Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1999 .
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from ____________ to ____________
Commission file number 0-23026
Paramark Enterprises, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-3261564
---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) No.)
One Harmon Plaza, Secaucus, New Jersey 07094
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(Address of principal executive offices)
201-422-0910
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(Issuer's telephone number including area-code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State 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 - 3,393,383 shares as of May 10, 1999.
Transitional Small Business disclosure Format (check one):
Yes __X__ No ___
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<PAGE>
Paramark Enterprises Inc.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
Balance Sheets at December 31, 1998 and 3
March 31, 1999.
Statements of Operations for the three months 4
ended March 31, 1998 and March 31, 1999.
Statements of Cash Flows for the three months 5
ended March 31, 1998 and March 31, 1999.
Notes to Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults upon Senior Securities 14
Item 4 Submission of Matters to a Vote
of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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<PAGE>
PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
PARAMARK ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 790,873 $ 504,672
Accounts receivable, less allowance for doubtful accounts 326,217 226,627
Notes receivable - current maturities 500,000 500,000
Inventory 167,956 172,454
Prepaid expenses and other current assets, net 44,352 72,408
----------- -----------
Total current assets 1,829,398 1,476,161
Property and equipment 517,140 510,560
Notes receivable, net of current maturities 375,000 273,108
----------- -----------
Total Assets $ 2,721,538 $ 2,259,829
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 601,593 $ 410,693
Current maturities of long-term debt 13,938 66,223
----------- -----------
Total current liabilities 615,531 476,916
Long-term debt, net of current maturities 55,522 0
----------- -----------
Total liabilities 671,053 476,916
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock 0 0
Common Stock 33,740 33,935
Additional paid-in capital 6,813,704 6,822,032
Accumulated deficit (4,796,959) (5,033,946)
----------- -----------
2,050,485 1,822,020
----------- -----------
Less, treasury stock at cost 0 (39,107)
----------- -----------
Total stockholders' equity 2,050,485 1,782,913
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,721,538 $ 2,259,829
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
PARAMARK ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1998 1999
---- ----
<S> <C> <C>
Revenue:
Wholesale sales $ 1,223,996 $ 716,977
Sales from Company-owned stores 35,530 0
Royalties, licensing fees and other 30,000 0
----------- -----------
Total revenue 1,289,526 716,977
Operating expenses:
Cost of goods sold 1,003,173 604,045
Bakery selling, general and administrative 231,540 190,434
Corporate selling, general and administrative 357,520 180,853
----------- -----------
Total operating expenses 1,592,233 975,332
----------- -----------
Loss from operations (302,707) (258,355)
----------- -----------
Other income (expense):
Interest income (expense), net (6,329) (3,178)
Gain from sale of assets 0 14,820
Other income 0 9,727
----------- -----------
Total other income (expense) (6,329) 21,369
----------- -----------
Net loss ($ 309,036) ($ 236,986)
=========== ===========
Net loss per common share ($ 0.10) ($ 0.07)
=========== ===========
Weighted average number of
common shares outstanding 3,145,907 3,379,300
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
PARAMARK ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1998 1999
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss ($309,036) ($236,986)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 35,864 25,265
Noncash interest expense 56,250 8,522
Noncash consulting fee 1,140 0
Gain from sale of assets 0 (15,210)
Gain from forgiveness of debt 0 (9,727)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (427,832) 91,692
(Increase) decrease in notes receivable (57,120) 0
(Increase) decrease in inventories 39,557 (5,619)
(Increase) decrease in prepaid expenses and other assets (35,912) (26,936)
Increase (decrease) in accounts payable and accrued expenses 139,519 (181,173)
--------- ---------
Net cash used in operating activities (557,570) (350,171)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (27,332) (18,685)
--------- ---------
Net cash used in investing activities (27,332) (18,685)
--------- ---------
Cash flows from financing activities:
Proceeds from financing 469,391 0
Proceeds from notes receivable 0 125,000
Purchases of treasury stock 0 (39,107)
Net repayments of notes payable 0 (3,237)
--------- ---------
Net cash provided by financing activities 469,391 82,656
--------- ---------
Net decrease in cash (115,511) (286,200)
Cash at beginning of period 122,561 790,873
--------- ---------
Cash at end of period $ 7,050 $ 504,673
========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
Paramark Enterprises, Inc.
