-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RPWq+T7HVHVQMX9PKovbOwefq8w9TyFMIlEhSHmBuyI5fhT0ADEMgppy6hCdOT27 oAeVxwY2mraRA+/qLxB/wQ== 0000807397-98-000066.txt : 19981014 0000807397-98-000066.hdr.sgml : 19981014 ACCESSION NUMBER: 0000807397-98-000066 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK SOLUTIONS INC CENTRAL INDEX KEY: 0000807397 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 112864481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-17118 FILM NUMBER: 98724322 BUSINESS ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 BUSINESS PHONE: 9738930500X119 MAIL ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 FORMER COMPANY: FORMER CONFORMED NAME: SHOWCASE COSMETICS INC DATE OF NAME CHANGE: 19920703 10-K 1 MARK SOLUTIONS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998 ----------------- 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 No. 0-17118 Mark Solutions, Inc. ----------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2864481 -------------------------- ----------------------- (State or other jurisdiction (I.R.S. employer identification no.) of incorporation or organization) Parkway Technical Center 1515 Broad Street, Bloomfield, New Jersey 07003 - ----------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (973) 893-0500 ----------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------------ ------------------------------------------ NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $ .01 par value (Title of class) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]. The aggregate market value of the 16,449,318 shares of Common Stock held by non-affiliates of the Registrant on September 21, 1998 was $14,393,153 based on the closing sales price of $ .875 on September 21, 1998. The number of shares of Common Stock outstanding as of September 21, 1998 was 19,296,674. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of Form 10-K will be incorporated by reference to certain portions of a definitive proxy statement, which is expected to be filed by the registrant pursuant to Regulation 14A within 120 days of the end of the fiscal year. PART I Item 1. Business (a) General Development of Business. Mark Solutions, Inc. ("Mark") is a Delaware corporation, which operates its various businesses through wholly owned subsidiaries and a division. Mark is engaged in the design, manufacture, and/or installation of (i) modular steel cells for correctional institution construction and (ii) diagnostic support, picture archiving and communication computer systems (PACS) marketed under the name "IntraScan". Mark markets its modular steel products by responding to public bids and by pursuing joint ventures and affiliations with other companies to solicit design build and/or operate correctional facilities both domestically and internationally. Mark markets its IntraScan II PACS systems to radiology departments, large healthcare facilities, hospitals, and outpatient imaging group practices, primarily through a marketing agreement with Data General Corporation. Mark discontinued marketing its treatment booth for communicable diseases in fiscal 1998. Mark was incorporated under the laws of the State of Delaware on September 29, 1986 under the name "Showcase Cosmetics, Inc." (b) Financial Information about Industry Segments The following table sets forth information regarding Mark's industry segments and classes of products. Fiscal Year Ended June 30, -------------------------- 1998 1997 1996 ---- ---- ---- Sales to unaffiliated customers: Mark Correctional Systems: Modular Cells ........... $ 12,713,508 $ 6,114,195 $ 3,256,574 ------------ ------------- ------------ MarkCare Medical Systems: IntraScan ............... 150,482 224,125 41,946 Other ......... 57,820 111,424 156,095 ------------ ---------- ---------- 208,302 335,549 198,041 ------------ ---------- ---------- $ 12,921,810 $ 6,449,744 $ 3,454,615 ============= ============ =========== Operating Profit: Mark Correctional Systems ... $ 73,434 $ (2,706,272) $(4,508,406) MarkCare Medical Systems ... (2,064,256) (1,035,934) (555,462) Identifiable Assets: Mark Correctional Systems ... $ 4,258,021 $ 5,002,432 $ 1,317,620 MarkCare Medical Systems ...... 916,080 429,845 1,766,143 1 (c) Narrative Description of Business Products and Services Mark Correctional Systems Division Mark operates its modular steel cell business through its division, Mark Correctional Systems. Modular Cells. Since the initial sale of its prefabricated modular steel cells for correctional facilities in 1989, Mark has manufactured and sold security prison cells in 14 states including Indiana, Illinois, New York, New Jersey, Michigan, Missouri, Washington and Wisconsin. Revenues generated by the sale of cells to correctional facilities aggregated $12,713,508 or 98.4% of Mark's total operating revenues for the fiscal year ended June 30, 1998. These revenues are primarily attributable to the New York State agreement described below. Effective March 15, 1996, Mark received a three-year agreement from the State of New York to be the exclusive supplier of modular steel prison cells and shower facilities. Pursuant to the agreement, Mark will provide complete, partially complete and/or components of modular units and support services to Corcraft (Department of Corrections-Division of Industries) for sale to State and local governments. The agreement has a stated estimate of 2,455 cells over the three years; however no minimum volume is guaranteed and purchase orders are to be issued for specific projects. The State of New York reserves the right to renegotiate the stated contract prices or solicit third party bids for any single order of 700 or more cells. At its option, New York State may license the manufacture of the entire cell and will not be obligated to pay additional licensing fees after (i) Mark receives total payments of $15,000,000 under the agreement, (ii) the total number of cells manufactured under the license exceeds 1,000 or (iii) the fifth anniversary date of the agreement. To date, Mark has received three (3) purchase orders for approximately $15,000,000 pursuant to this agreement. Mark's modular cell is a prefabricated, installation-ready, lightweight steel structure which is manufactured according to the construction and security specifications of each correctional institution project in sizes from 60 to 200 square feet. Each modular cell can be equipped with lavatory facilities; wall-mounted sleeping accommodations; desk and stool; lighting and ventilation systems; and optional components such as fixed or operable windows and hinged or sliding security doors. Each modular cell is constructed of durable low maintenance, non-porous materials including a scratch resistant epoxy polymer finish and is acoustically and thermally insulated. The modular cell's lightweight construction requires less extensive and costly foundation work than a traditional (e.g. concrete) cell, and is designed with a self-contained exterior access panel which allows for simple ventilation, plumbing and electrical connections. 2 Each cell is load bearing to allow for multiple-story construction, and is manufactured to tolerances of 1/16 of an inch, which results in more efficient and faster on-site installation. The modular cells can also be adapted for use as infectious disease isolation units, which have a negative pressure ventilation system, and safely discharges contaminated air. While Mark continues to have the capability to manufacture the infectious disease isolation units, it discontinued actively marketing such units in Fiscal 1998. MarkCare Medical Systems, Inc. Mark operates its PACS business through MarkCare Medical Systems, Inc., a wholly owned Maryland subsidiary ("MarkCare-US") and MarkCare Medical Systems, Ltd., a wholly owned United Kingdom subsidiary ("MarkCare-UK"). MarkCare-US and MarkCare-UK are collectively referred to as "MarkCare". IntraScan II PACS System. The IntraScan II PACS system, is a "filmless" picture, archiving and communications system marketed to radiology departments, large healthcare facilities, hospitals and outpatient imaging group practices primarily through a marketing agreement with Data General Corporation ("Data General") described below. The IntraScan II PACS system is a computer-based image, archival and retrieval system that interfaces with medical imaging devices and can store and recall images from imaging modalities including x-ray, computed tomography (CAT Scan), computed radiography, nuclear medicine, ultra sound and magnetic resonance imaging (MRI). While Mark is aware of similar systems in various stages of development, management believes the IntraScan II PACS system is the only system which is designed to be platform independent allowing the software to operate with most computer hardware and operating systems. The IntraScan II PACS system has a high resolution display capability (512 X 512 to 2000 X 2500 pixels). The high resolution allows medical providers to make diagnoses from computer digital images without the need for radiographic film. This capability eliminates the processing time for film development allowing faster diagnoses and significantly reduces the costs related to film development and patient record storage. The IntraScan II PACS system allows image manipulation, including simulation of the multi-image view box, which allows side-by-side comparisons of images from different modalities (e.g. x-ray and CAT Scan). In addition, the IntraScan II PACS system allows for networking between departments within a healthcare facility or between institutions at different locations by communication networks. This networking capability coupled with the high resolution allows efficient and instant transfer of diagnostic quality images for consultation and transportation of patient records. 3 The IntraScan II PACS system includes software programs, protected by British common law copyrights and U.S. copyrights, and standard hardware computer equipment as to which Mark has no proprietary interests. Effective March 18, 1996, Mark entered into a Master Supplier Agreement with Data General pursuant to which Mark provides IntraScan II PACS system software and related services to Data General to be incorporated into PACS sale proposals and bids to healthcare facilities. The products and services to be provided by Mark will be negotiated between Mark and Data General on a project by project basis. Pursuant to this agreement, Mark is Data General's exclusive supplier of PACS software products and Mark is permitted to market and sell the IntraScan II PACS system software to other distributors or systems integrators. While no assurances can be given, Mark believes that the sales related to the IntraScan II PACS system, will generate material revenues in the fiscal year ending June 30, 1999. Mark received its first purchase order for its IntraScan II PACS software on August 10, 1998 from Data General. Manufacturing and Assembly. Mark manufactures and assembles its modular cells at its 74,000 square foot plant located in Jersey City, New Jersey, which is equipped with a fully automated computer driven design and tooling system. This system allows for more precise tolerances and faster production output. The raw materials for Mark's products, including sheet metal, hardware, and other components are supplied primarily by regional manufacturers. In addition to the manufacture of the shell of its products, Mark purchases, assembles, and installs the ancillary components including lavatory facilities, shower facilities, desks, stools, and sleeping bunks. Management believes that there are a sufficient number of national vendors to meet its raw material and component needs, and that Mark is not dependent upon a limited number of suppliers. With respect to the IntraScan II PACS system, Mark's primary responsibility will be the development and loading of software programs on to standard hardware equipment, minimal hardware modifications and networking. Mark is able to conduct its IntraScan II PACS system assembly and modifications activities at the offices of MarkCare-UK and its executive offices. In the event Mark determines that additional space is necessary based on orders, management believes that adequate space will be available on acceptable economic terms. Delivery and On-Site Services. Mark contracts with several third-party carriers to deliver the modular cells to the construction site. In addition, Mark provides delivery and support services for its products including installation assistance, operating instructions and subsequent inspections and testing. 4 Marketing and Sales Modular Cells. The market for Mark's modular cell is primarily federal, state and local governmental agencies responsible for the construction and maintenance of correctional institutions. While Mark believes its modular cell technology has other applications such as temporary emergency housing, for the foreseeable future the correctional institutions market will represent the substantial majority of its modular products business. No assurances can be given that any other markets will develop to any significant degree. Mark designs prototypes of its modular cells for marketing, sales and trade show demonstrations. Mark's marketing and sales efforts are managed by its Vice President of Sales and Marketing and include in- person solicitations, direct mail campaigns and participation in industry trade shows. Mark presently markets and sells its modular cells directly and through independent manufacturers' representatives. Mark's network consists of 10 outside sales representatives servicing eighteen (18) states and eleven (11) foreign countries including Canada, Italy, France and Latin America. Each representative generally enters into an agreement with Mark, which contains certain non-disclosure restrictions and provides for payment on a commission basis. Mark has also signed a licensing agreement covering the continent of Africa and several surrounding islands. As a result of the New York State agreement, Mark has identified State prison industries, which operate as job training and rehabilitative programs for inmates, as a potential market for its modular cells. Mark is soliciting interest in the integration of its cells into other prison industries programs based on the New York State model. IntraScan II PACS System. The IntraScan II PACS system is primarily marketed jointly with Data General as the prime contractor to its existing healthcare client base and to other healthcare institutions. Mark personnel participate in systems demonstrations, site visits, and assist in the solicitation of and response to request for proposals. Mark has entered into other strategic alliances with established medical equipment providers to gain access to existing clients and to benefit from such companies' marketing and sales forces. Mark has signed licensing/marketing agreements with: Santax A/S, a Norwegian company; Konica, a multi-national company; Worldcare, a United Kingdom company; Avantec, an Indian company; AIS, a Swiss company, and Medilink, an Australian company. Bid Process, Subcontracting and Bonding Requirements Mark has derived the substantial majority of its revenues from state and local government correctional projects and is consequently required to prepare and submit bid proposals based on the design and specifications prepared by the supervising architectural or engineering firm. Mark prepares and submits a formal bid proposal, which includes price quotations and estimates, selected 5 material options and construction time estimates. Depending on the nature of the project, Mark itself may bid, or provide bidding data regarding Mark's products to a firm which is bidding to become the general contractor for the project. In the latter case, the Mark data is incorporated into the bid made by the prospective general contractor. After receipt and review of all accepted bids the governmental agency awards the contract based on numerous factors including costs, reputation, completion estimates and subcontracting arrangements. In those instances where Mark is not the direct bidder but provides bid information to a general contractor who is ultimately awarded the project, there is no guarantee that Mark will receive the subcontract business. The typical time period from submission of bids to awarding of the contract to the direct bidder (whether Mark or a general contractor) is 60 to 120 days. In those instances, where Mark is not the direct bidder, subcontracts are generally awarded within an additional 60 to 120 days. In connection with some government construction projects, Mark is required to provide performance and completion bonds as a condition to submission or participation in a bid. Due to Mark's financial condition, it has generally been unable to obtain bonds without the assistance and guarantee of third parties including Mark's President and/or another business entity owned by an outside director. See "Item 13. Certain Relationships and Related Transactions". To date, Mark has not limited its bidding activity nor lost any projects due to its limited bonding capacity. However, as Mark is awarded multiple projects, the inability to obtain bonds may limit the number of additional projects Mark can pursue and would have a material adverse effect on operations. Regulation Mark modular cells are subject to various state building codes including BOCA, UBC, the Southern Building Codes and criteria established by the American National Standards Institute. In addition, these products are subject to the guidelines and regulations of OSHA, NIOSH and Centers for Disease Control and Prevention. The modular cells comply with such codes and regulations in all material respects. IntraScan II PACS system is a "Class II medical device", classified by the Federal Food and Drug Administration ("FDA") subject to the pre-market notification and approval process. Accordingly, the