-----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, SloNuwwOAZbW3yvJaLTpPbGXHk7pCvlVD3Z9D6RQNfSRnURLHFjOp0pokcUAq5pI bpMebD+xyWhNv/VIC6iROw== 0000807397-00-000004.txt : 20000215 0000807397-00-000004.hdr.sgml : 20000215 ACCESSION NUMBER: 0000807397-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 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-Q SEC ACT: SEC FILE NUMBER: 333-72099 FILM NUMBER: 542343 BUSINESS ADDRESS: STREET 1: 1515 BROAD ST STREET 2: PARKWAY TECHNICAL CENTER CITY: BLOOMFIELD STATE: NJ ZIP: 07003 BUSINESS PHONE: 9738930500 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-Q 1 MARK SOLUTIONS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 31, 1999 -------------------------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission File Number: 0-17118 ----------------------------- Mark Solutions, Inc. -------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2864481 -------- ---------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation) Identification No.) 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 ------------------------ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by check whether 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: Common Stock, $ .01 par value: 6,338,623 shares outstanding as of February 14, 2000. The registrant is obligated to issue up to an additional 269,500 shares of Common Stock, which have not been issued due to prohibitions on beneficial ownership. MARK SOLUTIONS, INC. Form 10-Q for Quarter Ended December 31,1999 Index Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 1999 and June 30, 1999. . . 3-4 Consolidated Statements of Operations for the Six Months and Three Months Ended December 31, 1999 and 1998 . . . . . . . . 5 Consolidated Statements of Cash Flows for the Three Months Ended December 31, 1999 and 1998 . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 Part II. Other Information Item 2. Changes in Securities and Use of Proceeds . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 14 Signatures 15 2
Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheet Assets December 31, 1999 June 30, 1999 ------------------ ------------- Current Assets: Cash and cash equivalents $ 403,751 $ 298,167 Note receivable 250,000 250,000 Account receivable 4,356,187 4,744,459 Costs and estimated earnings in excess of billings on uncompleted contracts 993,689 1,006,955 Inventory 510,597 -- Deferred tax asset 548,477 500,000 Prepaid expenses 71,501 64,706 ---------- ---------- Total Current Assets 7,134,202 6,864,287 Property and equipment, net 1,536,451 1,224,110 Other Assets: Cost in excess of net assets of business acquired less accumulated amortization of $752,283 and $647,313 at December 31 and June 30, 1999, respectively 297,408 402,378 Deferred tax asset -- 500,000 Other assets 85,623 79,939 --------- ---------- Total Other Assets 383,031 982,317 ---------- ----------- Total Assets $9,053,684 $9,070,714 ========== ===========
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Mark Solutions, Inc. and Subsidiaries Consolidated Balance Sheet Liabilities and Stockholders' Equity December 31, 1999 June 30, 1999 ------------------ ------------------- Current Liabilities: Accounts payable $ 3,726,637 $ 3,617,608 Short-term loans 217,075 -- Current maturities of long-term debt 551,485 365,000 Current portion of obligations under capital leases 115,333 87,292 Due to related parties 55,027 177,977 Notes payable to officers/stockholders 200,000 375,000 Deferred revenues -- 655,874 Litigation settlement 525,000 300,000 Accrued liabilities 87,715 253,299 ----------- ----------- Total Current Liabilities 5,478,272 5,832,050 Other Liabilities: Long-term debt excluding current maturities 55,647 369,961 Long-term portion of obligations under capital leases 138,867 135,017 ----------- ----------- Total Other Liabilities 194,514 504,978 Commitments and Contingencies -- -- Stockholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 5,861,675 and 5,525,296 shares issued and outstanding at December 31, and June 30, 1999, respectively 58,617 55,253 Preferred stock, $1.00 par value, $10 liquidation value; 5,000,000 shares authorized: Series A; authorized and issued 122,000 shares; -0- and 24,000 outstanding at December 31, 1999 and June 30, 1999 respectively -- 24,000 Series B; authorized and issued 153,000 shares; -0- and 6,000 outstanding at December 31, 1999 and June 30, 1999 respectively 6,000 6,000 Series D; authorized and issued 20,000 shares; 20,000 and -0- outstanding at December 31, 1999 and June 30, 1999 respectively 20,000 - Additional paid-in capital 34,902,976 34,432,927 Deficit (31,732,993) (31,916,792) Accumulated other comprehensive income 183,000 183,000 Treasury stock, at cost; 17,500 shares at December 31 and June 30, 1999 (50,702) (50,702) ----------- ----------- Total Stockholders' Equity 3,380,898 2,733,686 Total Liabilities and Stockholders' Equity $9,053,684 $9,070,714 ========== ==========
4 Mark Solutions, Inc. and Subsidiaries Consolidated Statement of Operations
