U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to ________
COMMISSION FILE NUMBER: 000-31507
MARMION INDUSTRIES CORP.
(Name of small business issuer in its charter)
NEVADA 06-1588136
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9103 EMMOTT ROAD, BUILDING 6, SUITE A
HOUSTON, TEXAS 77040
(Address of principal executive offices) (Zip Code)
(713) 466-6585
(Issuer's telephone number)
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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of September 30, 2004, the
issuer had 298,430 shares of its common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 2
Item 1. Financial Statements (Unaudited). . . . . . . . . . . . . . . . . . 2
Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . 10
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . . 11
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . . 14
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . . 15
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. . . 16
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. . . 17
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements and related notes are included as part of this
Quarterly Report as indexed in the appendix on page F-1 through F------.
MARMION INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2004
(UNAUDITED)
ASSETS
Current assets
Cash $ 26,357
Accounts receivable, net of allowance for doubtful accounts of $0 118,192
------------
Total current assets 144,549
Property and equipment, net 103,046
------------
TOTAL ASSETS $ 247,595
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 179,376
Accrued expenses 45,599
Accrued salaries - officers 344,592
Advances - stockholder 30,984
Notes payable - related party 300,000
Current maturities of notes payable 16,169
------------
Total current liabilities 916,720
Notes payable, net of current maturities 33,053
------------
TOTAL LIABILITIES 949,773
Commitments
STOCKHOLDERS' DEFICIT:
Series A preferred stock, $.001 par value, 500,000,000 shares authorized,
2,870,000 shares issued and outstanding 147,669
Common stock, $.001 par value, 3,000,000,000 shares authorized,
298,430 shares issued and outstanding 298
Additional paid in capital 930,352
Retained earnings (1,780,497)
------------
Total Stockholders' Deficit (702,178)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 247,595
============
MARMION INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------
2004 2003 2004 2003
----------- ---------------- ------------ -----------
Revenues $ 349,079 $ 140,733 $ 742,738 $ 540,944
Cost of sales 241,152 162,608 550,333 409,732
----------- ---------------- ------------ -----------
Gross profit 107,927 (21,875) 192,405 131,212
----------- ---------------- ------------ -----------
Costs and expenses
Salaries and employee benefits 164,824 123,473 431,185 232,296
General and administrative 627,462 69,000 1,032,331 159,185
----------- ---------------- ------------ -----------
Total costs and expenses 792,286 192,473 1,463,516 391,481
----------- ---------------- ------------ -----------
Net loss $ (684,359) $ (214,348) $(1,271,111) $ (260,269)
=========== ================ ============ ===========
Net loss per share $ (3.05) $ (45.40) $ (13.95) $ (55.13)
=========== ================ ============ ===========
Weighted average shares
outstanding:
Basic and diluted 224,727 4,721 91,121 4,721
=========== ================ ============ ===========
MARMION INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
2004 2003
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,271,111) $(260,269)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 23,679 24,959
Loss on disposition of asset - 4,945
Stock for services 438,200 -
Stock options 85,356 -
Changes in assets and liabilities:
Accounts receivable 32,306 (13,433)
Accounts payable 89,830 138,048
Accrued expenses 15,971 13,481
Accured salaries - related party - 67,296
------------ ----------
CASH FLOWS USED IN OPERATING ACTIVITIES (585,769) (24,973)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Disposition of Assets - 20,421
Net cash received in recapitalization 4,477 -
Capital expenditures (3,466) (55,445)
------------ ----------
CASH FLOWS FROM INVESTING ATIVITIES
1,011 (35,024)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of exercise of common stock options 549,286 -
Advances - stockholder, net (60,125) 68,379
Proceeds from notes payable - related party 255,000 35,445
Repayment from notes payable - related party (200,000) (34,442)
Repayment of notes payable (11,908) -
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES 532,253 69,382
------------ ----------
NET INCREASE (DECREASE) IN CASH (52,505) 9,385
Cash, beginning of period 78,862 (9,158)
------------ ----------
Cash, end of period $ 26,357 $ 227
============ ==========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 2,119 $ 2,212
============ ==========
Income taxes $ - $ -
============ ==========
MARMION INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Marmion Industries,
Inc. have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the Securities and
Exchange Commission ("SEC"), and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's statement
filed with the SEC on Form 8-K. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements for the most recent
fiscal year 2003 as reported in Form 8-K, have been omitted.
