As filed with the Securities and Exchange Commission on September ___,
1997
Registration No. 333-17103
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
FLEX ACQUISITIONS CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS __________ 76-0498636
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)
MICHAEL T. FEARNOW
770 S. POST OAK LANE PRESIDENT
SUITE 515 FLEX ACQUISITIONS CORPORATION
HOUSTON, TEXAS 77056 770 S. POST OAK LANE, SUITE 515
(713) 840-7500 HOUSTON, TEXAS 77056
(Address, including zip code, (713) 840-7500
and telephone number including (Name, address ,including zip code,
area code, of registrant's and telephone number, including
principal executive offices) area code, of agent for service)
Copies to:
M. STEPHEN ROBERTS, ESQ.
770 S. POST OAK LANE, SUITE 515
HOUSTON, TEXAS 77056
(713) 961-2696
FACSIMILE: (713) 961-1148
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable following the effectiveness of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock (3). . . . . . . . . . . . . . . . 80,000 $ .23 $ 18,400 $ 5.58
Class A Options (2) . . . . . . . . . . . . . . 80,000 $ .00 $ 0 $ .00
Common Stock Underlying Class A Options . . . . 80,000 $ .50 $ 40,000 $ 12.12
Unit Purchase Options - Bridge Loan (2) . . . . 16,333 $ .00 $ 0 $ .00
Units issuable upon exercise of the Unit. . . . 16,333 $ .50 $ 8,167 $ 2.47
Purchase Options; each Unit consisting of one
share of common stock, $.001 par value, two
Class B Warrants and two Class C Warrants (2)
Common Stock issuable upon exercise of the. . . 16,333 $ .00 $ 0 $ .00
Unit Purchase Options (2)
Class B Warrants issuable upon exercise of the. 32,666 $ .00 $ .00
Unit Purchase Options (2)
Common Stock issuable upon exercise of. . . . . 32,666 $ 6.25 $ 46.71
Class B Bridge Loan warrants which underlie
the Unit Purchase Options
Class C Warrants issuable upon exercise of the. 32,666 $ .00 $ .00
Unit Purchase Options (2)
Common Stock issuable upon exercise of. . . . . 32,666 $ 10.00 $ 74.74
Class C Bridge Loan warrants which underlie
the Unit Purchase Options
Units, each consisting of one share of common . 14,000 $ 4.80 $ 20.36
stock, $.001 par value, two Class B Warrants
and two Class C Warrants (2)
Common Stock ($.001 par value) (2) (3). . . . . 14,000 $ .00 $ .00
Class B Warrants (2). . . . . . . . . . . . . . 28,000 $ .00 $ .00
Common Stock Underlying Class B Warrants (2). . 28,000 $ 6.25 $ 53.03
Class C Warrants (2). . . . . . . . . . . . . . 28,000 $ .00 $ .00
Common Stock Underlying Class C Warrants. . . . 28,000 $ 10.00 $ 8.48
Common Stock (for the Shelf) (4). . . . . . . . 2,000,000 $ .23 $ 139.38
- ----------------------------------------------- ------------ ---------------- -------------
TOTAL $ 288.13
=============================================== =============
<FN>
(1) Estimated solely for purposes of calculating the registration fee.
(2) No registration fee is required for these common shares, Class B Warrants, Class C Warrants, and Unit
Purchase Options, because the securities to be offered pursuant to the Class A Options, Units and Unit Purchase
Options are being registered in this same registration statement. Regulation 230.457(g).
(3) These 94,000 (80,000 and 14,000) shares are to be offered in exchange for all the issued and outstanding
shares of common stock of Flex Financial Group, Inc. in a proposed merger. The registration fee is based upon the
book value, $21,185, of Flex Financial Group, Inc. on July 31, 1996.
(4) These 2,000,000 shares are being registered pursuant to the provisions of Regulation 230.415(a) (viii) and
are to be available to be issued in connection with business combinations. The registration fee is based upon the
maximum offering price of the securities offered in exchange for all the issued and outstanding shares of capital
stock of Flex Financial Group, Inc
(5) The registration statement also covers any additional securities which may become issuable pursuant to
anti-dilution provisions of the warrants.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROSPECTUS
FLEX ACQUISITIONS CORPORATION
(a Texas corporation)
94,000 SHARES OF COMMON STOCK
(PAR VALUE, $.001 PER SHARE)
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR 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.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND ISSUER OR
RECIPIENT(3) COMMISSIONS OTHER PERSON(1)
<S> <C> <C> <C>
PER SHARE:
94,000 Merger Shares (2) . $ 0.23 $ 0.00 $ 21,620
2,000,000 Shelf Shares (4) $ 0.23 $ 0.00 $ 460,000
- -------------------------- ------------- -------------- ----------------
<FN>
(1) The estimated expenses of the proposed merger transaction described
herein are $35,000, all of which is being borne by Flex Financial Group, Inc.
(2) Should the proposed merger between Flex Acquisitions Corporation and
Flex Financial Group, Inc. described herein be approved and effectuated, these
94,000 shares (the "Merger Shares") will be distributed to the shareholders of
Flex Financial Group, Inc., and all outstanding shares of Flex Financial
Group, Inc. will be canceled. See "Terms of the Merger," page ___.
(3) Based upon the book value of Flex Financial Group, Inc. on July 31,
1996.
(4) These shares (the "Shelf Shares") shall not be distributed at this
time but shall be available to Flex Acquisitions Corporation for merger and
acquisition purposes during the two-year period after the effective date of
this Prospectus upon the Flex Acquisitions Corporation's filing post-effective
amendments to the Registration Statement of which this Prospectus is a part.
There are no current plans, arrangements or understandings for mergers,
acquisitions or business combinations for which the Shelf Shares would be
used.
(5) The offering price of the Shelf Shares would be determined in the
future, if use is made of such Shelf Shares, and would be reflected in
post-effective amendments to the Registration Statement of which this
Prospectus is a part.
</TABLE>
FLEX ACQUISITIONS CORPORATION IS NOT A "REPORTING COMPANY," AS
SUCH TERM IS EMPLOYED IN THE SECURITIES EXCHANGE ACT OF 1934. IT IS NOT
LISTED ON ANY EXCHANGE, AND ITS COMMON STOCK IS NOT ELIGIBLE FOR QUOTATION ON
THE NASDAQ SMALL-CAP MARKET ("NASDAQ"). THERE PRESENTLY IS NO PUBLIC MARKET
FOR THE COMMON STOCK OF THE FLEX ACQUISITIONS CORPORATION AND THERE
CAN BE NO ASSURANCE THAT SUCH A MARKET WILL DEVELOP OR CAN BE SUSTAINED SHOULD
THERE BE A COMPLETION OF THE PROPOSED MERGER. SHOULD THE PROPOSED MERGER NOT
BE EFFECTED, THERE WILL BE NO PUBLIC MARKET FOR THE SECURITIES OF FLEX
ACQUISITIONS CORPORATION BECAUSE OF THE ABOVE-DESCRIBED ESCROW
ARRANGEMENT. SEE "SUMMARY OF PROPOSED TRANSACTION-THE ESCROW ARRANGEMENT."
