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, 2001 .
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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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
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(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, 2001.
Transitional Small Business disclosure Format (check one):
Yes X No ___
Paramark Enterprises Inc.
Liquidation Basis
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
Financial Statements - Liquidation Basis
Consolidated Statement of Net Assets in Liquidation as of December 31, 2001. 3
Consolidated Statement of Net Assets in Liquidation as of March 31, 2001. 4
Consolidated Statement of Changes in Net Assets in Liquidation for the period
From January 1, 2001 to March 31, 2001. 5
Notes to Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND CHANGES IN NET ASSETS
(LIQUIDATION BASIS) 8
PART II
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults upon Senior Securities 11
Item 4 Submission of Matters to a Vote
of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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PART I - FINANCIAL INFORMATION
PARAMARK ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 2000
(AUDITED)
Assets
Cash $ 151,734
Accounts receivable 47,114
Other assets 58,676
Contract receivable 825,000
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Total current assets 1,082,524
Liabilities
Accounts payable and accrued expenses 714,496
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Net assets in liquidation $ 368,028
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SEE NOTES TO FINANCIAL STATEMENTS
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PARAMARK ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
MARCH 31, 2001
(UNAUDITED)
Assets
Cash $ 47,892
Accounts receivable 29,606
Other assets 41,386
Contract receivable 850,000
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Total assets 968,884
Liabilities
Accounts payable and accrued expenses 736,755
Reserve for legal fees 50,000
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Total liabilities 786,755
Net assets in liquidation $182,129
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SEE NOTES TO FINANCIAL STATEMENTS
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PARAMARK ENTERPRISES, INC.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS)
(UNAUDITED)
Net assets in liquidation at December 31, 2000 $ 368,028
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Loss from activities during the "wind-down" period from
January 1, 2001 through March 31, 2001 (135,899)
Reserve for legal fees in conection with outstanding legal proceedings (50,000)
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Decrease in net assets (185,899)
Net assets in liquidation at March 31, 2001 $ 182,129
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Number of common shares outstanding 3,613,383
Net assets in liquidation per common share $ .05
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SEE NOTES TO FINANCIAL STATEMENTS
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Paramark Enterprises, Inc.
Notes to Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
On December 15, 2000, the Company consummated an asset purchase agreement
(the "Rich Products Agreement") with Rich Products, pursuant to which the
Company sold its bakery operations located in El Cajon, California
representing a majority of the Company's operating assets. The Rich
Products Agreement provides for a purchase price aggregating $2,193,950
inclusive of a payment for inventory. The aggregate purchase price will be
paid as follows: $193,950 on October 16, 2000, $1,000,000 on December 15,
2000, and $1,000,000 payable in semiannual installments over a period of
four (4) years. Rich Products also assumed approximately $285,000 in
equipment lease related debt. In addition, pursuant to the terms of the
Rich Products Agreement, Rich Products entered into consulting agreements
with Charles Loccisano, Alan Gottlich and Wayne Sorensen, the Company's
Chairman and CEO, President and CFO, and Bakery General Manager,
respectively. These consulting agreements provided for compensation to
Messrs. Loccisano, Gottlich and Sorensen over a four year term in an annual
amount of $50,000, $30,000 and $20,000, respectively.
On December 15, 2000, the Company consummated an asset purchase and sale
agreement (the "Brooks Street Agreement") with Brooks Street Companies,
Inc. ("Brooks Street"), pursuant to which the Company sold the remainder of
its bakery operations to Brooks Street. The Brooks Street Agreement
provided for a purchase price in the form of the assumption by Brooks
Street of approximately $70,000 in equipment lease related debt, the
purchase of inventory by Brooks Street in the amount of $12,500 and the
agreement by Brooks Street to make royalty payments to the Company, over a
period of four (4) years, equal to 5% of net sales of pull-apart cakes to
existing customers of the Company plus 1 1/2% of net sales of pull-apart
cakes to new customers of Brooks Street.
The Company's shareholders approved a plan of liquidation on December 15,
2000 pursuant to which the Company would distribute all remaining net
proceeds form the Rich Products transaction and the Brooks Street
transaction to its shareholders over a period of four (4) years . Prior to
implementing the plan of liquidation, the Company intends to explore
various options available to the Company, including the possible sale of
the public shell. The Board of Directors reserves the right to terminate
the plan of liquidation to the extent any of the options explored by the
Company are financially beneficial to the Company's shareholders.