Notes to Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared by the Company, in
accordance with generally accepted accounting principles and pursuant to the
Rules and Regulations of the Securities and Exchange Commission, and except
for the Balance Sheet at December 31, 1998, all statements are unaudited. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the interim period are not necessarily indicative of
financial results for the full year.
Additionally, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principals have been omitted. It is suggested that these
unaudited financial statements be read in connection with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998. There have been no
significant changes of accounting policies since December 31, 1998.
Note 2 - Net Income (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
for each period presented. For purposes of the 1998 and 1999 computations,
shares issuable upon the exercise of all common stock purchase options and
warrants outstanding have been excluded from the computation of weighted
average shares outstanding since their effect is antidilutive.
Note 3 - Income Taxes
No provision for income taxes has been made for the three months ended March
31, 1999 as the Company has net operating losses. These net operating losses
have resulted in a deferred tax asset at March 31, 1999. Due to the
uncertainty regarding the ultimate amount of income tax benefits to be
derived from the Company's net operating losses, the Company has recorded a
valuation allowance for the entire amount of the deferred tax asset at March
31, 1999.
Note 4 - Sale of Assets
In August 1996, the Company closed a purchase agreement (the "Transaction")
with Triarc Restaurant Group d/b/a/ Arby's, Inc. ("Triarc") through which
(a) Triarc purchased the trademarks, service marks, recipes and secret
formulas of the Company, (b) Triarc licensed back to the Company the rights
to operate existing franchised bakery locations and to distribute T.J.
Cinnamons products through retail grocery outlets, and (c) the Company
entered into a management agreement with Triarc to manage the franchise
system.
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<PAGE>
The Company received payments of $1,790,000 at the closing, a promissory
note in the amount of $1,650,000 which is being paid in fifteen (15) equal
monthly installments beginning October 1, 1996, a promissory note in the
amount of $100,000 which is being paid in twenty four (24) equal monthly
installments beginning October 1, 1996. In addition, the purchase agreement
provides for the contingent payments of up to a maximum of an additional
$5,500,000 over time dependent upon the amount of T.J. Cinnamons product
sales by Triarc exceeding a minimum base system wide sales of $26.3 million.
Simultaneous with the closing of the Transaction in August 1996, the Company
entered into an agreement with Heinz Bakery Products to terminate the 1992
manufacturing and license agreement. Under the terms of the agreement, the
Company paid Heinz Bakery Products $600,000 at closing, and assigned to
Heinz the Triarc promissory note in the amount of $100,000 payable with
interest in equal installments over a two year period.
In August 1998, the Company closed an agreement with TJ Holding Company,
Inc., a wholly owned subsidiary of Triarc and Arby's, Inc. d/b/a/ Triarc
(the "1998 Triarc Agreement") pursuant to which the Company sold all of its
rights and interests under the existing T.J. Cinnamons franchise agreements
and terminated the purchase agreement dated June 3, 1996 and the license
agreement and management agreement entered into with Triarc and affiliates
dated August 29, 1996. The Company received payments under the 1998 Triarc
Agreement aggregating $4,000,000 of which $3,000,000 was paid in cash and
$1,000,000 in the form of a non-interest bearing promissory note payable
over 24 months.
Note 5 - Short Term Financing
In September 1997 the Company entered into a loan agreement with Gelt
Financial Corporation for a credit line in the amount of $200,000 which was
subsequently increased to $300,000 secured by Wal-Mart accounts receivable.
The terms of this loan agreement provided for a service fee of 1.5% of each
advance together with interest at a rate of 675 basis points above the prime
rate. In addition, the Company granted Gelt 3,000 shares of its common stock
as a loan origination fee. The credit line had a zero balance on March 31,
1999.