NOTE 2 - STOCK BASED COMPENSATION
The Company accounts for its employee stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. Marmion Industries granted 78,750,000 options to purchase common
stock to employees in the nine months ending September 30, 2004. All options
vest immediately, have an exercise price of 85 percent of market value on the
date of grant and expire 10 years from the date of grant. Marmion Industries
recorded compensation expense of $85,356 under the intrinsic value method during
the nine months ended September 30, 2004.
The following table illustrates the effect on net loss and net loss per share if
Marmion Industries had applied the fair value provisions of FASB Statement No.
123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ------------ -----------
Net loss available to common stockholders, as reported
$ (684,359) $ (214,348) $(1,271,111) $ (260,269)
Add: stock based compensation
determined under intrinsic value
based method 41,856 - 85,356 -
Less: stock based compensation
determined under fair value
based method (279,038) - (403,863) -
----------- ----------- ------------ -----------
Pro forma net loss $ (921,541) $ (214,348) $(1,589,618) $ (260,269)
=========== =========== ============ ===========
Basic and diluted net income
(loss) per share:
As reported $ (0.01) $ (0.09) $ (0.03) $ (0.11)
=========== =========== ============ ===========
Pro forma $ (0.01) $ (0.09) $ (0.03) $ (0.11)
=========== =========== ============ ===========
NOTE 3 - ADVANCES - STOCKHOLDER
Marmion Industries has received net advances from the President of $30,984. The
advances are unsecured and are due upon demand. Interest is being accrued at 10%
per year. Accrued interest as of September 30, 2004 and 2003 was $21,506 and
$13,550, respectively.
NOTE 4 - EQUITY
In November 2004 Marmion Industries approved a change to their articles of
incorporation bring the number of authorized shares of common stock to
3,000,000,000 and authorized shares of preferred stock to 500,000,000.
In November 2004, Marmion Industries declared a reverse stock split effected in
the form of one common shares for each five hundred (500) issued and outstanding
common share of Marmion Industries common stock. Accordingly, all references to
number of common shares and per share data in the accompanying financial
statements have been adjusted to reflect the stock split on a retroactive basis.
During the nine months ended September 30, 2004, employees' exercised options to
acquire 78,750,000 shares (pre split) of common stock on a cashless basis
through an outside broker. The broker sold the shares on the open market and
Marmion Industries received proceeds totaling $549,286.
During the nine months ended September 30, 2004 Marmion Industries issued 74,000
shares (post split) of common stock to various consultants. The shares were
valued at $438,200.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Much of the discussion in this Item is "forward looking" as that term is
used in Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. Actual operations and results may materially differ from
present plans and projections due to changes in economic conditions, new
business opportunities, changed business conditions, and other developments.
Other factors that could cause results to differ materially are described in our
filings with the Securities and Exchange Commission.
The following are factors that could cause actual results or events to
differ materially from those anticipated, and include, but are not limited to
general economic, financial and business conditions, changes in and compliance
with governmental laws and regulations, including various state and federal
environmental regulations, our ability to obtain additional financing from
outside investors and/or bank and mezzanine lenders; and our ability to generate
sufficient revenues to cover operating losses and position us to achieve
positive cash flow.
Readers are cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. We believe
the information contained in this Form 10-QSB to be accurate as of the date
hereof. Changes may occur after that date. We will not update that information
except as required by law in the normal course of our public disclosure
practices.
Additionally, the following discussion regarding our financial condition
and results of operations should be read in conjunction with the financial
statements and related notes contained in Item 1 of Part I of this Form 10-QSB,
as well as the financial statements in Item 7 of Part II of our Form 10-KSB for
the fiscal year ended December 31, 2003.