SHOULD THE PROPOSED MERGER BE EFFECTED, FLEX ACQUISITIONS CORPORATION
INTENDS TO REGISTER PURSUANT TO SECTION 12(G) OF THE 1934 ACT, AS AMENDED,
BECOME A "REPORTING COMPANY," AND, IN ACCORDANCE THEREWITH, WILL FILE REPORTS,
PROXY STATEMENTS, AND OTHER INFORMATION WITH THE SECURITIES AND EXCHANGE
COMMISSION. FLEX ACQUISITIONS CORPORATION INTENDS TO FURNISH ITS SHAREHOLDERS
WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS AND SUCH OTHER
PERIODIC REPORTS AS FLEX ACQUISITIONS CORPORATION DEEMS APPROPRIATE OR MAY BE
REQUIRED BY LAW.
ADDITIONAL INFORMATION
Flex Acquisitions Corporation (the "Company") has filed with the
Securities and Exchange Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended
(the "1933 Act"), with respect to the common stock (the "Common
Stock") offered by this Prospectus. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits listed in the Registration Statement.
The Registration Statement can be examined at the Public Reference Room of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained upon payment of the prescribed fees.
Should the proposed merger (the "Merger") be effected, the Company
intends to register pursuant to Section 12(g) of the Securities Act of 1934,
as amended (the "1934 Act"), become a "reporting company," and, in accordance
therewith, will file reports, proxy statements, and other information with the
Securities and Exchange Commission. The Company intends to furnish
shareholders with annual reports containing financial statements audited by
independent certified public accountants and such other periodic reports as it
may deem appropriate or as required by law.
It is expected that stock certificates for the securities offered hereby
will be ready for delivery within thirty days after the date of the approval
of the Merger and the filing of the necessary merger documents with the
Secretary of State of Texas, should the Merger be approved by the requisite
shareholder vote of each of the Company and Flex Financial Group, Inc.
("Flex Financial"), with respect to the shares (the "Merger
Shares") to be distributed in the merger to the existing shareholders of
Flex Financial Group, Inc.
Should the Merger described herein be approved by the requisite
shareholder vote of Flex Financial and become effective, the Company will file
a post-effective amendment to the Registration Statement described above and
cause stickers to be placed on the front cover page of all copies of the
Prospectus, which amendment and stickers will describe the results of the vote
and the effective date of the merger.
UNTIL _____________________, 1997 (90 DAYS AFTER THE REGISTERED
SECURITIES ARE RELEASED FROM ESCROW PURSUANT TO RULE 419 UNDER THE 1933 ACT),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES MAY BE
REQUIRED TO DELIVER A PROSPECTUS. fur
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL INFORMATION
SUMMARY
Securities Issued in Other Transactions Being Registered
The Companies
The Spinoff
The Proposed Merger and Spinoff
The Escrow Arrangement
Degree of Management Control of Vote on Merger
Dissenters' Rights of Appraisal
Compliance with Governmental Regulations
Tax Consequences of the Transaction
Risk Factors
RISK FACTORS
TERMS OF THE TRANSACTION
Terms of the Merger
Reasons for the Merger and Spinoff
Accounting Treatment of Proposed Merger
Plan of Merger
Description of Securities
Federal Income Tax Consequences
Pro Forma Financial Information and Dilution
Material Contacts among the Companies
Reoffering by Party Deemed to Be an Underwriter
Interest of Counsel
Indemnification
INFORMATION ABOUT THE COMPANY
Description of Business and Properties
Course of Business Should the Merger Not Occur
Legal Proceedings
Market for the Company's Common Stock and Related Stockholder Matters
Rule 144 and Rule 145 Restrictions on Trading
Financial Statements
INFORMATION ABOUT FLEX FINANCIAL
Management's Plan of Operation
Plan of Operation
Description of Business Properties
Legal Proceedings
Market for Flex Financial's Common Stock and Related Stockholder Matters
Financial Statements
VOTING AND MANAGEMENT INFORMATION
Dissenters' Rights of Appraisal
No Solicitation of Proxies
Voting Securities and Principal Holders Thereof
Security Ownership of Certain Beneficial Owners and Management
Directors, Executive Officers and Significant Employees
Remuneration of Directors and Officers
Interest of Management and Others in Certain Transactions
PARENTS
PLAN OF MERGER
</TABLE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained in or incorporated by
reference in this Prospectus and the Appendices hereto. Shareholders are
urged to read carefully this Prospectus and the Appendices hereto in their
entirety. Shareholders should carefully consider the information set forth
below under the heading "Risk Factors." As used in this Prospectus, unless
otherwise required by the context, the term "Flex Financial" means Flex
Financial Group, Inc. and the term "Company" means Flex Acquisitions
Corporation. Capitalized terms used herein without definition are, unless
otherwise indicated, defined in the text below and used herein with such
meanings.
The transaction in which the securities being registered are to be
offered is a proposed merger (the "Merger") between Flex Financial, a Texas
corporation and the"Company, also a Texas corporation. Should the Merger be
approved and effected, the Company will be the surviving entity and will be
under the management of Flex Financial's present management. The 20,000
shares of the Company's Common Stock presently outstanding are owned of record
by American NorTel Communications, Inc., a Wyoming corporation ("American
NorTel") with approximately 780 shareholders residing in 31 states and Canada.
Should the proposed Merger be approved, American NorTel will distribute
certificates representing the 20,000 shares of Common Stock of the Company it
now owns to its approximately 780 shareholders (the "Spinoff") and thereby lay
the basis for the creation of a market for its Common Stock. There is
presently no public market for the Common Stock of the Company, and no
assurance can be given that such a market will be developed, or if developed,
will be sustained.
SECURITIES ISSUED IN OTHER TRANSACTIONS BEING REGISTERED
The proposed Merger is being registered with the Securities and Exchange
Commission (the "SEC") simultaneously with the registration of the Units
Offering and the Spinoff described herein.