In March 1998, Charles Loccisano, the Company's Chairman and Chief Executive
Officer and Alan Gottlich, the Company's President and Chief Financial
Officer provided the Company with a credit line in the amount of $500,000.
The credit line is required to be repaid within one year, with interest
payable quarterly at the rate of 5.39% per annum. In consideration for the
credit line, Messrs. Loccisano and Gottlich were granted an aggregate of
300,000 shares of the Company's common stock. This credit line was repaid in
full out of the proceeds of the 1998 Triarc Agreement.
In November 1997, in order to bring the Company into compliance with
requirements necessary for continued listing on the Nasdaq SmallCap Market,
Messrs. Loccisano and Gottlich purchased an aggregate of 20,000 shares of
redeemable Series B preferred stock at a price of $5.00 per share. In
January 1998, following a delisting of the Company's securities from the
Nasdaq SmallCap Market
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<PAGE>
and as a result of additional funds loaned to the Company by Messrs.
Loccisano and Gottlich, these shares of Series B preferred stock were
redeemed by the Company at a price of $5.00 per share.
In July 1998 the Company borrowed $150,000 from Gelt Financial Corporation.
Such loan bears interest at the rate of 5% above the prime rate. The loan is
secured by all the payments due the Company under the purchase agreement
dated September 3, 1996 entered into with Triarc Restaurant Group. In order
to induce Gelt Financial Corporation to enter into this loan, the Company
paid Gelt Financial Group a placement fee in the amount of $15,625 and
agreed to issue Gelt Financial Group 15,000 shares of the Company's
unregistered common stock. This loan was repaid in full out of the proceeds
of the 1998 Triarc Agreement.
In August 1998, Charles Loccisano, the Company's Chairman and Chief
Executive Officer, and Alan Gottlich, the Company's President and Chief
Financial Officer, provided the Company with short term bridge loans
aggregating $100,000. These loans provided for a loan fee of 5% representing
the initial loan fees and interest on the loan. These loans were repaid in
full out of the proceeds of the 1998 Triarc Agreement.
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<PAGE>
PART I ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Forward Looking Statements
When used in this Quarterly Report, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"projected", "intends to" or similar expressions are intended to identify
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties including: history of operating losses and operating cash flow
deficits; potential loss of wholesale sales resulting from the 1998 Triarc
Agreement; possible need for additional financing; dietary trends and consumer
preferences; competition; management of growth; limited manufacturing and
warehouse facilities; dependence on major customers; dependence upon key and
other personnel; government regulations; insurance and potential liability; lack
of liquidity; volatility of market price of the Company's common stock and
warrants; possible adverse effect of penny stock rules on liquidity of the
Company's securities; dividend policy and control by directors and executive
officers. Any of the aforementioned risks and uncertainties could cause the
Company's actual results to differ materially from historical earnings and those
presently anticipated or projected. As a result, potential investors are
cautioned not to place undue reliance on any such forward-looking statements,
which speak only as of the date made.
Balance Sheet Information
Total assets decreased by $461,709 from $2,721,538 to $2,259,829 due
primarily to a decrease in cash and notes receivable. Cash decreased to $504,672
on March 31, 1999 from $790,873 on December 31, 1998 due to payments of
outstanding indebtedness. Notes receivable - net of current maturities as of
March 31, 1999 decreased to $273,108 from $375,000 on December 31, 1998 due to
payments received on outstanding notes receivable. Total liabilities as of March
31, 1999 decreased to $476,916 from $671,053 on December 31, 1998 due to
payments of outstanding indebtedness. These decreases in total assets and total
liabilities reflect payments of outstanding indebtedness out of the proceeds
received from the sale of certain assets under the 1998 Triarc Agreement as more
fully discussed in Note 4 to the unaudited financial statements.