MANAGEMENT'S PLAN OF OPERATION
Prior to 2002 we were a blind pool whose sole business and direction was to
identify and merge with an operating business. During 2002 we entered into two
separate transactions to acquire operating businesses. Both acquisitions proved
not to be profitable and were terminated. During 2002 and 2003, we continued
our efforts to identify and merge with an operating bushiness and entered into
several agreements and transactions to accomplish that goal.
We were formed in Florida on September 5, 1996 under the name Fairbanks,
Inc. On April 18, 1997, we changed our name to Jet Vacations, In. On May 11,
1998 we changed our name to Precom Technology, Inc. On October 12, 2002 we
again changed our name, this time to International Trust & Financial Systems,
Inc. Although we were founded in 1996, our original business plan was capital
intensive and we were unable to raise the capital necessary to implement or
carry out our original plan.
In accordance with Florida law, our board of directors unanimously voted on
August 13, 2002 to amend our Articles of Incorporation to effect a reverse split
of all outstanding shares of our common stock at an exchange ratio of
one-for-two, effective as of the close of business on September 10, 2002.
On January 19, 2004, a change in control occurred as the result of the
acquisition of our capital stock of the Registrant by Wilbert H. Marmion and
Stephen F. Owens. Pursuant to that certain Purchase and Escrow Agreement dated
November 12, 2003, by and between us and Wilbert H. Marmion, and J.
Bennett Grocock, P.A., on January 19, 2004 Mr. Marmion acquired 2,360,430 shares
of our common stock and 2,870,000 share of our preferred stock. Each of our
preferred shares is convertible into 40 shares of our common stock, and each
preferred share has the voting rights as 40 shares of our common stock. All of
the common and preferred shares acquired by Mr. Marmion carried a legend
restricting the transfer there of under the Securities Act of 1933, as amended.
On January 19, 2004, Mr. Owens acquired 2,999,855 shares of our
free-trading common stock.
Additionally with a consummation of the stock purchase transactions, Tim B.
Smith and David A Pells resigned their positions as our officers and directors.
Wilbert H. Marmion was elected our sole director and the Registrant in their
place and stead. On February 24, 2004, Wilbert H. Marmion, our sole director at
the time, appointed Ellen Raidl and John Royston to serve as directors alongside
Wilbert H. Marmion. Ms. Raidl and Mr. Royston were also elected our officers.
Consequently, as of the date of this Quarterly Report, we have the following
officers:
OFFICE NAME
------ ----
President and chief executive officer Wilbert H. Marmion
Secretary and treasurer Ellen Raidl
Vice president John Royston
Mr. Marmion and Mrs. Raidl are married.
Because we lack capital, an investment in us involves a very high degree of
risk.
Beginning in the second quarter of 2004, as a result of a contribution to
our capital by Mr. Marmion of all of his shares of common stock in Marmion
Investments, Inc., a Texas corporation d/b/a Marmion Air Service, we have
entered the business of manufacturing and marketing of the explosion proof air
conditioners, refrigeration systems, chemical filtration systems and building
pressurizers. The explosion-proof market encompasses industries including oil
and gas exploration and production, chemical plants, granaries and fuel storage
depots. We feel there is significant demand for these systems anywhere sensitive
computer systems and analysis equipment is located. We also provide residential
and commercial HVAC service in Texas, as well as specialty service to Fortune
500 clients.
On May 25, 2004, we filed a Certificate of Designation for the Class A
Preferred Stock. 2,870,000 shares of our Preferred Stock were designated as
Class A Preferred Stock. The shares of the Class A Preferred Stock are
convertible into 40 shares of the common stock. On all matters submitted to a
vote of the holders of the common stock, including, without limitation, the
election of directors, a holder of shares of the Class A Preferred Stock shall
be entitled to the number of votes on such matters equal to the number of shares
of the Class A Preferred Stock held by such holder multiplied by 40.
On July 15, 2004, we filed an Amendment to the Certificate of Designation
for the Class A Preferred Stock, which increased the number of shares designated
as Class A Preferred Stock from 2,870,000 to 10,000,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE CORRESPONDING PERIOD IN
2003.
