Prospectus
MARK SOLUTIONS, INC.
6,500,000 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 6,500,000 shares of common stock, $.01 par value, which may be
issued upon the conversion of a $2,000,000 principal amount convertible
note due April 13, 2002 and the payment of interest on the convertible
note.
o 448,932 shares of common stock issuable upon 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
April 13, 2005.
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 November 17, 2000, the closing sales price of the common stock
was $0.375 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------------------------
The date of this Prospectus is December 22, 2000.
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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 diag nostic, 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.
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.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
(in thousands, except share and per share data)
Three Months Ended
September 30 Fiscal Years Ended June 30
---------------------------- -------------------------------------------
------------ -- ------------ ------------- ------------- ------------
2000 1999 2000 1999 1998
------------ -- ------------ ------------- ------------- ------------
------------ -- ------------ ------------- ------------- ------------
Revenues $1,062 $ 3,997 $13,724 $10,226 $ 12,922
Cost and Expenses 1,919 3,833 18,131 12,695 14,913
Operating Income (Loss) (857) (164) ($4,407) (2,469) (1,991)
Net Other Income
(Expenses) (32) (30) (154) (241) (397)
Income Tax Benefit --- --- 173 1,000 ---
Net Income (Loss) (889) (134) (4,388) (1,710) (2,388)
Earnings (Loss)Per Share ($.12) ($.02) ($.72) ($.36) ($.58)
Fully Diluted Income (Loss)
Per Share ($.12) ($.02) ($.72) ($.36) ($.58)
Weighted Average Shares
Outstanding 7,297,895 5,553,999 6,112,534 4,945,257 4,145,101
Weighted Average Fully
Diluted Shares
Outstanding 7,297,895 6,498,742 6,112,534 4,945,257 4,145,101
Balance Sheet Data:
(in thousands, except share and per share data)
At
September 30 At June 30
--------------------- -----------------------------------------------
--------------------- ----------------------------- --- -------------
2000 2000 1999 1998
--------------------- ------------ ----------------- ------------
Working Capital $ 672 $1,372 $ 1,032 $ 3,077
Total Assets 5,085 6,329 9,070 5,174
Current Liabilities 2,959 3,379 5,832 999
Other Liabilities 2,090 2,094 505 1,060
Temporary Stockholders Equity --- ---- --- 1,220
Stockholders' Equity
36 856 2,733 1,895
</TABLE>
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 Experienced and Will Continue to Experience Significant Operating
Losses Unless Sales of its Modular Cells and IntraScan PACS Software
Significantly Increase.
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We have incurred significant operating losses and working capital and liquidity
deficiencies over the past several years. We had net losses of $4,388,000 and
$1,710,000 for the fiscal years ended June 30, 2000 and 1999. In addition, we
had an accumulated deficit of $37,194,000 at Spetember 30, 2000. Because of the
poor operating results, we are considering divesting ourselves of the jail cell
manufacturing operation in order to concentrate our efforts and resources on the
Mark Care Medical systems operations. However, there can be no assurance that we
will be able to locate a buyer or, even if we do, that we will be able to sell
the jail cell manufacturing operation on terms favorable to it.
2. Ability to Continue as a Going Concern. For the fiscal year ended June 30,
2000, our auditors rendered a qualified opinion expressing uncertainty as to our
ability to continue as a going concern in light of our recurring losses from
operations. Unless we are able to increase revenue and operate at a profit, we
may not be able to contiue in business.
3. Mark Will Have to Sell Additional Securities to Meet its Working
Capital Requirements Unless Sales Significantly Increase. Our ultimate
success may depend upon our ability to raise additional working capital by
selling equity securities or obtaining debt financing until our operating
results improve. The sale of additional securities, if available at all, would
result in dilution to the holders of common stock. We have primarily met our
working capital requirements through private placements of its securities.
We believe that our available working capital from existing contracts
and from anticipated contracts will be utilized by December 31, 2000. If we need
additional working capital from sources other than from operations, we will most
likely attempt to privately sell additional equity or debt securities, and given
the present financial condition, there can be no assurances we will be
successful.
4. 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, which amounts to approximately 85% of our revenues, 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.