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<PAGE>
RESULTS OF OPERATIONS (for the three month period ended March 31, 1999 compared
to the three month period ended March 31, 1998).
The following tables set forth the components of the Company's revenue:
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
Wholesale sales $ 716,977 $1,223,996
Company-owned bakery sales 0 35,530
Royalties and licensing fees 0 30,000
---------- ----------
Total Revenue $ 716,977 $1,289,526
Wholesale sales decreased by 41% to $716,977 for the three months ended
March 31, 1999 from $1,223,996 for the three months ended March 31, 1998. This
decrease in sales for the three months ended March 31, 1999 was primarily the
result of sales of T.J. Cinnamons branded products to Walmart Super Centers for
a seasonal promotion during the three months ended March 31, 1998 which did not
recur during the three months ended March 31, 1999. The Company is continuing to
develop its wholesale sales through alliances with food brokers including Le
Grand Marketing, representing retail grocery stores in Southern California,
Nasser Marketing, representing grocery stores in Arizona, DND Sales,
representing grocery stores in Northern California and American Sales and
Marketing, representing membership club stores nationwide. The Company is
targeting its product line to in-store bakeries and in-store deli areas of
supermarket chains, focusing on large multi-unit accounts. The Company's
marketing efforts are centered on the following core products: (a) T.J.
Cinnamons Gourmet Cinnamon Rolls and Gourmet Sticky Rolls; (b) T.J. Cinnamons
CinnaChips; (c) Gourmet Rugalach; (d) Gourmet Brownies sold under the Hershey's
label; (e) Gourmet Bundt Cakes; (f) Gourmet Specialty Cakes and (g) Layer Cakes.
All of these products are sold in various packaging and sizes, and are shipped
through both fresh and frozen distribution. Based on the terms of the 1998
Triarc Agreement, the Company's license agreement with Triarc pursuant to which
it is licensed to manufacture and sell "T.J. Cinnamons" branded products expired
on December 31, 1998. Triarc has granted the Company two three month extensions
which expire on June 30, 1999. During the three months ended March 31, 1999,
sales of T.J. Cinnamons branded products represented 23% of the Company's
wholesale sales.
The Company is currently selling products to the following accounts: Ralphs
Supermarkets, Food-4-Less Supermarkets, Luckys Supermarkets, H.E. Butt
Supermarkets, Giant Supermarkets, Fry's Supermarkets and Costco Wholesale Clubs.
During the three months ended March 31, 1999, sales to Ralphs Supermarkets and
Food-4-Less Supermarkets represented 89% of the Company's wholesale sales.
Company-owned bakery sales decreased to $0 for the three months ended March
31, 1999 from $35,530 for the three months ended March 31, 1998. This bakery
sales decrease resulted from the closing of the Company's retail bakery located
in the Poughkeepsie Galleria Mall in August 1998. The closing of this bakery was
required under the terms of the 1998 Triarc Agreement.
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<PAGE>
Royalty and licensing fee revenues decreased to $0 for the three months
ended March 31, 1999 from $30,000 for the three months ended March 31, 1998.
This decrease in royalties and licensing fees resulted from a decrease in
franchise royalty collections due to the terms of the 1998 Triarc Agreement
whereby the Company sold all its interests as franchisor in the T.J. Cinnamons
franchise agreements, and as a result, did not receive any further royalty fees
following the closing in August 1998.
Cost of goods sold decreased by 40% to $604,045 for the three months ended
March 31, 1999 from $1,003,173 for the three months ended March 31, 1998
resulting from decreased wholesale sales resulting from a decreased volume of
wholesale sales to supermarkets chains and membership club chains.
Bakery selling, general and administrative expenses decreased by 18% to
$190,434 for the three months ended March 31, 1999 from $231,540 for the three
months ended March 31, 1998 resulting from decreases in bakery selling, general
and administrative expenses associated with a lower volume of wholesale sales.