SPINOFF. Simultaneous with the securities being registered as described
in this Prospectus, the Company is registering, by means of a separate
prospectus and registration statement on Form SB-2, the 20,000 shares of
Common stock to be distributed by American NorTel, the corporate parent of the
Company, to its shareholders by dividend (the "Spinoff"). The Spinoff is
conditioned upon the consummation of certain transactions including the merger
of the Company and Flex Financial by filing Articles of Merger with the
Secretary of State of Texas.
SECURITIES ISSUED IN INITIAL PUBLIC OFFERING. Concurrently with the
registration of the Spinoff, the Company is registering by means of a separate
prospectus under the same registration statement filed on Form SB-2, a maximum
of 100,000 Units, each Unit consisting of one share of Common Stock, two Class
B Warrants and two Class C Warrants, at a price of $6.00 per Unit (the "Units
Offering"). The Units Offering is conditioned upon the consummation of
certain transactions including the merger of the Company and Flex Financial by
filing Articles of Merger with the Secretary of State of Texas.
THE COMPANIES
Three companies and their shareholders are affected by the Spinoff and
Merger transactions described in this Prospectus.
Flex Acquisitions Corporation (the "Company") was incorporated
under the laws of the State of Texas on March 21, 1996, for the purpose of
merging with Flex Financial Group, Inc. ("Flex Financial") should the Merger
transaction described herein be approved. The Company has no business
operations or significant capital and has no present intention of engaging in
any active business until and unless it merges with Flex Financial. The
business office of the Company is located at 770 S. Post Oak Lane, Suite 515,
Houston, Texas 77056. Its telephone number is (713) 840-7500.
Flex Financial Group, Inc. ("Flex Financial"), was incorporated under the
business corporation laws of the State of Texas on August 16, 1995. The
business office of Flex Financial is located at 770 S. Post Oak Lane, Suite
515, Houston, Texas 77056. Its telephone number is (713) 840-7500.
GENERAL. Flex Financial was formed in August 1995, to participate
in certain short-term financing opportunities (terms of less than one year) in
the underwriting segment of the securities industry. The Company has no
business operations or significant capital and has no present intention of
engaging in any active business until and unless it completes the public
offering of its securities described herein (the "Units Offering").
BUSINESS PLAN. The Company intends to participate in short-term
financing opportunities by (i) providing and/or participating in equity
subordination loans to selected underwriters requiring additional excess net
capital for underwriting specific issues on a firm commitment basis (the
"Subordination Loans") and (ii) providing and/or participating in bridge loans
to selected issuers meeting the Company's due diligence standards in
connection with initial public offerings and secondary financing (the "Bridge
Loans"). The Company also intends to engage in "spinoff" activities
such as are described herein, such spinoffs to involve the distribution, by
way of stock dividends or otherwise, of registered shares of stock of other
public companies.
Management of the Company believes that financing opportunities will
become available to the Company due primarily to the liquidity of its assets,
its future status as a publicly-held company, and its flexibility in
structuring and participating in financing opportunities.
American NorTel Communications Inc. ("American NorTel") filed its
Certificate of Registration and Articles of Continuance with the Secretary of
State of the State of Wyoming and became a Wyoming corporation effective
February 9, 1993. American NorTel was originally incorporated in
British Columbia, Canada on May 17, 1979. American NorTel's common stock has
been listed for trading on the Vancouver Stock Exchange since September 18,
1980. In conjunction with a one-for-five consolidation, the company's
name was changed to Coldsprings Resources Ltd. on June 4, 1987. In
conjunction with a one-for-ten consolidation, its name was changed to
Islehaven Capital Corporation on July 14, 1987. The company changed its
name to NorTel Communications Inc. on June 17, 1991. In conjunction with a
one-for-ten consolidation, the company's name was changed to American
NorTel Communications Inc. on May 11, 1992.
American NorTel currently operates only in the telecommunications
business, providing long distance telephone service in combination with
additional related services in the United States and a number of foreign
countries, including Argentina, Brazil, Mexico, Canada, and Costa Rica. Until
the end of 1993, the Company was also in the mining development and
exploration business in Costa Rica and Canada, and has divested of its
remaining mining assets.
In 1987, American NorTel was inactive and was classified as dormant under
the rules of the Vancouver Stock Exchange. The then current management
organized a reverse takeover by a number of limited partnerships and private
companies which were engaged in the mining development and exploration
business and who, on July 14, 1987, transferred all of their assets into the
company for Treasury shares. The company is no longer active in the mining
development and exploration business. In 1990, American NorTel became active
in the long distance telecommunications business, which is now its only
business.
American NorTel has approximately 780 shareholders. The company seeks to
diversify its business opportunities and investment potential to its
shareholders by engaging in "spinoff" activities such as are described herein,
such spinoffs to involve the distribution, by way of stock dividends or
otherwise, of registered shares of stock of other companies. American NorTel
organized the Company and, prior to the date of this Prospectus, has been the
controlling shareholder of the Company.
American NorTel's address is 7201 E. Camelback Road, Suite 320,
Scottsdale, Arizona 85251. Its telephone number is 602/945-1266.
THE SPINOFF
American NorTel purchased 20,000 Shares of Common Stock of the Company
for a cash consideration of $1,000 and proposes to distribute to the
shareholders of American NorTel , as a stock dividend, these 20,000
Shares on the basis of one share of the Company for every 588 shares of
American NorTel held of record on September 30, 1996. See "Terms of the
Transaction."
The Spinoff transaction is being registered by the Company with the
SEC on a separate registration statement ("the Spinoff Registration
Statement"). See "Terms of the Transaction."
THE PROPOSED MERGER AND SPINOFF
Upon the effectiveness both of the registration statements of which this
Prospectus is a part and the Spinoff registration statement, the shareholders
of the Company and of Flex Financial will each vote to approve or reject a
proposed merger of Flex Financial into the Company on the following terms:
1. Flex Financial shall merge into the Company, a Texas corporation.
2. Upon the effectiveness of the Merger, all the issued and
outstanding shares of capital stock of Flex Financial shall be converted into
94,000 shares of Common Stock of the Company, with each share of Flex
Financial's Common Stock being exchanged and converted into one share of the
Company's common. As of the date of this Prospectus, the following table sets
forth the number of outstanding shares of each class of Flex Financial capital
stock, the number of votes attributable to each class, the number of shares of
Common Stock of the Company that would be allocated to each class, and the
number of shares of each class to be exchanged for one share of the Company's
Common Stock in the Merger:
<TABLE>
<CAPTION>
NUMBER OF
COMPANY
NUMBER OF TOTAL NUMBER OF SHARES FOR ONE
FLEX FINANCIAL VOTING SHARES FLEX FINANCIAL
CLASS OF STOCK SHARES RIGHTS OF COMPANY SHARE
- --------------------- -------------- ------ ---------- --------------
<S> <C> <C> <C> <C>
Flex Financial Common 94,000 94,000 94,000 1
</TABLE>
3. Because the exchange and conversion will be one share for one
share, fractional shares shall not be issued. The exercise or purchase price
of Flex Financial options and warrants shall be adjusted to be, for the
replacement Company options and warrants, that price determined by multiplying
(a) the present exercise price or purchase price by (b) the total voting
rights of all classes of Flex Financial's capital stock (which total voting
rights equal 94,000 as of the date of this Prospectus) divided by 94,000. The
effect of this formula will be that the exercise price of Flex Financial
options and warrants shall be identical to the replacement Company options and
warrants.