As a result of the sale of substantially all of the Company's assets to
Rich Products and Brooks Street and the plan of liquidation and
dissolution, the Company changed its basis of accounting from the going
concern basis to the liquidation basis in accordance with generally
accepted accounting principles,
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effective October 1, 2000. This basis of accounting is considered
appropriate when, among other things, liquidation of a company appears
imminent and the net realizable value of its assets are reasonably
determinable. Consequently, assets have been valued at their estimated net
realizable value and liabilities are estimated at their estimated settlement
amounts. Because of the approval of the plan of liquidation, comparative
financial information from previous years and certain other disclosures are
not meaningful and have not been presented in the consolidated financial
statements.
The Company is continuing to explore a number of strategic alternatives
including a possible reverse merger or sale of its public shell, which would
allow the Company to continue as a going concern. In view of these matters,
continued operations of the Company are dependent upon these possible
strategic alternatives and a termination of the plan of liquidation.
The primary statements required under the liquidation basis of accounting
are Statements of Net Assets in Liquidation as of March 31, 2001 and
December 31, 2000, respectively, and a Statement of Changes in Net Assets in
Liquidation for the period from January 1, 2001 to March 31, 2001. With the
exception of the Statement of Net Assets in Liquidation as of December 31,
2000, 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, 2000. There have been no
significant changes of accounting policies since December 31, 2000.
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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. The Company's forward-looking statements reflect
the company's best judgment based on current information and are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those expressed in , or implied by, these statements. Readers
are cautioned that they should not place undue reliance on any forward-looking
statements because such statements speak only as of the date they are made.
The methods used by management in estimating the value of the Company's
assets and liabilities do not, with certainty, result in an exact determination
of value nor are they intended to indicate the amount, if any, a stockholder may
receive in liquidation. The amount of liquidation proceeds depends largely on
factors beyond the Company's control, including without limitation, the rate of
inflation, changes in interest rates, the final outcome of all pending
litigation, the amount and nature of any unknown contingent liabilities and the
ability to collect its receivables, contract payments and royalty payments.
Overview
On December 15, 2000, the Company consummated an asset purchase
agreement (the "Rich Products Agreement") with Rich Products, pursuant to which
the Company sold its bakery operations located in El Cajon, California
representing a majority of the Company's operating assets. The Rich Products
Agreement provides for a purchase price aggregating $2,182,750 inclusive of a
payment for inventory. The aggregate purchase price will be paid as follows:
$182,750 on October 16, 2000, $1,000,000 on December 15, 2000, and $1,000,000
payable in semiannual installments over a period of four (4) years. Rich
Products also assumed approximately $285,000 in equipment lease related debt. In
addition, pursuant to the terms of the Rich Products Agreement, Rich Products
entered into consulting agreements with Charles Loccisano, Alan Gottlich and
Wayne Sorensen, the Company's Chairman and CEO, President and CFO, and Bakery
General Manager, respectively. These consulting agreements provided for
compensation to Messrs. Loccisano, Gottlich and Sorensen over a four year term
in an annual amount of $50,000, $30,000 and $20,000, respectively.
On December 15, 2000, the Company consummated an asset purchase and
sale agreement (the "Brooks Street Agreement") with Brooks Street Companies,
Inc. ("Brooks Street"), pursuant to which the Company sold the remainder of its
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bakery operations to Brooks Street. The Brooks Street Agreement provided for a
purchase price in the form of the assumption by Brooks Street of approximately
$70,000 in equipment lease related debt, the purchase of inventory by Brooks
Street in the amount of $12,500 and the agreement by Brooks Street to make
royalty payments to the Company, over a period of four (4) years, equal to 5% of
net sales of pull-apart cakes to existing customers of the Company plus 1 1/2%
of net sales of pull-apart cakes to new customers of Brooks Street.