Corporate selling, general and administrative expenses decreased by 49% to
$180,853 for the three months ended March 31, 1999 from $357,520 for the three
months ended March 31, 1998. These decreases were primarily from reduced legal,
accounting and consulting expenses incurred as a result of the failed
Commonwealth private placement offering during the three months ended March 31,
1998, and a reduction in management fees resulting from a termination of the
Triarc Management Agreement in August 1998.
Net interest expense for the three months ended March 31, 1999 was $3,178 as
compared to net interest expense for the three months ended March 31, 1998 of
$6,329. This increase in net interest expense resulted primarily from a decrease
in borrowings through the Gelt credit line.
Gain from sale of assets for the three months ended March 31, 1999 was
$14,820 as compared to gain from sale of assets of $0 for the three months ended
March 31, 1998. The net gain from sale of assets during the three months ended
March 31, 1999 was the result of additional consideration received from Triarc
relating to 1998 Triarc Agreement.
Other income increased to $9,727 for the three months ended March 31, 1999
from $0 for the three months ended March 31, 1998. This increase in other income
resulted from reductions in accounts payable and accrued liabilities resulting
from discounted settlements and write-offs of accounts payable based on their
being no recent contact with the Company by the creditors being owed such
amounts.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had a working capital balance of
approximately $1.0 million. During the three months ended March 31, 1999, the
Company experienced cash flow deficits from its operating activities primarily
because its operating expenses exceeded its operating revenues.
The Company used net cash in operating activities in the amount of $350,171
for the three months ended March 31, 1999, as compared to $557,570 for the three
months ended March 31, 1998.
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<PAGE>
The Company used net cash in investing activities in the amount of $18,685 for
the three months ended March 31, 1999, as compared to net cash used in investing
activities in the amount of $27,332 for the three months ended March 31, 1998.
The Company received net cash from financing activities in the amount of $82,656
for the three months ended March 31, 1999 as compared to net cash received from
financing activities in the amount of $469,391 for the three months ended March
31, 1998.
In September 1997, the Company entered into a loan agreement with Gelt
Financial Corporation for a credit line in the amount of $200,000 which was
subsequently increased to $300,000 secured by the Wal-Mart accounts receivable.
The terms of this loan agreement provide for a service fee of 1.5% of each
advance together with interest at a rate of 675 basis points above the prime
rate. The credit line balance was $0 on March 31, 1999.
In October 1997, the Company offered for sale units in a convertible
preferred private placement with Commonwealth Associates acting as placement
agent. This offering was to be held open to investors through January 1998, and
was not consummated as orders for the minimum number of shares were not
obtained. Without alternative sources of financing to fund the Company's
operating deficit, in January 1998, Charles Loccisano, the Company's Chairman
and Chief Executive Officer, and Alan Gottlich, the Company's President and
Chief Financial Officer, provided the Company with loans aggregating $282,500.
In March 1998, based on the need for additional funding resulting from the
receipt of large purchase orders from Walmart Super Centers, the previous
Loccisano and Gottlich loans were repaid in full, and Messrs. Loccisano and
Gottlich agreed to provide the Company with a credit line for up to $500,000
with interest payable quarterly at the applicable federal rate of 5.39% per
annum. The credit line is required to be repaid within one year or such shorter
period if the Company closes the 1988 Triarc Agreement described below. In
consideration for providing this credit line facility, the Company granted
Messrs. Loccisano and Gottlich an aggregate of 300,000 unregistered shares of
Common Stock. These credit lines were repaid in full out of the proceeds of the
1998 Triarc Agreement.
In November 1997, in order to bring the Company into compliance with
requirements necessary for continued listing on the Nasdaq SmallCap Market,
Messrs. Loccisano and Gottlich purchased an aggregate of 20,000 shares of
redeemable Series B preferred stock at a price of $5.00 per share. In January
1998, following a delisting of the Company's securities from the Nasdaq SmallCap
Market and as a result of additional funds loaned to the Company by Messrs.
Loccisano and Gottlich, these shares of Series B preferred stock were redeemed
by the Company at a price of $5.00 per share.