Six Months Six Months Three Months Three Months Ended Ended Ended Ended December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998 ----------------- ----------------- ----------------- ----------------- Revenues: Sales $ 8,546,702 $ 2,936,517 $ 4,549,261 $ 2,247,656 ------------------ --------------------- ----------------- ---------------- Costs and Expenses: Cost of sales 5,014,878 1,147,847 2,848,684 800,295 General, and administrative expenses 1,400,064 945,225 725,058 594,782 Marketing costs 750,588 417,919 432,425 219,326 Software costs 707,970 550,279 432,444 391,536 Amortization expense 104,970 104,970 52,485 52,485 Litigation settlement 275,000 2,000 - - Consulting Fees 161,087 145,942 88,919 103,117 ------------------ --------------------- ----------------- ---------------- Total Costs and Expenses 8,414,557 3,314,182 4,580,015 2,161,541 ------------------ --------------------- ----------------- ---------------- Operating Income(Loss) 132,145 (377,665) (30,754) 86,115 ------------------ --------------------- ----------------- ---------------- Other Income (Expenses): Interest income 21,074 44,315 14,621 16,091 Interest expense (119,420) (20,764) (83,022) (9,338) Imputed Interest expense on convertible debentures - (109,667) - (54,833) ------------------ --------------------- ----------------- ---------------- (98,346) (86,116) (68,401) (48,080) ------------------ --------------------- ----------------- ---------------- Income before Income Tax Benefit $ 33,799 $ (463,781) $ (99,155) $ 38,035 Income Tax Benefit 150,000 - 150,000 - ------------------ --------------------- ---------------- ---------------- Net Income(Loss) $ 183,799 $ (463,781) $ 50,845 $ 38,035 =================== ==================== ================ ================ Basic Earnings(Loss) Per Share $ 0.03 $ (0.10) $ 0.01 $ 0.01 =================== ==================== ================= ================ Fully Dilutes Income(Loss)Per Share $ 0.03 $ (0.10) $ 0.01 $ 0.01 =================== ==================== ================= ================ Weighted Average Number of Basic Shares Outstanding 5,617,207 4,824,169 5,680,914 4,824,169 =================== ==================== ================= ================ Weighted Average Number of Fully Diluted Shares Outstanding 6,769,737 4,824,169 6,833,444 4,824,169 =================== ==================== ================= ================ Dividends Paid $ - $ - $ - $ - =================== ==================== ================= ================
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Mark Solutions, Inc. and Subsidiaries Consolidated Statements of Operations Six Months Six Months Ended Ended December 31, 1999 December 31, 1998 ------------------ ------------------- Cash Flows From Operating Activities: Net Income(loss) $ 183,799 $ (463,781) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 260,171 163,811 Deferred Imputed interest on convertible debentures - 109,667 Securities issued for services 203,652 - Deferred tax asset 451,523 - (Increase) decrease in assets: Restricted cash - 1,234,005 Accounts Receivable 388,272 (867,203) Notes Receivable - (250,000) Inventory (510,597) (946,375) Billing in excess of contract revenue recognized 13,266 - Other current assets (6,795) (19,822) Other assets (5,684) (1,871) Increase (decrease) in liabilities: Accounts payable 109,029 237,456 Due to related parties (122,950) 133,957 Deferred revenue (655,874) - Litigation settlement payable 225,000 - Accrued liabilities (165,584) (33,741) Net adjustments to reconcile net income(loss) to ----------- ---------- net cash provided by (used for)operating activities 183,429 (240,116) Net Cash Provided by (Used for) ----------- ---------- Operating Activities 367,228 (703,897) ----------- ---------- Cash Flows From Investing Activities: Acquisition of property and equipment (467,542) (395,284) Net Cash (Used for) ----------- ---------- Investing Activities (467,542) (395,284) ----------- ---------- Cash Flows From Financing Activities: Collection of subscriptions receivable - 1,231,000 Proceeds from sale of Stock 260,000 - Increase in short-term borrowings 217,075 275,000 Proceeds of equipment loans less repayments (95,938) 35,001 Repayment of notes payable officer (175,000) - Proceeds from notes payable officer - - Refund of stock related costs (239) (58,961) Purchase of treasury stock - (50,702) ----------- ---------- Net Cash Provided by Financing Activities 205,898 1,431,338 ----------- ---------- Net increase in Cash 105,584 332,157 Cash and Cash Equivalents at Beginning of Period 298,167 564,577 ----------- ---------- Cash and Cash Equivalents at End of Period $ 403,751 $ 896,734 =========== ==========