products are regulated by The Federal Food, Drug and Cosmetic Act and The Safe Medical Devices Act of 1990 regarding the (i) effectiveness and safety of the product, (ii) condition of the manufacturing facilities and procedures and, (iii) labeling of devices. Mark has received a letter from the FDA for the IntraScan II PACS system, authorizing commercial distribution. Certain aspects of Mark's manufacturing process are regulated by state and Federal environmental laws. Mark has obtained all necessary licenses and permits in this regard and is in compliance in all material respects with applicable environmental laws. 6 Competition Modular Cells. The construction industry in general and the governmental construction industry in particular are highly competitive. Due to the use of concrete and other traditional construction methods in the substantial majority (approximately 90%) of correctional facility construction, Mark competes for market share with a number of major construction companies. Such competition is not with respect to any particular project, but in persuading the purchasing agency to utilize steel cell construction rather than traditional methods. With respect to those projects which incorporate modular cell specifications in its design criteria, Mark competes with several other steel product manufacturers, some of which have greater financial resources than Mark. In addition, a number of manufacturers, which have greater financial and marketing resources than Mark, and which currently produce sheet metal products, could ultimately manufacture modular cells in competition with Mark. Although competition in the construction industry is intense, Mark believes it can compete for market share of correctional facility construction business by promoting the viability and construction advantages of its technology to the architectural, engineering and construction industries. In this regard management emphasizes the uniqueness of its modular cell design which can be manufactured and installed more efficiently than traditional concrete construction by virtue of lower labor and construction costs and shorter installation time and the life cycle cost savings. Mark also believes its modular cell design has advantages are over other manufacturers' steel cells. IntraScan II PACS System. Other companies, which are larger and better established than Mark, provide PACS systems for radiology departments. In addition, large film and medical equipment manufacturers may enter into the PACS business as the potential market is recognized. Mark believes the effectiveness of a PACS system features and post-installation support, are significant factors for its market. Mark believes it can compete by focusing its product development on platform independent software applications, which broadens the market base, continually updating the features of its software, and forming strategic alliances with established healthcare computer systems providers, such as Data General. Employees As of September 30, 1998, Mark had four (4) management employees, two (2) sales employees, nine (9) engineering employees and seven (7) office and clerical employees. Mark also employs hourly employees in its manufacturing facilities who are subject to a collective bargaining agreement, which expired on August 31, 1998. Mark is currently in negotiations on a new three (3) year collective bargaining agreement. Management believes its employee relations to be good. As of September 30, 1998, MarkCare-UK had twelve (12) clerical/software programming employees and two (2) sales employees. 7 Copyrights, Patents and Trade Secrets Mark does not presently own any patents on its modular cells or manufacturing assembly process. However, Mark attempts to protect its proprietary trade secrets regarding the design and manufacture of its products through non-disclosure agreements between Mark, its employees and most third-party suppliers and manufacturers' representatives. The IntraScan II PACS system software programs are protected by British common law copyright and United States copyright. Mark has applied for patents on several aspects of the IntraScan II PACS system. Mark believes the protection afforded by the copyrights and the granting of any patents for the IntraScan II PACS System will allow Mark to maintain its competitiveness in the PACS market. Item 2. Property Mark leases its executive offices at 1515 Broad Street, Bloomfield, New Jersey 07003, which consist of 6,500 square feet of space. Mark's lease expires on December 31, 1998 and provides for monthly rent of $7,200. In addition, Mark leases 74,000 square feet of manufacturing space in Jersey City, New Jersey pursuant to a triple net lease expiring on November 15, 2004 at an annual rental of $174,240 for the initial five years. The rent for the remaining three years is subject to increases based on the consumer price index at that time. MarkCare-UK leases its offices, which consist of 1,750 square feet of space on a month to month basis at a monthly rent of $2,063. Management believes its present manufacturing facilities and additional available facilities are sufficient for Mark's current and anticipated needs. Item 3. Legal Proceedings On August 28, 1998, Evergreen Mobile Company filed a demand for arbitration against Mark in San Francisco, California with the American Arbitration Association alleging delay and warranty claims of $1,333,000 related to a contract under which Mark provided modular steel cells for $432,000. Mark believes the alleged damages are excessive and intends to vigorously defend this action. In September 1997, the Pulaski County Board of Indiana filed a lawsuit against Mark and Calumet Construction Corporation, the general contractor ("Calumet"), related to a project where Mark provided modular steel cells for $913,731. The County alleges delay claims, and other damages caused by, among other things, delays in delivery of the cells and requests a declaratory judgment for the allocation of the remaining balance of $313,700 the County believes it owes Mark and Calumet under the project. The parties attempted to resolve the dispute through mediation, during which Calumet asserted backcharges against Mark of $399,000. Mark believes the delay claims and backcharges are excessive and is vigorously defending this action. 8 In August 1997, Mark filed a demand for arbitration against Demien Construction Company ("Demien") in Missouri with the American Arbitration Association alleging nonpayment of approximately $200,000 related to a contract under which Mark provided modular steel cells for $407,000. Demien has asserted delay claims and backcharges for remedial work of approximately $244,000 against Mark. Mark believes the alleged damages are excessive and intends to vigorously pursue this action. Item 4. Submission of Matters to a Vote of Security-Holders Not Applicable 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. (a) Market Information. The following table sets forth for the calendar quarters indicated the high and low bid prices of Mark's Common Stock. The Common Stock trades on the Nasdaq SmallCap Market under the symbol "MCSI". Common Stock ----------------------------------------- High Low ----------------- ------------------ 1996 1st Quarter 8-1/4 5-1/2 2nd Quarter 8-3/8 5-1/4 3rd Quarter 6-5/8 5 4th Quarter 5-7/8 1-3/8 1997 1st Quarter 2-3/4 15/16 2nd Quarter 4-1/2 1-31/32 3rd Quarter 4-1/2 1-15/16 4th Quarter 4-3/8 2- 3/16 1998 1st Quarter 2-7/16 1-21/32 2nd Quarter 2 1 3rd Quarter 1-15/16 7/16 - ----------------------------------------------------------------------- Over-the-counter quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and do not necessarily represent actual transaction. (b) Holders. As of October 1, 1998, there were 184 holders of record of the Common Stock. Mark estimates the number of beneficial holders of its Common Stock to be in excess of 530. There are 22 market makers in the Common Stock. On June 30, 1998, Mark's publicly traded Class A Warrants expired. (c) Dividends. Mark has never paid and does not intend to pay in the foreseeable future, cash dividends on its Common Stock. 10 (d) Sales of Unregistered Securities in Fiscal Year 1998. The following sets forth information regarding private placement of equity securities by Mark during the fiscal year ended June 30, 1998. Mark issued the following warrants to three (3) individuals for business consulting or legal services. Each of the transactions were effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering and the investor sophistication of the individuals. Number of Shares Per Share Exercise Warrant Grant Purchasable Price Term Date - --------------- ------------------ --------- --------- 100,000 $1.125 2 Years 06/25/98 30,000 $1.125 3 Years 06/25/98 5,000 $2.375 3 Years 02/12/98 On May 19, 1998, Mark granted three-year options to purchase 35,000 shares of Common Stock at between $2.00 and $2.875 per share to three employees as incentive compensation. Each of the grants was effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering and the individual's relationship with Mark. On May 19, 1998, Mark granted five-year warrants to purchase 75,000 shares of Common Stock at $1.50 per share to a holder of $200,000 in Mark's convertible debentures as an inducement to convert the debentures. This transaction was effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering and the investor sophistication of the individuals. On June 25, 1998 Mark cancelled options granted to its four outside directors to purchase an aggregate of 400,000 shares of Common Stock at between $2.875 and $3.375 per share and granted each outside director five-year options to purchase 100,000 shares of Common Stock at $1.125 per share, the closing sales price on the date of grant. Each of the grants was effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering, the investor sophistication of the individuals and the individuals' relationship with Mark. On June 25, 1998 Mark cancelled options granted to two of its officers to purchase an aggregate of 400,000 shares of Common Stock at $2.875 per share and granted to these officers three-year options to purchase 400,000 shares of Common Stock at $1.125 per share, the closing sales price on the date of grant. Each of the grants was effected in reliance on the registration exemption 11 provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering, the investor sophistication of the individuals and the individuals' relationship with Mark. On June 25, 1998, Mark extended the expiration date of outstanding warrants to purchase an aggregate of 140,000 shares of Common Stock at $2.00 per share from June 30, 1998, to December 31, 1998. These warrants were previously granted to three individuals pursuant to a private placement financing in 1995. The transaction was effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering, the investor sophistication of the individuals and the individuals' relationship with Mark. In June 1998, Mark completed a $2,750,000 private placement of equity and debt units (the "Private Placement") pursuant to which Mark issued 1,220,000 shares of Common Stock (the "Private Placement Common Stock"), (i) $1,530,000 principal amount convertible debentures due December 28, 1999, (the "Convertible Debentures"), (ii) warrants to purchase 1,375,000 shares of Common Stock, (iii) and an option exercisable by the investors to purchase an additional $2,550,000 principal amount convertible debentures with warrants to purchase 1,275,000 shares of Common Stock (the "Debt Unit Option"). This transaction was effected in reliance on the registration exemption provided by Section 4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering and the investor sophistication of the individuals. The holders of the Private Placement Common Stock are entitled to additional shares of Common Stock to the extent the net proceeds from the sale of the Private Placement Common Stock is less than $1.30 per share (the "Share Adjustment"). The Convertible Debentures are convertible into shares of Common Stock at the lesser of (i) $1.50 per share or (ii) 75% of the average closing bid price of the Common Stock for the five trading days immediately preceding the conversion. The Warrants are exercisable for a four-year period at $1.50 per share. The Debt Unit Option entitles the investors to purchase up to an additional $2,550,000 in 18-month principal amount convertible debentures with terms identical to the Convertible Debentures with four-year warrants to purchase an aggregate of 1,250,000 shares of Common Stock at $1.50 per share. Issuance of shares of Common Stock in excess of 3,615,334 pursuant to the Private Placement including the (i) Share Adjustment, (ii) conversion of the Convertible Debentures, (iii) exercise of Warrants and (iv) exercise of the Debt Unit Option is subject to the approval of Mark's shareholders at Mark's annual meeting of shareholders scheduled for December 1998. In the absence of shareholder approval of issuance's for the above 3,615,334, the holders of the Private Placement Common Stock and Convertible Debentures will have the right to demand cash payment equal to the value of the Share Adjustment and the redemption of the Convertible Debentures at 125% of the principal amount plus accrued interest. 12 Item 6. Selected Financial Data The following Selected Financial Data are based upon financial statements appearing elsewhere herein and such information should be read in conjunction with such financial statements and notes thereto.
Income Statement Data: Fiscal Years Ended June 30 ------------------------------------------------------------------------------ 1998 1997 1996 1995 1994 --------------- --------------- ------------------------------ --------------- Revenues $ 12,921,810 $ 6,449,744 $ 3,454,615 $ 6,125,573 $ 3,183,073 Costs and Expenses: Costs of Sales 10,972,291 6,091,773 4,022,102 5,975,973 2,370,971 Selling, general and administrative 3,940,341 4,100,177 3,718,886 3,876,330 3,592,081 Research and development - - - - - - - - - - - - 270,322 Reduction of carrying value of assets - - - - - - 777,495 - - - - - - ------------ ------------ ------------ ------------ ------------ Total Costs and Expenses 14,912,632 10,191,950 8,518,483 9,852,303 6,233,374 ------------ ------------ ------------ ------------ ------------ Operating (Loss) (1,990,822) (3,742,206) (5,063,868) (3,726,730) (3,050,301) Net Other Income (Expense) (397,277) (1,697,059) (46,691) (85,905) (64,749) Income Tax - - - - - - - - - - - - (29,460) ------------ ------------ ------------ ------------ ------------ (Loss) From Continuing Operations (2,388,099) (5,439,265) (5,110,559) (3,812,635) (3,144,510) (Loss) From Discontinued Operations - - - - - - (104,503) (1,377,438) (993,620) ----------- ----------- ----------- ------------ ------------ Net (Loss) ($2,388,099) ($5,439,265) ($5,215,062) ($5,190,073) ($4,138,130) =========== =========== =========== =========== =========== (Loss) per Share: (.14) (.38) (.41) (.48) (.47) =========== =========== =========== =========== =========== Weighted Average Shares Outstanding 16,580,402 14,221,606 12,732,022 10,726,204 8,802,543
Balance Sheet Data: At June 30 ------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------------------------- --------------- --------------- --------------- Working Capital (Deficit) $ 3,078,217 $ 923,457 $ 675,864 $ (48,112) $ 216,635 Net Property and Equipment 438,612 347,259 376,504 318,491 369,939 Total Assets 5,174,101 5,432,277 3,083,763 3,978,383 4,953,651 Current Liabilities 998,186 3,244,963 954,065 2,169,657 909,693 Other Liabilities 1,060,416 2,340,467 50,297 19,665 8,313 Stockholders' Equity (Deficiency) 3,115,499 (153,153) 2,079,401 1,789,061 4,035,645