In July 1998 the Company borrowed $150,000 from Gelt Financial Corporation.
Such loan bears interest at the rate of 5% above the prime rate. The loan is
secured by all the payments due the Company under the purchase agreement dated
September 3, 1996 entered into with Triarc Restaurant Group. In order to induce
Gelt Financial Corporation to enter into this loan, the Company paid Gelt
Financial Group a placement fee in the amount of $15,625 and agreed to issue
Gelt Financial Group 15,000 shares of the Company's unregistered common stock.
This loan was repaid in full out of the proceeds of the 1998 Triarc Agreement.
In August 1998, Charles Loccisano, the Company's Chairman and Chief
Executive Officer, and Alan Gottlich, the Company's President and Chief
Financial Officer, provided the Company with short
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<PAGE>
term bridge loans aggregating $100,000. These loans provided for a loan fee of
5% representing the initial loan fees and interest on the loan. These loans were
repaid in full out of the proceeds of the 1998 Triarc Agreement.
In August 1998, the Company closed an agreement with TJ Holding Company,
Inc., a wholly owned subsidiary of Triarc Restaurant Group and Arby's, Inc.
d/b/a/ Triarc Restaurant Group (the "1998 Triarc Agreement") pursuant to which
the Company sold all of its rights and interests under the existing T.J.
Cinnamons franchise agreements and will terminate the purchase agreement dated
September 3, 1996 and the license agreement and management agreement entered
into with Triarc Restaurant Group and affiliates dated August 29, 1996. The
Company received payments under the 1998 Triarc Agreement aggregating $4.0
million of which $3.0 million was paid in cash and $1.0 million was paid in the
form of a non-interest bearing promissory note payable over 24 months. The
agreement further provides for a contingent additional payment of up to $1.0
million conditioned on the Company's attainment of certain sales targets of T.J.
Cinnamons products for the fiscal year ending December 31, 1998. Based on actual
sales for the fiscal year ended December 31, 1998, the Company did not achieve
these sales targets, and as a result, the Company did not receive any of the
conditional additional payments under the 1998 Triarc Agreement.
The Company has an interoffice network of personal computers operating under
a Novell network. All of the Company's PC's utilize the Windows 95 operating
system and the Company runs its accounting system on MAS 90. The Company
recently retained outside computer consultants to upgrade its network system to
address Year 2000 issues including upgrading the MAS 90 accounting system and
other spreadsheet and word processing programs. The upgrades were completed and
tested in September 1998 at a cost of approximately $6,000. The Company believes
that as a result of these upgrades, its computer systems are Year 2000
compliant.
As part of its Year 2000 compliance program, the Company is in the process
of contacting and surveying all of its vendors and suppliers with whom the
Company does a material amount of business to determine whether these parties'
systems are subject to Year 2000 issues. The failure of the Company's vendors
and suppliers to convert their systems on a timely basis may have a material
adverse effect on the Company's operations. The Company is in the process of
developing a contingency plan in the even these vendors and suppliers are not
Year 2000 compliant on a timely basis.
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<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved as plaintiff or defendant
in various legal proceedings arising in the normal course of its
business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of
management that the resolution of these legal actions should not have
a material effect on the Company's financial position, results of
operations or liquidity.
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
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed herewith.
Exhibit Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file any current reports on Form 8-K for the
quarter ended March 31, 1999.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Paramark Enterprises, Inc.
Dated: May 13, 1998 By: /s/ Charles N. Loccisano
------------ ----------------------------------
Charles N. Loccisano,
Chairman and Chief Executive Officer
By: /s/ Alan S. Gottlich
----------------------------------
Alan S. Gottlich,
President and Chief Financial Officer
(Principal Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Paramark Enterprises, Inc. as of March 31,
1999 and the three months then ended, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<NAME> PARAMARK ENTERPRISES, INC.
<CIK> 0000915661
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 504,672
<SECURITIES> 0
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0
0
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</TABLE>
