Edgar Filing: MAREX COM INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ___________.

Commission file number: 000-25129

MAREX, INC.
(Exact name of registrant as specified in its charter)

FLORIDA 65-0354269
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5835 BLUE LAGOON DRIVE, 4TH FLOOR
MIAMI, FLORIDA 33126
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 285-2003

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 the registrant's Common Stock as of April
30, 2002 was 7,635,848.

MAREX, INC.

TABLE OF CONTENTS

PAGE
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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2002 and
December 31, 2001.................................................................. 2

Condensed Consolidated Statements of Operations for the three months
ended March 31, 2002 and 2001...................................................... 3

Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2002 and 2001...................................................... 4

Notes to Condensed Consolidated Financial Statements............................... 5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 10

Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 18

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.................................................................. 18

Item 2. Changes in Securities and Use of Proceeds.......................................... 18

Item 3. Defaults Upon Senior Securities.................................................... 18

Item 4. Submission of Matters to a Vote of Security Holders................................ 18

Item 5. Other Information.................................................................. 18

Item 6. Exhibits and Reports on Form 8-K................................................... 19

Signatures......................................................................... 20

MAREX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
(unaudited)

ASSETS

Current assets:
Cash and cash equivalents ........................................................ $ 1,759,574 $ 4,479,095
Accounts receivable, net ......................................................... 208,534 275,680
Inventories ...................................................................... 13,896 14,546
Prepaid expenses and other current assets ........................................ 82,374 145,835
Loan to related party ............................................................ 433,701 425,649
------------ ------------
Total current assets .......................................................... 2,498,079 5,340,805
------------ ------------
Property and equipment, net .......................................................... 1,319,573 1,533,872
------------ ------------
Other assets:
Software development costs, net .................................................. 2,260,956 2,311,551
Goodwill ......................................................................... 304,086 304,086
Deposits and other assets ........................................................ 168,877 171,623
------------ ------------
Total other assets ............................................................ 2,733,919 2,787,260
------------ ------------
Total assets .............................................................. $ 6,551,571 $ 9,661,937
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of seller-financed note payable .................................. $ 694,989 $ 684,718
Current portion of capital lease obligations ..................................... 157,723 163,775
Accounts payable and accrued expenses ............................................ 1,149,428 1,453,864
------------ ------------
Total current liabilities ..................................................... 2,002,140 2,302,357
------------ ------------

Long-term liabilities:
Seller-financed note payable, net of current portion ............................. 549,088 726,735
Capital lease obligations, net of current portion ................................ 56,162 90,725
------------ ------------
Total long-term liabilities ................................................... 605,250 817,460
------------ ------------
Total liabilities ......................................................... 2,607,390 3,119,817
------------ ------------

Shareholders' equity:
Series A1 Convertible Preferred Stock, par value $.01 per share,
1,000,000 shares authorized, 266,750 and 301,750 shares issued
and outstanding as of March 31, 2002 and December 31, 2001,
respectively .................................................................. 26,675,000 30,175,000
Common Stock, par value $.01 per share,
25,000,000 shares authorized, 7,635,848 and 7,366,617 shares
issued and outstanding as of March 31, 2002 and
December 31, 2001, respectively ............................................... 76,358 73,666
Additional paid-in capital ....................................................... 48,872,173 45,257,460
Accumulated deficit .............................................................. (71,679,350) (68,964,006)
------------ ------------
Total shareholders' equity .................................................... 3,944,181 6,542,120
------------ ------------
Total liabilities and shareholders' equity ................................ $ 6,551,571 $ 9,661,937
============ ============

See Notes to Condensed Consolidated Financial Statements

MAREX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
--------------------------------
2002 2001
----------- -----------

Net sales ............................... $ 494,381 $ 48,668
----------- -----------
Costs and expenses:
Cost of product sales ............... 69,090 --
Product support and development ..... 1,215,502 1,972,534
Selling and marketing ............... 746,183 1,088,521
General and administrative .......... 1,059,018 698,326
Stock-based compensation ............ 117,405 117,405
----------- -----------
Total costs and expenses ......... 3,207,198 3,876,786
----------- -----------
Loss from operations .................... (2,712,817) (3,828,118)
----------- -----------
Other income (expense):
Interest income ..................... 23,269 222,513
Interest expense .................... (25,355) (8,368)
Other ............................... (441) (8,193)
----------- -----------
Total other income (expense) ..... (2,527) 205,952
----------- -----------
Net loss ................................ $(2,715,344) $(3,622,166)
=========== ===========
Net loss per share, basic and diluted ... $ (0.36) $ (0.49)
=========== ===========
Basic and diluted weighted average shares
of Common Stock outstanding ......... 7,552,087 7,341,647
=========== ===========

