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Rule 424(b)(3)
File No. 333-31607
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Prospectus
MARK SOLUTIONS, INC.
600,000 Shares of Common Stock
This Prospectus relates to the sale of up to 600,000 shares of common
stock, $ .01 par value (the "Common Stock") of Mark Solutions, Inc.
("Mark") which are issuable upon conversion of Mark's $ 750,000 Principal
Amount 7% Convertible Debentures (the "Debentures") or paid as interest on
the Debentures. As of the date of this Prospectus, $ 750,000 principal
amount of the Debentures remain outstanding. The Debentures were issued by
Mark in a private placement in January 1997. The Debentures are
convertible, in whole or in part, at the option of the holder, into shares
of Common Stock at a conversion price which is the lesser of (i) $ 2.125 or
(ii) 80% of the average of the closing bid price on the five trading days
immediately proceeding the date(s) of conversion. Interest is payable in
cash or Common Stock, based on conversion formula stated above, at Mark's
option. Mark is obligated to keep the registration statement (the
"Registration Statement"), of which this Prospectus forms a part, effective
until January 20, 1999.
All of the shares of Common Stock offered hereby (the "Shares") are
being sold for the account of and by the person(s) named under the caption
"Selling Shareholders". Mark is bearing the cost related to the
Registration Statement. The Selling Shareholders have advised Mark that the
Shares may be sold by the Selling Shareholders or its pledgees, donees,
transferees or other successors in interest from time to time in the open
market or in privately negotiated transactions at prices satisfactory to
the seller. See "Plan of Distribution". Mark will receive no proceeds from
the sale of the Shares.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. See "Risk
Factors".
The Common Stock is traded on NASDAQ Small Cap Market under the symbol
"MCSI". On August 8, 1997, the closing sales price of the Common Stock was
$ 2-7/16 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is August 8, 1997.
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No person is authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if
given or made, such information or representations should not be relied
upon as having been authorized. This Prospectus does not constitute an
offer to sell, or solicitation of an offer to purchase, the securities
offered by this Prospectus, in any jurisdiction to or from any person to
whom or from whom it is unlawful to make such offer or solicitation of an
offer in such jurisdiction. Neither the delivery of this Prospectus nor any
distribution of the securities being offered pursuant to this Prospectus
shall, under any circumstances, create an implication that there has been
no change in the information set forth herein since the date of this
Prospectus.
AVAILABLE INFORMATION
Mark has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto the "Registration
Statement") under the Securities Act with respect to the Common Stock
offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement. For such information, reference is made to the
Registration Statement and the exhibits thereto. Mark is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith Mark files
reports and other information with the Commission.
The Registration Statement, reports and other information filed by
Mark with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, 1401
Brickell Avenue, Suite 200, Miami, Florida 33131, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, 1801 California Street, Suite 4800,
Denver Colorado 80202 and 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036. Copies of such material also can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates. In addition, the Commission maintains an internet site
(http:// www.sec.gov) that contains reports, proxy statements and other
information regarding Mark, which is an electronic filer under Regulation
S-T.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Mark (Commission File No.
0-17118) with the Commission pursuant to the Exchange Act are incorporated
and made a part of this Prospectus by reference:
(1) Mark's Annual Report on Form 10-K for the year ended June 30,
1996, as amended;
(2) Mark's Quarterly Report on Form 10-Q for the period ended
September 30, 1996;
(3) Mark's Quarterly Report on Form 10-Q for the period ended
December 31, 1996, as amended;
(4) Mark's Quarterly Report on Form 10-Q for the period ended
March 31, 1997, as amended;
(5) Mark's Current Report on Form 8-K dated May 28, 1996 as
amended;
(6) The description of the Common Stock contained in the Registration
Statement on Form 8-A.
All documents filed by Mark pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering contemplated by his Prospectus
shall be deemed to be incorporated by reference into this Prospectus and to
be a part hereof from the date of filing such documents. Any statements
contained herein or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed documents which also is or is deemed to be
incorporated by reference herein modified or supersedes such earlier
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
Mark undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered,
on written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated by
reference in the Prospectus, other than exhibits to such documents (unless
such documents are specifically incorporated by reference in such
documents). Requests for such copies should be directed to Ms. Cheryl
Gomes, Mark Solutions, Inc., 1515 Broad Street, Bloomfield, New Jersey
07003, Telephone Number (201) 893-0500.
