content: ================================================================================
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
  (Mark One)
  _x_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
  
  For the quarterly period ended June 30, 1996
  
                                         OR
  
  ___ 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 0-20394
  
                              INMARK ENTERPRISES, INC.
               (Exact name of registrant as specified in its charter)
  
                 Delaware                                06-1340408
                 --------                                ----------
       (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)              Identification Number)
  
               One Plaza Road
             Greenvale, New York                          11548
             -------------------                          -----
       (Address of principal executive offices)         (Zip Code)
  
  Registrant's telephone number, including area code: (516) 625-3500
  
  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 _____
  
  On August 6, 1996, 2,880,751 shares of the Registrant's Common Stock, par value
  $.001 a share, were outstanding.
  
  
  ================================================================================
  
  
  <PAGE>
  
  
                                        INDEX
  
                      INMARK ENTERPRISES, INC. AND SUBSIDIARIES
  
  
                                                                             Page
                                                                             ----
  
  
  PART I - FINANCIAL INFORMATION
  
  Item 1.   Consolidated Financial Statements of Inmark Enterprises, Inc.
            (Unaudited)
  
            Consolidated Balance Sheets - June 30, 1996 and March 31, 1996     3
  
            Consolidated Statements of Operations - Three month periods ended  4
            June 30, 1996 and June 30, 1995
  
            Consolidated Statement of Stockholders' Equity -                   5
            Three month period ended June 30, 1996
  
            Consolidated Statements of Cash Flows - Three month periods        6 
            ended June 30, 1996 and June 30, 1995
  
            Notes to Unaudited Consolidated Financial Statements               7
  
  Item 2.   Management's Discussion and Analysis of Financial Condition and    8
            Results of Operations
  
  
  PART II - OTHER INFORMATION                                                 11
  
  
  SIGNATURES                                                                  12
  
  
                                         -2-
  
  <PAGE>
  
                           PART I - FINANCIAL INFORMATION
  
                              INMARK ENTERPRISES, INC.
                             Consolidated Balance Sheets
                          June 30, 1996 and March 31, 1996
  
  
  <TABLE>
  <CAPTION>
  
                                                                         June 30, 1996       March 31, 1996*
                                                                         -------------       ---------------
                    Assets                                                (Unaudited)
  <S>                                                                    <C>                   <C>
  
  Current assets:
   Cash and cash equivalents                                              $   238,712              700,598
   Restricted cash                                                               --                250,000
   Accounts receivable                                                      3,551,405                 --
   Due from factor                                                               --                578,725
   Interest and other receivables                                                --                 31,040
   Deferred tax asset                                                         640,000              640,000
   Prepaid expenses and other current assets                                   36,251               57,940
                                                                           ----------            ---------
           Total current assets                                             4,466,368            2,258,303
                                                                           ----------            ---------
  
  Furniture, fixtures and equipment, net                                      130,610              121,159
  
  Goodwill, net                                                             2,452,357            2,524,927
  Note receivable from officer                                                200,000              200,000
  Other assets                                                                 14,180               14,180
                                                                           ----------            ---------
           Total assets                                                     7,263,515            5,118,569
                                                                           ==========            =========
  
                    Liabilities and Stockholders' Equity 
  
  Current liabilities:
   Accounts payable                                                           830,309              851,898
   Accrued job costs                                                        2,585,225            1,287,904
   Accrued compensation                                                        55,311               32,144
   Other accrued liabilities                                                  215,346              182,846
   Notes payable - SPAR                                                       750,000              750,000
                                                                           ----------            ---------
           Total current liabilities                                        4,436,191            3,104,792
                                                                           ----------            ---------
  
  Stockholders' equity:
   Class A convertible preferred stock, par value $.001;
     authorized 650,000 shares; none issued and outstanding                      --                   --
   Class B convertible preferred stock, par value $.001;
     authorized 700,000 shares; none issued and outstanding                      --                   --
   Preferred stock, undesignated; authorized 3,650,000
      shares; none issued and outstanding                                        --                   --
   Common stock, par value $.001; authorized 25,000,000
     shares; issued and outstanding 2,879,251 shares at June 30,
     1996 and 2,604,251 shares at March 31, 1996                                2,879                2,604
  Additional paid-in capital                                                1,321,751            1,043,526
   Retained earnings                                                        1,502,694              967,647
                                                                           ----------            ---------
           Total stockholders' equity                                       2,827,324            2,013,777
                                                                           ----------            ---------
  
           Total liabilities and stockholders' equity                       7,263,515            5,118,569
                                                                           ==========            =========
  
  <FN>
  - ----------
  * The consolidated balance sheet as of March 31, 1996 has been summarized from
    the Company's audited balance sheet as of that date.
  </FN>
  
  </TABLE>
  
  See accompanying notes to consolidated financial statements.
  