Revenues. During the three months ended September 30, 2004, we had net
revenues of $349,079 compared to $140,733 during the same period in 2003, an
increase of $2,083 (a 1% increase). Costs of sales were $241,152 or
approximately 69% of our revenues during the three-month period ended September
30, 2004 as compared to $162,608 or approximately 116% during the same period in
2003.
The increase in revenues reflects strong performance in our operations
generally, and especially in the sector of our business related to the slow
stabilization of the events in the Middle East. We believe that our hazardous
location manufacturing business is directly related to the general economy and
that a strong economy will have a positive effect on the revenues we earn.
Operating Expenses. During the three-month period ended September 30,
2004, operating expenses were $792,286 or approximately 125% of revenue as
compared to $192,473 or approximately 137% of revenue for the same period in
2003. The increase in operating expenses as a percentage of revenues is the
result of the increase in jobs that have been awarded as well as an increase in
professional fees and the hiring of new employees during the 2004 fiscal year.
Personnel and consulting expenses were $197,514 or approximately 75% of our
operating expenses during the three-month period ended September 30, 2004 as
compared to $44 or approximately 1% of our operating expenses during the
three-month period ended September 30, 2003. The number of our employees
increased due to the addition of higher quality employees to increase revenues.
During the three month period ended September 30, 2004, as a result of the
increase in employees, salaries and benefits increased to $164,824 as compared
to $56,177 for the same period in 2003, commissions decreased to $0 as compared
to $765 for the same period in 2003.
During the three-month period ended September 30, 2004, advertising and
promotion expenses were $6,637 or approximately 1% of our operating expenses as
compared to $375 or approximately .2% of our operating expenses for the
three-month period ended September 30, 2003. We anticipate that advertising and
promotion expenses will increase substantially for the remainder of 2004 as we
participate in joint marketing programs, and increase our investor relations
budget.
General overhead expenses totaled $627,462 for the three month period ended
September 30, 2004, or approximately 79% of our total operating expenses and
approximately 180% of our total revenue, as compared to $136,296 for the three
month period ended September 30, 2003, which was approximately 71% of our total
operating expenses and approximately 97% of our total revenue. General overhead
expenses for the three month period ended September 30, 2004 included rent and
utilities in the amount $13,697, telephone costs in the amount of $5,786, costs
of travel related to operations in the amount of $8,578, repair and maintenance
costs in the amount of $20, automotive costs in the amount of $3,821, insurance
costs totaling $7,698 and office and administration expenses in the amount of
$587,682.
We anticipate that overhead as a percentage of operating expenses and total
revenue will decrease in future periods as we achieve certain economies from our
operations. If we expand our operations, we anticipate that the overall level
of general overhead expenses in dollars will increase.
Professional fees, which are made up primarily of accounting fees and legal
fees, totaled $88,247 during the three-month period ended September 30, 2004 as
compared to $44 for the three-month period ended September 30, 2003. The
professional fees related to preparation of our Securities Exchange Act reports,
professional fees associated with the preparation of our Annual Meetings, and
professional fees associated with consulting and representation. Furthermore,
if we find an appropriate target, we intend to try to make at least one
acquisition during this fiscal year. If we are successful in making an
acquisition, we will incur expenses relating to the drafting and review of the
documents related to the transaction.
Depreciation and amortization expense was $7,867 for the three-month period
ended September 30, 2004 as compared to $3,283 for the three-month period ended
September 30, 2003.
Gross Profit. Costs of goods sold were $241,152 for the three-month period
ended September 30, 2004 as compared to $162,608 for the three-month period
ended September 30, 2003. Gross profits were $107,927 or approximately 30% of
revenues for the three-month period ended September 30, 2004 as compared to
$(21,875) or approximately 26% of revenues for the period ended September 30,
2003. Future gross profit margins may vary considerably from quarter-to-quarter
depending on the performance of our various divisions.
Operating Net Income. For the quarter ended September 30, 2004 we realized
a net loss from continuing operations of $(684,359) or $(0.01) per share as
compared to a net loss of $(214,348) for the third quarter of 2003, or $(0.09)
per share.