The Company's shareholders approved a plan of liquidation on December
15, 2000 Pursuant to which the Company would distribute all remaining net
proceeds form the Rich Products transaction and the Brooks Street transaction to
its shareholders over a period of four (4) years . Prior to implementing the
plan of liquidation, the Company intends to explore various options available to
the Company, including the possible sale of the public shell. The Board of
Directors reserves the right to terminate the plan of liquidation to the extent
any of the options explored by the Company are financially beneficial to the
Company's shareholders.
In August 2000, Charles Loccisano, the Company's Chairman and Chief
Executive Officer, provided the Company with a loan of $150,000. The loan
provided for a term of one year and provided for interest in the amount of 5%
per annum. The Company granted Mr. Loccisano 50,000 unregistered shares of
common stock as additional consideration for providing this loan. This loan was
repaid in full out of the proceeds of a loan with Gelt Financial Corporation in
September 2000.
In September 2000, Gelt Financial Corporation ("Gelt") provided the
Company with a credit line in the amount of $250,000. The credit line loan
provided for a term of one year and provided for interest of 5% above the prime
rate. In addition, the Company paid Gelt a placement fee in the amount of
$31,250 and granted Gelt 20,000 unregistered shares of common stock as
additional consideration for providing this loan. The balance of this credit
line loan will be repaid in full out of the proceeds of the Rich Products
Transaction.
In September 2000, Charles Loccisano, the Company's Chairman and Chief
Executive Officer, provided the Company with a credit line in the amount of
$150,000. The credit line provided for a term of one year and provided for
interest in the amount of 5% per annum. The Company granted Mr. Loccisano
150,000 unregistered shares of common stock as additional consideration for
providing this loan. The balance of this credit line will be repaid in full out
of the proceeds of the Rich Products Transaction.
Adoption of the Liquidation Basis of Accounting
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As a result of the sale of substantially all of the Company's assets to
Rich Products and Brooks Street and the plan of liquidation, and dissolution,
the Company changed its basis of accounting from the going concern basis to the
liquidation basis in accordance with generally accepted accounting principles,
effective October 1, 2000. This basis of accounting is considered appropriate
when, among other things, liquidation of a company appears imminent and the net
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realizable value of its assets are reasonably determinable. Consequently, assets
have been valued at their estimated net realizable value and liabilities are
estimated at their estimated settlement amounts. Because of the approval of the
plan of liquidation, comparative financial information from previous years and
certain other disclosures are not meaningful and have not been presented in the
consolidated financial statements.
Changes in Net Assets for the period January 1, 2001 to March 31, 2001
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The decrease in net assets in liquidation of $185,899 was due primarily
to the costs associated with the "winding-down" of the Company's operations and
a reserve in the amount of $50,000 for legal costs in connection with the
defence of outstanding legal proceedinds. The costs of winding-down" of the
Company's operations included approximately $48,300 of legal fees which include
the legal costs associated with defending the pending legal actions against the
Company, and approximately $14,000 of accounting fees.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
In 2000, the Company received discrimination and wrongful termination
claims brought by two separate employees (Vargas and DeSantiago)
employed at the Company's bakery facility in El Cajon, California.
These claims are currently pending in the California Department of Fair
Employment and Housing. The Company has fully responded to all requests
for information and has formally denied liability. The investigation
regarding these claims is currently pending.
In January 2001, the Company and certain of its officers were named as
a defendant in a civil action filed by Pensabene International, Inc.
(the "Plaintiff") in the Superior Court for the State of California.
The claim is for damages for misappropriation of trade secrets, trade
libel, breach of confidentiality, breach of fiduciary duty, tortious
interference with economic relations, breach of contract, common law
palming off, unfair business practices and a violation of state
antitrust laws. This action arose resulted from the Company's
employment of Kandy Konn, a former employee and consultant of the
Plaintiff. The Company believes these claims are frivolous and without
merit, and the Company intends to vigorously defend this action.
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
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
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NONE
(b) Reports on Form 8-K.
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The Company did not file any current reports on Form
8-K for the quarter ended March 31, 2001.
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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 10, 2001 By: /s/ Charles N. Loccisano
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Charles N. Loccisano,
Chairman and Chief Executive Officer
By: /s/ Alan S. Gottlich
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Alan S. Gottlich,
President and Chief Financial Officer
(Principal Accounting Officer)
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