                                        - 3 -
  
  <PAGE>
  
                              INMARK ENTERPRISES, INC.
                        Consolidated Statements of Operations
                      Three months ended June 30, 1996 and 1995
                                     (Unaudited)
  
  
                                                               1996         1995
                                                               ----         ----
  
  Sales                                                     $4,831,752   4,840,672
  Direct expenses                                            3,274,832   3,343,708
                                                            ----------   ---------
           Gross profit                                      1,556,920   1,496,964
                                                            ----------   ---------
  
  Salaries                                                     548,538     526,383
  Selling, general and administrative expense                  427,207     420,091
                                                            ----------   ---------
        Total operating expense                                975,745     946,474
                                                            ----------   ---------
        Operating income                                       581,175     550,490
  
  Interest expense, net                                          6,128      31,475
                                                            ----------   ---------
  Income before income taxes                                   575,047     519,015
  Provision for income taxes                                    40,000     202,000
                                                            ----------   ---------
         Net income                                         $  535,047     317,015
                                                            ==========   =========
  
   Net income per common and common equivalent share:
  
    Primary                                                 $      .16         .47
                                                            ==========   =========
    Fully diluted                                           $      .15         .47
                                                            ==========   =========
  
  Weighted average number of common and 
   common equivalent shares outstanding:
  
    Primary                                                  3,418,837     677,106
                                                            ==========   =========
    Fully diluted                                            3,637,852     677,106
                                                            ==========   =========
  
  
  
  
  See accompanying notes to consolidated financial statements.
  
  
  
  
  
  
                                        - 4 -
  
  <PAGE>
  
  
                              INMARK ENTERPRISES, INC.
                   Consolidated Statement of Stockholders' Equity
                          Three months ended June 30, 1996
                                     (Unaudited)
  
  
  
  <TABLE>
  <CAPTION>
  
                                     Common Stock   
                                    par value $.001            Additional                              Total
                                -----------------------        Paid - in          Retained          Stockholders'
                                   Shares      Amount           Capital           Earnings            Equity
                                -----------    ------          ----------        ----------         ------------
  
  <S>                            <C>           <C>            <C>                <C>                  <C>
  
  Balance, March 31, 1996        2,604,251     $2,604         $1,043,526         $  967,647           $2,013,777
  
  
  Exercise of warrants             275,000        275            278,225               --                278,500
  
  
  Net income                          --         --                 --              535,047              535,047
                                 ---------     ------         ----------         ----------           ----------
  Balance, March 31, 1996        2,879,251     $2,879         $1,321,751         $1,502,694           $2,827,324
                                 =========     ======         ==========         ==========           ==========
  
  
  </TABLE>
  
  
  
  See accompanying notes to consolidated financial statements.
  
  
                                        - 5 -
  
  <PAGE>
                              INMARK ENTERPRISES, INC.
                        Consolidated Statements of Cash Flows
                      Three months ended June 30, 1996 and 1995
                                     (Unaudited)
  
  
  <TABLE>
  <CAPTION>
  
                                                                                   1996          1995
                                                                                   ----          ----
  
  <S>                                                                          <C>             <C>
  Cash flows from operating activities:
     Net income                                                                $   535,047       317,015
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization                                               84,676       135,443
        Changes in operating assets and liabilities:
            Increase in accounts receivable                                     (3,551,405)         --
            Decrease (increase) in prepaid expenses and other current assets        21,689       (35,985)
            Decrease in interest and other receivables                              31,040          --
            (Decrease) increase in accounts payable                                (21,589)       46,552
            Increase in accrued job costs                                        1,297,321       985,817
            Increase in other accrued liabilities                                   63,167       268,322
            Decrease in accrued compensation                                        (7,500)     (215,000)
                                                                               -----------     ---------
            Net cash (used in) provided by operating activities                 (1,547,554)    1,502,164
                                                                               -----------     ---------
  
  Cash flows from investing activities:
    Costs of acquisition of business of SPAR net
        of cash acquired, including acquisition costs                                 --      (2,215,281)
    Purchases of fixed assets                                                      (21,557)       (3,723)
                                                                               -----------     ---------
          Net cash (used in) provided by investing activities                      (21,557)   (2,219,004)
                                                                               -----------     ---------
  Cash flows from financing activities:
    Proceeds of sale of accounts receivable to factor                                 --       1,828,000
    Repayments of loan payable to SPAR                                                --         (75,000)
    Release of restricted cash from factor                                         250,000          --
    Decrease (increase) in due from factor, net                                    578,725      (906,679)
    Proceeds from exercise of warrants                                             278,500          --
                                                                               -----------     ---------
         Net cash provided by financing activities                               1,107,225       846,321
                                                                               -----------     ---------
         Net (decrease) increase in cash                                          (461,886)      129,481
  Cash at beginning of period                                                      700,598           150
                                                                               -----------     ---------
  Cash at end of period                                                        $   238,712       129,631
                                                                               ===========     =========
  Supplemental disclosure:
    Interest paid during the period                                            $    18,918        32,059
                                                                               ===========     =========
    Income tax paid during the period                                          $    38,283          --
                                                                               ===========     =========
    Non-cash financing and investing activities:
        Notes payable issued in acquisition of SPAR
           net of cash acquired, including acquisition costs                   $      --       1,672,000
                                                                               ===========     =========
  
  </TABLE>
  
  
  See accompanying notes to consolidated financial statements.
  
                                         -6-
  
  <PAGE>
  
  
  
                      Inmark Enterprises, Inc. and Subsidiaries
  
              Notes to the Unaudited Consolidated Financial Statements
  
                               June 30, 1996 and 1995
  
  
  (1)  Organization and Nature of Business
  
       Inmark Enterprises, Inc. (formerly Health Image Media, Inc.) (the
       "Company") completed a merger on September 29, 1995 whereby Inmark
       Services, Inc., a New York corporation, was merged with and into the
       Company's wholly-owned subsidiary, InMark Acquisition Corp., a Delaware
       corporation (the "Merger"). Following the Merger, InMark Acquisition Corp.
       changed its name to Inmark Services, Inc. and Health Image Media, Inc.
       changed its name to Inmark Enterprises, Inc.
  
