Found out what happened. Ticker symbol was changed from MRKR to MRKH
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On November 30, 1999 (the "Closing Date"), the Company sold substantially all of its assets (including the equity securities of
its subsidiaries) to Marker International GmbH, a GmbH organized under the laws of Switzerland ("Newco"), pursuant to an
asset purchase agreement (as amended by the Amendment to the Asset Purchase Agreement dated as of September 20, 1999,
the "Purchase Agreement") between the Company and Newco. In exchange, Newco assumed substantially all of the liabilities
of the Company and the Company received a 15% equity interest in Newco. The remaining 85% equity interest in Newco is
held by CT Sports Holding AG ("CT"), a joint venture between Tecnica S.p.A. and H.D. Cleven, the principal shareholder of
the Volkl Group. Pursuant to the Purchase Agreement, CT was required to contribute to Newco $15,000,000 in cash for its
85% equity interest in Newco. As a result of CT's purchase of 66.66% of Marker Canada, Ltd. in June 1999 for $1,025,501,
CT's actual contribution to Newco totaled $13,974,499.
In connection with the Purchase Agreement, the Company and CT entered into an operating agreement which, among other
things, grants CT an option (the "Option") to purchase the Company's 15% equity interest in Newco at any time on or after
November 30, 2001 at the then fair market value, subject to reduction in an amount equal to the sum of: (a) any indemnity
obligations of the Company to Newco, (b) all unreimbursed advances from Newco for operating and administrative expenses
(currently estimated to be approximately $300,000 per year) and costs of defending indemnifiable claims, if any, incurred by
Newco, together with interest thereon, (c) all advances by Newco to the Company to pay any income tax liability, together
with interest thereon, plus (d) $775,000. Thereafter, the Company will be liquidated and the net proceeds of the exercise of the
Option will be distributed to the shareholders of the Company in liquidation. In determining fair market value, all of CT's
$15,000,000 transfer has been considered equity.
In connection with the Purchase Agreement, the Company reached agreements-in-principle regarding the restructuring of its
debt and the treatment of such debt under a plan of reorganization with substantially all of its creditors that were impaired under
the plan of reorganization. On August 19, 1999, the Company, DNR North America, Inc. and DNR USA, Inc. (collectively,
the "Debtors") filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). On September 22, 1999, the Debtors filed the First
Amended Joint Chapter 11 Plan of Reorganization (as amended by the Amendment to the First
8
PART I - FINANCIAL INFORMATION - (CONTINUED)
Amended Joint Chapter 11 Plan of Reorganization, dated as of October 25, 1999, the "Plan") and a related disclosure statement
(the "Disclosure Statement"). By order dated September 22, 1999, the Bankruptcy Court approved the Disclosure Statement as
containing adequate information. The Disclosure Statement and the Plan were subsequently distributed to the Debtors' creditors
and shareholders for approval, which approval was subsequently obtained. On October 27, 1999, the Plan was confirmed by
order of the Bankruptcy Court (the "Confirmation Order"). Pursuant to the Confirmation Order, the Bankruptcy Court
approved the Plan and the Purchase Agreement on October 27, 1999. The Company did not distribute any securities in
connection with the Plan.
As a result of the events described above, the Company is no longer engaged in the conduct of business and operates for the
sole purpose of holding and subsequently liquidating its assets (which consist almost entirely of its equity interest in Newco).
The Company is required to dissolve and liquidate all of its assets no earlier than November 30, 2002, and no later than
November 30, 2004. If the Option is not exercised prior to liquidation, then upon liquidation, the shareholders of the Company
will receive an equity interest in Newco equal to each shareholder's pro rata share of the Company's 15% equity interest in
Newco.
The Company recognized a gain of $16.5 million from the sale to Newco of substantially all of the Company's assets and the
assumption by Newco of certain of the Company's liabilities pursuant to the Purchase Agreement. The Company has valued
and accounted for its 15% equity interest in Newco (the "Investment") based on the estimated liquidation value. Based upon
the sales price of substantially all of the assets, Newco's initial liquidation value of the Investment was approximately $1.9
million. Changes in liquidation value to date are recorded as unrealized gains or losses in each period. As of March 31, 2000,
based on a report by an independent appraiser, the Investment was valued at approximately $2.8 million ($3.6 million less the
$775,000 that will be deducted from the purchase price if CT exercises the Option). This appraisal of the value of the
Investment will be updated going forward on at least an annual basis and the accounting for the Investment will be adjusted
accordingly. The actual liquidation value of the Company's Investment, when such liquidation occurs, may differ materially
from the estimated value recorded herein. The financial statements of Newco will be filed by an amendment to our Form 10-K
(filed on July 17, 2000) within 180 days of March 31, 2000.
RESULTS OF OPERATIONS
Comparisons of operations for the three months ended June 30, 2000, to the corresponding period of the prior fiscal year are
not meaningful due to the consummation of the transactions contemplated in the Purchase Agreement. As discussed in Note 1
to the financial statements, the Company is no longer engaged in the conduct of business and operates for the sole purpose of
holding and subsequently liquidating its assets. Since December 1, 1999, the Company's financial statements have been
reported in accordance with the liquidation basis of accounting.
9
PART I - FINANCIAL INFORMATION - (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for its payroll, professional fees incurred in preparing the Company's monthly
financial statements and in connection with its required SEC filings and administrative expenses.
The Company's sole source of working capital is monthly advances from Newco. Pursuant to the Purchase Agreement,
Newco is obliged to lend up to $300,000 annually to the Company for its operations and associated expenses. This obligation
extends until November 30, 2001, the second anniversary of the Closing Date. The Company currently has no commitments to
fund its operations subsequent to November 30, 2001. As of June 30, 2000, the Company had received $55,000 in advances
from Newco. The Company believes that $300,000 should be adequate to fund the required activities of the Company on an
annual basis until November 30, 2001, absent unanticipated or extraordinary circumstances. The funds advanced from Newco
to the Company will reduce the value to be received by the Company upon its liquidation. The interest rate for advances from
Newco is 5%.
OTHER MATTERS
Pursuant to the Plan, the Company changed its name to MKR Holdings. Pursuant to the Confirmation Order, the Company
amended its articles of incorporation and by-laws to satisfy the provisions of the Purchase Agreement, the Plan and the
Confirmation Order.
Pursuant to the Plan, as of November 30, 1999, the business and affairs of the Company have been managed by, and under
the direction of, a Board of Directors, which consists of Kevin Hardy, Henry E. Tauber and Louis M. Alpern. In addition to
being a director and an officer of the Company, Mr. Hardy serves as the Chief Financial Officer and Secretary and a director of
Marker USA, a subsidiary of Newco.
The Company was recently notified by NASDAQ that it should obtain a different ticker symbol due to the Company's name
change pursuant to such requests, effective August 3, 2000, the Company's ticker symbol changed from MRKR to MKRH |