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TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . 5
Summary Selected Financial Data . . . . . . . . . . . . . 6
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . 7
Selling Shareholders . . . . . . . . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . 12
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THE COMPANY
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 housing of the general prison population as
well as for use as infectious disease isolation units for correctional
institutions and health care facilities, (ii) a treatment booth for
communicable diseases and (iii) diagnostic support and archiving computer
systems marketed under the name "IntraScan". In its marketing of modular
steel products, Mark responds to public bids and pursues joint ventures and
affiliations with other companies to solicit design, build and/or operate
correctional facilities projects both domestically and internationally.
Mark's modular cells meet or exceed all applicable building and safety
code requirements in the United States and can be manufactured and
installed more efficiently than traditional housing alternatives by virtue
of lower labor and construction costs and shorter installation time.
Management also believes that its prefabricated modular cell manufacturing
process has other applications such as temporary emergency housing and
permanent shelters, although no assurances can be given that such
applications will be successfully developed and marketed.
Management believes that continued nationwide judicial and legislative
emphasis on an expedient easing of the overcrowding conditions of
correctional institutions, as well as the increase in the demand for
isolation and treatment quarters for both correctional institutions and
healthcare facilities, due to the rise in communicable diseases such as
tuberculosis and the HIV virus, present a significant growth opportunity
for Mark. However, there can be no assurance that any such business will
develop.
Mark was incorporated under the laws of the State of Delaware on
September 29, 1986 under the name "Showcase Cosmetics, Inc." Mark's
principal executive office is located at Parkway Technical Center, 1515
Broad Street, Bloomfield, New Jersey 07003 and its telephone number is
(201) 893-0500.
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SUMMARY SELECTED FINANCIAL DATA
The following summary selected financial data is based upon financial
information incorporated herein and such summary information should be read
in conjunction with such financial statements and notes thereto.
<TABLE>
<CAPTION>
Income Statement Data:
Nine Months Ended
March 31 Fiscal Years Ended June 30
----------------------------- ---------------------------
1997 1996 1996 1995 1994
----------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,276,578 $ 3,206,371 $ 3,454,615 $ 6,125,573 $ 3,183,073
Cost and Expenses 5,564,803 8,518,483 8,518,483 9,852,303 6,233,374
(Loss) From Continuing
Operations (2,998,801) (3,306,705) (5,110,559) (3,812,635) (3,144,510)
(Loss) from Discontinued
Operations -- (104,503) (104,503) 1,377,436) (993,620)
Net Income (Loss) (2,998,801) (3,411,208) (5,215,062) (5,190,073) (4,138,130)
Earnings (Loss) per Share ($.21) ($.27) ($.41) ($.48) ($.47)
Weighted Average
Shares Outstanding 13,974,665 12,500,250 12,732,022 10,726,204 8,802,543
Balance Sheet Data:
</TABLE>
<TABLE>
<CAPTION>
At June 30
At March 31 ----------
1997 1996 1995 1994
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<S> <C> <C> <C> <C>
Working Capital (Deficit) $ 1,362,231 $ 675,864 ($ 48,112) $ 216,635
Total Assets 4,839,033 3,083,763 3,978,383 4,953,651
Long-term Obligations 1,739,343 50,297 19,665 8,313
Total Liabilities 3,787,126 1,004,362 2,189,322 918,006
Stockholders' Equity 1,051,907 2,079,401 1,789,061 4,035,645
</TABLE>
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RISK FACTORS
Prospective investors in the Common Stock should give careful
consideration to the following risks in making a decision concerning the
securities offered hereby.
1. Poor Financial Condition. Mark has experienced significant
operating losses and working capital and liquidity deficiencies over the
past several years. Mark had net losses of $ 5,215,062 and $ 5,190,073 for
the fiscal years ended June 30, 1996 and 1995. In addition, Mark had an
accumulated deficit of $ 22,316,660 at June 30, 1996. Mark has and will
continue to experience such financial difficulties in the foreseeable
future absent significant increases in the sale of modular cells, its
principal product. Accordingly, based on past operating results there can
be no assurance that Mark will be able to operate profitably. Mark's poor
financial condition could adversely effect its ability to raise additional
working capital pursuant to private sales of its securities.
