**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C.  20549**

** **

**FORM 10-Q**

** **

** **

**ý   QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thequarterly period ended September 30, 2001**

**OR**

** **

**o   TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**Forthe transition period from __________ to __________**

** **

**CommissionFile Number: 0-24556**

 

 

**MKRHOLDINGS**

(Exact name ofregistrant as specified in its charter)

 

| **Utah**                                                        |   | **87-0372759**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**1070West 2300 South**

**SaltLake City, Utah 84119**

(Address ofprincipal executive offices)

 

**(801) 972-2100**

(Registrant'stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filings requirements for thepast 90 days.

Yesý                                                    Noo

 

Indicate the number ofshares outstanding of each of the issuer's classes of common stock, as of thelatest practicable date.

 
| Class of Common  Stock         |   | Outstanding at November  14, 2001 |
|--------------------------------|--------|-----------------------------------|
| Common Stock,  $0.01 par value |   | 11,102,077                        |

 

**MKR HOLDINGS**

 

**TABLE OF CONTENTS**

 

 
| **Part I - Financial Information**                                                       |   |   |
|------------------------------------------------------------------------------------------|--------|--------|
|                                                                                     |   |   |
| **Item  1.  Financial Statements**                                             |   |   |
|                                                                                     |   |   |
| Statements of  Net Assets in Liquidation                                                 |   |   |
| As of September  30, 2001 (Unaudited) and March 31, 2001                                 |   |   |
|                                                                                     |   |   |
| Statements  of Changes in Net Assets in Liquidation (Unaudited)                          |   |   |
| For  the Three Months Ended September 30, 2001 and 2000 and                              |   |   |
| For  the Six Months Ended September 30, 2001 and 2000                                    |   |   |
|                                                                                     |   |   |
| Note to the Interim Financial  Statements                                                |   |   |
|                                                                                     |   |   |
| **Item  2.  Management’s Discussion and Analysis of Financial Condition** |   |   |
|                                                                                     |   |   |
| **Item  3.  Quantitative and Qualitative Disclosures About Market Risk**       |   |   |
|                                                                                     |   |   |
|                                                                                     |   |   |
| **Part II - Other Information**                                                          |   |   |
|                                                                                     |   |   |
| **Item  6.  Exhibits and Reports on Form 8-K**                                 |   |   |
|                                                                                     |   |   |
| **Signature**                                                                            |   |   |

 

**PART I- FINANCIAL INFORMATION**

 

**Item 1.  FinancialStatements**

MKRHOLDINGS

STATEMENTSOF NET ASSETS IN LIQUIDATION

(Dollarsin Thousands, Except Share and Per Share Amounts)

 
|                                                                                         |   | **September  30,** |   | **March  31,** |   |
|----------------------------------------------------------------------------------------------|--------|--------------------|--------|----------------|--------|
|                                                                                         |   | **2001**           |   | **2001**       |   |
|                                                                                         |   | **(Unaudited)**    |   |           |   |
| Assets:                                                                                      |   |               |   |           |   |
| Cash  and cash equivalents                                                                   |   | $                  | 14     |           | $      | 261 |   |
| Prepaid  insurance                                                                           |   | 7                  |   | 29             |   |
| Investment  in Marker International GmbH                                                     |   | 2,480              |   | 2,480          |   |
| Total  assets in liquidation                                                                 |   | 2,501              |   | 2,770          |   |
|                                                                                         |   |               |   |           |   |
| Liabilities:                                                                                 |   |               |   |           |   |
| Accounts  payable and accrued liabilities                                                    |   | 81                 |   | 321            |   |
| Advances  payable to Marker International GmbH                                               |   | 452                |   | 365            |   |
| Total  liabilities in liquidation                                                            |   | 533                |   | 686            |   |
|                                                                                         |   |               |   |           |   |
| Net  assets in liquidation                                                                   |   | $                  | 1,968  |           | $      | 2,084 |   |
|                                                                                         |   |               |   |           |   |
| Net  assets in liquidation per common share (based on 11,102,077 common shares  outstanding) |   | $                  | .18    |           | $      | .19 |   |

 

The accompanying note to the interimfinancial statements is an integral part of these statements.

