Prospectus
MARK SOLUTIONS, INC.
1,062,500 Shares of Common Stock
Mark Solutions, Inc. sells modular steel cells for correctional institution
construction and develops software applications under the name "IntraScan II"
for medical diagnostic, picture archiving and communication computer systems
(PACS).
This prospectus relates to the sale of:
o Up to 343,750 shares of common stock, $.01 par value, which may be issued
upon the conversion of Series D preferred stock, $10.00 par value issued
in October 1999 and the payment of dividends on the Series D preferred
stock;
o 562,500 shares of common stock issuable in connection with the previous
conversion of debentures;
o 115,000 shares issued in connection with the settlement of
litigation; and
o 41,250 shares issued in connection with the exercise of warrants.
This prospectus is part of a registration statement filed with the
Securities and Exchange Commission and may only be used for the resale of the
shares. Mark is obligated to keep the registration statement effective until
November 1, 2001.
All of the shares may be sold by the person(s) listed in the Section
"Selling Shareholders" or by their transferees from time to time in the open
market or in privately negotiated transactions at prices acceptable to the
seller. See "Plan of Distribution".
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. You should carefully
consider the "Risk Factors" beginning on page 5 when determining whether to
purchase any of the shares.
The common stock is traded on the Nasdaq SmallCap Market under the symbol
"MSOL". On January 26, 2000, the closing sales price of the common stock was
$6.375 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISSAPPROVED OF THESE SECURITIES OR PASSED ON 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 January 26, 2000.
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You should only rely on the information contained or incorporated by reference
in this prospectus. No one has been authorized to provide you with additional or
different information.
The shares are not being offered in any jurisdiction where an offer is not
permitted.
You should not assume the information in this prospectus or any supplement is
accurate as of any date other than the date of the document regardless of when
it is delivered. We are obligated to keep the information current through
supplements or other filings incorporated by reference.
TABLE OF CONTENTS
Page
----
Summary . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . 3
Recent Developments . . . . . . . . . . . . . . . . 3
Summary Selected Financial Data . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . 5
Series D Preferred Stock . . . . . . . . . . . . . . . . 9
Selling Shareholders . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . 12
Forward Looking Statements . . . . . . . . . . . . . . . 12
Where You Can Find More Information . . . . . . . . . . . 13
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SUMMARY
This summary does not contain all the information provided by this
prospectus, some of which may be important to you. You should carefully read the
entire prospectus and incorporated documents before you decide to buy any
shares.
THE COMPANY
Mark designs, manufactures and installs modular steel cells for
correctional institution construction and develops software application under
the name "IntraScan II" for medical diagnostic, picture, archiving and
communication computer systems (PACS).
Mark markets its modular steel products through public bids and by pursuing
joint ventures and affiliations with other companies to solicit design, build
and/or operate correctional facilities projects both domestically and
internationally. Management believes that nationwide emphasis on easing
overcrowded conditions in correctional institutions presents a significant
growth opportunity; however, there can be no assurance of sustained business.
Mark's modular cells can be manufactured and installed more efficiently
than traditional housing alternatives by virtue of lower labor and construction
costs and shorter installation time.
Mark markets its IntraScan PACS software to radiology departments, large
healthcare facilities, hospitals and outpatient imaging group practices,
primarily through a marketing agreement with Data General Corporation.
Management believes that it can capitalize on the development of the domestic
and international PACS market; however, there can be no assurance that
significant business will develop.
The IntraScan PACS software interfaces with medical imaging devices to
store and recall images digitally from modalities including x-ray, CAT Scan,
MRI, ultrasound, computed radiography and nuclear medicine. The IntraScan PACS
software is "platform independent" allowing the software to operate with most
computer hardware and operating systems.
Mark is a Delaware corporation formed in 1986 under the name "Showcase
Cosmetics, Inc.". Mark's principal executive offices are located at 1515 Broad
Street, Bloomfield, New Jersey 07003 and its phone number is (973) 893-0500.