13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Mark's results of operations, liquidity, and working capital position have been historically impacted by sporadic sales of its principal product, modular steel cells. This sales pattern is primarily the result of the construction industry's unfamiliarity with Mark's products and the emergence of competition. Mark's modular steel cell is an alternative to traditional construction methods, and penetration into the construction market has met resistance typically associated with an unfamiliar product. Accordingly, Mark has been, and will continue to be, subject to significant sales fluctuations until its modular cell technology receives greater acceptance in the construction market, which management believes will occur as new projects are awarded and completed. In an attempt to achieve greater acceptance in the architectural, engineering, and construction communities, Mark's internal sales and engineering personnel and its nationwide network of independent sales representatives conduct sales presentations and participate in trade shows and other promotional activities. Mark has expanded its marketing efforts to more aggressively pursue domestic and international joint venture and design/build development opportunities to obtain projects and improve its results of operations in efforts to achieve profitability. In addition, Mark is promoting the incorporation of its modular cell products to state prison industries programs to capitalize on the New York State agreement. See "Item 1. Business (c) Narrative Description of Business-Marketing and Sales." Mark will continue to review its overhead and personnel expenses based on operating results and prospects. Mark is continually bidding on and soliciting joint venture opportunities regarding construction projects. The anticipated revenues from any major project would substantially improve Mark's operating results and cash flow, although no assurances can be given that any of these projects will be awarded to Mark. Under a three-year contract expiring in December 1999 with the State of New York, Mark provides modular steel cells and components to the State's prison industry program for the final assembly. In fiscal year ended June 30, 1998, revenues from this contract were approximately $12,000,000. Mark currently has bids pending on approximately $16,030,000 in modular cell projects. In addition to the New York State orders of $12,000,000, Mark bid on $51,000,000 in correctional cell projects in the fiscal year ended June 30, 1998, was warded $3,000,000 of the projects and remains under consideration for 14 $13,000,000 of these projects. For the fiscal year ended June 30, 1998 modular steel cells represented $22,000,000 or 43% of all domestic correctional cell projects awarded and Mark received 68% of these modular steel cell awards. Through its subsidiaries, MarkCare Medical Systems, Inc. and MarkCare Medical Systems, Ltd., (collectively "MarkCare"), Mark continues to market its IntraScan II PACS and teleradiology systems and is forming strategic alliance with other companies with related medical products. Mark has a master supplier agreement with Data General Corporation, a large computer hardware and systems integration provider with a client base of over 1,000 applications to which Data General will include the IntraScan II PACS system and teleradiology software applications in proposals to healthcare institutions. Mark has recently signed licensing/marketing agreements with six (6) companies including SANTAX A/S, WorldCare UK, Ltd. and Konica U.K., Ltd. Management anticipates that sales of the IntraScan II PACS system will begin to generate material revenues in the fiscal year ending June 30, 1999 although no assurances can be given in this regard. If the IntraScan marketing plan is successful, management believes that the revenues from resulting sales will be more constant then those of the modular steel products presently, and will reduce fluctuations in Mark's results of operations and financial condition. The following table sets forth Mark's segmented results of operations of continuing operations for the fiscal year ended June 30, 1998. Mark Correctional Systems MarkCare Medical Total Revenues $ 12,713,508 $ 208,302 $ 12,921,810 Cost of Sales 10,272,206 700,085 10,972,291 Selling, General and Administrative 2,287,832 1,652,509 3,940,341 Operating Income (Loss) 73,434 (2,064,256) (1,990,822) Results of Operations Substantially all of Mark's operating revenues for the reported periods were derived from the sale of its modular cells to correctional institutions. Management believes that the sale of these modular steel products will continue to represent a majority of Mark's operating revenues through June 30, 1999. 15 The following table sets forth, for the periods indicated, the percentages, which certain items bear to revenues and the percentage increases (decrease) from period to period:
Percentage of Revenues Year Ended June 30 Increase (Decrease) ------------------ ------------------- 1998 1997 1996 1998-1997 1997-1996 ---- ---- ---- --------- --------- Revenue 100.0 100.0 100.0 100.3 86.7 Cost of sales 84.9 94.4 116.4 80.1 51.5 Selling, general & administrative 30.5 63.5 107.7 3.9 10.3 Reduction of carrying value of assets - - - - 22.5 - - (100.0) ------ ------ ------ ------ ------- Operating income (loss) (15.4) (58.0) (146.6) (46.8) 26.1 Net other income (expenses) (3.1) (26.3) (1.4) (76.6) 353.5 ------ ------ ------- ------ ------- (Loss) from continuing operations (18.5) (84.3) (147.9) (56.1) 3.2 (Loss) from discontinued operations - - - - (3.0) - - (100.0) ------ ------ ------- ------ ------- Net (loss) (18.5) (84.3) (151.0) (56.1) 5.2 ====== ====== ====== ====== ======
Fiscal Year Ended June 30, 1998 Compared to Fiscal Year Ended June 30, 1997 Revenues from sales for the fiscal year ended June 30, 1998, increased 100.3% to $12,921,810 from $6,449,744 for the comparable period. This increase is primarily attributable to the awarding of a $12,000,000 project under the New York State agreement. Cost of sales for the fiscal year ended June 30, 1998, consists of materials, labor and fixed factory overhead expense and increased by 80.1% to $10,972,291 from $6,091,773 for the comparable period. Cost of sales as a percentage of revenues was 84.9% for the year ended June 30, 1998 as compared to 94.4% for the comparable period. Management expects continued gross profit improvement as sales become less sporadic and as the plant achieves additional operating efficiencies. For the year ended June 30, 1998 fixed factory overhead expenses were $264,381 as compared to $272,936 for the comparable 1997 period. Management believes that the substantial majority of the revenues of the MarkCare line will be attributable to software sales and support services, which have higher gross profits. Selling, general and administrative expenses for the fiscal year ended June 30, 1998, decreased 3.9% to $3,940,341 from $4,100,177 for the comparable 1997 period. Stabilization of these expenses is attributable to management's focus on cost controls. Mark reduced its operating losses 46.8% to $1,990,822 in the fiscal year ended June 30, 1998 from $3,742,206 in the comparable period. For the same period, Mark's net loss decreased by 56.1%. 16 Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996 Revenues from sales for the fiscal year ended June 30, 1997 increased 86.7% to $6,449,744 from $3,454,615 for the comparable 1996 period. This increase is primarily attributable to the awarding of nine projects, including $3,000,000 under the New York State agreement. Cost of sales for the fiscal year ended June 30, 1997, consists primarily of materials, labor and fixed factory overhead expense and increased 51.5% to $6,091,773 from $4,022,102 for the comparable 1996. Cost of sales as a percentage of revenues was 94.4% for the year ended June 30, 1997 as compared to 116.4% for the comparable 1996 period. Despite losses incurred in connection with the outsourcing of projects for the three months ended September 30, 1996, factory start up costs incurred in the quarter ended December 31, 1996 and cost overruns on several projects, Mark reduced its cost of sales as a percentage of revenues. Management expects continued gross profit improvement due to the completed relocation of its factory and improved operating efficiencies. For the year ended June 30, 1997 fixed factory overhead expenses were $272,066 as compared to $155,987 for the comparable 1996 period due to an increase in repairs and maintenance. Management believes that the substantial majority of the revenues of the MarkCare line will be attributable to software sales and support services, which have higher gross profit. Selling, general and administrative expenses for the fiscal year ended June 30, 1997 increased 10.3% to $4,100,177 from $3,718,886 for the comparable 1996 period. Stabilization of these expenses is attributable to reduction of office staff expenses, trade show expenses and professional fees partially offset by the inclusion of $877,269 of selling, general and administrative expenses of MarkCare-UK, which was acquired in May, 1996. Mark reduced its operating losses 26.1% to $3,742,206 in the fiscal year ended June 30, 1997 from $5,063,868 in the comparable 1996 period. However, due to a non-cash imputed interest expense of $1,422,813 in connection with the issuance of $4,500,000 in principal amount 7% convertible debentures for working capital purposes, Mark's Net Loss for fiscal year 1997 increased 5.2% from fiscal year 1996. Liquidity and Capital Resources Mark's working capital requirements result principally from staff and management overhead, office expense and marketing efforts. Mark's working capital requirements have historically exceeded its working capital from operations due to sporadic sales. Accordingly, Mark has been dependent and, absent continued improvements in operations, will continue to be dependent on the infusion of new capital in the form of equity or debt financing to meet its working capital deficiencies, although no assurance can be given that such financing will be available. Mark believes its present available working capital 17 and anticipated cash from its existing contracts is sufficient to meet its operating requirements through June 30, 1999. Mark obtained a $400,000 revolving line of credit collateralized by substantially all of its assets and has no outstanding borrowings at September 30, 1998. To the extent it requires additional capital, Mark will continue to principally look to private sources. On June 29, 1998, Mark completed a $2,750,000 private placement of debt and equity units (the "Private Placement") pursuant to which Mark sold (i) 1,220,000 in Common Stock, (ii) $1,530,000 in convertible debentures due December 28, 1999, (iii) warrants to purchase 1,375,000 shares of Common Stock and (iv) an option to purchase an additional $2,550,000 principal amount debentures with warrants to purchase 1,275,000 shares of Common Stock. See " Part II, Item 5(d)- "Sales of Unregistered Securities in Fiscal 1998" for a description of the terms of the Private Placement. In the fiscal year ended June 30, 1998, Mark sold 580,000 shares of Common Stock pursuant to the exercise of warrants for gross proceeds of $1,510,450. Mark presently has an effective registration statement relating to 569,500 shares of Common Stock issuable upon the exercise of warrants and options, the majority of which are at exercise prices ranging from $2.00 to $5.00 per share. Mark will initially look to the exercise of outstanding warrants and options to meet working capital deficits, if any. If Mark is required to seek additional private sales of its securities, if available, the sales would most likely be at discounts to the current trading price of the Common Stock. Mark's inventories decreased from $336,287 at June 30, 1997 to $112,474 at June 30, 1998 due to the completion of a major contract prior to year-end. While Mark presented does not have any material commitments for capital expenditures, management believes that is working capital requirements for inventory and other manufacturing related costs will significantly increase with increases in product orders. For the fiscal year ended June 30, 1998, Mark had negative cash flow from operating activities of $1,437,949. For the fiscal year ended June 30, 1998, Mark had negative cash flow from investing activities of $216,338 attributable to the purchase of property and equipment. Mark has no present intention to make any acquisition, which would have a material negative or positive effect on cash flow. For the fiscal year ended June 30, 1998, financing activities provided $1,796,407 in cash, principally from the Private Placement and warrants exercises. Cash and cash equivalents increased from $422,457 at June 30, 1997 to $564,577 at June 30, 1998 due to financing activities. Working capital increased to $3,078,217 at June 30, 1998 from $923,457 at June 30, 1997 primarily due to proceeds of long-term debenture issuance. 18 Other Matters As of June 30, 1998, Mark had net operating loss carry-forwards of approximately $19,550,000. Such carry-forwards begin to expire in the year 2009 if not previously used. The $19,550,000 carry-forward is comprised of approximately $17,850,000 which is available to offset taxable income in the tax year ending June 30, 1999. The remaining $1,700,000 carry-forward is restricted as to utilization under Section 382 of the Internal Revenue Code. Since realization of the tax benefits associated with these carry-forwards is not assured, a full valuation allowance was recorded against these tax benefits as required by SFAS No. 109. Impact of Inflation and Changing Prices Mark has been affected by inflation through increased costs of materials and supplies, increased salaries and benefits and increased general and administrative expenses; however, unless limited by competitive or other factors, Mark passes on increased costs by increasing its prices for products and services. Forward Looking Statements Except for the historical information contained herein, the matters discussed in this report are forward looking statements under the federal securities law. These statements are based on Mark's current plan and expectations and involve risks and uncertainties that could cause actual future activities and results to differ materially from those projected. Such risks and uncertainty include, among other things, collection risks, meeting financial requirements and the uncertainty of material sales of the IntraScan II PACS system. Year 2000 Disclosure After an evaluation and analysis of its operations, including its financial and operational computer systems applications, Mark has concluded no material adverse effect on its operations will occur due to Year 2000 software failures. To the extent modifications to such systems are required, management believes the related costs will not materially affect Mark's financial position. Item 7A. Quantitative and Qualitative Disclosure about Market Risk. Not Applicable. 19 Item 8. Financial Statements and Supplementary Data. The Financial Statements and Supplementary Data to be provided pursuant to this Item are included under Item 14 of this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not Applicable. 20 PART III Item 10. Directors and Executive Officers of the Registrant. The information regarding Directors and Executive Officers is incorporated herein by reference to Mark's definitive proxy statement to be mailed to its shareholders in connection with its 1998 Annual Meeting of Shareholders and to be filed within 120 days after the end of the fiscal year ended June 30, 1998. Item 11. Executive Compensation. The information regarding executive compensation is incorporated herein by reference to Mark's definitive proxy statement to be mailed to its shareholders in connection with its 1998 Annual Meeting of Shareholders and to be filed within 120 days after the end of the fiscal year ended June 30, 1998. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information regarding security ownership of certain beneficial owners and management is incorporated herein by reference to Mark's definitive proxy statement to be mailed to its shareholders in connection with its 1998 Annual Meeting of Shareholders and to be filed within 120 days after the end of the fiscal year ended June 30, 1998. Item 13. Certain Relationships and Related Transactions. The information regarding certain relationships and related transactions is incorporated herein by reference to Mark's definitive proxy statement to be mailed to its shareholders in connection with its 1998 Annual Meeting of Shareholders and to be filed within 120 days after the end of the fiscal year ended June 30, 1998. 21 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. (a)(1) Consolidated Financial Statements - Reports of Independent Accountants F-1, F-2 - Consolidated Balance Sheets for June 30, 1998 and 1997 F-3 - Consolidated Statements of Operations for fiscal years ended June 30, 1998, 1997 and 1996 F-5 - Consolidated Statements of Stockholders Equity for fiscal years ended June 30, 1998, 1997 and 1996 F-6 - Consolidated Statement of Cash Flows for fiscal years ended June 30, 1998, 1997 and 1996 F-7 - Notes to Consolidated Financial Statements F-8 - Chantrey Vellacott Report F-25 - Baker Tilly Report F-27 (3) Exhibits. Exhibit Number Description 2. a)-- Stock purchase Agreement between Mark and Ian Baverstock, Jonathan Newth, David Payne and Joanna Tubbs dated April 5, 1996. (Incorporated by reference to Exhibit 1 to Mark's Form 8-K-Dated of Report May 28, 1996 referred to herein as "Mark's May 1996 Form 8-K") b)-- Stock Purchase Agreement between Mark and Christopher Cummins and Moria Addington dated April 24, 1996. (Incorporated by reference to Exhibit 2 to Mark's May 1996 Form 8-K) 3. a)-- Amended and Restated Certificate of Incorporation* b)-- By-laws* 22 4. a)-- Specimen Stock Certificate* 10. Material Contracts a)-- Employment Agreement between Mark and Carl Coppola (Incorporated by reference to Exhibit 10 a) to Mark's Form 10-K for the fiscal year ended June 30, 1997) b)-- Incentive Stock Option Plan* c)-- Agreement between New York State and Mark dated July 17, 1996. (Incorporated by reference to Exhibit 10 d) to Mark's Form 10-K for the fiscal year ended June 30, 1996) d)-- Agreement between Data General Corporation and Mark dated March 18, 1996 as amended on January 20, 1997. (Incorporated by reference to Exhibit 10 e) to Mark's Form 10-K for the fiscal year ended June 30, 1996) 21. Subsidiaries of Mark* 24. Power of Attorney (included on page 24)* 27. Financial Data Schedule* * Filed with this Form 10-K for the year ended June 30, 1998 (b) Reports on Form 8-K. The following reports on Form 8-K have been filed by Mark during the quarter ended June 30, 1998: Date of Report Items Reported, Financial Statements Filed -------------- ------------------------------------------ April 15, 1998 Item 4. Change in Registrant's Certifying Accountant June 29, 1998 Item 5. Other Events- Pro Forma Balance Sheet as of May 31, 1998 23 POWER OF ATTORNEY Mark Solutions, Inc., and each of the undersigned do hereby appoint Carl Coppola, its or his true and lawful attorney to execute on behalf of Mark Solutions, Inc. and the undersigned any and all amendments to this Report and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. MARK SOLUTIONS, INC. October 9, 1998 By: /s/ Carl Coppola -------------------------- (Carl Coppola, Chief Executive Officer and President) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons on behalf of the Registrant and in the capacities and on the date indicated: Signature Title Date - --------- ----- ---- /s/ Carl Coppola Chief Executive Officer October 9, 1998 - ---------------- President and Director (Carl Coppola) (Principal Executive Officer) /s/Michael Nafash Chief Financial Officer, October 9, 1998 - ----------------- Vice President and (Michael Nafash) Director /s/ Richard Branca Director October 9, 1998 - ------------------ (Richard Branca) /s/ Ronald Olszowy Director October 9, 1998 - ------------------- (Ronald E. Olszowy) /s/William Westerhoff Director October 9, 1998 - -------------------- (William Westerhoff) /s/Yitz Grossman Director October 9, 1998 - ---------------- (Yitz Grossman) 24 Report of Independent Certified Public Accountants Board of Directors and Shareholders Mark Solutions, Inc. and Subsidiaries Bloomfield, New Jersey We have audited the consolidated balance sheet of Mark Solutions, Inc. and Subsidiaries as of June 30, 1998, and the related consolidation statements of operations, stockholders' equity (deficiency), and cash flows for the year ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of MarkCare Medical Systems Limited, a wholly owned subsidiary, which statements reflect total assets of $155,015 as of June 30,1998 and a net loss of $1,301,640 for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for MarkCare Medical Systems Limited, is based solely on the report of the other auditors. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. we believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mark Solutions, Inc. and Subsidiaries as of June 30, 1998, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles. HOLTZ RUBENSTEIN & CO., LLP Melville, New York August 25, 1998 -F-1- Report of Independent Certified Public Accountants To the Board of Directors and Stockholders of Mark Solutions, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Mark Solutions, Inc. and Subsidiaries as of June 30, 1997 and the related consolidated statements of operations, stockholders' equity (impairment), and cash flows for each of the years in the two-year period ended June 30, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of MarkCare Medical Systems Limited, a wholly owned subsidiary, which statements reflect total assets of $192,095 as of June 30, 1997 and total revenues of $224,125 and $41,946, respectively, for the two years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for MarkCare Medical Systems Limited, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mark Solutions, Inc. and Subsidiaries as of June 30, 1997 and the results of its operations and cash flows for each of the years in the two year period ended June 30, 1997 in conformity with generally accepted accounting principles. Sax Macy Fromm & Co., PC Certified Public Accountants Clifton, New Jersey August 22, 1997 Except for Note 1 as to which the date is September 23, 1997 -F-2-