2. Limited Market; Contracts for Modular Cells. Mark has derived
substantially all of its revenue from the sale of its modular cells and
disease containment units to correctional institutions and management
believes that the sale of these products will continue to represent the
substantial majority of Mark's operating revenues through December 31,
1997. The correctional institution market presents substantial sales
obstacles. Unless the project is very small, correctional institutions,
like other government agencies, must submit proposed projects to public
bidding by prospective suppliers. The purchasing agency is obligated to
select from among the bidders based on objective criteria. On the other
hand, private purchasers generally do not require bidding and a vendor such
as Mark would have the opportunity to convince the purchaser to deal with
Mark to the exclusion of competitors.
Mark continually bids on and solicits joint venture opportunities
regarding construction projects utilizing its modular steel cell products.
At present, Mark is not participating in any projects under a joint venture
format. Mark currently has contracts for it modular cells aggregating
approximately $ 4,300,000 in revenue for the period beginning January 1,
1997 to August 31, 1997.
3. Working Capital Requirements. The ultimate success of
Mark may depend upon its ability to raise additional equity or
obtain debt financing until it can improve its operating results.
To date Mark has primarily met its working capital requirements by
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the private issuance of its securities, including the Debentures. Absent
proceeds from the exercise of outstanding warrants and improvement in the
operations of Mark, management believes that its present available working
capital will be utilized by July 31, 1997. In the event Mark must seek
other sources of working capital, it will most likely have to rely on
additional private sales of its equity or debt securities. While Mark has
been successful in raising working capital through private sources in the
past, no assurance can be given that such sources will be available, or, if
available, on terms satisfactory to Mark. Mark will initially look to the
exercise of outstanding warrants to the extent that additional working
capital is necessary.
4. Significant Contract. Effective March 15, 1996, Mark received a
three-year contract for modular cells from the State of New York.
Management anticipates that this contract will generate revenues of
approximately $ 50,000,000 over the three years ending December 31, 1999,
which would represent Mark's largest contract to date. The agreement has a
stated estimate of 2,455 cells, however no minimum volume is guaranteed. In
addition, 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. Accordingly, no assurances can be given that Mark will
realize the revenues estimated by management.
5. Competition. The construction industry in general and the
government 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 efforts to convince the purchasing agency to
utilize steel cell construction rather than traditional methods. With
respect to those projects which incorporate modular steel cell
specifications in its design criteria, other companies are beginning to
enter the field. Some of these companies 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 enter the modular cell business in
competition with Mark. Accordingly, there can be no assurance that Mark
will be able to successfully compete in the market for modular steel cells,
which are Mark's most significant product.
6. Dependence on Key Person. Mark is dependent upon the
continued services of Carl C. Coppola, its Chairman of the Board,
President and Chief Executive Officer. The loss of Mr. Coppola
could have a material adverse effect on Mark. Mark is the
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beneficiary of a term life insurance policy of $1,000,000 on the
life of Mr. Coppola.
7. Bonding Qualifications. 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. 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 have a material adverse effect on
the operations of Mark.
8. Recent Trading Prices; Nasdaq Listing Maintenance Requirements.
From February 27, 1997 to June 20, 1997, Mark's Common Stock traded below $
2.00 per share, including trades at below $ 1.00 per share. On August 8,
1997 the closing sales price of the Common Stock was $ 2-7/16 per share.
Mark's Common Stock trades on the Nasdaq Small Cap Market tier of the
Nasdaq Stock Market. To be eligible for continued listing of its Common
Stock, Mark is required to maintain a bid price of $ 1.00 per share. If
Mark fails to maintain its Nasdaq Small Cap Market listing, the liquidity
of the Common Stock would be adversely affected. In addition, Mark's
ability to raise additional working capital through sales of its equity
securities would also be adversely affected.
9. Potential Application of Exchange Act "Penny Stock" Rules. In the
event Mark fails to maintain its Nasdaq Small Cap Market listing due to the
failure to meet the minimum bid price requirements, Mark's Common Stock
could be a "penny stock" as that term is defined in the Exchange Act.
Brokers effecting transactions in a "penny stock" are subject to additional
customer disclosure and record keeping obligations including disclosure of
the risks associated with low price stocks, stock quote information and
broker compensation. In addition, brokers effecting transactions in a
"penny stock" are also subject to addition sales practice requirements
under Rule 15g-9 of the Exchange Act including making inquiries into the
suitability of "penny stock" investments for each customer or obtaining a
prior written agreement for the specific "penny stock" purchase. Because of
these additional obligations, certain brokers will not effect transactions
in "penny stocks", which could have an adverse effect on the liquidity of
the security and make selling it more difficult.