       Inmark Services, Inc. is the successor to SPAR Promotion & Marketing
       Services, Inc. ("Spar"), a sales promotion and marketing firm, as a result
       of a management led buy-out of that company's net assets and business on
       April 3, 1995.
  
  
  (2)  Basis of Presentation
  
       The Merger has been accounted for as a reverse purchase of the Company by
       Inmark Services, Inc. and, for financial accounting and reporting purposes,
       Inmark Services, Inc. is treated as the acquirer of the Company. No
       goodwill was recognized in the Merger. Operations for the three month
       period ended June 30, 1995 are solely those of Inmark Services, Inc.
  
       The interim financial statements of the Company for the three month periods
       ended June 30, 1996 and 1995 have been prepared without audit. In the
       opinion of management, such financial statements reflect all adjustments,
       consisting of normal recurring accruals, necessary to present fairly the
       Company's results for the interim periods presented. The results of
       operations for the three month period ended June 30, 1996 is not
       necessarily indicative of the results for a full year.
  
       Certain information and footnote disclosures normally included in financial
       statements prepared in accordance with generally accepted financial
       statements have been condensed or omitted. These consolidated financial
       statements should be read in conjunction with the consolidated financial
       statements and notes thereto for the year ended March 31, 1996 included in
       the Company's Annual Report on Form 10-K for the year ended March 31, 1996.
  
  
  (3)  Earnings Per Share
  
       The computation of earnings per common and common equivalent share is based
       upon the weighted average number of common shares outstanding during the
       period, plus the assumed exercise of stock options and warrants, less the
       number of treasury shares assumed to be purchased from the proceeds of such
       exercises using the average market price of the Company's common stock for
       primary and the period end market price for fully diluted earnings per
       share.
  
                                         -7-
  
  <PAGE>
  
  
  
       The weighted average number of common shares was computed assuming that the
       677,106 shares of the Company's common stock exchanged for the common stock
       of Inmark Services, Inc. in the Merger were outstanding for the entire
       three month period ended June 30, 1995; for the three month period ended
       June 30, 1996, the actual outstanding common stock of the Company was used
       in the computation. Stock options and warrants have been excluded from the
       calculation of the primary and fully diluted earnings per share in any
       period in which they would be antidilutive.
  
  
  (4)  Income Taxes
  
       Federal income taxes have not been provided for the three months ended June
       30, 1996, as any such taxes are expected to be minimal as a result of net
       operating loss carryforwards. To the extent that net operating loss
       carryforwards may not be available to offset state and local income taxes,
       a $40,000 provision for such taxes has been established for the three
       months ended June 30, 1996.
  
  
  (5)  Recent Accounting Developments
  
       In December, 1995, the Financial Accounting Standards Board issued
       Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
       effective for years beginning after December 15, 1995. Under SFAS 123, the
       Company may elect either a "fair value" based method or the current
       "intrinsic value" based method of accounting prescribed by APB No. 25,
       "Accounting for Stock Issued to Employees", for its stock-based
       compensation arrangements. Under the "intrinsic value" based method, the
       Company will be required to disclose in the footnotes to the consolidated
       financial statements net income and earnings per share computed under the
       "fair value" based method. The Company has elected to continue accounting
       for stock-based compensation arrangements using the "intrinsic value" based
       method; therefore, the adoption of SFAS 123 will not impact the Company's
       results of operations or financial condition.
  
  
  
  Item 2. Management's Discussion and Analysis of Financial Condition and Results
          of Operations.
  
       On September 29, 1995, the Company completed the merger whereby Inmark
  Services, Inc., a New York corporation, was merged with and into the Company's
  wholly-owned subsidiary, InMark Acquisition Corp., a Delaware corporation.
  Following the Merger, InMark Acquisition Corp. changed its name to Inmark
  Services, Inc. and the Company changed its name from Health Image Media, Inc. to
  Inmark Enterprises, Inc. Inmark Services, Inc. is the successor to SPAR
  Promotion & Marketing Services, Inc.("Spar"), a sales promotion and marketing
  firm, as a result of a management led buy-out of that company's net assets and
  business on April 3, 1995.
  
       The Merger has been accounted for as a reverse purchase of the Company by
  Inmark Services, Inc. and, for financial accounting and reporting purposes,
  Inmark Services, Inc. is treated as the acquirer of the Company. Accordingly,
  the following discussion includes the Company's results of operations for the
  three month period ended June 30, 1996 compared to the results of operations of
  Inmark Services, Inc. for the three month period ended June 30, 1995. The
  following information should be read together with the consolidated financial
  statements and notes thereto included elsewhere herein.
  
                                         -8-
  
  <PAGE>
  
  
  Results of Operations
  
       Sales. Sales for the quarter ended June 30, 1996 were $4,832,000 compared
  to sales of $4,841,000 for the quarter ended June 30, 1995, a decrease of $9,000
  or less than 0.2%. The decrease in the comparative quarterly sales was primarily
  the result of timing differences in the billing of scheduled installments under
  the existing contracts, notwithstanding that at June 30, 1996 the future
  billings of total contracts in place exceeded the future billings of total
  contracts in place at June 30, 1995 by approximately $1,573,000.
  