See Notes to Condensed Consolidated Financial Statements

MAREX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
---------------------------------
2002 2001
----------- ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................. $(2,715,344) $ (3,622,166)
Adjustments to reconcile net loss to
net cash used in operating activities
Provision for doubtful accounts ..................... 44,475 243
Depreciation ........................................ 232,908 192,623
Amortization ........................................ 268,562 609,825
Stock-based compensation ............................ 117,405 117,405
Decrease (increase) in accounts receivable .......... 22,671 (14,413)
Decrease in inventory ............................... 650 --
Decrease in prepaid expenses and other current assets 63,461 344,365
Decrease in deposits and other assets ............... 2,746 5,494
Decrease in accounts payable and accrued expenses ... (304,436) (3,506,826)
----------- ------------
Net cash used in operating activities .......... (2,266,902) (5,873,450)
----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ...................... (18,609) (83,045)
Additions to software development costs .................. (217,967) (283,245)
Increase in loan to related party ........................ (8,052) (200,000)
----------- ------------
Net cash used in investing activities .......... (244,628) (566,290)
----------- ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on note payable ....................... (167,376) --
Principal payments on capital lease obligations .......... (40,615) (36,865)
Proceeds from exercise of stock options and warrants ..... -- 1,400
----------- ------------
Net cash used in financing activities .......... (207,991) (35,465)
----------- ------------
Net decrease in cash and cash equivalents .................... (2,719,521) (6,475,205)

CASH AND CASH EQUIVALENTS, beginning of period ............... 4,479,095 19,624,266
----------- ------------
CASH AND CASH EQUIVALENTS, end of period ..................... $ 1,759,574 $ 13,149,061
=========== ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during each period for interest .............. $ 27,866 $ 8,368
=========== ============

See Notes to Condensed Consolidated Financial Statements

MAREX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF FINANCIAL STATEMENT PRESENTATION

In management's opinion, the accompanying unaudited condensed consolidated
financial statements of Marex, Inc. and subsidiaries (the "Company") contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the Company's financial position, results of operations and cash
flows for each period shown. The results of operations for the 2002 interim
period presented are not necessarily indicative of the results to be expected
for any subsequent quarter or for the entire year ending December 31, 2002.

The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and the notes to
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001.

The accounting policies followed for interim financial reporting are the same as
those disclosed in the notes to consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

(2) GOING CONCERN CONSIDERATIONS

The accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. We have
sustained net operating losses and negative cash flows from operations since
inception and have an accumulated deficit of $71,679,350. Such conditions, among
others, give rise to substantial doubt about our ability to continue as a going
concern for a reasonable period of time. The accompanying unaudited condensed
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classifications of liabilities that might be necessary should we be unable to
continue as a going concern.

We currently anticipate that our available funds will be sufficient to meet our
projected working capital and operating resource requirements into the first
quarter of 2003 since we significantly decreased our staff and, during April
2002, shifted our focus from our electronic commerce solutions to our telemetry
and management information solutions. However, any projections of future cash
needs and cash flows are subject to substantial uncertainty. If current cash and
cash equivalents, and cash that may be generated from operations are not
sufficient to satisfy our liquidity requirements, we will likely seek to sell
additional equity or debt securities. If we raise additional funds through the
issuance of equity or convertible securities, such securities may have rights,
preferences or privileges senior to those of the rights of our Common Stock.
Furthermore, in the event that we issue or sell Common Stock or securities
convertible for Common Stock, at a price per share less than the conversion
price of the outstanding Series A1 Preferred Stock, the holders of the Series A1
Preferred Stock have the right to amend the conversion price of the price per
share of the issuance. As a result, our stockholders may experience significant
additional dilution. We cannot be certain that additional capital will be
available to us on acceptable terms or at all.

(3) RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations."
SFAS No. 141 addresses financial accounting and reporting for business
combinations and supercedes Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations" and SFAS No. 38, "Accounting for Preacquisition