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10. Impact of Conversion Price of Debentures on Trading Prices of
Common Stock. Due to the right of the holder to convert the Debentures into
shares of Common Stock at the discounted rate of 80% of the current bid
price on the date of conversion, rises in the trading price of the Common
Stock may met resistance due to the potential sale of the underlying Common
Stock which reflect the reduced purchase price resulting from the
conversion rate. In June 1997 Mark issued additional convertible debentures
in the principal amount of $ 1,950,000 which may be converted into shares
of Common Stock at $ .80 per share. These debentures may similarly affect
the trading price of the Common Stock.
11. Subcontractor Credit Risk. Mark's manufacturing operations are
limited to the steel modular cell for use as one component of correctional
institution projects. Therefore, Mark may not be the prime contractor on a
project, but a subcontractor. Under these circumstances, Mark usually will
not have the direct financial obligation of the government agency or other
purchaser, but will be primarily relying on the prime contractor regarding
payment for its products. This presents a greater credit risk to Mark.
12. Related Party Transactions. Mark has been a party to business
transactions with certain officers, Directors or their affiliates. Mark
intends to purchase goods and services in the ordinary course of business
from related parties and may determine based upon circumstances at that
time to engage in additional transactions with officers, Directors,
principal shareholders or affiliates. While Mark believes these
transactions have been on terms no less favorable than could be obtained
from unaffiliated parties, such situations present potential conflicts of
interest.
13. No Dividends. Mark has never paid a cash dividend on its
Common Stock. Mark does not intend to pay in the foreseeable
future, cash dividends on the Common Stock but intends to retain
its earnings to finance growth.
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SELLING SHAREHOLDERS
The 600,000 shares of Common Stock offered hereby are being offered
for the account of the following person(s). The information regarding such
person(s) and beneficial ownership of Common Stock has been provided by the
Selling Shareholders.
<TABLE>
<CAPTION>
Shares of
Shares of Common Stock
Common Stock Shares of Owned After
Beneficially Common Stock Offering/% of
Name Owned(1)(2) Offered Outstanding Shares(1)(2)
- ---- ------------ ------------ ------------------------
<S> <C> <C> <C>
Frank Brosens 623,941 352,941 271,000/1.8%
</TABLE>
(1) Assumes payment of interest on Debentures in cash and conversion of the
entire principal amount of Debentures at the maximum conversion price
of $ 2.125 per share.
(2) Excludes 143,333 shares of Common Stock purchasable upon exercise of
additional outstanding convertible debt.
PLAN OF DISTRIBUTION
The sale of shares of Common Stock by the Selling Shareholders may be
effected from time to time in transactions on one or more exchanges or in
the over-the-counter market, or otherwise in negotiated transactions,
through the timing of options on the shares or through a combination of
such methods of sale, at fixed prices, which may be charged at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling Shareholders may effect
such transactions by selling the shares of Common Stock in an exchange
distribution in accordance with the rules of such exchange to or through
broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the shares of Common Stock for which such
broker-dealer may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary compensation). The Selling Shareholders and any broker-dealers
who act in connection with the sale of the shares of Common Stock hereunder
may be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any commissions received by them and profit on any
sale of the shares of Common Stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
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In addition any securities covered by the Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant
to the Prospectus, as supplemented. From time to time the Selling
Shareholders may engage in short sales, short sales against the box, puts
and calls and other transactions in securities of Mark or derivatives
thereof, and may sell and deliver the shares in connection therewith.
From time to time Selling Shareholders may pledge their shares
pursuant to the margin provisions of their respective customer agreements
with their respective brokers. Upon a default by a Selling Shareholder, the
broker may offer and sell the pledged shares of the Common Stock from time
to time.
LEGAL MATTERS
Timothy J. McCartney, Esq. has acted as counsel for Mark and
has rendered an opinion on the validity of the shares of Common
Stock to be issued upon conversion of the Debentures.
EXPERTS
Mark's consolidated balance sheets as of June 30, 1996 and 1995 and
the consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1996
incorporated by reference in this Prospectus, have been incorporated herein
in reliance on the report of Sax Macy Fromm & Co., P.C., independent
certified public accountants, given on the authority of that firm as
experts in accounting and auditing.
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