4. The business of Flex Financial shall be conducted, after the
Merger, by the Company, into which Flex Financial shall have merged, but Flex
Financial's management and directors shall become the management and directors
of the Company.
5. American NorTel shall distribute to its shareholders ("the
Spinoff"), on a basis proportionate to their shareholdings in American NorTel,
20,000 Shares ("the Spinoff Shares") of Common Stock of the Company now held
by American NorTel. Each American NorTel shareholder shall receive one share
of the Company for each 588 shares of American NorTel held of record on
September 30, 1996.
THE ESCROW ARRANGEMENT
EFFECT OF THE MERGER. A vote to approve the Merger by the sole
shareholder of the Company is assured. After such vote but before any
vote by the shareholders of Flex Financial , American NorTel shall declare
a dividend to its shareholders of the 20,000 shares of Common Stock of the
Company held by it ("the Spinoff Shares"). Certificates representing the
20,000 Spinoff Shares shall be distributed by American NorTel to
Southwest Bank of Texas NA ("the Escrow Agent") to be held in escrow
pursuant to the provisions of the SEC Rule 419(e). Later distribution by
the Escrow Agent would be as follows:
EFFECTIVE TIME OF THE MERGER. Upon the legal effectiveness of the Merger
(should Flex Financial's shareholders approve the Merger) , the Company
shall supplement this Prospectus to indicate the fact and date of the Merger.
At such time as information concerning the Company in its post-merger form
shall have been made available to market makers of the Company's stock and
also published in Moody's OTC Industrial Manual, the Company shall provide to
the Escrow Agent the Company's representation that the requirements of the SEC
Rule 419(e) have been met, and the Escrow Agent shall distribute, subject to
the small shareholders' provisions described in the next paragraph, the
escrowed certificates representing the 20,000 Spinoff Shares to the owners of
thereof.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. With respect to certificates
representing the ownership of fewer than five Spinoff Shares of the Company,
the Escrow Agent shall not immediately distribute these certificates to the
American NorTel shareholders. Rather, each American NorTel shareholder
entitled to one of these small denomination certificates shall be advised by
American NorTel that the shareholder can elect either (i) to receive his
certificate or (ii) to have his shares aggregated with those of other
small-denomination shareholders who choose not to receive their certificates,
have his shares sold through a broker into the open market after trading in
the shares should commence in the open market, and receive the net cash
proceeds of the sale. Nor will fractional share interests be distributed.
The Company may choose to pay in cash the fair value of fractions of a share
as of the time when those entitled to receive such fractions are determined or
to aggregate fractional share interests with those of other small-denomination
shareholders who choose not to receive their certificates, and have the shares
sold through a broker into the open market after trading in the shares should
commence, and distribute to those entitled the net cash proceeds of such
sale.
CONDITIONS TO THE MERGER. There can be no assurance that the proposed
Merger between the Company and Flex Financial will occur, since a favorable
shareholder vote of Flex Financial's shareholders must be obtained, and Flex
Financial's management does not hold voting power over a majority of any of
its Common Stock, which two-thirds vote is required for Flex Financial to
approve the Merger. Further, Flex Financial shareholder voting on the
proposed merger will be taken by written consent pursuant to Texas corporate
law and Flex Financial's bylaws which require that written consent be
unanimous.
Should the Merger not become effective, (i) Flex Financial will continue
as a closely-held company with its existing assets and business, (ii) the
Company will have no significant assets or business, and there will be no
trading market for its Common Stock, because the stock certificates
representing all its issued and outstanding shares of capital stock will still
be held in escrow by the Escrow Agent, and (iii) the Units Offering will
not be effected . As long as this escrow continues, no transfer or other
disposition of the Shares held in escrow shall be permitted other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended
(the "Code") , or Title 1 of the Employee Retirement Income Security Act
or the rules thereunder. The Company's management has no specific plans for
an alternative to a rejection of the proposed Merger but would seek to acquire
a business or assets that would constitute a business, using funds contributed
by management to pay the costs of such search. Upon execution of any
agreement for the acquisition of a business or assets that would constitute a
business, the Company shall file a post effective amendment to the
Registration Statement and shall supplement this Prospectus to disclose
information about the alternative business or assets acquisition, including
financial statements and other information required by the SEC's Rule
419. Upon the legal effectiveness of the acquisition described in the amended
registration statement and supplemented Prospectus, an additional
post-effective amendment to the registration statement would be filed, and
upon the effectiveness of such post-effective amendment filed with the
SEC , the Escrow Agent would distribute the stock certificates held in
escrow. Should no alternative to the Merger be effected within 18 months
after the effective date of the Registration Statement of which this
Prospectus is a part, Flex Financial has agreed to convert its $4,000 Note
according to its terms into common stock representing 80% of the outstanding
voting shares of the Company's Common Stock and will have the voting rights to
cause a dissolution of the Company. Flex Financial has indicated its
intentions to so exercise these voting rights to that effect at that time.
See "The Escrow Arrangement."
CONDITIONS FOR THE ESCROW AGREEMENT. The purpose of the Escrow
Agreement is to (i) establish a definitive date for determining the fair
market value of the Spinoff Shares at $.02, the estimated book value of Flex
Acquisitions on the dividend distribution date for purposes of determining if
the distribution is to be taxed as a dividend and as ordinary income (See
"Federal Income Tax Consequences-Shareholders of American NorTel"); (ii)
ensure that the distribution of Spinoff Shares to American NorTel shareholders
is a distribution pursuant to an effective registration statement under the
[1933 or 1934] Act; and (iii) comply with the provisions of the SEC's Rule
419(e).