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Assets June 30, 1998 June 30, 1997 ----------------- ----------------- Current Assets: Cash and cash equivalents $ 564,577 $ 422,457 Restricted cash 1,234,005 - - - Subscriptions receivable 1,231,000 - - - Accounts receivable, less allowance of $5,500 in 1998 and 1997 623,912 3,178,928 Due from officer 102,058 - - - Inventories (Note 4) 112,474 336,287 Other current assets (Note 5) 208,377 230,748 ----------------- ----------------- Total Current Assets $ 4,076,403 $ 4,168,420 Property and Equipment: Machinery and equipment 1,545,728 1,488,255 Demonstration equipment 436,348 395,419 Office furniture and equipment 397,607 401,731 Leasehold improvements 188,973 41,568 Vehicles 62,283 62,283 Property held under capital lease 47,129 47,129 ----------------- ----------------- Total 2,678,068 2,436,385 Less: Accumulated depreciation and amortization 2,239,456 2,089,126 Net Property and Equipment 438,612 347,259 Other Assets: Costs in excess of net assets of businesses acquired, less accumulated amortization of $437,373 in 1998 and $227,433 in 1997 (Note 6) 612,318 822,258 Other Assets: 46,768 94,340 ----------------- ----------------- Total Other assets 659,086 916,598 ------------ ----------- Total Assets $ 5,174,101 $ 5,432,277 ============ ===========
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -F-3-
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheets Liabilities and Stockholder's Equity (Deficiency) June 30, 1998 June 30, 1997 ----------------- ----------------- Current Liabilities: Accounts payable $ 715,642 $ 1,638,288 Short-term borrowings - - - 435,225 Current maturities of long-term debt 108,171 448,729 Current portion of obligations under capital leases 19,418 8,276 Due to related parties 14,693 296,472 Notes payable to officer - - - 160,000 Accrued liabilities (Note 8) 140,262 257,973 ----------------- ----------------- Total Current Liabilities $ 998,186 $ 3,244,963 Other Liabilities: Long-term debt excluding current maturities 1,029,385 2,312,556 Long-term portion of obligations under capital leases 31,031 27,911 ----------------- ----------------- Total Other Liabilities 1,060,416 2,340,467 Commitments and Contingencies - - - - - - Stockholder's Equity (Deficiency): Common Stock, $.01 par value, 50,000,000 shares authorized; 19,296,674and 14,779,085 shares issued and outstanding at June 30, 1998 and 1997 respectively 192,967 147,790 Additional paid-in capital 33,066,556 27,454,982 Deficit (30,144,024) (27,755,925) ----------------- ----------------- Total Stockholder's Equity (Deficiency) 3,115,499 (153,153) ---------- ------------ Total Liabilities and Stockholders' Equity (Deficiency) $5,174,101 $5,432,277 ========== ===========
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -F-4-
Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Operations Years Ended June 30 ------------------- 1998 1997 1996 ---- ---- ---- Revenues $ 12,921,810 $ 6,449,744 $ 3,454,615 Costs and Expenses: Cost of sales 10,972,291 6,091,773 4,022,102 Selling, general and administrative expenses 3,940,341 4,100,177 3,718,886 Reduction in carrying value of assets - - - - - - 777,495 ---------- ---------- --------- Total Costs and Expenses 14,912,632 10,191,950 8,518,483 ---------- ---------- --------- Operating (Loss) (1,990,822) (3,742,206) (5,063,868) Other Income (Expenses): Interest income 12,503 21,291 23,800 Interest expense (249,623) (290,651) (10,490) Imputed interest expense on convertible debentures (160,157) (1,422,813) - - - Loss of disposal of property and equipment - - - (4,886) (60,001) ---------- ---------- ---------- Net Other (Expenses) (397,277) (1,697,059) (46,691) ---------- ---------- ---------- (Loss) From Continuing Operations (2,388,099) (5,439,265) (5,110,559) Discontinued Operations: Loss of Bar-Lor Subsidiaries - - - - - - (35,078) Loss of disposal of Bar-Lor Subsidiaries - - - - - - (69,425) ---------- ---------- --------- Total Discontinued Operations - - - - - - (104,503) Net (Loss) $(2,388,099) $(5,439,265) $(5,215,062) =========== ============ ============ Basic (Loss) per share $ (0.14) $ (0.38) $ (0.41) =========== ============ ============ Weighted Average Number of Shares Outstanding 16,580,402 14,221,606 12,732,022 =========== ============ =========== Dividends Paid $ -0- $ -0- $ -0- =========== ============ =========== The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
-F-5- Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (Deficiency)
Total Additional Retained Stockholders' Common Stock Paid-In Earnings Equity Shares Amount Capital (Deficit) [Deficiency] ------ ------ ------- --------- ------------ Balances June 30, 1995 11,734,801 $ 117,347 $18,773,312 $(17,101,598) 1,789,061 Acquisition of Simis Medical Imaging, Limited on May 28, 1996 204,850 2,048 1,247,952 - - - 1,250,000 Issuance of stock through private placements 1,636,664 16,367 4,247,210 - - - 4,263,577 Commission and related fees - - - - - - (8,175) - - - (8,175) Net loss for the year ended June 30, 1996 - - - - - - - - - (5,215,062) (5,215,062) ---------- ------- ---------- ----------- --------- Balance June 30, 1996 13,576,315 135,762 24,260,299 (22,316,660) 2,079,401 Issuance of stock through private placements 210,576 2,106 103,795 - - - 105,901 Conversion of convertible debentures 992,194 9,922 1,399,548 - - - 1,409,470 Imputed interest expense on convertible debentures - - - - - - 1,422,813 - - - 1,422,813 Deferred imputed interest on convertible debt, net of amortization of $32,031 - - - - - - 160,157 - - - 160,157 Warrants issued for services - - - - - - 130,861 - - - 130,861 Commissions and related fees - - - - - - (22,491) - - - (22,491 Net loss for the year ended June 30, 1997 - - - - - - - - - (5,439,265) (5,439,265) ---------- ------- ---------- ----------- ----------- Balances June 30, 1997 14,779,085 147,790 27,454,982 (27,755,925) (153,153) Conversion of convertible debentures 2,602,500 26,025 2,173,975 - - - 2,200,000 Deferred imputed interest on convertible debentures - - - - - - 321,000 - - - 321,000 Stock issued in lieu of interest 44,619 447 192,258 - - - 192,705 Stock issued for services 64,462 645 113,957 - - - 114,602 Warrants issued for services - - - - - - 92,000 - - - 92,000 Conversion of warrants 580,000 5,800 1,510,450 - - - 1,516,250 Commissions and related fees - - - - - - (45,456) - - - (45,456) Issuance of stock through private placement 1,220,000 12,200 1,077,450 - - - 1,089,650 Issuance of warrants through private placement - - - - - - 176,000 - - - 176,000 Miscellaneous adjustment 6,008 60 (60) - - - - - - Net loss for the year ended June 30, 1998 - - - - - - - - - (2,388,099) (2,388,099) ---------- ------- ---------- ----------- ----------- Balances June 30, 1998 19,296,674 $192,967 $33,066,556 $(30,144,024) $3,115,499 ========== ======== =========== ============= ==========
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements -F-6-
Mark Solutions Inc. and Subsidiaries Consolidated Statements and Cash Flow Years Ended June 30 ------------------- 1998 1997 1996 ---- ---- ---- Cash Flow From Operating Activities: Net (loss) $ (2,388,099) $ (5,439,265) $ (5,215,062) Adjustments to reconcile net (loss) to net cash (used for) provided by operating activities: Depreciation and amortization 360,270 377,280 637,169 Amortization of debt issue costs - - - 147,909 - - - Deferred imputed interest on convertible debentures - - - 160,157 - - - Securities issued for services 206,602 130,861 - - - Stock issued for interest expense 192,705 1,472,284 - - - Loss from discontinued operations - - - - - - 104,503 Reduction in carrying value of assets - - - - - - 777,495 Loss on disposition of property and equipment - - - 4,886 60,001 (Increase) decrease in assets: Restricted cash (1,234,005) 181,781 177,469 Accounts receivable 2,555,016 (2,274,332) 666,445 Costs and estimated earnings in excess of billings on contract in progress - - - - - - 66,485 Inventories 223,813 (189,982) 3,334 Other current assets 22,371 (97,423) (16,032) Due from officer (102,058) - - - - - - Other assets 47,572 (34,415) (7,153) Increase (decrease) in liabilities: Accounts payable (922,646) 1,139,038 (1,336,488) Due to related parties (281,779) 251,277 (161,763) Accrued liabilities (117,711) (65,265) 56,558 ------------ ------------ ------------ Net adjustments to reconcile net (loss) to net cash (used for) provided by operating activities 950,150 1,204,056 1,028,023 ------------ ------------ ------------ Net Cash (Used for) Operating Activities (1,437,949) (4,235,209) (4,187,039) ------------ ------------ ------------ Cash Flows From Investing Activities: Additions to property and equipment (216,338) (139,280) (51,451) Proceeds from disposition of segment - - - - - - 100,000 Proceeds from sale of assets - - - 2,500 12,500 ------------ ------------ ------------ Net Cash Provided by (Used for) Investing Activities (216,338) (136,780) 61,049 ------------ ------------ ------------ Cash Flows From Financing Activities: Proceeds from long-term debt 1,033,000 4,500,000 - - - Repayment of long-term debt (456,729) (398,704) - - - Proceeds from short-term borrowings 1,080,000 1,185,912 38,668 Repayment of short-term borrowings (1,515,225) (820,000) - - - Repayment of notes payable for equipment and vehicles (11,083) (17,387) (29,283) Advances from officer - - - 160,000 - - - Repayment of advances from officer (160,000) - - - - - - Payment of offering costs and commissions (45,456) (22,491) (8,175) Proceeds from issuance of securities 1,871,900 105,894 4,263,577 Payment of debt issue costs - - - (162,700) - - - Cash acquired in business combination - - - - - - 8,421 ------------ ------------ ------------ Net Cash Provided by Financing Activities 1,796,407 4,530,524 4,273,208 ------------ ------------ ------------ Net Increase in Cash and Cash Equivalents 142,120 158,535 147,218 Cash and Cash Equivalent at Beginning of Year 422,457 263,922 116,704 ------------ ------------ ------------ Cash and Cash Equivalents at End of Year $ 564,577 $ 422,457 $ 263,922 ============ =========== =========== The Accompanying Notes are an Integral Part of these Consolidated Financial Statements
-F-7- Mark Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 - Management Plans and Subsequent Events: Mark Solutions, Inc.'s (the Company) modular cell products represent an alternative to traditional construction methods, and penetration into the construction market has met resistance typically associated with an unfamiliar product. Accordingly, the Company has been and will continue to be subject to significant sales fluctuations until its modular cell technology receives greater acceptance in the construction market, which management believes will occur as new projects are awarded and completed. In May 1996, the Company acquired MarkCare Medical Systems Limited (formerly Simis Medical Imaging Limited), the entity, which developed the IntraScan II PACS software, to more effectively control the development and marketing strategy. In addition, the Company has entered into a software supplier agreement with Data General Corporation, a large computer hardware and integration provider, pursuant to which Data General will include the IntraScan II PACS software program in proposals to health care institutions. Although no assurances can be given, management believes that these actions will improve the effectiveness of its marketing plan and will enable the Company to generate significant revenues from the IntraScan II PACS system in fiscal 1999. Mark received its first purchase order for its IntraScan II PACS software on August 10, 1998 from Data General. The Company's working capital requirements have historically exceeded its working capital from operations. Accordingly, the Company has been dependent, and absent significant improvements in operations, will continue to be dependent on the infusion of new capital in the form of equity or debt financing. The Company has effective registration statements relating to 569,500 shares of common stock issuable upon the exercise of warrants and options and intends to register approximately 3,760,000 additional shares of common stock issuable upon the exercise of other outstanding warrants and options. The Company will initially look to the exercise of presently outstanding warrants and options to meet working capital deficits, however if sufficient securities are not exercised, the Company will consider additional private sales of its securities. The Company believes the existing modular cell contracts, presently available working capital, projected modular cell contracts and other financial developments will result in improved operating results and generate sufficient working capital through fiscal 1999. -F-8- Note 2 - Summary of Significant Accounting Policies: A. Nature of Business - The Company is a Delaware corporation, which operates its various businesses through wholly owned subsidiaries and a division. The Company is engaged in the design, manufacture, and/or installation of (i) modular steel cells for correctional institution construction and (ii) diagnostic support, picture archiving and communication computer systems (PACS) marketed under the name "IntraScan". B. Basis of Consolidation - The consolidated financial statements include the accounts of Mark Solutions, Inc. (Mark) and its wholly owned Subsidiaries, MarkCare Medical Systems, Inc. (MarkCare), and MarkCare Medical Systems Limited (LTD). The operations of MarkCare Medical Systems Limited are included in the accompanying consolidated financial statements from the date it was acquired, May 28, 1996. Prior to consolidation, the financial statements of LTD are reconciled to U.S. Generally Accepted Accounting Principles. C. Revenue Recognition - Revenues are recorded at the time services are performed or when products are shipped except for manufacturing contracts which are recorded on the percentage-of-completion method which measures the percentage of costs incurred over the estimated total costs for each contract. This method is used because management considers incurred costs to be the best available measure of progress on these contracts. Contract costs include all direct material and labor costs and those indirect costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. The Company provides an allowance for bad debts and returns based upon its historical experience. The allowance for bad debts is charged as a general and administrative expense. D. Cash Equivalents - For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. E. Inventories - Inventories are valued at the lower of cost or market on a first-in, first-out basis. The Company evaluates the levels of inventory based on historical movement and current projections of usage of the inventory. If this evaluation indicates obsolescence and or slow movement, the Company would record a reduction in the carrying value by the amount the cost basis exceeded the estimated net realizable value of the inventory. -F-9- Note 2 - Summary of Significant Accounting Policies (Continued): F. Property and Depreciation - All property and equipment items are stated at cost. Leasehold improvements are amortized under the straight-line method. Substantially all other items are depreciated under straight line and accelerated methods. Depreciation and amortization is provided in amounts sufficient to write-off the cost of depreciable assets, less salvage value, over the following estimated useful lives: Machinery and equipment 7 years Demonstration equipment 5 - 7 years Office furniture and equipment 5 - 7 years Leasehold improvements 31 - 39 years Vehicles 5 years Property held under capital lease 5 years From January 1, 1996 to September 30, 1996 the Company did not maintain a manufacturing facility and out-sourced its manufacturing to third party manufacturers. As a result, the Company's manufacturing equipment, with a cost of $1,261,637, was not utilized. The accompanying financial statements do not include a charge for the depreciation of the manufacturing equipment from January 1, 1996 to September 30, 1996. The Company obtained a manufacturing facility on October 1, 1996 and subsequently placed the manufacturing equipment in service. G. Costs in Excess of Net Assets of Businesses Acquired - In connection with the acquisition of MarkCare and LTD, the excess acquisition cost over the fair value of net assets of businesses acquired is being amortized using the straight-line method over five years. The Company periodically reviews the carrying amounts of costs in excess of net assets of businesses acquired. If events or changes in circumstances indicate that the amount of the net assets may not be recoverable, based on information available to the Company at that time, including current and projected cash flows, an appropriate adjustment is charged to operations. H. Income Taxes - Deferred income taxes are recognized for tax consequences of "temporary differences" by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting and the tax basis of existing assets and liability. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. -F-10- Note 2 - Summary of Significant Accounting Policies (Continued): I. Loss Per Common Share - In 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). This Statement establishes standards for computing and presenting earnings (loss) per share (EPS). SFAS No. 128 requires dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or convertible securities were exercised or converted into common stock. The Company's adoption of SFAS No. 128 did not materially change current and prior years' EPS. Basic and diluted loss per share amounts were equivalent for the years ended June 30, 1998, 1997 and 1996. J. Stock-Based Compensation - The Company grants stock options to employees with an exercise price equal to or above the fair value of the shares at the date of the grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, recognizes no compensation expense for the stock option grants. K. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the report period. The estimates involve judgments with respect to, among other things, various future factors which are difficult to predict and are beyond the control of the Company. Therefore, actual amounts could differ from these estimates. L. Research and Development Costs - Research and development costs, consisting of salaries and materials, relating to software development are expensed as incurred. Prior to technological feasibility the costs were charged to Selling, General and Administrative expense, amounting to $0, $481,987 and $326,158 for the years ended June 30, 1998, 1997 and 1996, respectively. M. Reclassifications - Certain prior year amounts have been reclassified to conform with the current year presentation. -F-11- Note 2 - Summary of Significant Accounting Policies (Continued): N. New Standards - In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distribution to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. In addition, in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for reporting information about operating segments. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. Both of these new standards are effective for periods beginning after December 15, 1997 and require comparative information for earlier years to be restated. The implementation of these new standards will not affect the Company's results of operations and financial position, but may have an impact on future financial statement disclosures. Note 3 - Acquisition: On May 28, 1996, the Company acquired all of the capital stock of MarkCare Medical Systems Limited, a privately held British company (LTD) for $1,250,000 payable in the Company's common stock. This acquisition has been accounted for using the purchase method of accounting. The Company recorded costs in excess of net assets approximating $1,050,000 in connection with this acquisition. Note 4 - Inventories: Inventories consist of the following: June 30 -------------------------------------- 1998 1997 ----------------- ----------------- Raw materials $ 84,974 $ 300,888 Finished goods 27,500 35,399 ----------------- ----------------- Total Inventories $ 112,474 $ 336,287 ================= ================= -F-12- Note 5 - Other Current Assets: Other current assets consist of: June 30 ------------------------------------ 1998 1997 ---------------- ----------------- Prepaid expenses $ 208,377 $ 60,860 Loans and exchanges - - - 9,731 Deferred imputed interest on convertible debentures - - - 160,157 ---------------- ----------------- Total $ 208,377 $ 230,748 ================ ================= Note 6 - Costs in Excess of Net Assets of Business Acquired: The components of costs in excess of net assets of businesses acquired as of June 30, 1998 and 1997 are as follows: Year Ended June 30 ------------------------------------------- 1998 1997 -------------------- ------------------- Beginning balances $ 822,258 $1,032,196 Amortization expense for the year (209,940) (209,938) -------------------- ------------------- Ending Balances $ 612,318 $ 822,258 ==================== =================== Note 7 - Short-Term Borrowings: In March 1997 the Company entered into a bank line of credit based on 60% of eligible accounts receivable and 32% of the appraised value of eligible machinery and equipment, not to exceed the line of credit amount of $400,000. This revolving credit agreement, which expires in October 1998, is collateralized by substantially all of the Company's assets plus the personal guarantee of the Company's chief executive officer. Interest is payable monthly at 1-1/2% above the bank's prime rate. The Company did not have any outstanding borrowing at June 30, 1998. -F-13- Note 8 - Accrued Liabilities: The accrued liabilities consist of: June 30 ----------------------------------------- 1998 1997 ------------------- ------------------ Salaries $ 34,282 $ 77,488 Professional fees 90,900 48,665 Interest - - - 35,422 Other 15,080 96,398 ------------------- ------------------ Total $ 140,262 $ 257,973 =================== ================== Note 9 - Related Party Transactions: The Company purchases materials and is reimbursed for various expenses from Mark Lighting Fixture Co., Inc. (Mark Lighting), an entity owned by the Company's Chief Executive Officer and Metalite, Inc. (Metalite), an entity owned by the brother of the Company's Chief Executive Officer. The following related party transactions are included in the accompanying financial statements: Year Ended June 30 --------------------------------------------------------- 1998 1997 1996 ----------------- ----------------- ------------------ Purchases $ 421,497 $ 231,051 $ 105,512 Expense reimbursement 58,104 135,319 93,125 Consulting services 1,120 33,540 - - - Bonding fees (5,029) 95,785 - - - -F-14- Note 9 - Related Party Transactions (Continued): As a result of current and prior years' transactions, the Company has net balances due to (from) the following related parties, which will be settled in the ordinary course of business: June 30 ----------------------------------------- 1998 1997 ------------------- ------------------ Mark Lighting Fixture Co., Inc. $ 3,360 $ 134,327 Metalite, Inc. 8,869 8,869 Laborstat, Inc. (800) (988) Carl Coppola (102,058) 95,785 Other shareholders 3,265 58,479 ------------------ ------------------ Due to (from) Related Parties $ (87,364) $ 296,472 =================== ================== In connection with several modular cell project, the Company's Chief Executive Officer, Carl Coppola, provided third party guarantees to assist the Company in obtaining performance and completion bonds. As compensation for providing these guarantees, the Company recorded $95,785 representing five percent of the gross proceeds from these projects for the year ended June 30, 1997. During May 1997 the Company received an aggregate of $160,000 and issued 10% promissory notes payable to its Chief Executive Officer with principal and interest due August 20, 1997 and September 30, 1997, respectively, and interest due semi-annually. The entire balance was paid during fiscal 1998. During fiscal 1998, the Company loan $100,000 to its Chief Executive Officer. The entire balance was repaid subsequent to year end. The Company grants non-employee directors, options for serving on the Board of Directors. On December 3, 1997, each of the Company's directors were granted five-year options to purchase 100,000 shares of Common Stock at between $2.875 and $3.375 per share, the closing share price on the date of grant. On June 25, 1998, the Company cancelled the options and issued new five-year options purchase 100,000 shares of Common Stock at $1.125 per share, the closing price on the date of the grant. -F-15- Note 10 - Long-Term Debt: A. Long-term debt consists of the following: June 30 ----------------------------------------- 1998 1997 ------------------ -------------------- Note payable, due December 1999;collateralized by small equipment $ 12,556 $ 19,989 7% convertible debentures due August 20, 1998 - - - 441,296 7% convertible debentures due January 20, 1999 - - - 750,000 7% convertible debentures due June 2, 1999 - - - 1,250,000 7% convertible debentures due June 29, 1999 100,000 300,000 7% convertible debentures due December 31, 1999 1,025,000 - - - ------------------ -------------------- Total Long-Term Debt 1,137,556 2,761,285 Less: Current Portion Long-Term Debt, Excluding Current Portion 108,171 448,729 ------------------ -------------------- $ 1,029,385 $ 2,312,556 ================== ==================== Maturities of total long-term debt are as follows: Year Ended June 30 ------------------ 1999 108,171 2000 1,029,385 B. Convertible Debentures: On August 23, 1996, the Company sold $2,200,000 principal amount 7% convertible debentures due August 22, 1998 ("1996 Debentures"). On December 26, 1996, the terms of the 1996 Debentures were amended to (i) prohibit additional conversions until March 31, 1997 unless the trading price of the common stock reaches levels in excess of $3.00 per share and (ii) modify the conversion price to the lesser of (a) $1.38 or (b) 80% of the average closing bid price on the five trading days immediately preceding the date(s) of conversion. The entire Debenture had been converted at June 30, 1998. In connection with the issuance of the 1996 Debentures, the Company incurred $162,700 of debt issue costs. These costs were charged to operations over the remaining term of the 1996 Debentures. On January 21, 1997, the Company sold $750,000 principal amount 7% convertible debentures due January 20, 1999 (the "1997 Debentures"). The 1997 debentures are convertible, on or after July 15, 1997, into shares of common stock at a conversion price which is the lesser of (i) $2.125 or (ii) 80% of the average closing bid price on the five trading days immediately preceding the date(s) of conversion. Interest on the 1997 Debentures is payable in cash or common stock at the Company's option. On May 1, 1998 the Debenture was converted into 750,000 shares of Common Stock. -F-16- Note 10 - Long Term Debt (Continued) On June 2, 1997, the Company sold $1,250,000 principal amount 7% Convertible Debentures due June 2, 1999. The debentures are immediately convertible into shares of common stock at a conversion price of $0.80 per share. During 1998 the Company issued 44,619 shares of Common Stock (valued at $192,258) in connection with the conversion of accrued interest on convertible debentures. On June 27, 1997, the Company sold $300,000 principal amount 7% convertible debentures due June 29, 1999. The debentures are convertible, on or after December 30, 1997, into shares of common stock at a conversion price of $0.80 per share. Included in current assets is $160,157, which represents the unamortized portion of the beneficial conversion feature as of June 30, 1997. On June 19, 1998, $200,000 of the Debenture was converted into 250,000 shares of Common Stock. The Company issued 75,000 warrants with an exercise price of $1.50 as part of the conversion. At June 30 1998, $100,000 of the debenture remains outstanding. In June 1998, the Company completed a $2,750,000 private placement of equity and debt units (the "Private Placement") pursuant to which the Company issued (i) 1,220,000 shares of Common Stock (the "Private Placement Common Stock"), (ii) convertible debentures (face amount $1,530,000) due December 28, 1999, (the "Convertible Debentures"), (iii) warrants to purchase 1,375,000 shares of Common Stock, (iv) and an option exercisable by the investors to purchase an additional convertible debentures (face amount $2,550,000) with warrants to purchase 1,275,000 shares of Common Stock (the "Debt Unit Option"). Of the $1,530,000 proceeds received in connection with the convertible debentures and its related options, $505,000 was attributed to the debenture conversion features and options and has been classified as additional paid-in capital, and the remaining $1,025,000 has been classified as a long-term obligation. At June 30, 1998 approximately $1,234,000 of the proceeds were held in escrow and $1,231,000 were outstanding. These funds were collected and deposited into the Company's operating accounts in July 1998. -F-17- Note 10 - Long Term Debt (Continued) The holders of the Private Placement Common Stock are entitled to additional shares of Common Stock to the extent the net proceeds from the sale of the Private Placement Common Stock is less than $1.30 per share (the "Share Adjustment"). The Convertible Debentures are convertible into shares of Common Stock at the lesser of (i) $1.50 per share or (ii) 75% of the average closing bid price of the Common Stock for the five trading days immediately preceding the conversion. The Warrants are exercisable for a four-year period at $1.50 per share. The Debt Unit Option entitles the investors to purchase up to an additional $2,550,000 in 18 month principal amount convertible debentures with terms identical to the Convertible Debentures with four-year warrants to purchase an aggregate of 1,250,000 shares of Common Stock at $1.50 per share. Issuance of Common Stock in excess of 3,615,334 shares pursuant to the Private Placement including the (i) Share Adjustment, (ii) conversion of the Convertible Debentures, (iii) exercise of Warrants and (iv) exercise of the Debt Unit Option is subject to the approval of the Company's shareholders. In the absence of shareholder approval of issuance's in excess of 3,615,334 shares the holders of the Private Placement Common Stock and Convertible debentures will have the right to demand cash payment equal to the value of the Share Adjustment and the redemption of the Convertible Debentures at 125% of the principal amount plus accrued interest. As of September 1, 1998, all of the Convertible Debentures and Warrants remained, issued and outstanding. The Company has charged to operations for the years ending June 30, 1998 and 1997, $160,157 and $1,422,813 of imputed interest expense on convertible debentures, which represents the discount on conversion of each of the above convertible debentures. Note 11 - Fair Value of Financial Instruments The estimated fair value of the Company's convertible debt as of June 30, 1998 is as follows: Carrying Fair Amount Value --------------------- --------------------- Convertible debt $ 1,125,000 $ 1,125,000 -F-18- Note 11 - Fair Value of Financial Instruments (Continued): The estimated fair value of the Company's convertible debt as of June 30, 1997 is as follows: Carrying Fair Amount Value --------------------- --------------------- Convertible debt $ 2,741,296 $ 2,928,796 The estimated fair value amount has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value, so the estimates are not necessarily indicative of the amount that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. The fair value of the Company's other financial instruments approximates their carrying amounts. Note 12 - Stockholders' Equity: A. Stock Option Plan: On November 10, 1993, the Company adopted a Stock Option Plan. The Plan is administered and terms of option grants are established by the Board of Directors. Under the terms of the Plan, options to purchase 1,000,000 shares of common stock may be granted to key employees. Options become exercisable as determined by the Board of Directors and expire over terms not exceeding employment, six months after death or one year in the case of permanent disability of the option holder. The option price for all shares granted under the Plan is equal to the fair market value of the common stock at the date of grant, as determined by the Board of Directors, except in the case of a ten percent shareholder where the option price shall not be less than 110% of the fair market value at the date of grant. -F-19- Note 12 - Stockholders' Equity (Continued): The following information relates to shares under option and shares available for grant under the Plan:
June 30 -------------------------------------------------------------------------------------- 1998 1997 1996 ---------------------------------------------------------- --------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------------------------------------- -------------- --------------------------- Outstanding at beginning of year 381,000 $ 2.04 367,000 $ 3.70 523,000 $ 3.71 Granted 524,000 2.67 282,500 1.60 --- -- Cancelled (505,500) 2.95 (268,500) 3.81 (76,000) 3.79 Exercised ---- -- ---- 2.04 (80,000) 3.67 ------- ------ ------- ------- ------- ------- Outstanding at end of year 399,500 $ 1.45 381,000 $ 2.04 367,000 $ 3.70 ======= ====== ======= ======= ======= ======= Available for issuance under Plan 520,000 539,000 553,000 Weighted average contractual life (years) 1.95 2.24 1.22 Shares subject to exercisable option 399,500 381,000 367,000