 

 

MKRHOLDINGS

STATEMENTS OF CHANGES INNET ASSETS IN LIQUIDATION

(Dollarsin Thousands)

 
|                                        |   | **For  the Three Months   Ended September 30,** |   | **For  the Six Months   Ended September 30,** |   |
|---------------------------------------------|--------|-------------------------------------------------|--------|-----------------------------------------------|--------|
|                                        |   | **2001**                                        |   | **2000**                                      |   | **2001** |   | **2000** |   |
|                                        |   | **(Unaudited)**                                 |   | **(Unaudited)**                               |   | **(Unaudited)** |   | **(Unaudited)** |   |
|                                        |   |                                            |   |                                          |   |   |   |   |   |
| General  and administrative expenses        |   | 91                                              |   | 34                                            |   | 116 |   | 40 |   |
|                                        |   |                                            |   |                                          |   |   |   |   |   |
| Net  change in net assets for the periods   |   | 91                                              |   | 34                                            |   | 116 |   | 40 |   |
|                                        |   |                                            |   |                                          |   |   |   |   |   |
| Net  assets at the beginning of the periods |   | 2,059                                           |   | 2,662                                         |   | 2,084 |   | 2,668 |   |
|                                        |   |                                            |   |                                          |   |   |   |   |   |
| Net  assets at the end of the periods       |   | $                                               | 1,968  |                                          | $      | 2,628 |   | $ | 1,968 |   | $ | 2,628 |   |
|                                             |        |                                                 |        |                                               |        |  |  |  |  |  |  |  |  |

 

The accompanying note to the interim financialstatements is an integral part of these statements.

 

**NOTE 1.  INTERIM FINANCIAL STATMENTS**

 

***Nature of Operations***

 

The accompanyingfinancial statements include the accounts of MKR Holdings (the “Company”).  The financial statements have been preparedpursuant to the rules and regulations of the Securities and Exchange Commission(the “SEC”).  Certain information andfootnote disclosures normally required in financial statements prepared inaccordance with generally accepted accounting principles have been omittedpursuant to such rules and regulations.

 

In the opinion ofmanagement, the accompanying financial statements include all normaladjustments considered necessary to present fairly the net assets inliquidation as of September 30, 2001 and March 31, 2001 and the changes in netassets in liquidation for the three months ended September 30, 2001 and 2000and for the six months ended September 30, 2001 and 2000.

 

The statements ofchanges in net assets in liquidation for the three months ended September 30,2001 and 2000 and for the six months ended September 30, 2001 and 2000 are notnecessarily indicative of the results for the full fiscal year.  It is suggested that these financialstatements be read in conjunction with the financial statements and notesthereto included in the Company’s last annual report on Form 10-K, as filedwith the SEC on July 16, 2001.

 

The Company is nolonger engaged in the conduct of business and operates for the sole purpose ofholding and subsequently liquidating its assets (which consist almost entirelyof its equity interest in Marker International GmbH (“Newco”)).  Prior to November 30, 1999, MKR Holdings,then Marker International, was a holding company which operated its businessthrough its subsidiaries, Marker Deutschland GmbH (“Marker Germany”), MarkerUSA, Inc. (“Marker USA”), Marker Ltd., Marker Japan Co. Ltd. (“Marker Japan”),Marker Austria GmbH (“Marker Austria”) and Marker Canada, Ltd. (“MarkerCanada”).