We intend to continue to find ways to expand our business, including
through acquisitions. We believe that revenues and earnings will increase as we
grow. We anticipate that we will incur losses in the future if we are able to
expand our business and the marketing of our Internet technology through
acquisitions. The losses will be created to the extent of the excess of
technology development and marketing expenses over the income from operations.
LIQUIDITY AND CAPITAL RESOURCES
Our capital requirements, particularly as they relate to our desire to
expand through acquisitions, our plan to expand services, have been and will
continue to be significant. Our future cash requirements and the adequacy of
available funds will depend on many factors, including the pace at which we are
able to make acquisitions, the pace at which we can deploy our technology, the
acceptance of our third party certification by our clients and the availability
of new contracts
To date, we have funded our operations with the revenue we earn and through
sales of our securities. A substantial portion of the revenue we earn comes
from our business relationships with large oil industry companies. If one or
both of these business relationships were terminated, our revenues could decline
significantly. We cannot guarantee that these relationships will continue, or
even if they continue, that we will earn enough revenue to sustain our
operations. Currently, however, we believe that revenues from our operations
together with the proceeds from the offering of our securities we undertook in
January 2004 and our cash on hand will be sufficient to satisfy our working
capital needs for the remainder of 2004. During the next 12 months, if we fail
to earn revenue in an amount sufficient to fund our operations, we intend to
raise capital through public or private offerings of our securities or from
loans, if we are able to obtain them. We have no commitments for financing for
our future needs and we cannot guarantee that financing will be available to us,
on acceptable terms or at all. If we do not earn revenues sufficient to support
our business and we fail to obtain other financing, either through an offering
of our securities or by obtaining loans, we may be required to curtail, or even
to cease, our operations.
As of September 30, 2004 we had working deficit of $(772,171) made up of
cash and accounts receivables of $118,192. Cash flow used for operating
activities required $(585,869) during the quarter ended September 30, 2004. We
anticipate that cash will remain constant for 2004. Our cash resources may
decrease if we complete an acquisition during 2004, or if we are unable to
maintain positive cash flow from our business through 2004.
Cash flow used in investing activities during the three-month period ended
September 30, 2004 was $(1,011), due to recapitalization. Net cash flow from
financing activities during the three-month period ended September 30, 2004, was
$523,253, which included proceeds from our private offering and proceeds from
the exercise of stock options.
Nine months ended September 30, 2004 compared to the corresponding period in
2003.
Revenues. During the Nine months ended September 30, 2004, we had net
revenues of $742,738 compared to $540,944 during the same period in 2003, an
increase of $201,794 (a 37% increase). Costs of sales were $550,333 or
approximately 74% of our revenues during the nine month period ended September
30, 2004 as compared to $409,732 or approximately 76% during the same period in
2003.
The increase in revenues reflects strong performance in our operations
generally. We believe that our hazardous location air conditioner manufacturing
will have positive effect on the revenues we earn. The decrease in the costs of
sales as a percentage of revenue is attributed to the strong performance of our
business products.
Operating Expenses. During the nine-month period ended September 30, 2004,
operating expenses were $1,032,331 or approximately 139% of revenue as compared
to $226,481 or approximately (.61)% of revenue for the same period in 2003.
The increase in operating expenses as a percentage of revenues is the result of
increased cost in professional fees and increase in payroll during the 2004
fiscal year.
Personnel and consulting expenses were $431,185 or approximately 29% of our
operating expenses during the nine month period ended September 30, 2004 as
compared to $165,000 or approximately 22% of our operating expenses during the
nine-month period ended September 30, 2003. The number of our employees
increased due to our expansion. During the nine month period ended September
30, 2004, as a result of the increase in employees, commissions and salaries
increased to $236,041 as compared to $76,607 for the same period in 2003,
commissions increased to $5,500 as compared to $765 for the same period in 2003.