5. Mark Has Had Limited Sales of IntraScan PACS Software. For the three
fiscal years ended June 30, 1999, our IntraScan PACS software revenues
totaled $3,991,000 and this business segment had a pretax loss of $4,251,000
for the fiscal year ended June 30, 1999. Absent significant increases in sales,
this business segment will continue to have a negative impact on our results
of operation and cash flows. There can be no assurance that we will establish
a material market share and operate our IntraScan business profitably.
6. Bonding Qualification May Limit Mark's Modular Cell Bidding
Activity. Many government construction projects require vendors like us to
provide performance and completion bonds as a condition to participation in a
correctional facility bid. Due to our financial condition, we have generally
been unable to obtain bonds without the assistance and guarantee of our
president. We have not limited our bidding activity nor lost any projects due to
our limited bonding capacity. However, as we are is awarded multiple projects,
the inability to obtain bonds may limit the number of additional projects we can
pursue and have a material adverse effect on the operations of Mark.
7. 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, we compete for market share with a
number of major national and regional
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construction companies in our 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, we compete against other regional metal fabricators, some of which
have greater financial resources than we do. In addition, other sheet metal
manufacturers which have greater financial and marketing resources than we
could enter the modular cell business. Accordingly, there can be no assurance
that we 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 we are 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 we will be able to successfully compete in the PACS market.
8. 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, we are required to continually develop,
update and enhance our 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 we intend to allocate
the necessary resources to the extent available, there can be no assurance that
we 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.
9. Significant Contracts. For the fiscal year ended June 30, 1999, $10,636,000
(77.5%) of our revenues were attributable to three projects. As such, we must
generate additional contracts in order to remain viable.
10. Mark Has Entered Into Related Party Transactions Which Raise
Potential Conflicts of Interests. We have 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 we believe these transactions have been on terms no less favorable than
could be obtained from unaffiliated parties, such situations present potential
conflicts of interest.
11. Mark is Dependent on Carl Coppola. We are dependent upon the continued
services of Carl Coppola, our Chairman of the Board, President and Chief
Executive Officer. The loss of Mr. Coppola could have a material adverse effect
on Mark. We are the beneficiary of a term life insurance policy of $1,000,000
on the life of Mr. Coppola.
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Risks Associated With Capital Stock
12. The Adjustable Conversion Price of the Convertible Note and the
Discounted Conversion Price of Preferred Stock Could Have a Negative Impact on
the Trading Price of Common Stock. The convertible note covered by this
prospectus has a conversion price which is dependent on the trading price of the
common stock at the time of conversions. As a result:
o Conversions of the convertible note and the preferred stock and the
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 convertible note and 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
convertible note and preferred stock may encourage short sales by the
holders and others causing further pressure on the trading price.
Based on the closing bid price of Mark's common stock on November 17, 2000 of
$0.375, approximately 5,333,333 shares of common stock are issuable on
conversion of the convertible note. Because the conversion of the convertible
note is dependent on the price of the common stock at future dates, the actual
number of shares of common stock which will be issued is undeterminable, and may
exceed the assumed number given above.
13. Liquidity of the Common Stock Depends on Maintaining Nasdaq
Listing; Recent Trading Prices. Our common stock trades on the Nasdaq
SmallCap Market. To be eligible for continued listing of its common stock, we
are 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.
Our common stock has recently traded below the $1.00 range and currently we fail
to meet the required net tangible assets. If we do not maintain our Nasdaq
SmallCap Market listing, the liquidity of the common stock will be adversely
affected. In addition, our ability to raise additional working capital through
sales of our equity securities would also be adversely affected.
14. No Dividends for the Foreseeable Future. We have never paid a cash dividend
on our common stock. We do not intend to pay in the foreseeable future, cash
dividends on the common stock but intend to retain any earnings to finance
growth.
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15. Mark's Authorized and Unissued Preferred Stock May Make a Takeover More
Difficult. Our 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.
CONVERTIBLE NOTE
A portion of the common stock being offered under this prospectus is
issuable upon the conversion of a $2,000,000 two-year principal amount
convertible note and upon the exercise of warrants issued in an April 2000
private placement. As of November 17, 2000, the entire convertible note and the
warrants remain outstanding.
The principal terms of the securities issued are set forth below.
Convertible Notes
Principal Amount: $2,000,000
----------------
Term: Two years
Interest Rate: Seven (7%) percent per annum. The interest is payable in cash or
common stock, at our option.