       Direct Expenses. Direct expenses for the quarter ended June 30, 1996 were
  $3,275,000, or 67.8% of sales, compared to $3,344,000, or 69.1% of sales, for
  the comparable prior year quarter. The decrease during the three month period
  ended June 30, 1996 in the amount of direct expenses and the direct expenses as
  a percentage of sales was principally the result of the current mix of client
  programs which, in the aggregate, have a higher gross profit margin than the mix
  of programs in place during the comparable prior year three month period.
  
       As a result of these changes in sales and direct expenses, gross profit for
  the quarter ended June 30, 1996 increased by $60,000 to $1,557,000 compared to
  the quarter ended June 30, 1995.
  
       Operating Expenses. Operating expenses for the quarter ended June 30, 1996
  increased by $29,000, or 3.1%, to $975,000 compared to $946,000 for the quarter
  ended June 30, 1995. Operating expenses as a percentage of sales were 20.2% and
  19.6%, respectively, for the quarters ended June 30, 1996 and June 30, 1995.
  
       The increase in operating expenses was primarily attributable to the net
  effect of the total of: (a) an increase in salaries of approximately $22,000 as
  a result of a general increase in non-executive salaries and the addition of
  personnel; (b) an increase in sales related expenses of approximately $87,000,
  inclusive of sales commissions; (c) an increase in legal and accounting expenses
  of approximately $40,000; and (d) an increase in marketing and advertising
  expenses of approximately $26,000, offset by a decrease of approximately
  $131,000 in factoring agreement related administrative and facility fees and a
  decrease of approximately $78,000 in acquisition and merger related expenses
  incurred in the comparable prior year quarter.
  
       Interest Expense. Net interest expense for the quarter ended June 30, 1996
  was $6,000 compared to $31,000 for quarter ended June 30, 1995. The decrease is
  the result of the reduced balance of notes payable outstanding during the
  quarter ended June 30, 1996, and interest income of $ 13,000 earned during the
  period.
  
       Provision For Income Taxes. For the three month period ended June 30, 1996,
  no provision for federal income taxes was made, as net operating loss carryovers
  from prior years of approximately $3,762,000 are available to offset taxable
  income; however, a $40,000 provision for state and local income taxes has been
  made, at a rate of approximately 7%, as net operating loss carryforwards may not
  be allowable as an offset against such taxes. For the three month period ended
  June 30, 1995, a $202,000 provision for income taxes had been made at a then
  estimated effective tax rate of 39% for Inmark Services, Inc.
  
       Net Income. As a result of the items discussed above, net income for the
  quarter ended June 30, 1996 was $535,000 compared to net income of $317,000 for
  the comparable prior year quarter.
  
                                         -9-
  
  <PAGE>
  
  
  
  Liquidity and Capital Resources.
  
       The Company's operating activities and other commitments until April 24,
  1996 were funded with the sale of accounts receivable pursuant to a factoring
  agreement and with cash provided from operations. Effective April 24, 1996, the
  Company entered into a one year factoring agreement, which replaced its prior
  factoring agreement, pursuant to which the Company may receive advances of up to
  75% of those of its accounts receivable which the Company, at its discretion,
  elects to sell to the factor. Total advances may not exceed $2,000.000 at any
  given time during the term of the factoring agreement. In connection with the
  factoring agreement, the Company paid a one time closing fee of $25,000 and pays
  an administration fee and facility fee based upon the same terms upon which such
  fees were paid under its earlier factoring agreement. In connection with the
  termination of its earlier factoring agreement, the $250,000 cash collateral
  deposit balance pledged to the factor was released together with the accrued
  interest thereon.
  
       For the quarter ended June 30, 1996, cash used in operations amounted to
  $1,548,000 and purchases of fixed assets totalled $22,000. Cash provided by the
  collection of receivable amounts due from the factor and by the release of
  restricted cash by the factor totalled $829,000, and proceeds from the exercise
  of warrants amounted to $279,000. As a result, cash decreased by $462,000. At
  June 30, 1996, the Company had cash of $239,000 and working capital of $30,000
  compared to cash of $701,000 and a negative working capital of $846,000 at June
  30, 1995. Stockholders' equity increased by $814,000 during the quarter ended
  June 30, 1996 as a result of the Company's net income and the proceeds received
  from the exercise of outstanding warrants.
  
       At June 30, 1996, the outstanding principal balance of the notes issued to
  Spar in the Spar acquisition was $750,000. The Company believes that it will be
  able to satisfy its cash requirements to pay the principal plus the accrued
  interest on the notes issued to Spar as they become due from cash flow generated
  from operations, as well as from funds available under the factoring agreement.
  To continue to improve the Company's working capital position, the Company must
  maintain profitable operations as well as continued availability of funding
  under the factoring agreement. Otherwise, the Company will be required to seek
  external financing, either through additional equity or debt financing. There
  can be no assurance that the Company will be able to obtain such additional
  funding, if required.
  
                                        -10-
  
  <PAGE>
  
  
  
                             PART II - OTHER INFORMATION
  
  
  Items 1-5.  Not Applicable
  
  
  Items 6.    Exhibits and Reports on Form 8-K.
  
              (a) Exhibits.  None
  
              (b) Reports on Form 8-K.  None
  
  
  
  
  
  
  
  
  
  
  
  
                                        -11-
  
  
  <PAGE>
  
  
                                     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.
  
  
  
                                    INMARK ENTERPRISES, INC.
  