B. Stock Warrants Outstanding warrants are as follows:
June 30 --------------------------------------------------------------------------------------- 1998 1997 1996 --------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------------------------------------- ------------------------------------------- Warrants outstanding at beginning of year 3,241,758 $ 3.67 3,933,880 $ 4.10 4,848,859 $ 4.45 Granted 2,565,000 1.58 1,395,000 2.91 615,000 5.08 Exercised (580,000) (2.61) (43,572) 2.43 (1,456,979) 2.54 Expired (980,091) (4.20) (2,043,550) 4.02 (73,000) 7.16 --------- ------ --------- ------ --------- ------ Warrants outstanding at end of year 4,246,667 $ 2.43 3,241,758 $ 3.64 3,933,880 $ 4.10 ========= ====== ========= ====== ========= ====== Weighted average contractual life (years) 2.56 1.51 .79
-F-20- Note 12 - Stockholders' Equity (Continued): C. Pro forma Information: Pro forma information regarding net earnings and earnings per share, as required by SFAS No. 123, has been determined as if the Company had accounted for its employee stock options under the fair-value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for fiscal 1998 and 1997: risk-free interest rate of 6.40% and 5.57%; dividend yield -0-; volatility fact related to the expected market price of the Company's common stock of .35; and weighted-average expected option life of 3.3 and 2.0 years. The weighted-average fair value of options granted during fiscal 1998 and 1997 were $1.76 and $1.84, respectively. The Company's pro forma information follows: June 30 -------------------------------------------------- 1998 1997 1996 ---- ---- ---- Pro forma net (loss) ($3,017,300) $(5,701,590) $(5,224,781) Pro forma loss per common share (.18) (.40 ) (.41) ote 13 - Leases: A. Facility Leases: The Company occupies its offices pursuant to an operating lease expiring in December 1998. The Company conducts its manufacturing operations pursuant to an operating lease expiring November 15, 2004. Under the terms of these leases, the Company is obligated to pay maintenance, insurance, and its allocable share of real estate taxes. The Company also leases various automobiles and small office equipment. Future minimum rental payments under these operating leases are as follows: Year Ended June 30 1999 276,254 2000 193,820 2001 186,149 2002 174,236 2003 and thereafter 413,811 ---------- Total future minimum rental payments 1,070,034 ========= -F-21- Note 13 - Leases (Continued): Rent expense for the years ending June 30, 1998, 1997, and 1996, was $330,991, $254,522, and $205,586, respectively. B. Capital Leases: The Company leases certain equipment under capital leases with expiration dates ranging from April 2000 through April 2002. Future minimum lease payments are as follows: Year Ended June 30 1999 $ 29,723 2000 26,587 2001 8,936 2002 1,611 --------- Total future minimum lease payments 66,857 Less: Amount representing interest 16,408 --------- Present value of net future minimum lease payments 50,449 Less: Current portion of obligations under capital leases 19,418 --------- Long-term portion of obligations under capital leases $ 31,031 ========= Note 14 - Commitments and Contingencies: The Company entered into an employment agreement with its Chief Executive Officer. The agreement expires on June 30, 2000 and is payable at an annual base salary of $200,000. In addition, the agreement includes three (3) year nonqualified options to purchase 750,000 shares of common stock at various prices exercise prices ranging from $1.25 to $2.75. In connection with the acquisition of LTD, a former shareholder of LTD entered into a three (3) year employment agreement with LTD which provides (i) an annual salary of U.K. Pounds 60,000 in the initial year with U.K. Pounds 5,000 increases in the succeeding two years and (ii) bonus equal to 10% of the post tax profits of LTD. On January 28, 1998 the Company bought out the remainder of the contract in exchange for 64,462 shares of Common Stock. The value of the shares at the issue date was $114,602. The Company maintains cash balances at several financial institutions located in New Jersey. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. As of June 30, 1998 and 1997, the Company's uninsured cash balances approximated $1,576,000 and $599,000, respectively. -F-22- Note 14 - Commitments and Contingencies (Continued): The Company is involved in various lawsuits and claims incidental to its business. In the opinion of management, the ultimate liabilities, if any, resulting from such lawsuits and claims, will not materially affect the financial position of the Company. Note 15 - Income Taxes: As of June 30, 1998, the Company has Federal net operating loss carry forwards of approximately $19,550,000. Such carry forwards begin to expire in 2009 if not previously used. The $19,550,000 carry forward is comprised of approximately $17,850,000 which is available for utilization in the tax year ending June 30, 1999. The remaining $1,700,000 carry forward is restricted as to utilization subject to the provisions of Internal Revenue Code Section 382. Since realization of the tax benefits associated with these carry forwards is not assured, a full valuation allowance was recorded against these tax benefits as required by SFAS No. 109. Note 16 - Discontinued Operations: On November 10, 1993, Showcase Cosmetics, Inc. (Showcase), the parent company of the Bar-Lor Subsidiaries, and the Company consummated Reorganization (the "Reorganization") pursuant to a Plan of Reorganization dated December 23, 1992, as amended. The reorganization was accounted for using the purchase method of accounting. On October 13, 1995, the Company disposed of the Bar-Lor Subsidiaries, whose principal services were the packaging and distribution of cosmetic products. Note 17 - Supplemental Cash Flow Information: A. Cash paid for interest during the years ended June 30, 1998, 1997 and 1996 amounted to $64,919, $40,832 and $9,581. B. The Company acquired certain equipment with an aggregate cost of $25,345 and $6,200 under capital leases obligations for the years ended June 30, 1998 and 1997 respectively. C. During 1998, $2,200,000 of Debentures were converted into 2,602,500 shares of common stock. During 1997, $360,000 of Converted Debentures were liquidated through the issuance of Common Stock. -F-23- Note 17 - Supplemental Cash Flow Information (Continued): D. During 1998, the Company granted outside consultants options to acquire 360,000 shares of common stock at exercise prices ranging from $1.16 to $4.00. In addition, the Company modified the terms of 640,000 options held by outside consultants. The fair value of these options ($92,000) has been charged to operations in accordance with SFAS No. 123. Note 18 - Segment Information: The Company's two industry segments are the design and manufacture of modular steel prison cells for the corrections industry and the distribution of treatment booths and IntraScan Systems to the medical industry. The following is a summary of selected consolidated financial information for the Company's industry segments: June 30 ------------------------------------------------ 1998 1997 1996 ---- ---- ---- Revenues: Modular steel products $ 12,713,508 $ 6,114,195 $ 3,256,574 Medical products 208,302 335,549 198,041 ------------- ------------ ------------ Total $ 12,921,810 $ 6,449,744 $ 3,454,615 ============= ============ ============ Operating Profit (Loss): Modular steel products 73,434 (2,706,272) (4,508,406) Medical products (2,064,256) (1,035,934) (555,462) -------------- ------------- ------------ Total $ (1,990,822) $ (3,742,206) $(5,063,868) ============= ============= ============ Identifiable Assets: Modular steel products $ 4,258,021 $ 5,002,432 $ 1,317,620 Medical products 916,080 429,845 1,766,143 ------------- ------------- ------------ Total $ 5,174,101 $ 5,432,277 $ 3,083,763 ============= ============= ============ For the year ended June 30, 1998, 1997 and 1996, one customer accounted for 93%, 48% and 70% of the total revenues. As of June 30, 1998, one customer accounted for 42% of receivables. Note 19 - Reduction in Carrying Value of Assets: The Company acquired the stock of LTD, the developer of the IntraScan II PACS system. In connection with this acquisition, the Company has determined to focus its marketing efforts on the IntraScan II PACS technology. In November 1992, the Company acquired Diversified Imaging Technology, a company that developed the IntraScan I technology, which was subsequently integrated with the IntraScan II product. As a result, during the fourth quarter of fiscal 1996 the Company charged operations with approximately $777,000 to write off the excess net assets of businesses acquired as resulting from its acquisition of the IntraScan I technology. -F-24- CHANTREY VELLACOTT MARKCARE MEDICAL SYSTEMS LIMITED Auditors' Report To The Members of MarkCare Medical Systems Limited We have audited the financial statements, [for the year ended June 30, 1998]. Which have been prepared under the historical cost convention [ ]. Respective Responsibilities Of Directors And Auditors As described [ ] the company's directors are responsible for the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report our opinion to you. Basis Of Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting polices are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Going concern In forming our opinion we have considered the adequacy of the disclosures made in the financial statements [ ] concerning the basis on which the financial statements have been prepared. The financial statements have been prepared on a going concern basis. We considered that this matter should be drawn to your attention but our opinion is not qualified in this respect. US GAAP and US GAAS With respect to the information disclosed in the financial statements, we are not aware of any material differences between UK Generally Accepted Accounting Principles and US Generally Accepted Accounting Principles or between UK Auditing Standards and US Generally Accepted Auditing Standards. -F-25- Opinion In our opinion the financial statements give a true and fair view of the state of the company's affairs at 30 June 1998 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act of 1985. /s/ Chantrey Vellacott Chartered Accountants Registered Auditors LONDON -F-26- BAKER TILLY AUDITORS REPORT TO THE MEMBERS OF MARKCARE MEDICAL SYSTEMS, LTD. We have audited the financial statements. [for the year ended June 30, 1997]. Respective responsibilities of directors and auditors As described [ ] the company's directors are responsible for the preparation of the financial statements. It is our responsibility to form and independent opinion, based on our audit, on those statements and to report our opinion to you. Basis of opinion We conducted our audit, in accordance with Auditing Standards issued by the Auditing Practice Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit, as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Fundamental Uncertainty These accounts have been prepared under the going concern accounting policy. This is on the basis that the holding company and the directors will continue to provide sufficient finance to enable the company to meet its liabilities. The balance sheet position at June 30, 1997, is insolvent by L 340,319. As stated in the financial statements amounts owned to the holding company and a company owned by a director total L 324,476. The company is therefore reliant on the holding company and directors support in order to continue trading. Our opinion is not qualified in this respect. US GAAP and US GAAS With respect to the information disclosed in the financial statements, we are not aware of any material differences between UK Generally Accepted Accounting Principles and US Generally Accepted Accounting Principles or between UK Auditing Standards and US Generally Accepted Auditing Standards. -F-27- Opinion In our opinion the financial statements give a true and fair view of the state of the company's affairs at 30 June 1997 and of its loss for the period then ending and have been properly prepared in accordance with the provisions of the Companies Act 1985. /s/ Baker Tilly Registered Auditors Chartered Accountants Old Sarum House 49 Princes Street Yeovil, Somerset BA20 1EG -F-28- EX-3.(I) 2 AMENDED AND RESTATED CERTIFICATE OF INCORP. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MARK SOLUTIONS, INC. The undersigned corporation, in order to amend and restate its Certificate of Incorporation, hereby certifies as follows: 1. (a) The present name of the corporation (hereinafter called the corporation") is Mark Solutions, Inc. (b) The name under which the corporation was originally incorporated is Showcase Cosmetics, Inc., and the date of filing the original certificate or incorporation of the corporation with the Secretary of State of the State of Delaware is September 29, 1986. 2. The certificate of incorporation of the corporation is hereby amended by striking out Article FOURTH thereof and by substituting in lieu thereof new Article FOURTH which is set forth in the Restated Certificate or Incorporation hereinafter provided for. 3. The provisions of the certificate of incorporation of the corporation as heretofore amended and/or supplemented, and as herein amended, are hereby restated and integrated into a single instrument which is hereinafter set forth, and which is entitled Restated Certificate of Incorporation of Mark Solutions, Inc. without any further amendment other than the amendment herein certified and without any discrepancy between the provisions of the certificate of incorporation as heretofore amended and supplemented and the provisions of the said single instrument hereinafter set forth. 4. The amendment and the restatement of the restated certificate of incorporation herein certified have been duly adopted by the stockholders in accordance with the provisions of Section 242 and of Section 245 of the General Corporation Law of the State of Delaware. -1- RESTATED CERTIFICATE OF INCORPORATION OF MARK SOLUTIONS, INC. FIRST: The name of the corporation is: Mark Solutions, Inc. SECOND: The registered office of the corporation is to be located at c/o Corporation Service Company, 1013 Centre Road, in the City of Wilmington, County of New Castle, State of Delaware 19805. The name of its registered agent at that address is Corporation Service Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The Corporation shall be authorized to issue the following shares: Class Number of Shares Par Value ----- ---------------- --------- Common Stock 50,000,000 $.01 FIFTH: The name and address of the incorporator are as follows: - NAME ADDRESS ---- ------- Ray A. Barr 9 East 40th Street, New York, NY 10016 SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and for further definition, limitation and regulation for the powers of the corporation and of its directors and stockholders: (1) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in the by-laws. Election of directors need not be by ballot unless the by-laws so provide. (2) The Board of Directors shall have power without the assent or vote of the stockholders: (a) To make, alter, amend, change, add to or repeal the By-laws of the corporation; to fix and vary the amount to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens upon all or any part of the property of the corporation; to determine the use and disposition of any surplus or net profits; and to fix the times for the declaration and payment of dividends. (b) To determine from time to time whether, and to what times and places, and under what conditions the accounts and books of the corporation (other than the stockledger) or any of them shall be open to the inspection of the stockholders. -2- (3) The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the corporation which is represented in person or by proxy as such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person in person or by proxy) shall be as valid and as binding upon the corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest, or for any other reason. (4) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made. SEVENTH : No director shall be liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director's duty of loyalty to the corporation or its stockholders, (2) acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (3) liability under Section 174 of the Delaware General Corporation Law or, (4) a transaction from which the director derived an improper personal benefit, it being the intention of the foregoing provision to eliminate the liability of the corporation's directors to the corporation or its stockholders to the fullest extent permitted by Section 102(b)(7) of the Delaware General Corporation Law, as amended from time to time. The corporation shall indemnify to the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as amended from time to time, each person that such Sections grant the corporation the power to indemnify. EIGHTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware, may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application as been made, be binding on all the creditors or class of creditors, and/or all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. -3- NINTH: The corporation reserves the right to amend, alter, change or repreal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors, and officers are subject to this reserved power. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true and under the penalties of perjury, this 27th day of January 1998. MARK SOLUTIONS, INC. /s/ Carl Coppola ----------------------- Carl Coppola, President ATTEST: /s/ Cheryl Gomes - -------------------------- Cheryl A. Gomes, Secretary -4- EX-3.