 

On November 30, 1999 (the “Closing Date”), the Company sold substantiallyall of its assets (including the equity securities of its subsidiaries) toMarker International GmbH, a GmbH organized under the laws of Switzerland(“Newco”), pursuant to an asset purchase agreement (as amended by the Amendmentto the Asset Purchase Agreement dated as of September 20, 1999; the “PurchaseAgreement”) between the Company and Newco. In exchange, Newco assumed substantially all of the liabilities of theCompany and the Company received a 15% equity interest in Newco.  The remaining 85% equity interest in Newcois held by CT Sports Holding AG (“CT”), a joint venture between Tecnica S.p.A.and H.D. Cleven, the principal shareholder of the Völkl Group.  Pursuant to the Purchase Agreement, CT wasrequired to contribute to Newco $15,000,000 in cash for its 85% equity interestin Newco.  After taking into accountCT’s purchase of 66.66% of Marker Canada in June 1999 for $1,025,501, CTcontributed $13,974,499 to Newco in a combination of debt and equity.

 

In connection with the Purchase Agreement, the Company and CT enteredinto 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 onor after November 30, 2001, at the then fair market value, subject to reductionin an amount equal to the sum of: (a) any indemnity obligations of the Companyto Newco, (b) all unreimbursed advances from Newco for operating andadministrative expenses (currently estimated to be approximately $300,000 peryear) and costs of defending indemnifiable claims, if any, incurred by Newco,together with interest thereon, (c) all advances by Newco to the Company to payany income tax liability, together with interest thereon, plus (d)$775,000.  Thereafter, the Company willbe liquidated and the net proceeds of the exercise of the Option will bedistributed to the shareholders of the Company in liquidation.  In determining fair market value, all ofCT’s $15,000,000 contribution will be considered equity.

 

In connection with the Purchase Agreement, the Company reachedagreements-in-principle regarding the restructuring of its debt and thetreatment of such debt under a Plan of Reorganization with substantially all ofits creditors that were impaired under the Plan of Reorganization.  On August 19, 1999, the Company, DNR NorthAmerica, Inc. and DNR USA, Inc. (collectively, the “Debtors”) filed voluntarypetitions for relief under Chapter 11 of the United States Bankruptcy Code inthe United States Bankruptcy Court for the District of Delaware (the “BankruptcyCourt”).  On September 22, 1999, theDebtors filed the First Amended Joint Chapter 11 Plan of Reorganization (asamended by the Amendment to the First Amended Joint Chapter 11 Plan ofReorganization, dated as of October 25, 1999, the “Plan”) and a relateddisclosure statement (the “Disclosure Statement”).  By order dated September 22, 1999, the Bankruptcy Court approvedthe Disclosure Statement as containing adequate information.  The Disclosure Statement and the Plan weresubsequently distributed to the Debtors’ creditors and shareholders forapproval, which approval was subsequently obtained.  On October 27, 1999, the Plan was confirmed by order of theBankruptcy Court (the “Confirmation Order”). Pursuant to the Confirmation Order, the Bankruptcy Court approved thePlan and the Purchase Agreement on October 27, 1999.  The Company did not distribute any securities in connection withthe Plan.

 

As a result of the events described above, the Company is no longerengaged in the conduct of business and operates for the sole purpose of holdingand subsequently liquidating its assets (which consist almost entirely of itsequity interest in Newco).  The Companyis required to dissolve and liquidate all of its assets no earlier thanNovember 30, 2002, and no later than November 30, 2004.  If the Option is not exercised prior toliquidation, then upon liquidation and the payment of the Company’s outstandingobligations, the shareholders of the Company will receive an equity interest inNewco equal to each shareholder’s pro rata share of the Company’s remainingequity interest in Newco.