RECENT DEVELOPMENTS
On January 6, 2000, Mark announced a $145,000 purchase order for IntraScan
PACS software for a South Korea installation. Mark also expects additional
revenues of $355,000 for providing installation, training and support services
for this installation over the next several months.
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SUMMARY SELECTED FINANCIAL DATA
The following summary selected financial data is based upon financial
information appearing elsewhere herein and such summary information should be
read in conjunction with such financial statements and notes thereto.
Income Statement Data:
(in thousands, except share and per share data)
Three Months Ended
September 30 Fiscal Years Ended June 30
------------------- --------------------------------
1999 1998 1999 1998 1997
------------------- --------------------------------
Revenues $3,997 $ 689 $10,226 $ 12,922 $ 6,450
Cost and Expenses 3,835 1,153 12,695 14,913 10,192
Operating Income (Loss) 163 (464) (2,469) (1,991) (3,742)
Net Other(Expenses) (30) (38) (241) (397) (1,697)
Income Tax Benefit --- --- 1,000 --- ---
Net Income (Loss) 133 (502) (1,710) (2,388) (5,439)
Earnings (Loss)Per Share $.02 ($.10) ($.36) ($.58) ($1.53)
Fully Diluted Income
(Loss) Per Share $.02 ($.10) ($.36) ($.58) ($1.53)
Weighted Average Shares
Outstanding 5,535,999 4,820,419 4,945,257 4,145,101 3,555,402
Weighted Average Fully
Diluted Shares
Outstanding 6,498,742 4,820,419 4,945,257 4,145,101 3,555,402
Balance Sheet Data:
(in thousands, except share and per share data)
Three Months
Ended
September 30 Fiscal Years Ended June 30
------------------- --------------------------------
1999 1999 1998 1997
------------------- --------------------------------
Working Capital $ 1,464 $ 1,032 $ 3,077 $ 923
Total Assets 8,444 9,070 5,174 5,432
Current Liabilities 4,663 5,832 999 3,245
Other Liabilities 561 505 1,060 2,340
Temporary Stockholders Equity --- --- 1,220 ---
Stockholders' Equity
(Deficiency) 3,220 2,733 1,895 (153)
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RISK FACTORS
Before you make a decision to purchase any of the shares, you should
carefully read and consider the following risks.
Risks Associated With Operations
1. Mark Has and Will Continue to Experience Significant Operating Losses
Unless Sales of its Modular Cells and IntraScan PACS Software Significantly
Increase. Mark has significant operating losses and working capital and
liquidity deficiencies over the past several years. Mark had net losses of
$1,710,000 and $2,388,099 for the fiscal years ended June 30, 1999 and 1998. In
addition, Mark had an accumulated deficit of $31,917,000 at June 30, 1999. If
operating results do not improve significantly, the value of the common stock
would decrease and Mark's ability to raise additional working capital through
private placements of its securities would be negatively affected. Based on past
operating results there can be no assurance that Mark will be able to operate
profitably.
2. Mark Will Have to Sell Additional Securities to Meet its Working Capital
Requirements Unless Sales Significantly Increase. Mark's ultimate success may
depend upon its ability to raise additional working capital by selling equity
securities or obtaining debt financing until its operating results improve. The
sale of additional securities, if available at all, would result in dilution to
the holders of common stock. Mark has primarily met its working capital
requirements through private placements of its securities. Management believes
that its available working capital from existing contracts and from anticipated
contracts will be utilized by June 30, 2000. If Mark needs additional working
capital from sources other than its operations, it will most likely attempt to
privately sell additional equity or debt securities.
3. Mark Has Been Dependent on Sales of Modular Cells For the Majority of
its Revenues and This Market is Subject to Significant Fluctuations. The
substantial majority of Mark's revenues have been from the sale of a single
product, modular steel cells, including 83% for the fiscal year ended June 30,
1999. This market is subject to significant fluctuations resulting from
budgeting plans, lengthy approval process and other variables common with
construction of correctional facilities by Federal, State and local government
agencies. Management believes that modular steel cells will continue to
represent the majority of Mark's operating revenues for the next two fiscal
years.