  
  
  Dated: August 6, 1996             By:  /s/ John P. Benfield
                                        ----------------------------------------
                                        John P. Benfield, President
                                        (Principal Executive Officer)
                                        and Director
  
  
  
  Dated: August 6, 1996             By: /s/ Donald A. Bernard
                                        ----------------------------------------
                                        Donald A. Bernard, Executive Vice
                                        President and Chief Financial Officer
                                        (Principal Accounting and Financial
                                        Officer) and Director
  
  
  
  
                                        -12-
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 31513}]
metadata_filer: {"company-data": {"conformed-name": "INMARK ENTERPRISES INC", "cik": "0000886475", "assigned-sic": "9995", "irs-number": "061340408", "state-of-incorporation": "DE", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-20394", "film-number": "96605307"}, "business-address": {"street1": "ONE PLAZA ROAD", "city": "GREENVALE", "state": "NY", "zip": "11548", "phone": "5166253500"}, "mail-address": {"street1": "ONE PLAZA ROAD", "city": "GREENVALE", "state": "NY", "zip": "11548"}, "former-company": {"former-conformed-name": "HEALTH IMAGE MEDIA INC", "date-changed": "19930328"}}
text: ================================================================================
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
  (Mark One)
  _x_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
  
  For the quarterly period ended June 30, 1996
  
                                         OR
  
  ___ 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 0-20394
  
                              INMARK ENTERPRISES, INC.
               (Exact name of registrant as specified in its charter)
  
                 Delaware                                06-1340408
                 --------                                ----------
       (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)              Identification Number)
  
               One Plaza Road
             Greenvale, New York                          11548
             -------------------                          -----
       (Address of principal executive offices)         (Zip Code)
  
  Registrant's telephone number, including area code: (516) 625-3500
  
  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 _____
  
  On August 6, 1996, 2,880,751 shares of the Registrant's Common Stock, par value
  $.001 a share, were outstanding.
  
  ================================================================================
  INDEX
  
                      INMARK ENTERPRISES, INC. AND SUBSIDIARIES
  
                                                                             Page
                                                                             ----
  
  PART I - FINANCIAL INFORMATION
  
  Item 1.   Consolidated Financial Statements of Inmark Enterprises, Inc.
            (Unaudited)
  
            Consolidated Balance Sheets - June 30, 1996 and March 31, 1996     3
  
            Consolidated Statements of Operations - Three month periods ended  4
            June 30, 1996 and June 30, 1995
  
            Consolidated Statement of Stockholders' Equity -                   5
            Three month period ended June 30, 1996
  
            Consolidated Statements of Cash Flows - Three month periods        6 
            ended June 30, 1996 and June 30, 1995
  
            Notes to Unaudited Consolidated Financial Statements               7
  
  Item 2.   Management's Discussion and Analysis of Financial Condition and    8
            Results of Operations
  
  PART II - OTHER INFORMATION                                                 11
  
  SIGNATURES                                                                  12
  
                                         -2-
  PART I - FINANCIAL INFORMATION
  
                              INMARK ENTERPRISES, INC.
                             Consolidated Balance Sheets
                          June 30, 1996 and March 31, 1996
  June 30, 1996       March 31, 1996*
                                                                         -------------       ---------------
                    Assets                                                (Unaudited)
  Current assets:
   Cash and cash equivalents                                              $   238,712              700,598
   Restricted cash                                                               --                250,000
   Accounts receivable                                                      3,551,405                 --
   Due from factor                                                               --                578,725
   Interest and other receivables                                                --                 31,040
   Deferred tax asset                                                         640,000              640,000
   Prepaid expenses and other current assets                                   36,251               57,940
                                                                           ----------            ---------
           Total current assets                                             4,466,368            2,258,303
                                                                           ----------            ---------
  
  Furniture, fixtures and equipment, net                                      130,610              121,159
  
  Goodwill, net                                                             2,452,357            2,524,927
  Note receivable from officer                                                200,000              200,000
  Other assets                                                                 14,180               14,180
                                                                           ----------            ---------
           Total assets                                                     7,263,515            5,118,569
                                                                           ==========            =========
  
                    Liabilities and Stockholders' Equity 
  
  Current liabilities:
   Accounts payable                                                           830,309              851,898
   Accrued job costs                                                        2,585,225            1,287,904
   Accrued compensation                                                        55,311               32,144
   Other accrued liabilities                                                  215,346              182,846
   Notes payable - SPAR                                                       750,000              750,000
                                                                           ----------            ---------
           Total current liabilities                                        4,436,191            3,104,792
                                                                           ----------            ---------
  
  Stockholders' equity:
   Class A convertible preferred stock, par value $.001;
     authorized 650,000 shares; none issued and outstanding                      --                   --
   Class B convertible preferred stock, par value $.001;
     authorized 700,000 shares; none issued and outstanding                      --                   --
   Preferred stock, undesignated; authorized 3,650,000
      shares; none issued and outstanding                                        --                   --
   Common stock, par value $.001; authorized 25,000,000
     shares; issued and outstanding 2,879,251 shares at June 30,
     1996 and 2,604,251 shares at March 31, 1996                                2,879                2,604
  Additional paid-in capital                                                1,321,751            1,043,526
   Retained earnings                                                        1,502,694              967,647
                                                                           ----------            ---------
           Total stockholders' equity                                       2,827,324            2,013,777
                                                                           ----------            ---------
  
           Total liabilities and stockholders' equity                       7,263,515            5,118,569
                                                                           ==========            =========
  - ----------
  * The consolidated balance sheet as of March 31, 1996 has been summarized from
    the Company's audited balance sheet as of that date.
  See accompanying notes to consolidated financial statements.
  