(II) 3 BY-LAWS BY-LAWS 0F MARK-SOLUTIONS, INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. -The registered office shall be established and maintained at c/o United Corporate Services, Inc, 410 South State Street, Dover, Delaware 19901 and United Corporate Services, Inc. shall be the registered agent of this corporation in charge thereof. SECTION 2. OTHER OFFICES. - The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS: - Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of meeting. In the event the Board of Directors fails to so determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the registered office of the corporation in Delaware. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote should elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. SECTION 3. VOTING.- Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the -1- meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 4. QUORUM . - Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any purpose or purposes any be called. by the President or Secretary, or by resolution of the directors. SECTION 6. NOTICE OF MEETINGS . - Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than fifty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM. - The number of directors shall be one (1). The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. A director need not be a stockholder. SECTION 2. RESIGNATIONS. - Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3. VACANCIES - If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 4. REMOVAL. - Any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus -2- created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote. SECTION 5. INCREASE OF NUMBER. - The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify. SECTION 6. POWERS. The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member or such committee or committees, the member or members thereof present at any such meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power of authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent, in writing, of all the directors. Unless restricted by the incorporation document or elsewhere in these By-laws, members of the Board of Directors or any committee designated by such Board may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. Regular meetings of the Board of Directors may be scheduled by a resolution adopted by the Board. The Chairman of the Board or the President or Secretary may call, and if requested by any two directors, must call special meeting of the Board and give five days' notice by mail, or two days' notice personally or by telegraph or cable to each director. The Board of Directors may hold an annual meeting, without notice, immediately after the annual meeting of shareholders. -3- SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. SECTION 10. COMPENSATION. - Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS. - The officers of the corporation shall be a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4. PRESIDENT. - The President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer. SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors. SECTION 6. TREASURER. - The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors. -4- The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by the law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.-Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the Chairman or Vice-Chairman of the Board of Directors, if they be elected, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. When such certificates are countersigned (1) by a transfer agent other than the corporation or its employee, or, (2) by a registrar other than the corporation or its employee, the signatures of such officers may be facsimiles. SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation shall be transferrable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificate shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any -5- other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjournment meeting. SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation. SECTION 6. SEAL. - The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "Corporate Seal, Delaware, 1986". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. FISCAL YEAR.- The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage, prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal of By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws to be made, be contained in the notice of such special meeting. -6- EX-4 4 SPECIMEN STOCK CERTIFICATE NUMBER SHARES MS MARK SOLUTIONS INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 570418 10 3 COMMON STOCK THIS CERTIFIES THAT: SPECIMEN is owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.01 VALUE EACH OF MARK SOLUTIONS, INC. transferable on the books of the Corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and By-laws of the Corporation, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. DATED: COUNTERSIGNED: CONTINENTAL STOCK TRANSFER & TRUST COMPANY JERSEY CITY, NJ TRANSFER AGENT BY: AUTHORIZED OFFICER MARK SOLUTIONS, INC. CORPORTATE SEAL 1986 DELAWARE /s/ Cheryl A. Gomes /s/ Carl Coppola Secretary President -1- The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MINA CT.......Custodian.... TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act ............... in common (State) Additional abbreviations may also be used though not in the above list. For Value Received, ____________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _____________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESSS, INCLUDING ZIP CODE, OF ASSIGN) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ______________________________________________________________________________ Shares of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated____________________ ---------------------------------------------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE. THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM. -2- EX-10 5 INCENTIVE STOCK OPTION PLAN MARK SOLUTIONS, INC. 1993 STOCK OPTION PLAN -1- TABLE OF CONTENTS Page Section 1. PURPOSE............................................ 4 Section 2. DEFINITIONS........................................ 4 2.1 Board....................................... 4 2.2 Code........................................ 4 2.3 Committee................................... 4 2.4 Corporation................................. 4 2.5 Exchange Act................................ 4 2.6 Fair Market Value........................... 4 2.7 Option...................................... 4 2.8 Key Employee................................ 4 2.9 Option Certificate.......................... 5 2.10 Option Price................................ 5 2.11 Parent Corporation.......................... 5 2.12 Plan........................................ 5 2.13 Principal Officer........................... 5 2.14 Securities Act.............................. 5 2.15 Stock....................................... 5 2.16 Subsidiary.................................. 5 2.17 Ten Percent Shareholder..................... 5 Section 3. SHARES SUBJECT TO OPTIONS.......................... 6 Section 4. EFFECTIVE DATE.................................... 6 Section 5. COMMITTEE......................................... 6 Section 6. ELIGIBILITY....................................... 6 Section 7. GRANT OF OPTIONS.................................. 7 7.1 Committee Action............................. 7 7.2 $100,000 Limit............................. 7 Section 8. OPTION PRICE...................................... 7 Section 9. EXERCISE PERIOD.................................. 8 Section 10. NONTRANSFERABILITY............................. 9 Section 11. SECURITIES REGISTRATION AND RESTRICTIONS....... 9 Section 12. LIFE OF PLAN................................... 10 Section 13. ADJUSTMENT..................................... 10 Section 14. SALE OR MERGER OF THE CORPORATION.............. 10 -2- Section 15. AMENDMENT OR TERMINATION...................... 11 Section 16. MISCELLANEOUS................................ 11 16.1 No Shareholder Rights................. 11 16.2 No Contract of Employment............. 11 16.3 Withholding........................... 11 16.4 Construction.......................... 11 -3- Section 1. PURPOSE The purpose of this Plan is to promote the interests of the Corporation by granting Options to purchase Stock to Key Employees in order to (a) attract and retain Key Employees; (b) provide an additional incentive to each Key Employee to work to increase the value of the Stock; and (c) provide each such Key Employee with a stake in the future of the Corporation which corresponds to the stake of each of the Corporation's shareholders. Section 2. DEFINITIONS Each term set forth in this Section 2 shall have the meaning set forth opposite such term for purposes of this Plan and for any Option granted under this Plan. For purposes of such definitions, the singular shall include the plural and the plural shall include the singular. Unless otherwise expressly indicated, all Section references herein shall be construed to mean references to a particular Section of this Plan. 2.1 Board means the Board of Directors of the Corporation. 2.2 Code means the Internal Revenue Code of 1986, as amended. 2.3 Committee means the committee or either of the committees appointed by the Board to administer this Plan as contemplated by Section 5. 2.4 Corporation means Mark Solutions, Inc., a Delaware corporation, and any successor to such corporation. 2.5 Exchange Act means the Securities Exchange Act of 1934, as amended. 2.6 Fair Market Value means the price which the Committee acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. 2.7 Key Employee means any employee of the Corporation or a Subsidiary, who, in the judgment of the Committee acting in its absolute discretion, is a key to the success of the Corporation or a Subsidiary. 2.8 Option means any option granted under this Plan to purchase Stock which satisfies the requirements of Section 422 of the Code. 2.9 Option Certificate means the written agreement or instrument which sets forth the terms of an Option granted to a Key Employee under this Plan. 2.10 Option Price means the price which shall be paid to purchase one share of stock upon the exercise of an Option granted under this Plan. 2.11 Parent Corporation means any corporation which is a parent corporation of the Corporation within the meaning of Section 424(e) of the Code. -4- 2.12 Plan means this Mark Solutions, Inc. 1993 Stock Option Plan, as amended from time to time. 2.13 Principal Officer means the Chairman of the Board (if the Chairman of the Board is a payroll employee), the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President and the Treasurer of the Corporation and any other person who is an "officer" of the Corporation as that term is defined in Rule 16a-1(f) under the Exchange Act or any successor rule thereunder. 2.14 Securities Act means the Securities Act of 1933, as amended. 2.15 Stock means the Common Stock, $.01 par value per share, of the Corporation. 2.16 Subsidiary means any corporation which is a subsidiary corporation of the Corporation within the meaning of Section 424(f) of the Code. 2.17 Ten Percent Shareholder means a person who owns after taking into account the attribution rules of Section 424(d) of the Code more than ten percent (10%) of the total combined voting power of all classes of stock of either the Corporation, a Subsidiary or a Parent Corporation. Section 3. SHARES SUBJECT TO OPTIONS There shall be 1,000,000 shares of Stock reserved for issuance in connection with Options under this Plan. Such shares of Stock shall be reserved to the extent that the Corporation deems appropriate from authorized but unissued shares of Stock and from shares of Stock which have been reacquired by the Corporation. Any shares of Stock subject to an Option which remain after the cancellation expiration or exchange of such Option for another Option thereafter shall again become available for use under this Plan. Section 4. EFFECTIVE DATE The effective date of this Plan shall be the date it is originally approved and adopted by the Board of the Corporation, subject to approval by the shareholders of the Corporation acting at a duly called meeting of such shareholders or acting by unanimous written consent in lieu of a meeting, provided such shareholder approval occurs within twelve (12) months after the date the Board approves and adopts this Plan. Section 5. COMMITTEE This Plan shall be administered by the Committee. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan. Furthermore, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Corporation, on each affected Key Employee, and on each other person directly or indirectly affected Key Employee, and on each other person directly or indirectly affected by such action. The Board may designate one Committee, all of the members of which are members of the Board. -5- Section 6. ELIGIBILITY Only Key Employees shall be eligible for the grant of Options under this Plan. Section 7. GRANT OF OPTIONS 7.1Committee Action. The Committee in its absolute discretion shall grant Options to Key Employees under this Plan from time to time to purchase shares of Stock and, further, shall have the right to grant new Options in exchange for outstanding Options. Each grant of an Option shall be evidenced by an Option Certificate, and each Option Certificate shall: (a)specify that the Option is an "incentive stock option"; (b) incorporate such other terms and conditions as the Committee acting in its absolute discretion deems consistent with the terms of this Plan, including, without limitation, a limitation on the number of shares subject to the option which first became exercisable or subject to surrender during any particular period. In connection with the termination for any reason of employment by or service to the Corporation or any Subsidiary of any particular holder of any Option, the Committee may, in its discretion, determine to modify the number of shares of Stock as to which such Option first becomes exercisable during any particular period as provided in the related Option Certificate; provided, however, that the Committee may not extend any such period with respect to any shares of Stock subject to such Option. 7.2$100,000 Limit. To the extent that the aggregate Fair Market Value of the stock with respect to which Options satisfying the requirements of Section 422 of the Code granted a Key Employee under this Plan and under any other stock option plan adopted by the Corporation, a Subsidiary or a Parent Corporation first become exercisable in any calendar year exceeds $100,000 (based upon the Fair Market Value on the date of the grant), such Options shall be treated as non-qualified options. Section 8. OPTION PRICE The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted, or if the Key Employee is a Ten Percent Shareholder, the Option Price for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in cash in full upon the exercise of any Option. Section 9. EXERCISE PERIOD Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Certificate, but no Option Certificate shall provide that: (a) an Option is exercisable before the date such Option is granted, or (b) an Option is exercisable after the date which is the tenth anniversary of the date such option is granted. If an Option is granted to a Key Employee who is a Ten Percent Shareholder the Option Certificate shall provide that the Option is not exercisable after the expiration of five years from the date the Option is granted. An Option Certificate may provide for the exercise of an Option after the employment of a Key Employee has terminated only as provided below. -6- Upon the occurrence of the Key employee's ceasing for any reason to be employed by the Corporation (such occurrences being a "termination of employment"), the Option, the extent not previously exercised, shall terminate and become null and void immediately upon such termination of employment, except in a case where the termination of the Key Employee's employment is by reason of retirement, disability or death. Upon a termination of employment by reason of retirement, disability or death, the Option may be exercised during the following periods, but only to the extent that the Option was outstanding and exercisable on any such date of retirement, disability or death: (i) the one-year period following the date of such termination of employment in the case of a disability (within the meaning of Section 22(e) (3) of the Code), (ii) the six-month period following the date of issuance of letters testamentary or letters of administration to the executor or administrator of a deceased Key Employee, in the case of death during his employment by the Corporation, but not later than one year after the Key Employee's death, and (iii) the three-month period following the date of such termination in the case of retirement on or after attainment of age 65, or in the case of disability other than as described in (i) above. In no event, however, shall any such period extend beyond the original exercise period. A transfer of the Key Employee's employment between the Corporation and any Subsidiary, or between any Subsidiaries, shall not be deemed to be a termination of the Key Employee's employment. Notwithstanding any other provisions set forth herein or in the Plan, if the Key Employee shall (i) commit any act of malfeasance of wrongdoing affecting the Corporation or any Subsidiary, (ii) breach any covenant not to compete, or employment contract, with the Corporation or any Subsidiary, or (iii) engage in conduct that would warrant the Key Employee's discharge for cause (excluding general dissatisfaction with the performance of the Key Employee's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon the Corporation or any Subsidiary), any unexercised portion of the Option shall immediately terminate and be void. Section 10. NONTRANSFERABILITY No Option granted under this Plan shall be transferable by a Key Employee otherwise than by will or by the laws of descent and distribution, and such Option shall be exercisable during a Key Employee's lifetime only by the Key Employee. The person or persons to whom an Option is transferred by will or by the laws of descent and distribution thereafter shall be treated as the Key Employee for purposes of this Plan. -7- Section 11. SECURITIES REGISTRATION AND RESTRICTIONS Each Option Certificate shall provide that, upon the receipt of shares of Stock as a result of the exercise of an Option, the Key Employee shall, if so requested by the Corporation, hold such shares of Stock for investment and not with a view toward resale or distribution to the public and, if requested by the Corporation, shall deliver to the Corporation a written statement to that effect satisfactory to the Corporation. Each Option Certificate shall also provide that, if so requested by the Corporation, the Key Employee shall represent in writing to the Corporation that he or she will not sell or offer to sell any such shares of Stock unless a registration statement shall be in effect with respect to such Stock under the Securities Act and any applicable state securities law or unless he or she shall have furnished to the Corporation an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Certificates representing the Stock transferred upon the exercise of an Option granted under this Plan may at the discretion of the Corporation bear a legend to the effect that such Stock has not been registered under the Securities Act or any applicable state securities law and that such Stock may not be sold or offered for sale in the absence of (i) an effective registration statement as to such Stock under the Securities Act and any applicable state securities law or (ii) an opinion, inform and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Furthermore, the Corporation shall have the right to require a Key Employee to enter into such shareholder or other related agreements as the Corporation deems necessary or appropriate under the circumstances as a condition to the issuance of any Stock under this Plan to a Key Employee. Section 12. LIFE OF PLAN No Option shall be granted under this Plan on or after the earlier of (a) the tenth anniversary of the original effective date of this Plan as determined under Section 4; provided, however, that after such anniversary date this Plan otherwise shall continue in effect until all outstanding Options have been exercised in full or no longer are exercisable, or (b) the date on which all of the Stock reserved under Section 3 of this Plan has, as a result of the exercise of Options granted under this Plan, been issued or no longer is available for use under this Plan, in which event this plan also shall terminate on such date. Section 13. ADJUSTMENT The number of shares of Stock reserved under Section 3 of this Plan, and the number of shares of Stock subject to Options granted under this Plan and the Option Price of such Options shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of the Corporation, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Board shall have the right to adjust in a manner which satisfies the requirements of Section 424(a) of the Code the number of shares of Stock reserved under Options granted under this Plan and the Option Price of such Options in the event of any corporate transaction described in Section -8- 424(a) of the Code that provides for the substitution or assumption of such Options. If any adjustment under this Section 13 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Options granted under this Plan shall be the next lower number of shares of Stock, rounding all factions downward. An adjustment made under this Section 13 by the Board shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in "the number of shares reserved under Section 3" within the meaning of Section 15(a) of this Plan. Section 14. SALE OR MERGER OF THE CORPORATION If the Corporation agrees to sell all or substantially all of its assets for cash or property or for a combination of cash and property or agrees to any merger, consolidation, reorganization, division or other corporate transaction in which Stock is converted into another security or into the right to receive securities or property and such agreement does not provide for the assumption or substitution of the Options granted under this Plan, each then outstanding Option at the direction and discretion of the Board may be canceled unilaterally by the Corporation as of the effective date of such transaction in exchange for the same net consideration which each Key Employee would have received if each such Option had been exercisable in full on such date and each Key Employee had exercised each such Option for Stock under Section 11 on such date and then sold such Stock on such date. Section 15. AMENDMENT OR TERMINATION This Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, that no such amendment shall be made absent the approval of the shareholders of the Corporation (a) to increase the aggregate number of shares reserved under Section 3, (b) to extent the maximum life of the Plan under Section 12 or the maximum exercise period under Section 9, (c) to decrease the minimum option price under Section 8, (d) to change the class of persons eligible for Options under Section 6 or to otherwise materially modify the requirements as to eligibility for participation in this Plan, or (e) to otherwise materially increase the benefits accruing under this Plan. The Board also may suspend the granting of Options under this Plan at any time and may terminate this Plan at any time; provided, however, that the Corporation shall not have the right unilaterally to cancel or, in a manner which would materially adversely affect the holder, amend or modify any Option granted before such suspension or termination unless (i) the Key Employee consents in writing to such modification, amendment or cancellation or (ii) there is a dissolution or liquidation of the Corporation or a transaction described in Section 13 or Section 14 of this Plan. Section 16. MISCELLANEOUS 16.1 No Shareholder Rights. No Key Employee shall have any rights as a shareholder of the Corporation as a result of the grant of an Option to him or to her under this Plan or his or her exercise of such Option pending the actual delivery of Stock subject to such Option to such Key Employee. -9- 16.2 No Contract of Employment. The grant of an Option to a Key Employee under this Plan shall not constitute a contract of employment and shall not confer on a Key Employee any rights upon his or her termination of employment or service in addition to those rights, if any, expressly set forth in the Option Certificate which evidences his or her Option. 16.3 Withholding. The exercise of any Option granted under this Plan shall constitute a Key Employee's full and complete consent to whatever action the Committee elects to satisfy the federal and state tax withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. 16.4 Construction. This Plan and the Option Certificates shall be construed under the laws of the State of New Jersey. -10- MARK SOLUTIONS, INC. INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT, dated as of the date of grant, ******************* ,(the "Date of Grant"), is delivered by Mark Solutions, Inc., a Delaware corporation (the "Corporation") to ************** (the "Grantee"), who is an employee or officer of the Corporation or one of its subsidiaries. WHEREAS, the Board of Directors of the Corporation (the "Board") on April 19, 1993, adopted, with subsequent stockholder approval, the Corporation's 1993 Incentive Stock Option Plan (the "Plan"). WHEREAS, the Plan provides for the granting of incentive stock options by a committee to be appointed by the Board (the "Committee") to officers and key employees of the Corporation or any subsidiary to purchase shares of the Common Stock of the Corporation, par value $.01 per share (the "Stock"), in accordance with the terms and provisions thereof; and WHEREAS, the Committee considers the Grantee to be a person who is eligible for a grant of incentive stock options under the Plan, and has determined that it would be in the best interest of the Corporation to grant the incentive stock options documented herein. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Grant of Option. Subject to the terms and conditions hereinafter set forth, the Corporation, with the approval and at the direction of the Committee, hereby grants to the Grantee, as of the Date of Grant, an option to purchase up to ****** shares of Stock at a price of $***** per share, the fair market value. Such option is hereinafter referred to as the "Option" and the shares of Stock purchasable upon exercise of the "Option" are hereinafter sometimes referred to as the "Option Shares". The Option is intended by the parties hereto to be, and shall be treated as, an incentive stock option (as such term is defined under Section 422 of the Internal Revenue Code of 1986). 2. Exercise. Subject to such further limitations as are provided herein, the Option shall become exercisable on and after three (3) months from Date of Grant. -11- 3. Termination of Option. (a) The Option and all rights hereunder with respect thereto, to the extent such rights shall not have been exercised, shall terminate and become null and void after the expiration of three (3) years from Date of Grant (the "Option Term"). (b) Upon the occurrence of the Grantee's ceasing for any reason to be employed by the Corporation (such occurrence being a "termination of employment"), the Option, to the extent not previously exercised, shall terminate and become null and void immediately upon such termination of the Grantee's employment, except in a case where the termination of the Grantee's employment is by reason of retirement, disability or death. Upon a termination of the Grantee's employment by reason of retirement, disability or death, the Option may be exercised during the following periods, but only to the extent that the Option was outstanding and exercisable on any such date of retirement, disability or death: (i) the one-year period following the date of such termination of the Grantee's employment in the case of a disability (within the meaning of Section 22(e) (3) of the Code), (ii) the six-month period following the date of issuance of letters testamentary or letters of administration to the executor or administrator of deceased Grantee, in the case of the Grantee's death during his employment by the Employer, but not later than one year after the Grantee's death, and (iii) the three-month period following the date of such termination in the case of retirement on or about attainment of age 65, or in the case of disability other than as described in (i) above. In no event, however, shall any such period extend beyond the Option Term. (c) In the event of the death of the Grantee, the Option may be exercised by the Grantee's legal representative(s), but only to the extent that the Option would otherwise have been exercisable by the Grantee. (d) A transfer of the Grantee's employment between the Corporation and any Subsidiary, or between any Subsidiaries, shall not be deemed to be a termination of the Grantee's employment. (d) Notwithstanding any other provisions set forth herein or in the Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing affecting the Corporation or any Subsidiary, (ii) breach any covenant not to compete, or employment contract, with the Corporation or any Subsidiary, or (iii) engage in conduct that would warrant the Grantee's discharge for cause (excluding general dissatisfaction with the performance of the Grantee's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon the Corporation or any Subsidiary) any unexercised portion of the Option shall immediately terminate and be void. -12- 4. Exercise of Options. (a) The Grantee may exercise the Option with respect to all or any part of the number of Option Shares then exercisable hereunder by giving the Secretary of the Corporation written notice of intent to exercise. The notice of exercise shall specify the number of Option Shares as to which the Option is to be exercised and the date of exercise thereof, which date shall be at least five (5) days after the giving of such notice unless an earlier time shall have been mutually agreed upon. (b) Full payment (in U.S. dollars) by the Grantee of the option price for the Option Shares purchased shall be made on or before the exercise date specified in the notice of exercise in cash. (c) On the exercise date specified in the Grantee's notice or as soon thereafter as is practicable, the Corporation shall cause to be delivered to the Grantee, a certificate or certificates for the Option Shares then being purchased (out of theretofore issued Stock or reacquired Stock, as the Corporation may elect) upon full payment for such Option Shares. The obligation of the Corporation to deliver Stock shall, however, be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the Option or the Option Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. (d) If the Grantee fails to pay for any of the Option Shares specified in such notice or fails to accept delivery thereof, the Grantee's right to purchase any such Option Shares may be terminated by the Corporation. The date specified in the Grantee's notice as the date of exercise shall be deemed the date of exercise of the Option, provided that payment in full for the Option Shares to be purchased upon such exercise shall have been received by such date. 5. Adjustment of and Changes in Stock of the Corporation. In the event of a reorganization, recapitalization, change of shares, stock split, spin-off, stock dividend, reclassification, subdivision or combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of capital stock of the Corporation, the Committee shall make any adjustment as it deems appropriate in the number and kind of shares of Stock subject to the Option or in the option price provided, however, that no such adjustment shall give the Grantee any additional benefits under the Option. -13- 6. No Rights of Stockholders. Neither the Grantee nor any personal representative shall be, or shall have any of the rights and privileges of, a stockholder of the Corporation with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, prior to the date of exercise of the Option. 7. Non-Transferability of Option. During the Grantee's lifetime, the Option hereunder shall be exercisable only by the Grantee or any guardian or legal representative of the Grantee, and the Option shall not be transferable except, in case of the death of the Grantee, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. In no event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided for herein, or (b) the levy of any attachment, execution or similar process upon the rights or interest hereby conferred, the Corporation may terminate the Option by notice to the Grantee and it shall thereupon become null and void. 8. Employment Not Affected. The granting of the Option nor its exercise shall not be construed as granting to the Grantee any right with respect to continuance of employment of the Corporation. Except as may otherwise be limited by a written agreement between the Corporation and the Grantee, the right of the Corporation to terminate at will the Grantee's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Corporation, or on behalf of the Corporation (whichever the case may be), and acknowledged by the Grantee. 9. Amendment of Option. The Option may be amended by the Board or the Committee at any time (i) if the Board or the Committee determines, in its sold discretion, that amendment is necessary or advisable in the light of any addition to or change in the Internal Revenue Code of 1986 or in the regulations issued thereunder, or any federal or state securities law or other law or regulation, which change occurs after the Date of Grant and by its terms applies to the Option; or (ii) other than in the circumstances described in clause (i), with the consent of the Grantee. -14- 10. Incorporation of Plan by Reference. The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and the Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this instrument, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. 11. Governing Law. The validity, construction, interpretation and effect of this instrument shall exclusively be governed by and determined in accordance with the law of the State of New Jersey, except to the extent preempted by federal law, which shall to that extent govern. IN WITNESS WHEREOF, the Corporation has caused its duly authorized officers to execute and attest this Grant of Incentive Stock option, and to apply the corporate seal hereto, and the Grantee has placed his or her signature hereon, effective as of the Date of Grant. Attest: MARK SOLUTIONS, INC. ___________________________ By:___________________________ Secretary President ACCEPTED AND AGREED TO: By:_________________________ Grantee -15- EX-21 6 SUBSIDIARIES OF MARK SOLUTIONS, INC. SUBSIDIARIES OF MARK SOLUTIONS, INC. Name of Subsidiary Jurisdiction of Organization - ------------------ ---------------------------- MarkCare Medical Systems, Inc. Maryland MarkCare Medical Systems, Limited United Kingdom-England -1- EX-27 7 FDS MARK SOLUTIONS, INC.
5 0000807397 Mark Solutions, Inc. 12-MOS JUN-30-1998 JUN-30-1998 564,577 0 629,412 5,500 112,474 4,076,403 2,678,068 2,239,456 5,174,101 998,186 1,060,416 0 0 192,967 2,922,532 5,174,101 12,921,810 12,934,313 10,972,291 14,912,632 160,157 0 249,623 (2,388,099) 0 (2,388,099) 0 0 0 (2,388,099) (.14) (.14)
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