Conversion Rights: Convertible at the average of the lowest closing price of
three (3) of the ten (10) day immediately preceding the conversion date(s). In
the event we effect a convertible securities financing while any portion of
the convertible notes are outstanding, the conversion price for the then
outstanding principal amount of the convertible note will be the conversion
price established in such financing.
Warrants
Shares Purchasable: 400,000 shares
Exercise Price: $5.00 per share provided, however, if we effect an equity
financing at less than $5.00 per share while any portion of the convertible note
remains outstanding, the exercise price shall be reduced to such per share
purchase price.
Term: Five Years expiring on April 13, 2005.
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Miscellaneous
Issuances over Twenty (20%) Percent of the Outstanding Common Stock
Pursuant to Private Placement. In order to satisfy applicable Nasdaq corporate
governance requirements, We are prohibited from issuing in excess of 20% or
1,462,973 shares of Common Stock under the private placement until we obtain
shareholder approval. Upon request of the investors, Mark is obligated to
present the matter to its shareholders no later than December 31, 2000.
Based on the closing bid price of our Common Stock on November 17,
2000 of $0.375, 5,333,333 shares of common stock would be issuable under the
private placement. Because the conversion of the convertible note is based on
the price of the common stock at future dates, the actual number of shares of
common stock which will be issued is undeterminable, and may exceed the assumed
number given above.
Anti-dilution Provisions. The convertible note and warrants contain
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 investor is prohibited from acquiring the beneficial ownership of over five
(5%) percent of our common stock through the (i) conversion of the
convertible note or (ii) the exercise of the warrants.
Registration Rights. Mark is obligated to register for resale under the
Securities Act the common stock underlying the convertible note and the
warrants.
Impact of Conversion Price of the Convertible Note. The conversion price of the
convertible note is variable based on the current price of Mark's common stock
at the time of conversion. Because the conversion price is based on the current
market price of the common stock, sales of the shares of common stock underlying
the convertible note may cause a downward trend in the trading price of the
common stock until such shares are sold. The selling shareholders are not
prohibited from taking or maintaining a short position in the common stock.
SELLING SHAREHOLDERS
Up to 6,500,000 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.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Other
Shares of Shares of Shares of
Common Stock Common Stock Shares of Common Stock
Underlying Beneficially Common Stock Beneficially Owned
Name Convertible Notes Owned Offered After Offering
Frank Brosens 5,333,333(1) 586,816(2) 5,733,333 186,816
Richard Branca 0 90,016(3) 24,466 65,550
Bernard Branca 0 24,467(4) 24,466 0
(1) Assumes dividends paid in cash. Based on a conversion rate of 100% of the closing sale price
of $0.375 on November 17, 2000.
(2) Includes 386,834 shares of common stock and 400,000 shares of common
stock underlying warrants exercisable at $5.00, subject to certain
adjustments, expiring on April 13, 2005.
(3) Includes 24,466 shares of common stock underlying warrants exercisable
at $1.25 per share expiring on March 2, 2005 and other options and
warrants to purchase 49,300 shares of common stock which are presently
exercisable.
(4) Represents 24,467 shares of common stock underlying warrants exercisable at $1.25 per share
expiring on March 2, 2005.
</TABLE>
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.
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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
McLaughlin & Stern, LLP 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 sheets as of June 30, 1999 and 2000 and the
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for three years ended June 30, 1999 and 2000 incorporated by
reference into this Prospectus, have been included in reliance on the report of
Holtz Rubenstein & Co., LLP, independent certified public accountants, which
includes an explanatory paragraph that describes the uncertainty as to our
ability to continue as a going concern due to our historical recurring losses
from operations, 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 to place undue reliance on
these forward-looking statements, which speak only as of the date on which they
were made.
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
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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, 2000.
(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,
2000.
(4) Mark's Current Report on Form 8-K for the event date of April 17, 2000.
(5) Mark's Current Report on Form 8-K for the event date of July 24, 2000.
(6) 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 Paul Litwinczuk, Mark Solutions, Inc. 1515 Broad Street, Bloomfield,
New Jersey 07003, Telephone Number (973) 893-0500.
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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.............................................................. 1
The Company ............................................... 1
Summary Selected Financial Data ............................. 1
Risk Factors .......................................................... 3
Convertible Note.................................................... 7
Selling Shareholders .................................................. 8
Plan of Distribution ................................................. 9
Legal Matters ....................................................... 10
Experts .............................................................. 10
Forward Looking Statements........................................... 10
Where You Can Find More Information ...................................10
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