4. Mark Has Had Limited Sales of IntraScan PACS Software. For the three
fiscal years ended June 30, 1999, Mark's IntraScan PACS software revenues
totaled $2,103,000 and this business segment had an operating loss of $598,000
for the fiscal year ended June 30, 1999. Absent significant increases in sales
this business segment will continue to have a negative impact on Mark's results
of operation and cash flows. There can be no assurance that Mark will establish
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a material market share and operate its IntraScan business profitably.
5. Bonding Qualification May Limit Mark's Modular Cell Bidding Activity.
Many government construction projects require vendors like Mark to provide
performance and completion bonds as a condition to participation in a
correctional facility bid. Due to Mark's financial condition, it has generally
been unable to obtain bonds without the assistance and guarantee of its
president. 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.
6. Mark Competes In Two Industries Which Are Highly Competitive- Government
Construction and Computer Software. Due to the use of concrete and other
traditional construction methods in the substantial majority (approximately 90%)
of correctional facilities construction, Mark competes for market share with a
number of major national and regional construction companies in its efforts to
convince the government agency to design the project utilizing steel cells
rather than traditional methods. With respect to those projects which
incorporate modular steel cells in its design criteria, Mark competes against
other regional metal fabricators, some of which have greater financial resources
than Mark. In addition, other sheet metal manufacturers which have greater
financial and marketing resources than Mark could enter the modular cell
business. Accordingly, there can be no assurance that Mark will be able to
successfully compete in the market for modular cells.
With regard to the IntraScan PACS software, other companies, including
several established film and medical equipment manufacturers, which are larger
and better financed than Mark, offer PACS systems and the related software. As
the PACS market develops, other large medical equipment, computer hardware or
software companies could enter the PACS business. Accordingly, there can be no
assurance that Mark will be able to successfully compete in the PACS market.
7. Rapid Technological Change in the Software Industry Could Make the
IntraScan PACS Software Obsolete Unless Mark Continues To Undertake Product
Development. The application software industry is subject to rapid technological
and industry standard changes that can quickly make existing products less
desirable or obsolete. Consequently, Mark is required to continually develop,
update and enhance its IntraScan PACS software applications to keep pace with
industry changes and to respond to the changing needs of customers. These
efforts require substantial capital investments. While Mark intends to allocate
the necessary resources to the extent available, there can be no assurance that
Mark will not experience difficulties in product development or that other
companies will not develop software applications which will achieve greater
acceptance in the PACS market.
8. Significant Contracts. For the fiscal year ended June 30, 1999,
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$7,127,500 (69.7%) of Mark's revenue was attributable to three modular steel
cell projects. In addition, one of these projects is expected to represent
$2,600,000 in revenue for fiscal 2000.
9. Mark Has Entered Into Related Party Transactions Which Raise Potential
Conflicts of Interests. 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.
10. Mark is Dependent on Carl Coppola. Mark is dependent upon the continued
services of Carl 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 beneficiary of a term life insurance policy of $1,000,000
on the life of Mr. Coppola.
Risks Associated With Capital Stock
11. The Discounted Conversion Price of Preferred Stock and Adjustment
Provisions of Previously Converted Debentures Could Have a Negative Impact on
the Trading Price of Common Stock. Mark currently has outstanding 20,000 shares
of Series D preferred stock which are convertible into shares of common stock at
a 30% discount to the market price at the time of conversion. As a result:
o Conversions of the preferred stock and subsequent sales of the common
stock may cause a downward trend in the trading price of the common stock
if the interest to buy the common stock by investors is weak.
o The lower the stock price at the time of conversion the more shares the
holder will receive which creates greater dilution to holders of common
stock.
o If the sale of the shares of common stock received through the partial
conversions of the preferred stock causes a decrease in the trading price
of the common stock, subsequent conversions would result in the issuance
of a greater number of shares.
o Any significant downward pressure on the trading price of the common
stock caused by the conversion and sales by the holders of the preferred
stock may encourage short sales by the holders and others causing further
pressure on the trading price.