Contingencies of Purchased Enterprises." All business combinations in the scope
of SFAS No. 141 are to be accounted for under the purchase method. SFAS No. 141
is effective for acquisitions initiated subsequent to June 30, 2001.
Accordingly, the Company's purchase of Software Support Team, Inc. ("Software
Support Team") on October 2, 2001 was accounted for under the provisions of SFAS
No. 141.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets (but not
those acquired in a business combination) at acquisition. SFAS No. 142 also
addresses financial accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. With the adoption of SFAS No. 142,
goodwill is no longer subject to amortization. Rather, goodwill will be subject
to at least an annual assessment for impairment by applying a fair value-based
test. The impairment loss is the amount, if any, by which the implied fair value
of goodwill is less than the carrying or book value. SFAS No. 142 is effective
for fiscal years beginning after December 15, 2001. Impairment loss for goodwill
arising from the initial application of SFAS No. 142 is to be reported as
resulting from a change in accounting principle. As a result of the purchase of
Software Support Team, the Company recognized goodwill in the amount of
$304,000. The Company does not believe the adoption of SFAS No. 142 will have a
material effect on the Company's financial position, results of operations or
cash flows.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the carrying amount of the related
long-lived asset. Subsequently, the asset retirement cost should be allocated to
expense using a systematic and rational method over its useful life. SFAS No.
143 is effective for fiscal years beginning after June 15, 2002. The Company
does not believe the adoption of SFAS No. 143 will have a material effect on the
Company's financial position, results of operations or cash flows.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business as previously defined in that opinion.
This statement also amends Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely temporary. For purposes of this
statement, impairment is the condition that exists when the carrying amount of a
long-lived asset exceeds its fair value. An impairment loss recognized for a
long-lived asset to be held and used shall be included in income from continuing
operations before income taxes in the income statement of a business enterprise.
A long-lived asset shall be tested for recoverability whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early application encouraged.
The Company reviews long-lived assets for impairment in accordance with SFAS
144. For the three months ended March 31, 2002, no impairment was recognized.

(4) NET LOSS PER SHARE

The Company is required to present basic and diluted earnings per share
information. Basic earnings per share is computed by dividing income available
to common stockholders (the numerator) by the weighted average number of common
shares (the denominator) for the period. The computation of diluted earnings per
share is similar to basic earnings per share, except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued. Diluted
earnings per share was the same as basic earnings per share for all periods
presented because the Company reported a net loss for all periods presented and,
therefore, the effects of potential shares would be anti-dilutive. The total
number of potential shares outstanding at March 31, 2002 and 2001 that were
excluded from the diluted earnings per share calculation was approximately 4.7
million and 8.1 million, respectively.

(5) SOFTWARE DEVELOPMENT COSTS

The Company follows SFAS No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed," Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," and Emerging Issues Task Force Issue No. 00-02, "Accounting for
Web Site Development Costs," for the accounting of development costs. During the
three months ended March 31, 2002 and 2001, the Company capitalized
approximately $218,000 and $283,000, respectively, of development costs
associated with development of its software products.

(6) ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Under APB Opinion No. 25, compensation
cost is measured as the excess, if any, of the quoted market price of the
Company's Common Stock at the date of grant over the exercise price of the
option granted. Compensation cost for stock options, if any, is recognized
ratably over the vesting period. In March 2000, the Company granted options to a
director at an exercise price below the quoted market price which resulted in
total non-cash compensation of $2.4 million. During the three months ended March
31, 2002 and 2001, compensation expense related to the vested portion of the
stock options granted to the director totaled $117,000 and is included in the
unaudited condensed consolidated statements of operations as "Stock-based
compensation."

(7) INCOME TAXES

The Company did not record a benefit for income taxes due to the full valuation
allowance that has been recorded given the uncertainty of the realization of its
deferred income tax assets.

(8) PREFERRED STOCK

The Company has authorized 1,000,000 shares of Preferred Stock of $.01 par value
with preferences to be determined by the Board of Directors. On March 2, 2000,
the Board of Directors designated 430,000 shares as Series A1 Convertible
Preferred Stock ("Series A1 Preferred Stock").

In March 2000, the Company received net proceeds of $20.4 million in connection
with the sale of 210,000 shares of Series A1 Preferred Stock at $100 per share.
In May 2000, the Company completed the private placement through the sale of an
additional 210,000 shares of Series A1 Preferred Stock at $100 per share. Total
net proceeds from the private placement were $40.9 million. During the three
months ended March 31, 2002, 35,000 shares of Series A1 Preferred Stock were
converted into 269,231 shares of Common Stock.

Each share of the Series A1 Preferred Stock is convertible into 7.69 shares of
Common Stock at the option of the holder at any time. In the event that the
Company issues or sells Common Stock or securities convertible or exchangeable
for Common Stock, subject to certain exclusions, at a price per share less than
the conversion price of the outstanding Series A1 Preferred Stock, the holders
of the Series A1 Preferred Stock shall have the right to amend the conversion
price of the Series A1 Preferred Stock outstanding to the price per share of the
issuance. Automatic conversion occurs upon either of the following: completion
by the Company of a public offering which raises gross proceeds of at least $50
million, at an effective price per share to the public of at least $26.00 as
adjusted for stock splits, stock dividends or other similar transactions; or,
upon the event that the market price per share of the Company's Common Stock
exceeds $26.00, subject to adjustments for stock splits, stock dividends, or
other similar transactions, for a consecutive twenty-day period following the
one-year anniversary of the effective date of a registration statement covering
the Common Stock underlying the Series A1 Preferred Stock.

The holders of the Series A1 Preferred Stock are entitled to the number of votes
equal to the number of shares of Common Stock into which such Preferred Stock is
convertible.