DEGREE OF MANAGEMENT CONTROL OF VOTE ON MERGER
Texas corporate law requires that the Merger be approved by a vote of
two-third of the outstanding shares of Common Stock of each of the Company and
Flex Financial. With respect to such companies, the percentage of
outstanding shares entitled to vote and held by officers, directors and their
affiliates are as follows: the Company - 0%; and Flex Financial - Common Stock
- - 43%.
DISSENTERS' RIGHTS OF APPRAISAL
No dissenter's rights of appraisal come into effect with respect to
the proposed Merger. While Texas and Wyoming corporate law provide
dissenter's rights of appraisal in the case of mergers, (i) all the issued and
outstanding shares of capital stock of the Company will be voted by the
American NorTel sole director, and a unanimous vote approving the Merger is
assured and (ii) Flex Financial shareholder voting on the proposed merger will
be taken by written consent pursuant to Texas corporate law and Flex
Financial's bylaws which require that written consent be unanimous, and
therefore, no dissenter's rights of appraisal would be created by either vote
because a vote to disapprove or a failure of unanimous approval would defeat
the Merger.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS
No federal or state regulatory requirements, other than securities laws
and regulations, must be complied with or federal or state approval obtained
in connection with the Spinoff and Merger, other than the filing of articles
of merger with the Secretary of State of Texas after a favorable vote might be
obtained on the proposed merger.
TAX CONSEQUENCES OF THE TRANSACTION
The Merger should be a "tax-free" reorganization under Section 368(a)(1)
of the Code. See "Terms of the Transaction-Federal Income Tax Consequences."
RISK FACTORS
Ownership of the Common Stock of the Company is speculative and involves
a high degree of risk, whether the Merger with Flex Financial be effected or
not. See "Risk Factors," below.
<PAGE>
RISK FACTORS
The shareholders of Flex Financial, all of whom shall be asked to vote on
the proposed Merger, are making an investment decision that involves a high
degree of risk and should carefully consider the following factors in
evaluating the Merger, the surviving corporation, and its business in
determining whether to approve the Merger. In addition to the other
information contained in this Prospectus, the following risk factors should be
considered when evaluating an investment in the shares of Common Stock offered
hereby.
RISKS INHERENT IN DEVELOPMENTAL STAGE COMPANY. The Company was
organized in March 1996 and has no operating history, revenues from
operations, or assets. The Company received $1,000 cash for the initial
issuance of 20,000 shares of its common stock and $4,000 for the issuance of a
convertible, subordinated, redeemable note. The proceeds from its issuance of
equity and debt has been expended on organizational expenses and the expenses
associated with the Units Offering. The Company faces all of the risks of a
new business and those risks specifically inherent in the investigation,
participation, or investment in financings of the type sought by the Company.
Purchase of the securities in this offering must be regarded as placing funds
at a high risk in a new or "start-up" venture with all of the unforeseen
costs, expenses, problems, and difficulties to which such ventures are
subject. There is no assurance that the Company will close the Units Offering
necessary for it to implement its business plan, or if it does, that the
Company will be able to locate and participate in financing and investment
opportunities. In addition, even if the Company becomes involved in a
financing opportunity, there is no assurance that it will generate revenues or
profits, nor that the value or market price of the Company's Common Stock
would be increased thereby.
NO ASSURANCE OF A PUBLIC MARKET AND LIKELIHOOD OF A VOLATILE MARKET.
While the shares of Common Stock of the Company to be issued or distributed
pursuant to this Prospectus will be free of restrictions on transferability
for all persons except "affiliates" of the Company and Flex Financial (and
with respect to such "affiliates" such shares may be transferred subject to
certain restrictions), there is presently no public market for the Common
Stock of the Company and there is no assurance that a public market for such
securities will develop after the occurrence of the Merger described in this
Prospectus, or, if one develops, that it will be sustained. It is likely that
any market that develops for the Common Stock, should it develop, will be
highly volatile and that the trading volume in such market will be limited.
MARKET RESTRICTIONS ON BROKER-DEALERS. The Company's common stock is
covered by a SEC Rule 15-g that imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in
excess of $5 million or individuals with net worth in excess of $1 million or
annual income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the
rule may affect the ability of broker-dealers to sell the Company's securities
and also may affect the ability of persons receiving shares in this offering
to sell their shares in the secondary market. Further, the Company's Common
Stock, after the Merger, will initially be quoted on an NASD inter-dealer
system called "the Bulletin Board," will not have $4 million in assets or $2
million in stockholders' equity which are both required for it to qualify for
quotation on NASDAQ, and may not be expected to command a market price of $5
per share, the price required for a non-NASDAQ-quoted security to escape the
trading severities imposed by the SEC on so-called "penny stocks." These
trading severities tend to reduce broker-dealer and investor interest in penny
stocks and could operate (i) to inhibit the ability of the Company's stock to
reach a $3 per share trading price that would make it eligible for quotation
on NASDAQ even should it otherwise qualify for quotation on NASDAQ and (ii) to
inhibit the ability of the Company to use its stock for business acquisition
purposes. See "Information about the Company-Market for the Company's Common
Stock and Related Stockholders Matters."
MANAGEMENT CONTROL. Should the proposed Merger be approved and effected,
the Company's officers and directors and their affiliates will own
approximately 35% of the common stock of the Company and thereby may be able
to determine the outcome of any vote affecting the control of the Company. The
Board of Directors has complete discretion in making all business decisions.
Accordingly, no person should purchase securities in the Company unless he is
willing to entrust all business decisions to the Board of Directors.
DEPENDENCE ON KEY PERSONNEL. The affairs of the surviving company,
should the Merger be approved, shall be conducted by the present management of
Flex Financial. The loss of the services of any of these persons and other
key employees, for any reason, may have a materially adverse effect on the
prospects of the emergent company. There are no employment contracts with
management or key personnel of the Company. The Company will be heavily
dependent on the skills, talents, and abilities of its management and
consultants to successfully implement its business plan. Although management
has experience in seeking, investigating and participating in financing and
investment opportunities, management will generally depend on their general
business expertise in making decisions regarding the Company's operations.
Because investors will not be able to evaluate the merits of possible business
opportunities by the Company, they should critically assess the information
concerning the Company's management. The success of the emergent Company is
dependent upon, among other things, the services of Michael T. Fearnow,
President of Flex Financial, and of M. Stephen Roberts, who will provide
certain financial and legal consulting services to the Company. The Company
has not entered into employment agreements with any of its officers. Flex
Financial does not have, nor does it or the Company presently intend to
obtain, key man life insurance (with proceeds payable to the Company) on the
life of Mr. Fearnow. The loss of the services of Messrs. Fearnow and Roberts
for any reason, may have a material adverse effect on the prospects of the
Company.
