SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended: September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to
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Commission file number :000-24447
MARKLAND TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
49 QUINNIPIAC AVENUE, UNIT H
NORTH HAVEN, CT 06473
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(Address of principal executive offices)
(203) 946-3058
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(Registrant's telephone number)
Florida [4813] 84-1331134
(State of Incorporation) Primary Standard Industrial IRS Employer
(Classification Code Number I.D. Number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.0001 per share
(Title of class)
Indicate by check mark whether the Registrant:(1) has 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 [ ]
The number of shares outstanding of each of the issuer's classes of equity
as of September 30, 2002, 299,909,179 shares of Common Stock, par value $0.0001
per share; and, no shares of Preferred Convertible Stock, no par value.
MARKLAND TECHNOLOGIES, INC.
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 2002 ...................... 2
Consolidated Statements of Operations - Three months ended
September 30, 2002 and 2001 ..................................... 3
Consolidated Statements of Cash Flows - Three months ended
September 30, 2002 and 2001 ..................................... 4
Notes to Consolidated Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Plan of Operations.................. 5-6
Item 3. Controls and Procedures.................................. 7
Part II - Other Information
Item 5. Other Information .. ...................................... 7
Item 6. Exhibits and Reports on Form 8-K............................ 8
Signature ............................................................ 9
MARKLAND TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 2002
ASSETS
CURRENT ASSETS:
Cash $ 253
Prepaid expenses 14,500
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Total Current Assets 14,753
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$ 14,753
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LIABLITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 102,636
Secured line of credit 4,260,305
Notes payable 1,394,592
Liabilities from discontinued operations 1,298,713
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Total Current Liabilities 7,056,246
STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value;
300,000,000 shares authorized; 299,909,179 shares
issued and outstanding 29,990
Accumulated deficit (7,071,483)
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Total Stockholders' Deficit (7,041,493)
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$ 14,753
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See accompanying notes to consolidated financial statements.
2
MARKLAND TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
September 30,
2002 2001
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SELLING, GENERAL AND ADMINISTRATIVE $ 46,396 $ 74,709
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OTHER EXPENSE, net:
Interest expense, net 106,433 63,911
Other income, net (17,200) -
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TOTAL OTHER EXPENSE, net 89,233 63,911
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NET LOSS $ (135,629) $ (138,620)
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BASIC AND DILUTED LOSS PER SHARE:
NET LOSS PER SHARE $ (0.00) $ (0.00)
=============== =================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 299,909,179 299,909,179
=============== =================
See accompanying notes to consolidated financial statements.
3
MARKLAND TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
September 30,
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2002 2001
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Cash flows from operating activities
Net loss $ (135,629) $ (138,620)
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Adjustments to reconcile net loss to
net cash used in operating activities
Changes in operating assets and liabilities:
Prepaid expenses 7,250 -
Accounts payable 7,288 (5,078)
Net cash used in discontinued operations - (28,870)
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14,538 (33,948)
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Net cash used in operating activities (121,091) (172,568)
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Cash flows from financing activities
Notes payable and secured line of credit 116,433 -
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Net cash provided by financing activities 116,433 -
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Net increase (decrease) in cash
and cash equivalents (4,658) (172,568)
Cash and cash equivalents at beginning of year 4,911 173,568
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Cash and cash equivalents at end of period $ 253 $ 1,000
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See accompanying notes to consolidated financial statements.
4
MARKLAND TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to Article 10 of Regulation S-X of the
Securities and Exchange Commission. The accompanying unaudited financial
statements reflect, in the opinion of management, all adjustments necessary to
achieve a fair statement of the financial position and results of operations of
Markland Technologies, Inc. (the "Company") for the interim periods presented.
All such adjustments are of a normal and recurring nature. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Transition Report on form 10-KSB/A, filed with
the Securities and Exchange Commission on November 27, 2001.
GOING CONCERN MATTERS
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidations of liabilities in the normal course of
business. The Company has incurred significant losses since its incorporation,
resulting in an accumulated deficit as of September 30, 2002 of approximately
$7,071,493. The Company continues to experience negative cash flows, has no
meaningful operations and has been dependent on continued financing from
investors to sustain its activities. There is no assurance that such financing
will be available in the future if needed. These factors raise considerable
doubt about the Company's ability to continue as a going concern.
BASIC AND DILUTED LOSS PER SHARE
Loss per common share is computed by dividing net loss available to common
shareholders by the weighted average number of shares of common stock
outstanding for the period of time then ended. The effect of the Company's stock
options and convertible securities is excluded from the computations for the
three months ended September 30, 2002 and 2001, as it is antidilutive.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
related notes included in this Form 10-QSB. This quarterly report on Form 10-QSB
contains forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objective, expectations and
intentions. These forward-looking statements include all statements that are not
statements of historical fact. You can identify these statements by our use of
words such as "may," "expect," "believe," "anticipate," "intend," "could,"
"estimate," "continue," "plans," or their negatives or cognates. Some of these
statements include discussions regarding our future business strategy and our
ability to generate revenue, income and cash flow. We wish to caution the reader
that all forward-looking statements contained in this Form 10-QSB are only
estimates and predictions. Our actual results could differ materially from those
anticipated as a result of risk facing us or actual events differing from the
assumptions underlying such forward looking statements. Some factors that could
affect our results include those that we discuss in this section as well as
elsewhere in this Form 10-QSB.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained in this prospectus. We will not update these
forward-looking statements unless the securities laws and regulations require us
to do so.