Upon declaration by the Board of Directors, holders of Series A1 Preferred Stock
shall be entitled to receive dividends ratably in an amount per share equal to
that which the holders would have been entitled had they converted their Series
A1 Preferred Stock into shares of Common Stock.

Upon any liquidation of the Company, holders of record of the Series A1
Preferred Stock shall be entitled to receive, out of the assets of the Company
and before any distribution or payment is made upon any class of security of
lesser rank, an amount per share equal to the lesser of $100 per share or the
assets of the Company available for distribution to its shareholders,
distributed ratably among holders of the outstanding Series A1 Preferred Stock.
After the distribution to the holders of Series A1 Preferred Stock has been
made, the remaining assets of the Company available for distribution to
shareholders shall be distributed pro rata solely among the holders of Common
Stock.

Holders may redeem shares of Series A1 Preferred Stock in the event that the
Company does not honor a conversion. In such a case, the redemption amount is
equal to, at the option of the holder, the market value of the Common Stock that
the shares of Series A1 Preferred Stock would otherwise have been convertible
into or $100 per share.

(9) SEGMENT INFORMATION

Through March 31, 2002, the Company operated two primary business segments for
internal management reporting purposes: electronic commerce products and
management information solutions software products. Electronic commerce products
consist of our internally developed procurement solutions. Management
information solution software products consist of those products obtained
through the acquisition of Software Support Team on October 2, 2001. These
operating segments generally follow the management organizational structure of
the Company. Sales are made only to external customers in the United States of
America. Information on operating segments for the three months ended March 31,
2002 is as follows:

Management
Information Solutions Electronic Commerce* Total
--------------------------- -------------------------- -----------------------

Net sales $ 479,356 $ 15,025 $ 494,381
=========================== ========================== =======================
Costs and expenses $ 701,585 $ 2,505,613 $ 3,207,198
=========================== ========================== =======================
Interest income $ 963 $ 22,306 $ 23,269
=========================== ========================== =======================
Interest expense $ 921 $ 24,434 $ 25,355
=========================== ========================== =======================
Net loss $ (222,109) $ (2,493,235) $ (2,715,344)
=========================== ========================== =======================
Total assets at quarter end $ 2,225,226 $ 4,326,345 $ 6,551,571
=========================== ========================== =======================
Long-lived assets at quarter end $ 1,545,880 $ 2,034,649 $ 3,580,529
=========================== ========================== =======================

* Certain corporate overhead and assets are included within the
electronic commerce segment for reporting purposes.

For the three months ended March 31, 2001, the Company operated solely in the
electronic commerce operating segment and one customer accounted for
approximately 58% of total revenues of this segment. During the fourth quarter
of 2001, the agreement with this customer was terminated. For the three months
ended March 31, 2002, the Company did not have a major customer.

(10) RELATED PARTY TRANSACTIONS

During 2001, the Company loaned its Chief Executive Officer, who is also a
Director and a shareholder, $400,000. The loan accrues interest at an annual
rate of 8.0% and matures on December 31, 2002. The loan is included in the
audited condensed consolidated balance sheets as "Loan to related party."

(11) LEGAL MATTERS

be disposed of unfavorably to the Company, based on currently available
information, the Company does not believe that such legal matters will have a
material adverse effect on its consolidated financial position or results of
operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, WHICH ARE INCLUDED ELSEWHERE IN THIS FORM 10-Q. IT
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH RELATE TO SUCH MATTERS AS
ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, TECHNOLOGICAL
DEVELOPMENTS, AND SIMILAR MATTERS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF MAREX TO BE MATERIALLY DIFFERENT FROM
THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED ELSEWHERE IN THIS REPORT IN THE SECTION
ENTITLED "RISK FACTORS" AND THE RISKS DISCUSSED IN OUR OTHER SECURITIES AND
EXCHANGE COMMISSION FILINGS.

OVERVIEW

Marex, Inc. (the "Company" or "Marex") is a software products and technology
services company offering high end technology solutions to businesses. Our
mission is to improve the efficiency of our customers' technology initiatives.
We are currently serving the marine and transportation industries.

The Company has available for the markets it serves three products which
include: an e-commerce solution which enables the electronic exchange of
business documents and product information; a management information solution
which provides a front and back office solution for a retail or dealer store
environment; and a telemetry product which is capable of tracking assets from a
remote location over the Internet.

Marex has developed a line of client server applications under the name of
MarConnect Enterprise, Standard and Advisor ("MarConnect Suite"), which enable
the electronic exchange of business documents including the promotion of new
product information and advisories. The MarConnect offerings include support for
EDI, XML and flat file formats and do not require additional hardware, staff or
specialized training. MarConnect Standard and Enterprise were launched during
January of 2002, whereas MarConnect Advisor was launched during February of
2002.