DEPENDENCE ON OUTSIDE CONSULTANTS AND ADVISERS; CONFLICTS OF INTEREST.
Mr. Fearnow will, as an officer of the Company, provide, without compensation,
the ministerial duties necessary for the president of the Company and will,
with respect thereto, have a continuing fiduciary obligation to the Company.
Mr. Fearnow will provide as a consultant ongoing advice and consultation with
respect to business opportunities and the business activities of the Company.
During the investigation of a possible business opportunity and in order to
supplement the business experience of management, the Company may employ
accountants, technical experts, appraisers, attorneys, or other consultants
and advisers. The selection of any advisers will be made by management and
without any control from stockholders.
Certain conflicts of interest may exist between the Company and Mr.
Fearnow as a result of his position as an officer and director of the Company
and his service as a consultant. In particular, he will face a conflict of
interest with regard to his possible future participation in other business
relationships with companies to which the Company may provide financing. In
such cases, Mr. Fearnow may have interests that conflict with those of the
Company. Although Mr. Fearnow will attempt to resolve any conflicts in favor
of the Company, there is no assurance that this will be the case. The Company
has not established procedures for the resolution of such conflicts of
interest.
LACK OF INDEPENDENT DIRECTORS. Should the Merger be approved and
effected, for a foreseeable period of time thereafter the Company's board of
directors will have only one director. As such, upon effectiveness of the
Merger, the Company's sole director will be Michael T. Fearnow, the Company's
sole officer.
DILUTION. Should the Merger be approved and effected, the shareholders
of Flex Financial shall suffer a 17.4% dilution in their percentage ownership
of the surviving company in exchange solely for obtaining shares of Common
Stock registered under the Securities Act to be exchanged for their shares of
capital stock of Flex Financial. Measured on the basis of net tangible book
value a share as of July 31, 1997 , the Flex Financial Common
Stockholders shall suffer a 16.7% reduction in dilution (from
$(0.36) a share up to $(0.30) a share).
TAX CONSEQUENCES. The anticipated favorable tax consequences of the
proposed Merger and Spinoff to the Company and its shareholders (see "Terms of
the Transaction - Federal Income Tax Consequences") are not supported by an
advance ruling by the Treasury Department but are based upon an opinion of M.
Stephen Roberts, Esq., in his capacity as tax counselor to the Company (which
tax opinion is one of the exhibits to the registration statement of which this
Prospectus is a part). Should the actual income tax consequences be different
than as represented herein by the Company, significant gain or loss might be
recognized and reportable by any of the Company, American NorTel, or American
NorTel's approximately 780 shareholders to whom will be distributed the 20,000
Spinoff Shares should the Merger be effected.
DIVIDENDS NOT LIKELY. Should the Merger be effected, for the foreseeable
future it is anticipated that any earnings which may be generated from
operations of the emergent company will be used to finance the growth of such
company, and cash dividends will not be paid to holders of the Common Stock.
POSSIBLE FUTURE DILUTION. In addition to the Shares registered for the
proposed Merger and for the Spinoff, the Company has registered 2,000,000
shares to be available for issuance in possible business combinations or asset
acquisitions, the issuance of which would dilute the percentage ownership and
could dilute the net tangible book value per share of shareholders of the
surviving company.
TERMS OF THE TRANSACTION
The Company and Flex Financial, pursuant to approval by their respective
boards of directors, have entered into an agreed plan of merger, a copy of
which is included herein (see "Plan of Merger"). In order for the merger
contemplated by the Plan of Merger to become effective, it is necessary that
each of the following occur:
(i) a registration statement covering the 20,000 Spinoff Shares
offered herein and a registration statement covering the 94,000 Merger shares
(for distribution to Flex Financial's shareholders) (a) must be filed with the
SEC and with appropriate state securities regulatory agencies and (b) must
become effective;
(ii) the shareholders of each of the Company and of Flex Financial
must, by a requisite vote of the shares outstanding, approve the merger
contemplated by the Plan of Merger; and
(iii) certain documents evidencing the approved merger must be
prepared and filed with the appropriate state authority in the State of Texas.
These conditions are not waivable.
TERMS OF THE MERGER
The terms of the proposed merger ("the Merger") are as follows:
l. Flex Financial shall merge into the Company, a Texas corporation.
2. Upon the effectiveness of the Merger, all the issued and
outstanding shares of capital stock of Flex Financial shall be converted into
94,000 shares of Common Stock of the Company.
3. The Company shall reserve 217,665 additional shares of its
Common Stock for possible issuance upon the exercise of Company options and
warrants to be issued to replace presently outstanding and unexercised Flex
Financial options and warrants.
4. The business of Flex Financial shall be conducted, after the
Merger, by the Company, into which Flex Financial shall have merged,
but Flex Financial's management and directors shall become the
management and directors of the Company.
5. American NorTel shall distribute to its shareholders ("the
Spinoff"), on a basis proportionate to their shareholdings in American NorTel,
20,000 Shares ("the Spinoff Shares") of Common Stock of the Company now held
by American NorTel. Each American NorTel shareholder shall receive one share
of the Company for each 588 shares of American NorTel held of record on
September 30, 1996; provided that certificates representing the ownership
of fewer than five Spinoff Shares of the shall not immediately be distributed
to the American NorTel shareholders. Rather, each American NorTel shareholder
entitled to one of these small denomination certificates shall be advised by
American NorTel that the shareholder can elect either (i) to receive his
certificate or (ii) to have his shares aggregated with those of other
small-denomination shareholders who choose not to receive their certificates,
have his shares sold through a broker into the open market after trading in
the shares should commence in the open market, and receive the net cash
proceeds of the sale. Nor will fractional share interests be distributed.
The Company may choose to pay in cash the fair value of fractions of a share
as of the time when those entitled to receive such fractions are determined or
to aggregate fractional share interests with those of other small-denomination
shareholders who choose not to receive their certificates, and have the shares
sold through a broker into the open market after trading in the shares should
commence, and distribute to those entitled the net cash proceeds of such
sale.
6. There shall also be registered as part of the Merger registration
statement filed with the SEC, two million additional shares of Common
Stock of the Company ("the Shelf Shares"), which Shelf Shares shall be
available after the Merger for issuance, upon the filing of post-effective
amendments to the Merger registration statement, in subsequent, possible
mergers or acquisitions with companies engaged in business activities of types
related or similar to those now conducted by Flex Financial. Management of
Flex Financial (who shall become the management of the Company after the
Merger) has no current plans, arrangements or understandings with respect to
possible mergers, acquisitions or business combinations for which the Shelf
Shares would be used.