                                        - 3 -
  INMARK ENTERPRISES, INC.
                        Consolidated Statements of Operations
                      Three months ended June 30, 1996 and 1995
                                     (Unaudited)
  
                                                               1996         1995
                                                               ----         ----
  
  Sales                                                     $4,831,752   4,840,672
  Direct expenses                                            3,274,832   3,343,708
                                                            ----------   ---------
           Gross profit                                      1,556,920   1,496,964
                                                            ----------   ---------
  
  Salaries                                                     548,538     526,383
  Selling, general and administrative expense                  427,207     420,091
                                                            ----------   ---------
        Total operating expense                                975,745     946,474
                                                            ----------   ---------
        Operating income                                       581,175     550,490
  
  Interest expense, net                                          6,128      31,475
                                                            ----------   ---------
  Income before income taxes                                   575,047     519,015
  Provision for income taxes                                    40,000     202,000
                                                            ----------   ---------
         Net income                                         $  535,047     317,015
                                                            ==========   =========
  
   Net income per common and common equivalent share:
  
    Primary                                                 $      .16         .47
                                                            ==========   =========
    Fully diluted                                           $      .15         .47
                                                            ==========   =========
  
  Weighted average number of common and 
   common equivalent shares outstanding:
  
    Primary                                                  3,418,837     677,106
                                                            ==========   =========
    Fully diluted                                            3,637,852     677,106
                                                            ==========   =========
  
  See accompanying notes to consolidated financial statements.
  
                                        - 4 -
  INMARK ENTERPRISES, INC.
                   Consolidated Statement of Stockholders' Equity
                          Three months ended June 30, 1996
                                     (Unaudited)
  Common Stock   
                                    par value $.001            Additional                              Total
                                -----------------------        Paid - in          Retained          Stockholders'
                                   Shares      Amount           Capital           Earnings            Equity
                                -----------    ------          ----------        ----------         ------------
  Balance, March 31, 1996        2,604,251     $2,604         $1,043,526         $  967,647           $2,013,777
  
  Exercise of warrants             275,000        275            278,225               --                278,500
  
  Net income                          --         --                 --              535,047              535,047
                                 ---------     ------         ----------         ----------           ----------
  Balance, March 31, 1996        2,879,251     $2,879         $1,321,751         $1,502,694           $2,827,324
                                 =========     ======         ==========         ==========           ==========
  See accompanying notes to consolidated financial statements.
  
                                        - 5 -
  INMARK ENTERPRISES, INC.
                        Consolidated Statements of Cash Flows
                      Three months ended June 30, 1996 and 1995
                                     (Unaudited)
  1996          1995
                                                                                   ----          ----
  Cash flows from operating activities:
     Net income                                                                $   535,047       317,015
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization                                               84,676       135,443
        Changes in operating assets and liabilities:
            Increase in accounts receivable                                     (3,551,405)         --
            Decrease (increase) in prepaid expenses and other current assets        21,689       (35,985)
            Decrease in interest and other receivables                              31,040          --
            (Decrease) increase in accounts payable                                (21,589)       46,552
            Increase in accrued job costs                                        1,297,321       985,817
            Increase in other accrued liabilities                                   63,167       268,322
            Decrease in accrued compensation                                        (7,500)     (215,000)
                                                                               -----------     ---------
            Net cash (used in) provided by operating activities                 (1,547,554)    1,502,164
                                                                               -----------     ---------
  
  Cash flows from investing activities:
    Costs of acquisition of business of SPAR net
        of cash acquired, including acquisition costs                                 --      (2,215,281)
    Purchases of fixed assets                                                      (21,557)       (3,723)
                                                                               -----------     ---------
          Net cash (used in) provided by investing activities                      (21,557)   (2,219,004)
                                                                               -----------     ---------
  Cash flows from financing activities:
    Proceeds of sale of accounts receivable to factor                                 --       1,828,000
    Repayments of loan payable to SPAR                                                --         (75,000)
    Release of restricted cash from factor                                         250,000          --
    Decrease (increase) in due from factor, net                                    578,725      (906,679)
    Proceeds from exercise of warrants                                             278,500          --
                                                                               -----------     ---------
         Net cash provided by financing activities                               1,107,225       846,321
                                                                               -----------     ---------
         Net (decrease) increase in cash                                          (461,886)      129,481
  Cash at beginning of period                                                      700,598           150
                                                                               -----------     ---------
  Cash at end of period                                                        $   238,712       129,631
                                                                               ===========     =========
  Supplemental disclosure:
    Interest paid during the period                                            $    18,918        32,059
                                                                               ===========     =========
    Income tax paid during the period                                          $    38,283          --
                                                                               ===========     =========
    Non-cash financing and investing activities:
        Notes payable issued in acquisition of SPAR
           net of cash acquired, including acquisition costs                   $      --       1,672,000
                                                                               ===========     =========
  See accompanying notes to consolidated financial statements.
  
                                         -6-
  Inmark Enterprises, Inc. and Subsidiaries
  
              Notes to the Unaudited Consolidated Financial Statements
  
                               June 30, 1996 and 1995
  
  (1)  Organization and Nature of Business
  
       Inmark Enterprises, Inc. (formerly Health Image Media, Inc.) (the
       "Company") completed a merger on September 29, 1995 whereby Inmark
       Services, Inc., a New York corporation, was merged with and into the
       Company's wholly-owned subsidiary, InMark Acquisition Corp., a Delaware
       corporation (the "Merger"). Following the Merger, InMark Acquisition Corp.
       changed its name to Inmark Services, Inc. and Health Image Media, Inc.
       changed its name to Inmark Enterprises, Inc.
  