The MarConnect Suite replaced MarExpress! and MarexPO!. MarExpress! and MarexPO!
provided marine industry buyers and suppliers with an e-procurement solution for
the purchase and sale of new parts, supplies, components and equipment through a
web-based transaction system. Prior to the launch of MarExpress! and MarexPO!,
our Internet based trading exchange, the Exchange, and its successor, Classified
and Auctions, were the only products offered to the marine industry. We
suspended the Classifieds and Auctions product in the first quarter of 2001.

In October 2001, we completed the acquisition of 100% of the outstanding stock
of Software Support Team, Inc. ("Software Support Team"), which is engaged in
the business of developing management information solution software for
retailers, distributors and dealers. Software Support Team's current product,
DockMaster, offers comprehensive business functions to the marine industry
through a series of integrated software modules.

The Company has developed a telemetry solution (the "Telemetry Solution") for
the marine industry, which we believe to be comprehensive, and is currently
marketing this same technology for the transportation industry, as well as other
industries. The Telemetry Solution is designed to enable the remote tracking of
assets from virtually any location in the world via the Internet by using our
MarConnect Suite. During April 2002, Marex shifted its business strategy from
e-commerce solutions to the Telemetry Solution.

CRITICAL ACCOUNTING POLICIES

Marex's discussion and analysis of its financial condition and results of
operations are based upon Marex's unaudited condensed consolidated financial
statements, which have been prepared in

accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires Marex to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. Marex
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 to the consolidated
financial statements included in Item 8 of our Form 10-K for the year ended
December 31, 2001. We believe our most critical accounting policies include
software and website development costs and revenue recognition.

Marex follows Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," and Emerging Issues
Task Force Issue No. 00-02, "Accounting for Web Site Development Costs," for the
accounting of development costs. Marex evaluates software and website
development costs for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of any asset to future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets.

The Company follows SOP 97-2, "Software Revenue Recognition," which requires
companies to defer revenue and profit recognition if certain required criteria
of a sale are not met. In addition, SOP 97-2 requires that revenue recognized
from software arrangements is to be allocated to each element of the arrangement
based on the relative fair values of the elements, such as software products,
upgrades, enhancements, post contract customer support, installation, or
training. The Company licenses software under noncancellable license agreements.

DockMaster, the Company's core management information solutions product acquired
during 2001, generates revenues from the licensing of software modules, customer
support contracts, training, custom programming, and hardware sales. Licensing
and related hardware and service revenues are recognized on a subscription basis
over the term of the related customer support contract, which is typically one
year. Customer support contracts are billed on a monthly or quarterly basis and
revenue is recognized during the month of support.

The MarConnect Suite generated revenues by charging a monthly subscription fee.
MarExpress! and MarexPO!, Marex's former core products, generated revenues by
charging a transaction fee which was based on the gross transaction price of
items purchased and sold through the system. The fee was recognized as revenue
when the customers' right to receive a refund for the transaction fee expired.
Classifieds and Auctions, which supplemented MarExpress! and MarexPO!, generated
revenues by charging listing and transaction fees.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 AND 2001

REVENUES

For the three months ended March 31, 2002, we recorded revenues of $494,000
compared to $49,000 during the same period in 2001. The increase was due to the
acquisition of Software Support Team in October 2001.

Software Support Team generated revenues of $479,000 during the three months
ended March 31, 2002. Software Support Team revenues were primarily comprised of
$188,000 in DockMaster software and hardware sales and $219,000 in related
support. The balance was comprised of income from other software, hardware and
seminars.

The MarConnect Suite generated revenues by charging a monthly subscription fee.
For the three months ended March 31, 2002, we recorded revenues of $15,000
related to the MarConnect Suite. For the three months ended March 31, 2001, we
did not record revenues related to the MarConnect Suite as it was launched
during the first quarter of 2002. MarExpress! and MarexPO! generated revenues by
charging a transaction fee based on the gross transaction price of items
purchased and sold through the system. The fees were recognized as revenue when
customers' right to receive a refund expired. For the three months ended March
31, 2001, we recorded revenues of $49,000 generated from $2.8 million of
transactions. MarExpress! and MarexPO! did not generate revenues during the
three months ended March 31, 2002 as they were discontinued during the fourth
quarter of 2001.

We expect future revenues to consist primarily of sales from DockMaster and our
Telemetry Solution.

PRODUCT SUPPORT AND DEVELOPMENT

Product support and development expenses consist primarily of compensation for
product support and development personnel, cost of outside contractors,
amortization of software development costs, and other costs associated with the
operations and enhancements of the website. Product support and development
expenses decreased to $1.2 million for the three months ended March 31, 2002,
compared to $2.0 million for the same period in 2001. The change related
primarily to decreases of $382,000 in cost of outside contractors and $330,000
in amortization of software development costs. The balance was comprised of
decreases in overhead and operating costs directly associated with the
development, support and maintenance of the web site and e-commerce products. We
expect future expense related to product support and development to decrease as
we have completed development of our core products and decreased the size of our
support and development staff.