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In June 1998 a holder converted debentures in the principal amount of
$750,000 provided Mark agree to issue additional shares of common stock to the
extent the trading price falls below $1.25 on January 31, 2000. This adjustment
provision may similarly affect the trading price of the common stock.
Based on the closing bid price of Mark's common stock on January 26, 2000
of $6.375, 607,317 shares of common stock are issuable on conversion of the
outstanding preferred stock and as a result of the debenture adjustment. Because
the conversion of the preferred stock is dependent on the price of the common
stock at future dates, the actual number of shares of common stock which will be
issued in undeterminable, and may exceed the assumed number given above.
12. Liquidity of the Common Stock Depends on Maintaining Nasdaq Listing;
Recent Trading Prices. Mark's common stock trades on the Nasdaq SmallCap Market.
To be eligible for continued listing of its common stock, Mark is required to
maintain, among other things:
o a minimum bid price of $1.00 per share.
o minimum net tangible assets of $2,000,000 or a market
capitalization of $35 million.
If Mark does not maintain its Nasdaq SmallCap 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. In response to the low trading price of its common
stock, Mark effected a 1 for 4 reverse stock split in June 1999 to meet Nasdaq's
minimum bid requirement.
13. No Dividends For The Foreseeable Future. 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 any earnings to
finance growth.
14. Mark's Authorized and Unissued Preferred Stock May Make a Takeover More
Difficult. Mark's Board of Directors have the authority to issue up to 4,705,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions including voting rights, of those shares without any
further vote or action by Mark's shareholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by the rights of
the holders of any preferred stock that may be issued. The issuance of preferred
stock, while providing flexibility for possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of Mark.
Mark has no present plans to issue additional shares of preferred stock.
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SERIES D PREFERRED STOCK
A portion of the common stock being offered under this prospectus are
issuable upon the conversion of 20,000 shares of Series D preferred stock
purchased for $200,000 in a private placement. As of January 26, 2000, all of
the Series D preferred stock remained issued and outstanding.
The principal terms of the Series D preferred stock are:
Conversion Rights. Each share of preferred stock is convertible, at the
option of the holder, into shares of common stock. The number of shares of
Common Stock issuable is calculated by multiplying the number of shares of
preferred stock being converted by $10.00 and dividing by 70% of the average per
share closing bid price of the common stock for the five trading days
immediately preceding the conversion date(s).
Voting Rights. Except as otherwise required by law, the holders of the
preferred stock have no voting rights.
Dividends. Each share of preferred stock receives a quarterly dividend with
an annual rate of $1.00 per share. The dividends on the preferred stock are
payable in cash or common stock, at the option of Mark.
Redemption Rights. Mark is not obligated to redeem the preferred stock. In
the event the preferred stock is not converted into common stock, Mark may, at
its option, redeem all or a portion of the preferred stock at any time after
September 30, 2000 at $10.00 per share plus accrued dividends.
Liquidation Rights. In the event of any liquidation, the holders of the
preferred stock will share equally in any balance of Mark's assets available for
distribution to them up to $10.00 per share plus unpaid dividends, after
satisfaction of creditors and the holders of Mark's senior securities, if any.
Anti-dilution Provisions. The preferred stock contains anti-dilution
provisions in the event of stock dividends, stock splits, reverse stock splits
and similar transactions.
Restriction on Acquiring in Excess of Five (5%) of the Outstanding Common
Stock. Each holder of the preferred stock is prohibited from acquiring the
beneficial ownership of over five (5%) percent of Mark's common stock through
the conversion of the preferred stock or otherwise.
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Impact of Conversion Price of the Preferred Stock. The conversion price of the
preferred stock is variable based on the current price of Mark's common stock at
the time of conversion. Because of the discount to the current market price of
the common stock, sales of the shares of common stock underlying the preferred
stock may cause a downward trend in the trading price of the common stock until
such shares are sold if the interest to buy the common stock by investors is
weak. The Selling Shareholders are not prohibited from taking or maintaining a
short position in the common stock.