6 Mark Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 INTERIM FINANCIAL INFORMATION The consolidated balance sheet of the Company as of December 31, 1999, the consolidated statement of operations for the six months and three months ended December 31, 1999 and 1998 and the consolidated statements of cash flows for the six months ended December 31, 1999 and 1998 are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows have been included. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The June 30, 1999 balance sheet data is derived from the audited consolidated financial statements. The attached financial statements should be read in connection with the consolidated financial statements and notes hereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. Certain reclassifications have been made to the current and prior year amounts to conform to the current period presentation. Note 2 INVENTORIES Inventories consist of the following December 31, 1999 June 30, 1999 ----------------- ------------- Work In Progress $ 510,597 $ - Note 3 COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL Basic earnings (loss) per common share is computed by dividing the net earnings by the weighted average number of shares of common stock outstanding during the period. Dilutive earnings per share gives effect to stock options and warrants which are considered to be dilutive common stock equivalents. Earnings per share have been retroactively restated to reflect FASB No. 128 for all prior periods presented. 7 Mark Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 4 SEGMENT INFORMATION The company's two industry segments are modular steel cells for the corrections industry and software applications for the medical industry. The following is a summary of selected consolidated financial information for the Company's industry segments:
Modular Steel Medical Intersegment Products Products Charges Total ----------- ----------- ----------- ----------- Six Months Ended December 31, 1999 Revenues $ 7,249,459 $ 1,297,243 $ - $ 8,546,702 Interest income 335,340 8,158 (322,424) 21,074 Interest expense 115,439 326,405 (322,424) 119,420 Depreciation and amortization 101,640 53,561 104,970 260,171 Segment pre-tax profit 1,333,744 (1,044,975) (104,970) 183,799 Segment assets 17,308,642 1,415,134 (9,670,092) 9,053,684 Capital expenditures 142,111 325,431 - 467,542 Six Months Ended Decemebr 31, 1998 Revenues $ 2,028,415 $ 908,102 $ - $ 2,936,517 Interest income 240,935 816 (197,436) 44,315 Interest expense 126,063 201,804 (197,436) 130,431 Depreciation and amortization 21,794 44,194 104,970 170,958 Segment pre-tax profit 452,492 (785,068) (127,897) (460,473) Segment assets 11,552,036 970,379 (7,047,144) 5,475,271 Capital expenditures 395,284 - - 395,284
The following table presents revenues by country based on the location of the use of the product or service: 12/31/99 12/31/98 -------- -------- United States $ 7,405,372 $ 2,378,415 Norway 667,500 - Other 473,830 558,102 ----------- ----------- $ 8,546,702 $ 2,936,517 =========== =========== The following table presents long-lived assets by country based on the location of the assets: 12/31/99 12/31/98 -------- -------- United States $ 1,018,032 $ 667,750 United Kingdom 518,418 107,305 ----------- ----------- $ 1,536,450 $ 775,055 =========== =========== 8 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 products, modular steel cells and IntraScan II PACS software. 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 sales fluctuations until its modular cell technology obtains broader acceptance in the construction market. Based on the increase in the number of projects being designed for steel cells, management believes its cell are receiving greater market acceptance as a viable alternative to concrete. Mark continues to promote it steel cells to the architectural, engineering, and construction communities by making sales presentations, participating in trade shows, conducting selected direct mail campaigns and engaging in other marketing activities. Mark has increased its cell marketing spending to more aggressively pursue projects and to persuade the construction industry to increase the use of steel cells. Mark believes this investment has been successful to date and is necessary to achieve profitability. 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. Through its fiscal year ended June 30, 2000 Mark expects to bid on approximately $20,000,000 in cell projects which are specified steel only, and $12,000,000, which include steel as an equal to concrete. 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. For the six months ended December 31, 1999, Mark was awarded $4,812,340 of the $4,915,321 in correctional cell projects it bid on and remains under consideration for the balance of the projects. MarkCare markets the IntraScan II PACS software as part of comprehensive PACS proposals made by MarkCare's strategic partners. MarkCare's principal marketing partner is Data General Corporation, a subsidiary of EMC Corporation. In response to increased interest from its strategic partners and prospective customers, MarkCare accelerated its development and marketing efforts. Sales of the IntraScan II PACS software began to generate material revenues in the fiscal year ended June 30, 1999 and management expects these revenues to increase during fiscal 2000 although no assurances can be given in this regard. If the IntraScan marketing plan is successful, management believes that the revenues 9 will be more constant then those presently generated by modular steel cell sales, and will reduce fluctuations in Mark's consolidated results of operations and financial condition. Results of Operations The substantial majority of Mark's operating revenues for the reported periods were