SELLING AND MARKETING

Selling and marketing expenses consist primarily of compensation for sales and
marketing personnel, cost of outside contractors and marketing costs. Selling
and marketing expenses decreased to $746,000 for the three months ended March
31, 2002, compared to $1.1 million for the same period in 2001. The change is
primarily due to decreases of $127,000 in personnel and personnel related costs,
$108,000 in outside contractor costs, and $61,000 in operating costs associated
with selling activities. The balance was comprised of decreases in overhead and
operating costs directly associated with selling and marketing activities. We
expect future selling and marketing expenses to decrease as we will perform
fewer advertising and marketing activities since we believe our target markets
are aware of our brand and we have decreased the size of our sales and marketing
staff.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation for
administrative personnel, facilities expenses, professional fees, and general
corporate expenses. General and administrative expenses increased to $1.1
million for the three months ended March 31, 2002, compared to $698,000 for the
same period in 2001. The change related primarily to increases of $123,000 in
personnel and personnel related costs and $195,000 in professional fees. The
balance was comprised of corporate charges directly associated with the
administrative functions of our Company. We expect future general and
administrative expenses to decrease as we have decreased our general and
administrative staff.

STOCK-BASED COMPENSATION

For the three months ended March 31, 2002 and 2001, we recognized non-cash
compensation expense of $117,000 relating to options granted to a director.

OTHER INCOME AND EXPENSE

We recognized $23,000 of interest income for the three months ended March 31,
2002, compared to $223,000 for the three months ended March 31, 2001. The
decrease was a result of lower balances of cash equivalents derived from the net
proceeds of our private placements. Interest expense for the three

months ended March 31, 2002 was $25,000, compared to $8,000 for the three months
ended March 31, 2001. The increase was primarily due to the seller-financed note
payable related to the acquisition of Software Support Team.

NET LOSS

Our net loss decreased to $2.7 million for the three months ended March 31,
2002, from $3.6 million in the three months ended March 31, 2001. The change
resulted from the decrease in costs, as described above.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through the private sales of Common
Stock and Preferred Stock.

Net cash used in operating activities was $2.3 million for the three months
ended March 31, 2002, primarily as a result of a net loss of $2.7 million and
the decrease of $304,000 in accounts payable and accrued expenses. The net loss
and decrease in accounts payable and accrued expenses were partially offset by
amortization expense of $269,000, depreciation expense of $233,000, and a
non-cash stock-based compensation charge of $117,000.

Net cash used in investing activities was $245,000 for the three months ended
March 31, 2002, primarily due to $218,000 of software development costs related
to the development of our e-commerce and management information solutions.

Net cash used in financing activities was $208,000 for the three months ended
March 31, 2002, primarily due to $167,000 of principal payments on the
seller-financed note payable and $41,000 of principal payments on capital lease
obligations.

As of March 31, 2002, cash and cash equivalents totaled $1.8 million, while our
working capital was $496,000. In comparison, as of December 31, 2001, cash and
cash equivalents totaled $4.5 million, while our working capital was $3.0
million. To date, our primary uses of cash have been in operating activities to
fund the development and promotion of our e-commerce solutions.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations." SFAS No. 141 addresses financial accounting and
reporting for business combinations and supercedes Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations" and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." All business
combinations in the scope of SFAS No. 141 are to be accounted for under the
purchase method. SFAS No. 141 is effective for acquisitions initiated subsequent
to June 30, 2001. Accordingly, the Company's purchase of Software Support Team
on October 2, 2001 was accounted for under the provisions of SFAS No. 141.

RISK FACTORS

The following risk factors, together with all information in this Form 10-Q,
should be carefully considered in evaluating Marex and its business. Due to the
significant impact that the risk factors set forth below may have on Marex's
business, results of operations and financial condition, actual results could
differ materially from those expressed or implied by any forward-looking
statement.

WE HAVE A LIMITED OPERATING HISTORY

Marex was founded in 1992 but did not launch its main products until June 2000,
which were replaced by new products launched in 2001 and will be replaced by
products launched in 2002. Thus, we have a limited operating history on which to
base an evaluation of our software business and prospects. Our prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as software
development. There can be no assurance that we will be able to address these
risks.

WE HAVE A HISTORY OF LOSSES

We have incurred losses from operations in each period since our inception. The
Company has incurred losses of $19.6 million, $43.4 million and $3.7 million for
the years ended December 31, 2001, 2000 and 1999, respectively, and $2.7 million
for the three months ended March 31, 2002. We expect to incur substantial
operating losses and have continued negative cash flows from operations for the
foreseeable future. Moreover, we expect to incur significant sales and
marketing, product support and development, and general and administrative
expenses. In addition, we have no material revenues to date. If our revenue does
not increase substantially or if our expenses are more than we expect, we may
not become profitable.