       Inmark Services, Inc. is the successor to SPAR Promotion & Marketing
       Services, Inc. ("Spar"), a sales promotion and marketing firm, as a result
       of a management led buy-out of that company's net assets and business on
       April 3, 1995.
  
  (2)  Basis of Presentation
  
       The Merger has been accounted for as a reverse purchase of the Company by
       Inmark Services, Inc. and, for financial accounting and reporting purposes,
       Inmark Services, Inc. is treated as the acquirer of the Company. No
       goodwill was recognized in the Merger. Operations for the three month
       period ended June 30, 1995 are solely those of Inmark Services, Inc.
  
       The interim financial statements of the Company for the three month periods
       ended June 30, 1996 and 1995 have been prepared without audit. In the
       opinion of management, such financial statements reflect all adjustments,
       consisting of normal recurring accruals, necessary to present fairly the
       Company's results for the interim periods presented. The results of
       operations for the three month period ended June 30, 1996 is not
       necessarily indicative of the results for a full year.
  
       Certain information and footnote disclosures normally included in financial
       statements prepared in accordance with generally accepted financial
       statements have been condensed or omitted. These consolidated financial
       statements should be read in conjunction with the consolidated financial
       statements and notes thereto for the year ended March 31, 1996 included in
       the Company's Annual Report on Form 10-K for the year ended March 31, 1996.
  
  (3)  Earnings Per Share
  
       The computation of earnings per common and common equivalent share is based
       upon the weighted average number of common shares outstanding during the
       period, plus the assumed exercise of stock options and warrants, less the
       number of treasury shares assumed to be purchased from the proceeds of such
       exercises using the average market price of the Company's common stock for
       primary and the period end market price for fully diluted earnings per
       share.
  
                                         -7-
  The weighted average number of common shares was computed assuming that the
       677,106 shares of the Company's common stock exchanged for the common stock
       of Inmark Services, Inc. in the Merger were outstanding for the entire
       three month period ended June 30, 1995; for the three month period ended
       June 30, 1996, the actual outstanding common stock of the Company was used
       in the computation. Stock options and warrants have been excluded from the
       calculation of the primary and fully diluted earnings per share in any
       period in which they would be antidilutive.
  
  (4)  Income Taxes
  
       Federal income taxes have not been provided for the three months ended June
       30, 1996, as any such taxes are expected to be minimal as a result of net
       operating loss carryforwards. To the extent that net operating loss
       carryforwards may not be available to offset state and local income taxes,
       a $40,000 provision for such taxes has been established for the three
       months ended June 30, 1996.
  
  (5)  Recent Accounting Developments
  
       In December, 1995, the Financial Accounting Standards Board issued
       Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
       effective for years beginning after December 15, 1995. Under SFAS 123, the
       Company may elect either a "fair value" based method or the current
       "intrinsic value" based method of accounting prescribed by APB No. 25,
       "Accounting for Stock Issued to Employees", for its stock-based
       compensation arrangements. Under the "intrinsic value" based method, the
       Company will be required to disclose in the footnotes to the consolidated
       financial statements net income and earnings per share computed under the
       "fair value" based method. The Company has elected to continue accounting
       for stock-based compensation arrangements using the "intrinsic value" based
       method; therefore, the adoption of SFAS 123 will not impact the Company's
       results of operations or financial condition.
  
  Item 2. Management's Discussion and Analysis of Financial Condition and Results
          of Operations.
  
       On September 29, 1995, the Company completed the merger whereby Inmark
  Services, Inc., a New York corporation, was merged with and into the Company's
  wholly-owned subsidiary, InMark Acquisition Corp., a Delaware corporation.
  Following the Merger, InMark Acquisition Corp. changed its name to Inmark
  Services, Inc. and the Company changed its name from Health Image Media, Inc. to
  Inmark Enterprises, Inc. Inmark Services, Inc. is the successor to SPAR
  Promotion & Marketing Services, Inc.("Spar"), a sales promotion and marketing
  firm, as a result of a management led buy-out of that company's net assets and
  business on April 3, 1995.
  
       The Merger has been accounted for as a reverse purchase of the Company by
  Inmark Services, Inc. and, for financial accounting and reporting purposes,
  Inmark Services, Inc. is treated as the acquirer of the Company. Accordingly,
  the following discussion includes the Company's results of operations for the
  three month period ended June 30, 1996 compared to the results of operations of
  Inmark Services, Inc. for the three month period ended June 30, 1995. The
  following information should be read together with the consolidated financial
  statements and notes thereto included elsewhere herein.
  
                                         -8-
  Results of Operations
  
       Sales. Sales for the quarter ended June 30, 1996 were $4,832,000 compared
  to sales of $4,841,000 for the quarter ended June 30, 1995, a decrease of $9,000
  or less than 0.2%. The decrease in the comparative quarterly sales was primarily
  the result of timing differences in the billing of scheduled installments under
  the existing contracts, notwithstanding that at June 30, 1996 the future
  billings of total contracts in place exceeded the future billings of total
  contracts in place at June 30, 1995 by approximately $1,573,000.
  