derived from the sale of its modular steel cells. For the three months ended December 31, 1999, modular steel cells represented 92.6% of total operating revenue. Management believes that the sale of cells will continue to represent a majority of Mark's operating revenues through June 30, 2000. Revenues from sales for the three months ended December 31, 1999, increased 102.4% to $4,549,261 from $2,247,656 for the comparable period. This increase is attributable to increases in modular steel cell projects. Cost of sales for the three months ended December 31, 1999, consisting of materials, labor and fixed factory overhead expense increased by 256% to $2,848,684 from $800,295 for the comparable period. Cost of sales as a percentage of revenues was 62.6% for the three months ended December 31, 1999 as compared to 35.6% for the prior comparable period. This change is due to lower margins in its modular steel cell business, which represented a larger percentage of revenue for the three months ended December 31, 1999 as compared to the prior year. General and administrative expenses for the three months ended December 31, 1999, increased 21.9% to $725,058 from $594,782 for the comparable period. The increase is attributable to the additional staffing in response to sales growth and prospects in both business segments. Marketing costs for the three months ended December 31, 1999, increased 97.2% to $432,425 from $219,326 for the comparable period. This increase in due to the expanded marketing efforts for its two products, modular steel cells and IntraScan II PACS software. Software costs for the three months ended December 31, 1999 related to IntraScan II PACS, increased 10.4% to $432,444 from $391,536 for the comparable period as Management focused working capital on IntraScan II PACS software and related items in response to increased interest from distributors and potential customers. Revenues from sales for the six months ended December 31, 1999, increased 191% to $8,546,702 from $2,936,517 for the comparable period. This increase is attributable to increases in both modular steel cell and IntraScan II PACS software projects. For the six months ended December 31, 1999, modular steel cells represented 84.8% of total operating revenue. 10 Cost of sales for the six months ended December 31, 1999, consisting of materials, labor and fixed factory overhead expense increased by 336.8% to $5,014,878 from $1,147,847 for the comparable period. Cost of sales as a percentage of revenues was 58.7% for the three months ended December 31, 1999 as compared to 39.1% for the prior comparable period. This change is due to lower margins in its modular steel cell business, which represented a larger percentage of revenue for the three months ended December 31, 1999 as compared to the prior year. General and administrative expenses for the six months ended December 31, 1999, increased 48.1% to $1,400,064 from $945,225 for the comparable period. The increase is attributable to the additional staffing in response to sales growth and prospects in both business segments. Marketing costs for the six months ended December 31, 1999, increased 79.6% to $750,588 from $417,919 for the comparable period. This increase in due to the expanded marketing efforts for its two products, modular steel cells and IntraScan II PACS software. Software costs for the six months ended December 31, 1999 related to IntraScan II PACS, increased 28.7% to $707,970 from $550,279 for the comparable period as Management focused working capital on IntraScan II PACS software and related items in response to increased interest from distributors and potential customers. 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 depended on and, absent continued improvements in operations, will depend on new capital in the form of equity or debt financing to meet its working capital deficiencies, although no assurances can be given that such financing will be available. Mark believes its present available working capital from existing contracts and from anticipated contracts is sufficient to meet its operating requirements through June 30, 2000. If Mark requires additional capital, it will continue to principally look to private sources. Marks inventory increased to $510,597 at December 31, 1999 from $-0- at June 30, 1999. While Mark presently does not have any material commitments for capital expenditures, management believes that its working capital requirements for inventory and other manufacturing related costs will significantly increase with increases in product orders. 11 For the six months ended December 31, 1999, Mark had cash flow from operating activities of $367,228. For the six months ended December 31, 1999, Mark had negative cash flow from investing activities of $467,542, all of which is attributable to the purchase of property and equipment. Mark has no present intention of making any acquisition, which would have a material negative or positive effect on cash flow. For the six months ended December 31, 1999, financing activities provided $205,898 in cash, principally due to the proceeds from stock sales and an increase in short-term borrowing. Cash and cash equivalents increased from $298,167 at June 30, 1999 to $403,751 at December 31, 1999 due to proceeds from stock sales and an increase in short-term borrowings. Working capital increased to $1,655,930 at December 31, 1999 from $1,032,237 at June 30, 1999 primarily due to profits recorded by Mark during the period and the recognition of unearned revenue recorded at June 30, 1999. 