 

Each year, Newco’s fair market value is estimated by an independentappraiser engaged by the Company.  Basedon the appraiser’s valuation of Newco, management then determines theliquidation value of the Company by taking 15% of Newco’s fair market value andsubtracting amounts computed pursuant to items (a) through (d) set forthabove.  As of March 31, 2001, Newco wasvalued by the Company’s independent appraiser at approximately $21.7million.  Based on this valuation, theCompany’s 15% equity interest in Newco (the “Investment”) is approximately$3.255 million (i.e., 15% of Newco’s appraised fair market value).  Management thus estimates that as of March31, 2001, the liquidation value of the Company was no more than approximately$2.115 million, or $3.255 million less $775,000 and the $365,000 in fundspreviously advanced by Newco to the Company. If Newco advances additional sums to the Company, or if the appraisal ofNewco changes in a subsequent annual valuation, the liquidation value of theCompany will be changed accordingly. The foregoing discussion is set forth herein as an estimate only.  The actual liquidation value of the Company,when such liquidation occurs, may differ materially from the current estimatedvalue contained herein.

 

The Companyadopted the liquidation basis of accounting effective December 1, 1999.  Under this basis of accounting, assets andliabilities are stated at their estimated net realizable value.

 

***New Accounting Pronouncements***

 

In June 2001, the Financial Accounting Standards Board (“FASB”) finalized FASB StatementsNo. 141, *Business Combinations*(SFAS 141)*,* and No. 142, *Goodwill and Other Intangible Assets* (SFAS142)*.*  SFAS 141 requires the use of the purchase method of accountingand prohibits the use of the pooling-of-interests method of accounting forbusiness combinations initiated after June 30, 2001.  SFAS 141 also requires that the Company recognize acquiredintangible assets apart from goodwill if the acquired intangible assets meetcertain criteria.  SFAS 141 applies toall business combinations initiated after June 30, 2001 and for purchasebusiness combinations completed on or after July 1, 2001.  It also requires, upon adoption of SFAS 142,that the Company reclassify the carrying amounts of intangible assets andgoodwill based on the criteria in SFAS 141.

 

SFAS 142 requires,among other things, that companies no longer amortize goodwill, but insteadtest goodwill for impairment at least annually.  In addition, SFAS 142 requires that the Company identifyreporting units for the purposes of assessing potential future impairments ofgoodwill, reassessing the useful lives of other existing recognized intangibleassets, and ceasing amortization of intangible assets with an indefinite usefullife.  An intangible asset with anindefinite useful life should be tested for impairment in accordance with theguidance in SFAS 142.  SFAS 142 isrequired to be applied in fiscal years beginning after December 15, 2001 to allgoodwill and other intangible assets recognized at that date, regardless ofwhen those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairmenttest six months from the date of adoption. The Company is also required to reassess the useful lives of otherintangible assets within the first interim quarter after adoption of SFAS142.  We expect that the adoption by the Company of SFAS 141 andSFAS 142 will have no impact on the Company’s financial position in the future.

**Item2.  Management’s Discussion and Analysisof Financial Condition**

 

##### ***Overview***

 

Prior to November30, 1999, MKR Holdings, then Marker International (the “Company”) was a holdingcompany which operated its business through its subsidiaries, MarkerDeutschland GmbH (“Marker Germany”), Marker USA, Inc. (“Marker USA”), MarkerLtd., Marker Japan Co. Ltd. (“Marker Japan”), Marker Austria GmbH (“MarkerAustria”) and Marker Canada, Ltd. (“Marker Canada”).  The Company and its subsidiaries were a leading designer,developer, manufacturer and marketer of alpine ski bindings in North America,Europe and Asia.  Substantially all ofthe Company’s ski bindings were manufactured by Marker Germany, whichdistributed bindings in Germany, to subsidiaries of the Company and toindependent distributors in countries where the Company did not have adistribution subsidiary.

 

On November 30, 1999 (the “Closing Date”), the Company sold substantiallyall of its assets (including the equity securities of its subsidiaries) toMarker International GmbH, a GmbH organized under the laws of Switzerland(“Newco”), pursuant to an asset purchase agreement (as amended by the Amendmentto the Asset Purchase Agreement dated as of September 20, 1999; the “PurchaseAgreement”) between the Company and Newco. In exchange, Newco assumed substantially all of the liabilities of theCompany and the Company received a 15% equity interest in Newco.  The remaining 85% equity interest in Newcois held by CT Sports Holding AG (“CT”), a joint venture between Tecnica S.p.A.and H.D. Cleven, the principal shareholder of the Völkl Group.  Pursuant to the Purchase Agreement, CT wasrequired to contribute to Newco $15,000,000 in cash for its 85% equity interestin Newco.  After taking into accountCT’s purchase of 66.66% of Marker Canada in June 1999 for $1,025,501, CTcontributed $13,974,499 to Newco in a combination of debt and equity.