5
GENERAL
We historically had been engaged in providing Internet and telecommunications
sales, service and connectivity. Most recently, through its wholly owned
subsidiary, Vidikron of America, Inc., the Company engaged in the marketing and
distribution of high-end projection systems and support accessories primarily to
the consumer market.
The Company is no longer involved in either the Internet and telecommunications
business nor is it involved in the high-end projection systems market as it no
longer has any operating subsidiaries or any meaningful operations as more fully
described in its Form 10-KSB/A as filed with the Securities and Exchange
Commission on October 18, 2002. We believe that there may be value in remaining
current in our reporting obligations under the Securities Exchange Act of 1934,
as amended, although we can give no assurance that we will ever be able to
realize any value from our situation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
COSTS AND EXPENSES
Selling, general and administrative expenses decreased by $28,313 or
37% to $46,396 for the three months ended September 30, 2002, from $74,709 for
the same period in 2001. The decrease was achieved by reduction in legal and
accounting costs and the major scale down of its office and salary expenses.
Interest expense increased to $106,433 for the three months ended
September 30, 2002 compared to $63,911 for the three months ended September 30,
2001. This increase in interest expense is primarily due to additional financing
from the secured line of credit.
LIQUIDITY AND CAPITAL RESOURCES
From our inception, our revenues have been insufficient to support our
operations. As a result, our continued existence is dependent upon our ability
to resolve our liquidity problems, principally by obtaining additional debt or
equity financing, or both. Currently we have a working capital deficit of
$7,041,493 and a stockholders' deficit of $7,041,493, including an accumulated
deficit of $7,071,483 at September 30, 2002. Additionally, the cash used in
operations for the three months ended September 30, 2002 totaled $121,091.
We have $1,084,746 remaining on our Market LLC $4,500,000 revolving credit line.
The ability of management to draw down on the credit facility is at the sole
discretion of the lenders and is not a certainty. These and other factors raise
a substantial doubt as to our ability to continue as a going concern. In order
to continue our current, scaled-down operations and to effect a new operation
plan, we will need to obtain additional debt or equity financing, or both. In
the event that we are unable to effect a new operation plan, unable to obtain
debt or equity financing or unable to obtain financing on terms and conditions
that are acceptable, we may be unable to remain a going concern.
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 2 to
the audited financial statements included in the Company's annual report on Form
10-KSB for the year ended June 30, 2002. Management believes the application
of these policies on a consistent basis enables the Company to provide reliable
and useful information about the Company's operating results and financial
conditions.
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Item 3. CONTROLS AND PROCEDURES
(a) Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
report. Based on their evaluation, our principal executive officer and principal
accounting officer concluded that Samaritan's disclosure controls and procedures
are effective.
(b) There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.
GENERAL
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Divestiture of Vidikron of America, Inc. Stock and Debt Restructuring
On May 28, 2002, Markland Technologies, Inc. (the "Company") received a Notice
of Default from its senior secured lender, Market LLC, ("Lender") relating to a
Loan and Security Agreement and a related Secured Convertible Revolving Credit
Note ("Note") issued in favor of Lender for, among other things, the Company's
failure to make payments of principal and interest due under the Note. In
addition, as a result of the defaults under the Note, the Lender declared all
outstanding principal and interest under the Note, totaling $4,213,300 (the
"Indebtedness"), to be immediately due and payable. The Lender had advised the
Company that it intended to exercise its right as a secured creditor in and to
all collateral granted to it to secure the Note including, among other things,
all of the issued and outstanding shares of Vidikron of America, Inc. (the
"Vidikron Shares"), a wholly owned subsidiary of the Company ("Vidikron").
As reported on Form 8-K filed with the Securities and Exchange Commission on
June 11, 2002, the Company agreed on June 4, 2002 to transfer legal title to the
Vidikron Shares to the Lender in partial satisfaction of the Indebtedness in the
amount of $50,000 pursuant to a Debt Restructuring Agreement among the Company,
Vidikron and the Lender. The amount of the reduction in Indebtedness was
calculated based on the fact that Vidikron was insolvent and its liabilities
exceeded its assets.
As a result of the aforementioned, the Company no longer retains any operating
subsidiary or has any meaningful operations
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
REPORTS on Form 8-K:
None.
(a) Exhibits
Exhibit Description
10.1 Current Report on Form 8-K filed June 11, 2002 with the Securities and
Exchange Commission and incorporated by reference.
10.2 Form 10-KSB/A as filed October 18, 2002 with the Securities and
Exchange Commission and incorporated by reference.
99.1 * Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, who is duly authorized to sign as an officer and as the principal
financial officer of the registrant.
Dated: November 14, 2002 MARKLAND TECHNOLOGIES, INC.
By: /s/ Larry Shatsoff
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Larry Shatsoff, President
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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Markland Technologies, Inc.
on Form 10-QSB for the quarter ended September 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof, I, Lawrence Shatsoff, the
Financial Officer of the Company, certify, pursuant to and for purposes of
18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, that:
1. I have reviewed this quarterly report on Form 10-QSB of
Markland Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 By: /s/Lawrence Shatsoff
Name: Lawrence Shatsoff
Title: Financial Officer