,919
Less: Accumulated depreciation
and amortization 2,002,794 1,939,415
------------ ----------
Net Property and Equipment 390,771 376,504
Other Assets:
Costs in excess of net assets
of businesses acquired, less accumulated
amortization of $122,465 and $17,495 at
December 31, 1996 and June 30, 1996,
respectively 927,226 1,032,196
Debt issue costs, less accumulated amortization
of $27,117 as of December 31, 1996 135,583 - - -
Other assets 78,548 45,134
------------ ----------
Total Other Assets 1,142,357 1,077,330
---------- ----------
Total Assets $4,488,604 $3,083,763
========== ==========
</TABLE>
3
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
------------------------------ ---------------------------
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts payable $ 1,132,535 499,254
Current maturities of long-term debt 96,496 80,558
Current portion of obligations under capital leases - - - 5,921
Due to related parties 132,441 45,194
Accrued liabilities 265,939 323,138
------------ ----------
Total Current Liabilities $1,627,411 $ 954,065
Other Liabilities:
Long-term debt excluding current maturities 994,979 19,989
Long-term portion of obligations under
capital leases - - - 30,308
------------ ----------
Total Other Liabilities 994,979 50,297
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value,
25,000,000 shares authorized,
14,616,282 shares issued and
outstanding at December 31, 1996
and 13,576,315 shares issued and
outstanding at June 30, 1996 144,645 135,762
Additional paid-in capital 26,035,596 24,260,299
Retained earnings (deficit) (24,314,027) (22,316,660)
------------ ----------
Total Stockholders' Equity 1,866,214 2,079,401
---------- ----------
Total Liabilities and Stockholders' Equity $4,488,604 $3,083,763
========== ==========
</TABLE>
4
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31 December 31
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales $ 1,684,030 $ 2,550,492 $ 1,374.672 $ 583,435
Other income 11,177 - - - 11,177 - - -
----------- ----------- ----------- -----------
Total Revenues 1,695,207 2,550,492 1,385,849 583,435
----------- ----------- ----------- -----------
Cost and Expenses:
Cost of sales 1,358,375 2,929,219 1,116,549 820,327
Selling, general and administrative 1,822,640 1,977,745 936,872 975,098
----------- ----------- ----------- -----------
Total Costs and Expenses 3,181,015 4,906,964 2,053,421 1,795,425
----------- ----------- ----------- -----------
Operating (Loss) (1,485,808) (2,356,472) (667,572) (1,211,990)
----------- ----------- ----------- -----------
Other Income (Expenses):
Interest earned 17,146 12,044 7,464 5,724
Interest expense (525,583) (4,979) (61,589) (2,098)
Loss on asset disposal (3,120) - - - (1,500) - - -
----------- ----------- ----------- -----------
Net Other Income (Expenses) (511,557) 7,065 (55,625) 3,626
----------- ----------- ----------- -----------
(Loss) From Continuing Operations (1,997,365) (2,349,407) (723,197) (1,208,364)
----------- ----------- ----------- -----------
Discontinued Operations:
Loss on cosmetics segment - - - (35,078) - - - - - -
Loss on disposal of cosmetics segment - - - (69,425) - - - - - -
----------- ----------- ----------- -----------
Loss From Discontinued Operations - - - (104,503) - - - - - -
----------- ----------- ----------- -----------
Net (Loss) $(1,997,365) $(2,453,910) $ (723,197) $(1,208,364)
=========== =========== =========== ===========
(Loss) Per Share $ (.14) $ (.20) $ (.05) (.10)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 14,061,378 12,290,665 14,232,470 12,700,914
=========== =========== =========== ===========
Dividends Paid $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
5
<PAGE>
Mark Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
December 31, 1996 December 31, 1995
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) $ (1,997,365) $ (2,453,910)
Adjustments to reconcile net (loss) to
net cash (used for) operating activities:
Depreciation and amortization $ 198,846 $ 312,600
Accrued interest on debt conversion 9,477 - - -
Loss on sale of equipment 3,120 - - -
Loss from discontinued operations - - - 104,503
Imputed interest expense on convertible debt 440,000 - - -
(Increase) decrease in assets:
Restricted cash (1,907) 16,075
Accounts receivable (874,173) 395,968
Costs and estimated earnings in excess
of billings on contract in progress - - - (293,742)
Inventories (537,675) (177,211)
Other current assets (68,320) (29,170)
Other assets (34,414) (74,354)
Increase (decrease) in liabilities:
Accounts payable 633,281 (494,548)
Due to related parties 87,247 (154,864)
Accrued liabilities (57,202) (5,016)
--------- ---------
Net adjustments to reconcile net (loss)
to net cash (used for) operating activities (201,720) (399,759)
----------- ----------
Net Cash (Used for) Operating Activities (2,199,085) (2,853,669)
Cash Flows From Investing Activities:
Additions to property and equipment (84,146) (28,334)
Proceeds from disposition of segment - - - 85,000
--------- ---------
Net Cash Provided by (Used for)
Investing Activities (84,146) 56,666
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 2,200,000 - - -
Increase of short-term borrowings 13,086 - - -
Repayment of notes payable for equipment (8,386) (14,605)
Proceeds from issuance of common stock 105,982 2,907,088
Debt issue costs (162,700) - - -
Payment of issuance costs (21,279) - - -
--------- ---------
Net Cash Provided by Financing Activities 2,126,703 2,892,483
----------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents (156,528) 95,480
Cash at Beginning of Year 263,922 116,704
----------- ----------
Cash at End of Period $ 107,394 $ 212,184
=========== ==========
</TABLE>
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 December 31, 1996 and June 30, 1996 and the results of operations
and cash flows for the six months ended December 31, 1996 and 1995.