IF WE FAIL TO ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED

We are currently commencing the marketing of orders for the Telemetry Solution.
Accordingly, our core solution has a limited market history. If the Telemetry
Solution does not achieve market acceptance, our business will be adversely
affected.

WE FACE INTENSE COMPETITION

We perceive competition to be pervasive and we expect it to increase in the
future. We may face competition from other companies with telemetry or
management information offerings as well as traditional suppliers and
distributors in industries we serve and companies that have or may develop their
own online solutions. In addition, providers of online marketplaces and online
auction services that currently focus on other industries may expand their
services to include products from industries that we currently target. Our
competitors and potential competitors may develop superior solutions that
achieve greater market acceptance than the Marex solutions. In addition,
substantially all of our prospective customers have established long-standing
relationships with some competitors and potential competitors. We cannot be
certain that we can compete successfully.

OUR SOLUTIONS AND SERVICES ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES

The markets for the Marex solutions are characterized by rapid technological
advances, evolving standards in the software markets, changes in customer
requirements and frequent new product and service introductions and
enhancements. As a result, we believe that our future success depends upon our
ability to enhance our current solutions. If we do not adequately respond to the
need to enhance our solutions or services, then our business will be negatively
affected.

WE WILL NEED TO MANAGE OUR EXPANDING BUSINESS

Our growth has placed, and is expected to continue to place, a significant
demand on our sales, marketing, managerial, operational, information technology
and other resources. If we cannot manage our growth effectively, our business
will be adversely affected. Our current information systems, procedures and
controls may not support expanded operations and may hinder our ability to take
advantage of the markets for telemetry and management information solutions to
the industries we serve.

WE DEPEND ON A MAJOR CUSTOMER

We had an agreement with one of the largest manufacturers of powerboats in the
world for the utilization of our e-commerce solution, which was our largest
customer. During 2001, the agreement was terminated. During April 2002, we
shifted our strategic focus from e-commerce solutions to our telemetry and
management information solutions. Accordingly, we do not expect revenues from
our e-commerce solutions to be a significant part of our future gross revenues.

WE DEPEND ON KEY PERSONNEL

Our performance is substantially dependent on the performance of the executive
officers and other key employees. Failure to successfully manage personnel
requirements would have a negative effect on the business. We have experienced
difficulty from time to time in hiring the personnel necessary to support

the growth of our business, and we may experience similar difficulty in hiring
and retaining personnel in the future. Competition for senior management,
experienced sales and marketing personnel, software developers, and other
employees is intense, and we cannot be certain that we will be successful in
attracting and retaining personnel. The loss of the services of any executive
officers or key employees could have a negative effect on the business. Failure
to obtain or retain the services of necessary executive officers or key
employees may not support existing or expanded operations, and may hinder our
ability to take advantage of the markets for telemetry and management
information solutions in the industries we serve.

WE EXPECT THE PRICE OF OUR COMMON STOCK TO BE VOLATILE

The market price of our Common Stock may fluctuate significantly in response to
a number of factors, some which are beyond our control, including the following:
Marex Common Stock is thinly traded; quarterly variations in operating results;
changes in market valuation of Internet commerce companies; announcements of
significant contracts, acquisitions, strategic partnerships, joint ventures or
capital commitments; loss of a major customer or strategic partner, or failure
to complete a sale to a significant customer; additions or departures of any key
personnel; future sales of our Common Stock; and stock market price and volume
fluctuations, which are particularly common among highly volatile securities of
technology companies.

SECURITY PROBLEMS MAY INHIBIT THE GROWTH OF OUR SOLUTIONS

A significant barrier to the adoption of technology solutions is the secure
transmission of confidential information over public networks. Users generally
are concerned with security and privacy on the Internet and any publicized
security problems could inhibit the growth of the Internet, and therefore
inhibit the Marex solutions as a means of conducting transactions. If there is a
breach in our security system, we may be required to make significant
expenditures to protect against security breaches and to alleviate problems
caused by such breaches.

SYSTEM FAILURE MAY CAUSE INTERRUPTION OF SERVICES

The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation, and affects our
ability to process transactions, provide high quality customer service and
attract and retain customers, suppliers, users and strategic partners.
Currently, the infrastructure and systems are located at one site in Miami,
Florida. Any disruption to this infrastructure resulting from a natural disaster
or other event could result in an interruption in service, fewer transactions
and, if sustained or repeated, could impair our reputation and the
attractiveness of the services.