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 current plans and expectations of Mark and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include whether cell and PACS projects are awarded to Mark and the timing of their completion, meeting current and future financial requirements, competition and changes in PACS related technology. 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 are required, management believes the related costs will not materially affect Mark's financial position. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings. On December 29, 1999, Mark settled its arbitration action with Demien Construction Company related to a modular cell project in Missouri. Pursuant to the settlement, Mark agreed to pay $275,000, payable in shares of Common Stock, and the parties exchanged mutual releases. Item 2. Changes in Securities and Use of Proceeds On October 19, 1999, each of the six members of the Board of Directors was granted five-year options to purchase 9,300 shares of Common Stock at $1.28125 per share. On October 19, 1999, Carl Coppola was granted three-year options to purchase 100,000 shares of Common Stock at $1.28125 per share in connection with his on-going employment. On October 19, 1999, two consultants were granted three-year warrants to purchase an aggregate of 21,000 shares of Common Stock at $1.28125 per share. On November 9, 1999, Mark granted to six employees, three-year nonqualified options to purchase an aggregate of 29,000 shares of Common Stock at $1.28125 per share. Each of the foregoing transactions was effected in reliance on the registration exemption provided by Section4(2) of the Securities Act as not involving a public offering due to the limited nature of the offering and the individuals' relationship with Mark. 13 Item 4. Submission of Matters to a Vote of Security-Holders. On December 17, 1999, Mark held its Annual Meeting of Shareholders (the "Annual Meeting"). At the Annual Meeting six directors were elected. The vote for the foregoing matters was as follows: 1. Election of Directors Each of the directors was re-elected. FOR WITHHELD ---------- -------- Carl Coppola 4,875,380 63,411 Richard Branca 4,879,642 59,149 Ronald E. Olszowy 4,879,002 59,789 William Westerhoff 4,877,727 61,064 Michael Nafash 4,876,827 61,964 Yitz Grossman 4,879,229 59,562 Item 5. Other Information. On November 11, 1999, Mark retained Sherleigh Associates LLC ("Sherleigh") to provide financial and investor related services to MarkCare Medical Systems, Inc. ("MarkCare") under a one-year consulting agreement. Pursuant to the agreement, Sherleigh purchased five percent of MarkCare for $60,000 and was issued a warrant, exercisable until May 10, 2000 for $1.00 to purchase additional shares of MarkCare to insure that Sherleigh beneficially owns five percent of MarkCare on a fully diluted basis. Under certain circumstances MarkCare has the right to repurchase the shares and warrant for $160,000. Sherleigh will also receive a monthly fee of $1,000 under the agreement. Item 6. Exhibits and Reports on Form 8-K 1. Consulting Agreement between MarkCare Medical Systems, Inc. and Sherleigh Associates LLC dated November 11, 1999. (a) Exhibits Exhibit No. Exhibit Description - ----------- ------------------- 27.1 Financial Data Schedule (b) Reports on Form 8-K for the Quarter ending December 31, 1999 None 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. Date: February 14, 2000 MARK SOLUTIONS INC. By:/s/ Michael Nafash -------------------------- Chief Financial Officer 15 EX-99 2 CONSULTING AGREEMENT SHERLEIGH ASSOCIATES LLC 660 MADISON AVENUE NEW YORK, NEW YORK 10021 CONSULTING AGREEMENT November 11, 1999 MarkCare Medical Systems, Inc. Attn: Carl Coppola, President 1515 Broad Street Bloomfield, New Jersey 07003 Dear Mr. Coppola: This letter will confirm our agreement (the "Agreement") pursuant to which Sherleigh Associates LLC (the "Consultant"), has been retained to serve as a management consultant and advisor to MarkCare Medical Systems, Inc. (the "Company") and/or its subsidiaries or affiliates for a period of twelve (12) months commencing on the date hereof unless extended by mutual written consent of the parties hereto. The undersigned hereby agrees to the following terms and conditions: 1. Duties of Consultant. The Consultant shall, at the request of the Company, upon reasonable notice, render the following services: (i) assist the Company in the presentation of an in-depth business plan suitable for presentation to potential investors, underwriters, strategic partners and lenders. We have agreed that the basic components of the business plan will consist of the following: (a) Overview of the Company and PACS. (b) Description of the capabilities of the Company PACS. (c) Strategic market