7. Should the Merger not be approved by the unanimous written
consent of persons holding all of the issued and outstanding shares of
Common Stock of Flex Financial, none of Flex Financial, the Company, or
American NorTel shall be liable to any of the others, the sole obligation of
each being to pay its expenses relating to the registration of the Shares
described herein.
8. The historical financial statements of the post-Merger Company
shall be those of Flex Financial.
REASONS FOR THE MERGER AND SPINOFF
The managements of the Company and of Flex Financial believe that Flex
Financial's shareholders will benefit from receiving shares that have been
registered under the Securities Act in exchange for their shares of capital
stock of Flex Financial. Further, the managements of the Company and of Flex
Financial believe that the distribution of shares to the stockholders of
American NorTel in the Spinoff will provide the basis for the creation of a
public market for the common stock of the post-merger Company and that the
existence of such a public market will benefit the Flex Financial
stockholders. No assurance can be given, however, that a market will develop
for the Common Stock or, if it develops, that it will be sustained. See "Risk
Factors-No Assurance of a Public Market and Likelihood of a Volatile Market."
In determining to undertake the Merger and Spinoff on the terms proposed,
the board of directors of Flex Financial considered the 17% dilution to
shareholders of Flex Financial and the fairness of the consideration received
by the shareholders pursuant to the Merger and Spinoff. The board considered
among other factors: prior disclosures to shareholders as to expected
dilution in any merger and spinoff transaction, the amount of capital
contributed by the shareholders, the estimated expenses and timing of an
independent initial public offering of securities, the percentage of ownership
to be held by investors in this Units Offering, the current market conditions
in the over-the-counter securities market, the Company's proposed capital
structure, possible future capital requirements of the Company, potential
dilution to shareholders from Warrant exercise, the estimated costs of
acquiring a fully reporting and current public shell corporation, the dilutive
effects of such alternative transactions, the company's ability to develop a
public market for its common stock, and the costs and dilutive effect of
similar transactions necessary to accomplish a public underwriting and to
become a widely owned public company. The board concluded that alternative
undertakings posed a number of obstacles which management determined were
unreasonable, including: substantial time requirements, legal and accounting
costs, the inability to obtain an underwriter willing to commit to a firm
underwriting, limited capital available to the company, and the potential
amount of dilution likely to be experienced by the Flex Financial shareholders
and other costs associated with an IPO or shell acquisition.
The management of Flex Financial determined that, after research into
other possible alternatives, the proposed Merger and Spinoff presented the
fastest and least expensive method of accessing the U.S. public securities
markets and providing the most desirable corporate vehicle for conducting its
business operations. The criteria applied by the board was to obtain trading
status for the shares held by Flex Financial's shareholders and to seek to
raise additional capital in order to expand its business operations while
utilizing its existing infrastructure, management and knowledge of its
industry at the least cost to shareholders measured in terms of capital
expended and dilution. Applying this criteria, the board determined that,
considering the 17% dilution was in line with prior disclosures to
shareholders regarding expected dilution in any merger and spinoff
transaction, the terms of the proposed Merger and Spinoff were fair to its
shareholders.
ACCOUNTING TREATMENT OF PROPOSED MERGER
Because the Company is only a corporate shell and not an operating
entity, the proposed Merger will be accounted for as if Flex Financial
recapitalized.
PLAN OF MERGER
The complete Plan of Merger among the Company, Flex Financial, and
American NorTel is included in this Prospectus. See "Plan of Merger."
DESCRIPTION OF SECURITIES
COMMON STOCK. The Company is authorized to issue 10 million shares of
Common Stock, $0.001 par value. As of the date of this Prospectus,
the Company had 20,000 shares of Common Stock issued and outstanding.
Voting Rights. Holders of the shares of Common Stock are entitled
to one vote per share on all matters submitted to a vote of the shareholders.
Shares of Common Stock do not have cumulative voting rights, which means that
the holders of a majority of the shares voting for the election of the board
of directors can elect all members of the board of directors.
Dividend Rights. Holders of record of shares of Common Stock are
entitled to receive dividends when and if declared by the board of directors
out of funds of the Company legally available therefor.
Liquidation Rights. Upon any liquidation, dissolution or winding up
of the Company, holders of shares of Common Stock are entitled to receive pro
rata all of the assets of the company available for distribution to
shareholders, subject to the prior satisfaction of the liquidation rights of
the holders of outstanding shares of Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any
preemptive rights to subscribe for or to purchase any stock, obligations or
other securities of the Company.
Registrar and Transfer Agent. Registrar and Transfer Company, 10
Commerce Drive, Cranford, New Jersey 07016-3572 serves as the transfer agent
and registrar of the Company.
Dissenter's Rights. Under current Texas law, a shareholder is
afforded dissenters' rights which if properly exercised may require the
corporation to repurchase its shares. Dissenters' rights commonly arise in
extraordinary transactions such as mergers, consolidations, reorganizations,
substantial asset sales, liquidating distributions, and certain amendments to
the company's certificate of incorporation.
REDEEMABLE COMMON STOCK PURCHASE WARRANTS. Pursuant to this
Prospectus, the Company is offering 200,000 Class B Redeemable Common Stock
Purchase Warrants ("Class B Warrants") and 200,000 Class C Redeemable Common
Stock Purchase Warrants ("Class C Warrants")to purchase an aggregate of
400,000 shares of Common Stock.
Class B Warrants. The Class B Warrants are being issued under a
Warrant Agreement dated November 15, 1995, between the Company and Warrant
Holders. Each Class B Warrant will be exercisable immediately upon its
acquisition and until January 1, 2001, at an exercise price of $6.25 per
Warrant, and shall entitle the holder thereof to receive one (1) share of
Stock for each Class B Warrant exercised. Fractional shares of Stock will not
be required to be issued upon exercise of the Class B Warrants. A Class B
Warrant may be exercised by surrendering a Class B Warrant certificate with an
executed form of election to purchase shares attached to the certificate, and
paying to the Company the full exercise price for the Class B Warrants being
exercised. Holders of Class B Warrants will not be entitled (by virtue of
being Class B Warrant holders) to receive dividends, vote, receive notices of
shareholders' meetings or otherwise have any rights of shareholders of the
Company.
The Class B Warrants are redeemable, at the option of the Company,
at a price of $0.05 per Class B Warrant at any time after January 1, 1997 upon
not less than 30 days prior written notice, provided that there is a public
trading market for the Common Stock and that the reported high bid price of
the Common Stock equals or exceeds $7.50 per share for the 20 consecutive
trading days immediately prior to the date of the notice of redemption to
warrant holders.