WE MAY REQUIRE ADDITIONAL CAPITAL FOR OPERATIONS, WHICH COULD HAVE A NEGATIVE
EFFECT ON YOUR INVESTMENT

We currently anticipate that our available funds will be sufficient to meet our
projected working capital and operating resource requirements into the first
quarter of 2003 since we significantly decreased our staff and, during April
2002, shifted our focus from our electronic commerce solutions to our telemetry
and management information solutions. However, any projections of future cash
needs and cash flows are subject to substantial uncertainty. The Company is in
process of launching new product offerings which may or may not be successful.
The Company's cash requirements may be substantial and may exceed the amount of
the Company's existing working capital. If current cash and cash equivalents,
and cash that may be generated from operations are not sufficient to satisfy our
liquidity requirements, we will likely seek to sell additional equity or debt
securities. If we raise additional funds through the issuance of equity or
convertible securities, such securities may have rights, preferences or
privileges senior to those of the rights of our Common Stock. Furthermore, in
the event that we issue or sell Common Stock or securities convertible for
Common Stock, at a price per share less than the conversion price of the
outstanding Series A1 Preferred Stock, the holders of the Series A1 Preferred
Stock have the right to amend the conversion price of the price per share of the
issuance. As a result, our stockholders may experience significant additional
dilution. We cannot be certain that additional capital will be available to us
on acceptable terms or at all.

A PROLONGED ECONOMIC DOWNTURN WOULD ADVERSELY AFFECT OUR OPERATIONS AND
FINANCIAL CONDITION

Although we have not operated during a period of prolonged general economic
downturn or a recession, these events have historically resulted in unfavorable
results for corporate entities. The United States economy is currently
undergoing a difficult period, which some observers might view as a recession.
This economic condition has been worsened by the September 11th terrorist
attacks in New York City and Washington, D.C. A continued economic downturn
would have a significant adverse impact on our operations and our financial
condition.

WE DEPEND ON INTELLECTUAL PROPERTY RIGHTS

Our intellectual property is important to us. We seek to protect intellectual
property through copyrights, trademarks, trade secrets, confidentiality
provisions in customer, supplier and strategic relationship agreements, and
nondisclosure agreements with third parties, employees and contractors. We
cannot assure that measures we take to protect intellectual property will be
successful or that third parties will not develop alternative purchasing
solutions that do not infringe upon our intellectual property. In addition, we
could be subject to intellectual property infringement claims by others. Failure
to protect against misappropriation of intellectual property, or claims that we
are infringing the intellectual property of third parties could have a negative
effect on our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any market risk sensitive instruments. As a result, this item is
not applicable to our consolidated balance sheet as of March 31, 2002.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in only ordinary, routine litigation and claims
incidental to its business. Although the outcome of such matters cannot be
predicted with certainty and some of these matters may be disposed of
unfavorably to the Company, based on currently available information, the
Company does not believe that such legal matters will have a material adverse
effect on its consolidated financial position or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

EXHIBITS DESCRIPTRION OF DOCUMENTATION
-------- -----------------------------

3.1 Amended and Restated Articles of Incorporation of the Company (1)

3.2 Amended and Restated Bylaws of the Company (1)

3.3 Articles of Amendment to Amended and Restated Articles of
Incorporation of the Company (3)

4.1 Certificate of Designation for the Series A1 Convertible
Preferred Stock, par value $.01 (3)

4.2 Securities Purchase Agreement among Marex, Inc. and Certain
Purchasers, dated March 2, 2000 (3)

4.3 Registration Rights Agreement among Marex, Inc. and Certain
Purchasers, dated March 2, 2000 (3)

10.1 1996 Incentive Stock Option Plan, as amended (1)

10.2 Amended and Restated 1997 Stock Option Plan (2)

10.3 Company's Office Lease, 2701 South Bayshore Dr., Miami, FL, as
amended (4)

10.4 Company's Office Lease, 5835 Blue Lagoon Dr., Miami, FL, as
amended (5)

10.5 Stock Purchase Agreement among Marex, Inc., Software Support
Team, Inc., Arthur M. Peacock and Albert L. Peacock, dated
September 21, 2001 (6)
-----------
(1) Previously filed as an exhibit to the Company's Form 10-SB and Amendment
No. 1 to Form 10-SB.

(2) Previously filed as part of the Company's Form DEFS14A filed on October 19,
1999.

(3) Previously filed as an exhibit to the Company's Form 8-K filed on March 8,
2000.

(4) Previously filed as an exhibit to the Company's Form 10-K filed on March
23, 2000.

(5) Previously filed as an exhibit to the Company's Form 10-K filed on March
23, 2001.

(6) Previously filed as an exhibit to the Company's Form 8-K filed on October
16, 2001.

(b) REPORTS ON FORM 8-K.

No reports on Form 8-K were filed during the three months ended March
31, 2002.

SIGNATURES

Pursuant to 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 thereunto duly authorized.

MAREX, INC.

DATE: MAY 15, 2002 By: /s/ DAVID A. SCHWEDEL
------------------ ---------------------------------------
David A. Schwedel
Chief Executive Officer and Principal
Accounting Officer