analysis: trends and opportunities, domestic and international. (d) Value proposition to the PACS' buyer including case studies and/or testimonials. (e) Competitive analysis of the Company PACS versus Agfa, Kodak etc. (f) Financial projections and capitalization. (ii) introduce the Company to prospective underwriters, auditors and legal counsel. (iii) provide financial guidance on issues of budgeting, compensation and financial structure. (iv) assist the Company in developing sources of interim financing should interim financing be deemed required. (v) develop together with the Company an investor relations program, including the hiring of an investor relations firm. (vi) provide advice and guidance regarding an employee option and warrant program. (vii) provide assistance and guidance regarding a possible spin-off of the Company from its parent company. (viii)provide advice and guidance regarding prospective appointments to the Board of Directors of the Company. 2. Compensation. As compensation for the services which have previously been rendered by the Consultant on behalf of the Company with regard to the formulation of preliminary business concepts and in consideration of the Consultant's commitment to enter into this Agreement, the Company shall pay to the Consultant a monthly fee of $1,000 for each month during the term hereof. 3. Issuance of Stock and Warrant. 3.1 The Company, on the execution of this Agreement, shall sell to the Consultant the following shares and warrant in consideration of a cash purchase price of $60,000: (i) such number of shares of the Company's common stock (the "Initial Shares") which shall equal (following the issuance of such shares to the Consultant) 5% of all the issued and outstanding capital stock of the Company on a fully diluted basis(1); and (ii) a common stock purchase warrant ("Warrant") to purchase, for an aggregate purchase price of $1.00: (a) such number of shares of the Company's common stock ("Warrant Shares") as shall equal, when added to the Initial Shares, 5% of the Issued and outstanding capital stock of the Company on a fully diluted basis(1), immediately following the Company's initial round of financing (as defined herein); and (b) 5% of the number of the Company's shares or (shares underlying exercise of) warrants issued to any strategic partners, employees consultants or affiliates. - - -------------------- (1) Fully diluted basis shall mean all shares of the Company issued and outstanding after taking into account (a) the exercise of all outstanding warrants (including for purposes of section 3.1(b) the exercise of the Warrant), options and convertible securities which are exercisable or convertible into the Company's capital stock; and (b) any stock issued in exchange for, or capitalization of the Company's debt to its parent company. 2 3.2 The Company's initial round of financing shall mean the number of shares issued in consideration of the first $2,000,000 raised by the Company following the issuance of the Initial Shares. The Warrant shall have a term of six months commencing on the date hereof. 3.3 The Company shall have the option (the "Option") to buy back the Initial Shares, the Warrant and/or any Warrant Shares, from the Consultant for a purchase price of $160,000 provided such Option may only be exercised in the event the Company has not, within six months from the date hereof, completed the sale of equity and/or obtained financing (as defined herein) in a minimum amount of $1,000,000. Notwithstanding the foregoing, the Option may not be exercised if the Company, within a period of six months from the date hereof, has rejected an offer to purchase equity or provide financing based upon a pre money valuation of the Company of not less than $7,000,000(2). For purposes of this section, the term "financing" shall mean either a loan fully or partially convertible into equity (at a conversion rate based upon a pre money valuation of not less than $7,000,000), and/or a loan which requires the issuance of warrants to the lender (exercisable at a price based upon a pre money valuation of not less than $7,000,000). The Option may be exercised by written notice to the Consultant and by delivery of the aforesaid Option purchase price during the option exercise period which shall commence six months from the date hereof and shall end nine months from the date hereof. 3.4 The Consultant shall have two demand and unlimited piggyback registration rights with respect to the Initial Shares, the Warrant and the Warrant Shares. 4. Covenants. As further consideration to the Consultant for its execution of this Agreement, the Company, and its parent company, Mark Solutions, Inc. ("MSI") covenant and agree as follows: (i) MSI shall either subordinate all outstanding indebtedness owed by the Company to MSI to any initial round of financing (as that term is defined in Section 3.2) or capitalize such debt; (ii) For the term of this Agreement, Consultant shall have the right to designate one member of the Board of Directors of MSI and one member of the Company's Board of Directors (or to designate a representative to attend all meetings of such boards as an observer); (iii)The Board of Directors of the Company shall initially consist of one director designated by the Consultant, Carl Coppola, Leo Futerman and two directors designated by MSI. 5. Expenses. The Company shall reimburse the Consultant for all of its reasonable and pre-approved travel and other out-of-pocket expenses incurred in connection with its engagement hereunder. - - -------------------- (2) Such valuation shall be based upon an assumption that all debt of the Company to its parent company (and/or other inter company debt) has been capitalized. 