       Direct Expenses. Direct expenses for the quarter ended June 30, 1996 were
  $3,275,000, or 67.8% of sales, compared to $3,344,000, or 69.1% of sales, for
  the comparable prior year quarter. The decrease during the three month period
  ended June 30, 1996 in the amount of direct expenses and the direct expenses as
  a percentage of sales was principally the result of the current mix of client
  programs which, in the aggregate, have a higher gross profit margin than the mix
  of programs in place during the comparable prior year three month period.
  
       As a result of these changes in sales and direct expenses, gross profit for
  the quarter ended June 30, 1996 increased by $60,000 to $1,557,000 compared to
  the quarter ended June 30, 1995.
  
       Operating Expenses. Operating expenses for the quarter ended June 30, 1996
  increased by $29,000, or 3.1%, to $975,000 compared to $946,000 for the quarter
  ended June 30, 1995. Operating expenses as a percentage of sales were 20.2% and
  19.6%, respectively, for the quarters ended June 30, 1996 and June 30, 1995.
  
       The increase in operating expenses was primarily attributable to the net
  effect of the total of: (a) an increase in salaries of approximately $22,000 as
  a result of a general increase in non-executive salaries and the addition of
  personnel; (b) an increase in sales related expenses of approximately $87,000,
  inclusive of sales commissions; (c) an increase in legal and accounting expenses
  of approximately $40,000; and (d) an increase in marketing and advertising
  expenses of approximately $26,000, offset by a decrease of approximately
  $131,000 in factoring agreement related administrative and facility fees and a
  decrease of approximately $78,000 in acquisition and merger related expenses
  incurred in the comparable prior year quarter.
  
       Interest Expense. Net interest expense for the quarter ended June 30, 1996
  was $6,000 compared to $31,000 for quarter ended June 30, 1995. The decrease is
  the result of the reduced balance of notes payable outstanding during the
  quarter ended June 30, 1996, and interest income of $ 13,000 earned during the
  period.
  
       Provision For Income Taxes. For the three month period ended June 30, 1996,
  no provision for federal income taxes was made, as net operating loss carryovers
  from prior years of approximately $3,762,000 are available to offset taxable
  income; however, a $40,000 provision for state and local income taxes has been
  made, at a rate of approximately 7%, as net operating loss carryforwards may not
  be allowable as an offset against such taxes. For the three month period ended
  June 30, 1995, a $202,000 provision for income taxes had been made at a then
  estimated effective tax rate of 39% for Inmark Services, Inc.
  
       Net Income. As a result of the items discussed above, net income for the
  quarter ended June 30, 1996 was $535,000 compared to net income of $317,000 for
  the comparable prior year quarter.
  
                                         -9-
  Liquidity and Capital Resources.
  
       The Company's operating activities and other commitments until April 24,
  1996 were funded with the sale of accounts receivable pursuant to a factoring
  agreement and with cash provided from operations. Effective April 24, 1996, the
  Company entered into a one year factoring agreement, which replaced its prior
  factoring agreement, pursuant to which the Company may receive advances of up to
  75% of those of its accounts receivable which the Company, at its discretion,
  elects to sell to the factor. Total advances may not exceed $2,000.000 at any
  given time during the term of the factoring agreement. In connection with the
  factoring agreement, the Company paid a one time closing fee of $25,000 and pays
  an administration fee and facility fee based upon the same terms upon which such
  fees were paid under its earlier factoring agreement. In connection with the
  termination of its earlier factoring agreement, the $250,000 cash collateral
  deposit balance pledged to the factor was released together with the accrued
  interest thereon.
  
       For the quarter ended June 30, 1996, cash used in operations amounted to
  $1,548,000 and purchases of fixed assets totalled $22,000. Cash provided by the
  collection of receivable amounts due from the factor and by the release of
  restricted cash by the factor totalled $829,000, and proceeds from the exercise
  of warrants amounted to $279,000. As a result, cash decreased by $462,000. At
  June 30, 1996, the Company had cash of $239,000 and working capital of $30,000
  compared to cash of $701,000 and a negative working capital of $846,000 at June
  30, 1995. Stockholders' equity increased by $814,000 during the quarter ended
  June 30, 1996 as a result of the Company's net income and the proceeds received
  from the exercise of outstanding warrants.
  
       At June 30, 1996, the outstanding principal balance of the notes issued to
  Spar in the Spar acquisition was $750,000. The Company believes that it will be
  able to satisfy its cash requirements to pay the principal plus the accrued
  interest on the notes issued to Spar as they become due from cash flow generated
  from operations, as well as from funds available under the factoring agreement.
  To continue to improve the Company's working capital position, the Company must
  maintain profitable operations as well as continued availability of funding
  under the factoring agreement. Otherwise, the Company will be required to seek
  external financing, either through additional equity or debt financing. There
  can be no assurance that the Company will be able to obtain such additional
  funding, if required.
  
                                        -10-
  PART II - OTHER INFORMATION
  
  Items 1-5.  Not Applicable
  
  Items 6.    Exhibits and Reports on Form 8-K.
  
              (a) Exhibits.  None
  
              (b) Reports on Form 8-K.  None
  
                                        -11-
  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.
  
                                    INMARK ENTERPRISES, INC.
  
  Dated: August 6, 1996             By:  /s/ John P. Benfield
                                        ----------------------------------------
                                        John P. Benfield, President
                                        (Principal Executive Officer)
                                        and Director
  
  Dated: August 6, 1996             By: /s/ Donald A. Bernard
                                        ----------------------------------------
                                        Donald A. Bernard, Executive Vice
                                        President and Chief Financial Officer
                                        (Principal Accounting and Financial
                                        Officer) and Director
  
                                        -12-