 

In connection with the Purchase Agreement, the Company and CT enteredinto 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 onor after November 30, 2001, at the then fair market value, subject to reductionin an amount equal to the sum of: (a) any indemnity obligations of the Companyto Newco, (b) all unreimbursed advances from Newco for operating andadministrative expenses (currently estimated to be approximately $300,000 peryear) and costs of defending indemnifiable claims, if any, incurred by Newco,together with interest thereon, (c) all advances by Newco to the Company to payany income tax liability, together with interest thereon, plus (d)$775,000.  Thereafter, the Company willbe liquidated and the net proceeds of the exercise of the Option will bedistributed to the shareholders of the Company in liquidation.  In determining fair market value, all ofCT's $15,000,000 contribution will be considered equity.

 

In connection with the Purchase Agreement, the Company reached agreements-in-principleregarding the restructuring of its debt and the treatment of such debt under aPlan of Reorganization with substantially all of its creditors that wereimpaired 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 underChapter 11 of the United States Bankruptcy Code in the United States BankruptcyCourt for the District of Delaware (the “Bankruptcy Court”).  On September 22, 1999, the Debtors filed theFirst Amended Joint Chapter 11 Plan of Reorganization (as amended by theAmendment to the First Amended Joint Chapter 11 Plan of Reorganization, datedas of October 25, 1999, the “Plan”) and a related disclosure statement (the“Disclosure Statement”).  By order datedSeptember 22, 1999, the Bankruptcy Court approved the Disclosure Statement ascontaining adequate information.  TheDisclosure Statement and the Plan were subsequently distributed to the Debtors’creditors and shareholders for approval, which approval was subsequentlyobtained.  On October 27, 1999, the Planwas confirmed by order of the Bankruptcy Court (the “Confirmation Order”).  Pursuant to the Confirmation Order, theBankruptcy Court approved the Plan and the Purchase Agreement on October 27,1999.  The Company did not distributeany securities in connection with the Plan.

 

As a result of the events described above, the Company is no longerengaged in the conduct of business and operates for the sole purpose of holdingand subsequently liquidating its assets (which consist almost entirely of itsequity interest in Newco).  The Companyis required to dissolve and liquidate all of its assets no earlier thanNovember 30, 2002, and no later than November 30, 2004.  If the Option is not exercised prior toliquidation, then upon liquidation and the payment of the Company’s outstandingobligations, the shareholders of the Company will receive an equity interest inNewco equal to each shareholder’s pro rata share of the Company’s remainingequity interest in Newco.

 

Each year, Newco’sfair market value is estimated by an independent appraiser engaged by theCompany.  Based on the appraiser’svaluation of Newco, management then determines the liquidation value of the Companyby taking 15% of Newco’s fair market value and subtracting amounts computedpursuant to items (a) through (d) set forth above.  As of March 31, 2001, Newco was valued by the Company’sindependent appraiser at approximately $21.7 million.  Based on this valuation, the Company’s 15% equity interest inNewco (the “Investment”) is approximately $3.255 million (i.e., 15% of Newco’sappraised fair market value). Management thus estimates that as of March 31, 2001, the liquidationvalue of the Company was no more than approximately $2.115 million, or $3.255million less $775,000 and the $365,000 in funds previously advanced by Newco tothe Company.  If Newco advancesadditional sums to the Company, or if the appraisal of Newco changes in asubsequent annual valuation, the liquidation value of the Company will bechanged accordingly.  The foregoingdiscussion is set forth herein as an estimate only.  The actual liquidation value of the Company, when suchliquidation occurs, may differ materially from the current estimated valuecontained herein.  The financialstatements of Newco were filed on September 18, 2001 in an amendment to ourForm 10-K for the fiscal year ended March 31, 2001.