SELLING SHAREHOLDERS
The up to 1,062,500 shares of common stock offered hereby are being offered
for the account of the following person(s). Mark will receive no proceeds from
the sale of the shares. Mark is bearing all costs (except for commissions)
related to the registration statement. The information regarding such person(s)
and beneficial ownership of common stock has been provided by the Selling
Shareholders.
Shares of Shares of Shares Shares of
Common Stock Common Stock of Common Common Stock
Underlying D Beneficially Stock Beneficially Owned
Name Preferred Stock Owned Offered After Offering
- --------------- ---------------------------------------------------------------
Frank Brosens 44,817(1) 562,500(2) 607,317 0
Demien Construction
Company 0 115,000 115,000 0
Global Consultants of
Colorado, Inc. 0 41,250 41,250 0
(1) Assumes dividends paid in cash. Based on a conversion rate of 70% of the
closing sale price of $6.375 on January 26, 2000.
(2) Represents 562,500 shares of Common Stock issuable subject to owner being
prohibited from beneficially owning in excess of five (5%) of Mark's
Common Stock.
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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.
In addition any securities covered by the prospectus which qualify 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.
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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 sold pursuant to
this prospectus.
EXPERTS
Mark's consolidated balance sheet as of June 30, 1998 and 1999 and the
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for the years ended June 30, 1998 and 1999 incorporated into this
Prospectus, have been included in reliance on the report of Holtz Rubenstein &
Co., LLP, independent certified public accountants, given on the authority of
that firm as experts in accounting and auditing.
Mark's consolidated statement of operations, stockholders' equity and cash
flows for the year ended June 30, 1997 incorporated into this Prospectus, have
been included 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.
FORWARD LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in the
prospectus contain forward-looking statements within the of the Private
Securities Litigation Reform Act of 1995. These statements are made on current
plans and expectation 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 modular steel
cell projects and PACS projects are awarded to Mark and the timing of project
completion, meeting current an future financial requirements, competition and
changes in PACS technology. You are cautioned not place undue reliance on these
forward-looking statements, which speak only as of the date on which they were
made.
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WHERE YOU CAN FIND MORE INFORMATION
Registration Statement and SEC Filing. This prospectus is part of a
registration statement filed with the SEC and omits certain information
contained in that registration statement. Mark also files annual, quarterly,
special reports and other information with the SEC. You may read and copy any
document that Mark files at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
information on the operations of its Public Reference Rooms. In addition, the
SEC maintains an Internet site (http:// www.sec.gov) where Mark's SEC filings
are available free of charge.
Mark's Web Site. Mark maintains its own Internet site
(www.mark-solutions.com), which contains other information about Mark.
Information Incorporated by Reference. Mark is permitted to incorporate by
reference into this prospectus information and reports that are filed with the
SEC. The following documents filed by Mark (Commission File No. 0-17118) 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, 1999.
(2) Mark's definitive proxy statement for its Annual Shareholders Meeting
to be held on December 17, 1999. Mark's Annual Report on Form 10-K for
the year ended June 30, 1999.
(3) Mark's Quarterly Report on Form 10-Q for the period ended September 30,1999.
Mark's Quarterly Report on Form 10-Q for the period ended September 30,1999.
(4) Mark's Current Report on Form 8-K for the event date of December 16, 1999.
(5) The description of the common stock contained in the Registration
Statement on Form S-1 (File No. 333-62513) declared effective on
December 31, 1999.
In addition, all documents subsequently filed by Mark under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 and prior to the
termination of the offering of shares are deemed to be incorporated by reference
into and made a part of this prospectus from the date of filing. Information
contained in these subsequent filings automatically modifies or supersedes
previously filed information, including information contained in this
prospectus.
You may obtain free copies of these filings. Requests for copies should be
directed to Ms. Cheryl Gomes, Mark Solutions, Inc. 1515 Broad Street,
Bloomfield, New Jersey 07003, Telephone Number (973) 893-0500.
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