During the nine-month period ended September 30, 2004, advertising and
promotion expenses were $8,342 or approximately .57% of our operating expenses
as compared to $461 or approximately .10% of our operating expenses for the
nine-month period ended September 30, 2003. We anticipate that advertising and
promotion expenses will increase substantially for the remainder of 2004 as we
participate in joint marketing programs and increase our investor relations
budget.
General overhead expenses totaled $1,032,331 for the nine month period
ended September 30, 2004, or approximately 71% of our total operating expenses
and approximately 144% of our total revenue, as compared to $226,481 for the
nine month period ended September 30, 2003, which was approximately 58% of our
total operating expenses and approximately 42% of our total revenue. General
overhead expenses for the six month period ended September 30, 2004 included
rent and utilities in the amount $29,595, telephone costs in the amount of
$10,398, costs of travel related to operations in the amount of $17,467, repair
and maintenance costs in the amount of $878, automotive costs in the amount of
$7,778, insurance costs totaling $11,456 and office and administration expenses
in the amount of $958,759.
We anticipate that overhead as a percentage of operating expenses and total
revenue will decrease in future periods as we achieve certain economies from our
operations. If we expand our operations, we anticipate that the overall level
of general overhead expenses in dollars will increase.
Professional fees, which are made up primarily of accounting fees and legal
fees, totaled $194,425 during the nine-month period ended September 30, 2004 as
compared to $7,844 for the nine-month period ended September 30, 2003. The
professional fees related to preparation of our Securities Exchange Act reports,
professional fees associated with the preparation of our Annual Meeting.
Furthermore, if we find an appropriate target, we intend to try to make at least
one acquisition during this fiscal year. If we are successful in making an
acquisition, we will incur expenses relating to the drafting and review of the
documents related to the transaction.
Depreciation and amortization expense was $23,679 for the nine-month period
ended September 30, 2004 as compared to $9,849 for the nine-month period ended
September 30, 2003.
Gross Profit. Costs of goods sold were $550,333 for the nine-month period
ended September 30, 2004 as compared to $409,732 for the nine-month period ended
September 30, 2003. Gross profits were $192,405 or approximately 26% of
revenues for the six-month period ended September 30, 2004 as compared to
$131,212 or approximately 24% of revenues for the period ended September 30,
2003.
Operating Net Income. For the nine months ended September 30, 2004 we
realized a deficit in continuing operations of ($1,271,111) as compared to
($260,269) in the nine months ended September 30, 2003
We intend to continue to find ways to expand our business, including
through acquisitions. We believe that revenues and earnings will increase as we
grow. We anticipate that we will incur losses in the future if we are able to
expand our business and the marketing of our Internet technology through
acquisitions. The losses will be created to the extent of the excess of
technology development and marketing expenses over the income from operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We believe that we do not have any material exposure to interest or
commodity risks. We are exposed to certain economic and political changes in
international markets where we compete, such as inflation rates, recession,
foreign ownership restrictions, and trade policies and other external factors
over which we have no control.
Our financial results are quantified in U.S. dollars and a majority of our
obligations and expenditures with respect to our operations are incurred in U.S.
dollars. In the past the majority of our revenues were derived from the
business operations of our wholly owned subsidiary, Marmion Investments, Inc.,
whose operations are conducted in United States dollars. Although we do not
believe we currently have any materially significant market risks relating to
our operations resulting from foreign exchange rates, if we enter into financing
or other business arrangements denominated in currency other than the U.S.
dollars, variations in the exchange rate may give rise to foreign exchange gains
or losses that may be significant.
We currently have no material long-term debt obligations. We do not use
financial instruments for trading purposes and we are not a party to any
leverage derivatives.
As discussed by our accountants in the audited financial statements
included in Item 7 of our Annual Report on Form 10-KSB, our revenue is currently
insufficient to cover our costs and expenses. The management anticipates
raising any necessary capital from outside investors coupled with bank or
mezzanine lenders. As of the date of this report, we have not entered into any
negotiations with any third parties to provide such capital.
OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS HAVE STATED IN THEIR REPORT
INCLUDED IN OUR DECEMBER 31, 2003 FORM 10-KSB, THAT WE HAVE INCURRED OPERATING
LOSSES IN THE LAST TWO YEARS, AND THAT WE ARE DEPENDENT UPON MANAGEMENT'S
ABILITY TO DEVELOP PROFITABLE OPERATIONS. THESE FACTORS AMONG OTHERS MAY RAISE
SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
RECENT DEVELOPMENTS
Effective November 16, 2004, we filed Articles of Amendment to our Articles
of Incorporation, increasing the number of our authorized common shares to
3,000,000,000 and increasing the number of our authorized preferred shares to
500,000,000.
Effective November 19, 2004, we implemented a one for 500 reverse split of
our issued and outstanding common stock.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
Evaluation of disclosure and controls and procedures. As of the end of the
period covered by this Quarterly Report, we conducted an evaluation, under the
supervision and with the participation of our chief executive officer and chief
financial officer, of our disclosure controls and procedures (as defined in
Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
Changes in internal controls over financial reporting. There was no change
in our internal controls, which are included within disclosure controls and
procedures, during our most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As of the date of this report, we are not involved in any legal
proceedings.
ITEM 2. CHANGES IN SECURITIES.
Please see "Recent Developments," supra, for information related to changes
in our capital structure and the November 19, 2004 reverse split of our common
stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a special meeting of our shareholders held on July 12, 2004, our
majority shareholders voted in favor of a resolution which changed our domicile
from Florida to Nevada. The change in domicile resulted in a change in our name
from "International Trust and Financial Systems, Inc." to "Marmion Industries
Corp.," change in our jurisdiction of incorporation from the State of Florida to
the State of Nevada and the adoption of new articles of incorporation and
bylaws, which now govern us under Nevada law.
The total number of votes cast in favor of each of the above proposals was
117,160,430 shares of
our common stock, which number was sufficient to approve pass the proposed
corporate actions.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
3.1** Articles of Incorporation of International Trust & Financial Systems, Inc.
3.2** Articles of Incorporation of Marmion Industries Corp.
3.3** Articles of Amendment to the Articles of Incorporation of Marmion Industries Corp.
3.4* Certificate of Designation for Marmion Industries Corp.
3.5* Certificate of Amendment to the Certificate of Designation for Marmion Industries Corp.
3.6** Articles of Merger of International Trust & Financial Systems, Inc. with and into Marmion
Industries Corp., filed with Secretary of State of Nevada on July 12, 2004.
3.7** Articles of Merger of International Trust & Financial Systems, Inc. with and into Marmion
Industries Corp., filed with Secretary of State of Florida on July 12, 2004.
3.8** Bylaws of International Trust & Financial Systems, Inc.
3.9** Bylaws of Marmion Industries Corp.
10.1** Plan of Merger.
31.1* Certification of Wilbert H. Marmion, Chief Executive Officer of Marmion Industries Corp.,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of
2002.
31.2* Certification of Wilbert H. Marmion, Chief Financial Officer of Marmion Industries Corp.,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of
2002.
32.1* Certification of Wilbert H. Marmion, Chief Executive Officer of Marmion Industries Corp.,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of
2002.
32.2* Certification of Wilbert H. Marmion, Chief Financial Officer of Marmion Industries Corp.,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of
2002
__________
* Filed herewith.
** Previously filed.
(b) Reports on Form 8-K.
On July 23 2004, we filed a Current Report on Form 8-K regarding the
completion of the steps necessary to effect the change in our name from
"International Trust and Financial Systems, Inc." to "Marmion Industries Corp."
and the change in our domicile from the State of Florida to the State of Nevada
effective July 12, 2004.
On August 23, 2004, we filed a Current Report on Form 8-K regarding the
change in our certifying accountant.
On September 28, 2004, we filed an Amended Current Report on Form 8-K/A
regarding the financial statements and pro forma financial information of
Marmion Investments, Inc., our wholly-owned subsidiary.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MARMION INDUSTRIES CORP.
Dated November 22, 2004.
By /s/ Wilbert H. Marmion
--------------------------------------
Wilbert H. Marmion,
Chief Executive Officer