 

***Results ofOperations***

 

As discussed inNote 1 to the interim financial statements, the Company is no longer engaged inthe conduct of business and operates for the sole purpose of holding andsubsequently liquidating its assets. Since December 1, 1999, the Company’s financial statements have beenreported in accordance with the liquidation basis of accounting.

 

### ***Liquidityand Capital Resources***

 

The Company’s primary cash needs are for administrative expenses andprofessional fees incurred in preparing the Company’s monthly financialstatements and in connection with its required SEC filings.

 

The Company’s sole source of working capital isadvances from Newco.  Pursuant to thePurchase Agreement, Newco is obliged to lend up to $300,000 annually to theCompany for its operations and associated expenses, at an interest rate of 5%.  This obligation extends until November 30,2001, the second anniversary of the Closing Date.  As of September 30, 2001, the Company had received $439,000 inadvances from Newco.  The Companybelieves that it will have adequate financing to fund the required activitiesof the Company on an annual basis until November 30, 2001, absent unanticipatedor extraordinary circumstances.  Thefunds advanced from Newco to the Company will reduce the amount to be receivedby the Company upon the exercise of the Option, if the Option isexercised.  The Company currently has nocommitments from any other party to fund the Company’s operations afterNovember 30, 2001.  If CT does notexercise its Option on November 30, 2001, or shortly thereafter, the Companywill be forced to obtain capital to fund its operations from third partiesother than Newco.  The Company may notbe able to obtain the required funds on as favorable terms as Newco’s, or atall.  If the Company is unable to obtainfinancing, there is no guarantee it will be able to sustain its operations.

 

# ***OtherMatters***

 

Pursuant to the Plan, the Company changed its name to MKR Holdings.  Pursuant to the Confirmation Order, theCompany amended its Articles of Incorporation and By-laws to satisfy theprovisions of the Purchase Agreement, the Plan and the Confirmation Order.

 

Pursuant to the Plan, since November 30, 1999, the business and affairsof the Company have been managed by, and under the direction of, a Board ofDirectors, which consists of Kevin Hardy, Henry E. Tauber and Louis M.Alpern.  Until September 15, 2000, in addition to being a director and anofficer of the Company, Mr. Hardy served as the Chief Financial Officer andSecretary and a director of Marker USA, a subsidiary of Newco.  Mr. Hardy currently serves as President andChief Financial Officer of the Company.

 

Since August 3,2000, the Company has operated under the ticker symbol MKRH.

**Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

The Company isexposed to market risk, including various foreign currency exchange rate andinterest rate risks.

 

***Foreign Currency Exchange Rate Risk*****–**The functional currency of Newco is theEuro.  As a result, the value of theCompany’s Investment in Newco is subject to foreign currency fluctuationsbetween the U.S. Dollar and the Euro which could have a material impact on thefair value of the Company’s Investment**.**

 

***Interest Rate Risk***** ****– **The Company nolonger has any significant exposure to market risks for changes in interestrates since the Company’s borrowings from Newco are at a fixed rate of 5%.

 

**Item6.  Exhibits and Reports on Form 8-K**

 

a)             **Exhibits:**

 

99.1  Valuation of Marker International GmbH as of March 31,2001. *

 

 

 

                b)            **Reports filed on Form 8-K:**

 

None.

______________________

*              Filed previously on Form 10-K/A on September 18, 2001.

 

**SIGNATURE**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

###### MKR HOLDINGS

###### Registrant

 
| Dated:   November 14, 2001 | /s/  Kevin  Hardy                |
|---------------------------------|---------------------------------------|
|                            | Kevin Hardy                           |
|                            | President and Chief Financial Officer |