3 6. Relationship. Nothing herein shall constitute Consultant as an employee or agent of the Company, except to such extent as might hereinafter be agreed upon for a particular purpose. Except as might hereinafter be expressly agreed, Consultant shall not have the authority to obligate or commit the Company in any manner whatsoever. 7. Confidentiality. Except in the course of the performance of its duties hereunder, Consultant agrees that it shall not disclose any trade secrets, know-how, or other proprietary information not in the public domain learned as a result of Consultant's services to the Company unless and until such information become generally known or unless compelled to do so pursuant to subpoena or court order. 8. Information; Notice of Events. The Company recognizes and confirms that the Consultant will be using information provided by or on behalf of the Company in connection with the performance of its duties under this Agreement, and that the Consultant does not assume any responsibility for and may rely upon, without independent verification, the accuracy and completeness of any such information. The Company hereby warrants that any information relating to the Company that is furnished to the Consultant by or on behalf of the Company will be fair, accurate and complete and will not contain any material omissions or misstatements of fact. 9. Indemnity. The Company shall indemnify the Consultant from liability it may incur in connection with the performance of its duties hereunder to the extent that such liability is a result of false information provided to the Consultant by the Company. 10. Assignment. The Agreement shall not be assignable by any party (except to successors to all or substantially all of the business of either party) for any reason whatsoever without the prior written consent of the other party, which consent may be arbitrarily withheld by the party whose consent is required. 11. Governing Law; Submission to Jurisdiction. This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State. The Company and Consultant hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America located in the State of New York, City of New York, for any action, suits or proceedings arising out of or relating to this letter and the transactions contemplated hereby (and agree not to commence any actions, suits or proceeding relating thereto except in such courts, and further agree that service of process for any action, suit or proceeding brought against the Company or the Consultant, as the case may be, in any such court. The Company and Consultant also hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this letter or the transactions contemplated hereby, in the courts of the State of New York or the United States of America located in the State of New York, County of New York and hereby further irrevocably and unconditionally waive, and agree not to plead a claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 4 12. Miscellaneous. This letter (a) incorporates the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous agreements should they exist with respect thereto, whether written or oral, (b) may not be amended, modified or waived except in a writing executed by the Company and the Consultant and their respective successors and assigns. This letter may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes, but all such counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of this letter by facsimile shall be equally effective as delivery of an executed original counterpart of this letter. Please confirm that the foregoing is in accordance with your understanding and agreement with the Consultant by signing and returning to us a copy of this letter, which shall become our binding agreement upon our receipt. We are delighted to accept this engagement and look forward to working with you on this assignment. Very truly yours, SHERLEIGH ASSOCIATES LLC By: /s/ Jack Silver --------------------- Name: Jack Silver Title: President AGREED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN: MARKCARE MEDICAL SYSTEMS, INC. By: /s/ Carl Coppola ----------------------------- Name: Carl Coppola Title: PRES & CEO AS TO SECTION 4 MARK SOLUTIONS, INC. By: /s/ Carl Coppola ----------------------------- PRES & CEO 5 EX-27 3 MARK SOLUTINS, INC.
5 6-MOS JUN-30-2000 DEC-31-1999 403,751 0 4,606,187 0 510,597 7,134,202 4,118,043 2,581,592 9,053,684 5,478,272 194,514 0 20,000 58,617 3,322,281 9,053,684 8,546,702 8,546,702 5,014,878 8,414,557 98,346 0 119,420 33,799 (150,000) 0 0 0 0 183,799 .03 .03
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