The accounting policies followed by the Company are set forth in the
Notes to Financial Statements included in the company's Annual Reports on Form
10-K for the fiscal year ended June 30, 1996, 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.
Convertible Debenture Conversion Discount - The discount to market value
rights on conversion of convertible debentures to common stock is recorded as
interest expense over the period from the sale of the debentures to the first
conversion date.
Note 2 - Inventories:
Inventories at December 31, 1996 and June 30, 1996 consist of the
following:
December 31, 1996 June 30, 1996
----------------- -------------
Raw materials $ 518,030 $ 127,477
Finished goods 165,950 18,828
--------- ---------
$ 683,980 $ 146,305
========= =========
Note 3 - Convertible Debentures:
On August 23, 1996, the Company sold $2,200,000 principal amount 7%
convertible debentures due August 22, 1998 (the "Debentures"). The Debentures
are convertible into shares of common stock at a conversion price which is the
lesser of (i) $5-3/16 or (ii) 80% of the average closing bid price on the five
trading days immediately preceding the date(s) of conversion. Interest on the
Debentures is payable in cash or common stock at the Company's option. The
outstanding balance of $2,200,000 as of September 30, 1996 is included in
long-term debt excluding current maturities on the accompanying balance sheet.
Included in interest expense for the period ended December 31, 1996 is
$440,000 of imputed interest which represents the twenty percent discount on
conversion of the convertible debentures into common stock.
In connection with the issuance of these debentures, the Company incurred
$162,700 of debt issue costs. These costs have been capitalized and are
amortized over the term of the debentures.
7
<PAGE>
Note 4 - Common Stock and Additional Paid-In Capital:
During the six months ended December 31, 1996, the Company issued 43,572
shares of common stock as a result of exercise of warrants, receiving gross
proceeds of $105,894.
Note 5 - Subsequent Events:
On January 21, 1996, the Company sold $759,000 principal amount 7%
convertible debentures due January 20, 1999 (the "1997 Debentures"). The 1997
Debentures are convertible, on or after July 15, 1997, into shares of common
stock at a conversion price which is the lesser of (i) $2.125 or (ii) 80% of the
average closing bid price on the five trading days immediately preceding the
date(s) of conversion. Interest on the Debentures is payable in cash or common
stock at the Company's option.
8
<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.
Date: April 30, 1997 MARK SOLUTIONS, INC.
By: /s/ Carl Coppola
--------------------
Carl Coppola- President,
Chief Executive Officer
and Chief Financial Officer
9
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 107,394
<SECURITIES> 0
<RECEIVABLES> 1,778,769
<ALLOWANCES> 0
<INVENTORY> 683,980
<CURRENT-ASSETS> 2,955,476
<PP&E> 2,393,565
<DEPRECIATION> 2,002,794
<TOTAL-ASSETS> 4,488,604
<CURRENT-LIABILITIES> 1,627,411
<BONDS> 0
0
0
<COMMON> 144,645
<OTHER-SE> 1,721,569
<TOTAL-LIABILITY-AND-EQUITY> 4,488,604
<SALES> 1,684,030
<TOTAL-REVENUES> 1,695,207
<CGS> 1,358,375
<TOTAL-COSTS> 3,181,015
<OTHER-EXPENSES> 3,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 525,583
<INCOME-PRETAX> (1,997,365)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,997,365)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,997,365)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