The exercise price, number and kind of shares of Common Stock to be
obtained by the exercise of the Class B Warrants is subject to adjustment in
the event of a split of the Common Stock or in the event of the reorganization
or recapitalization of the Company or of the merger or consolidation of the
Company.
The Company will reserve from the authorized and unissued shares a
sufficient number of shares of Common Stock for issuance upon the exercise of
the Class B Warrants.
Class C Warrants. The Class C Warrants are being issued under a
Warrant Agreement dated November 15, 1995, between the Company and Warrant
Holders. Each Class C Warrant will be exercisable immediately upon its
acquisition and until January 1, 2001, at an exercise price of $10.00 per
Warrant, and shall entitle the holder thereof to receive one share of stock
for each Class C Warrant exercised. Fractional shares of stock will not be
required to be issued upon exercise of the Class C Warrants. A Class C
Warrant may be exercised by surrendering a Class C Warrant certificate with an
executed form of election to purchase shares attached to the certificate, and
paying to the Company the full exercise price for the Class C Warrants being
exercised. Holders of Class C Warrants will not be entitled (by virtue of
being Class C Warrant holders) to receive dividends, vote, receive notices of
shareholders' meetings or otherwise have any rights of shareholders of the
Company.
The Class C Warrants are redeemable, at the option of the Company,
at a price of $0.05 per Class C Warrant at any time after January 1, 1997,
upon not less than 30 days prior written notice, provided that there is a
public trading market for the Common Stock and that the reported high bid
price of the Common Stock equals or exceeds $12.00 per share for 20
consecutive trading days immediately prior to the date of the notice of
redemption to warrant holders.
The exercise price, number and kind of shares of Common Stock to be
obtained by the exercise of the Class C Warrants is subject to adjustment in
the event of a split of the Common Stock or in the event of the reorganization
or recapitalization of the Company or of the merger or consolidation of the
Company.
The Company will reserve from the authorized and unissued shares a
sufficient number of shares of Common Stock for issuance upon the exercise of
the Class C Warrants.
PREFERRED STOCK. The Company is authorized to issue 10 million shares of
Preferred Stock, $0.001 par value. The preferences, rights and attributes of
the Preferred Stock, which may be set forth in series, shall be determined by
the board of directors at such times as series are authorized to be issued.
As of the date of this Prospectus, the Company has not issued any shares of
its authorized Preferred Stock.
OTHER SECURITIES OF THE COMPANY. Under the terms of the Merger, all
warrants and options of Flex Financial which are outstanding on the Effective
Date shall be canceled and converted into warrants and options of the Company
of equivalent tenor. Therefore upon the Effective Date of the Merger, the
Company will have pursuant to the Merger the following additional securities
outstanding.
Class A Common Stock Purchase Options. In September 1995 Flex
Financial authorized the issuance of 80,000 Class A Common Stock Purchase
Options ("Class A Options") in connection with a private placement of 80,000
shares of common stock to its founding shareholders. As of the date of this
Prospectus, all of such Class A Options continue to be owned by the original
subscribers and are outstanding. The Class A Options are currently
exercisable and will terminate on December 31 , 2000 and may be
exercised at a price of $.50 per share.
Unit Purchase Options. In connection with an IPO Bridge Loan, Flex
Financial issued $50,000 principal amount of 10% subordinated notes ("Notes")
and Unit Purchase Options ("Option Units"). The Option Units entitle the
holders to purchase such number of equivalent units of Flex Financial's
securities as may be offered in an initial public offering at an aggregate
offering price of at least $60,000 pursuant to an effective registration
statement filed under the Securities Act that closes prior to June 30, 1996.
The number of equivalent units purchasable at a price of $.50 per unit is
determined by dividing the IPO unit offering price into the principal amount
of Notes. Under the terms of this Units Offering, holders of the Option
Units are entitled to purchase 8,333 equivalent Units. By mutual consent,
the applicable IPO closing date and expiration date for exercise was extended
to March 31, 1998 and the holders were granted an additional 8,000
Option Units. As of the date of this Prospectus, all of such Class A
Options continue to be owned by the original subscribers and are
outstanding.
Class B and Class C Warrants. As of the date of this Prospectus,
Flex Financial had 28,000 Class B Warrants and 28,000 Class C Warrants
outstanding to purchase an aggregate of 56,000 shares of common stock. These
warrants were issued in a private placement that closed in April 1996 and are
identical to those purchasable in this offering.
FEDERAL INCOME TAX CONSEQUENCES
THE MERGER. The Merger should qualify as a type "A" reorganization under
Section 368(a)(1) of the Code. However, when consideration is given to the
fact that the Company is newly organized, the "step transaction doctrine"
might be applied and, accordingly, the Company might be considered a
continuation of Flex Financial with only a change of name or place of
incorporation, a type "F" reorganization under Section 368(a)(1). Whether the
Merger be characterized as a type "A" or "F" reorganization, the Company
believes that there should be no recognition of taxable gain or loss to the
shareholders of the Company by reason of the Merger.
THE SPINOFF. It is anticipated that the distribution by American NorTel
to its shareholders of the 20,000 Spinoff Shares will be a taxable event to
American NorTel and to each of its shareholders receiving any of the Spinoff
Shares. Gain (but not loss) would be recognized by American NorTel under
Section 311 of the Internal Revenue Code for any excess of the fair market
value of the Company's stock on the date of actual distribution over the tax
basis to American NorTel of such stock.
SHAREHOLDERS OF AMERICAN NORTEL. As for American NorTel's shareholders
who receive Spinoff Shares of the Company, the Spinoff shall occur prior to
the vote by Flex Financial's shareholders to accept or reject the Merger.
Since the result of the vote by Flex Financial's shareholders cannot be
forecast, and since the Merger cannot and shall not become effective until
after a favorable vote is obtained on the Merger, American NorTel takes the
view that the fair market value of the Spinoff Shares on the date of the
Spinoff should not have increased over the $0.05 price paid by American NorTel
for the 20,000 Spinoff Shares.
American NorTel has no current or accumulated earnings, and the
distribution is being made from excess capital. Each shareholder of American
NorTel should reduce the adjusted basis of his American NorTel stock by the
fair market value of the distribution to him, and any remaining portion will
be treated as capital gain in the same manner as a sale or exchange of the
stock. This fair market value is assumed to be $0.02 per share, the
book value per share of Flex Financial at July 31, 1997. American
NorTel undertakes to advise its shareholders in late 1997 or early 1998
should it deem the fair market value of the distributed Spinoff Shares on the
date of distribution to have been different than $0.02 per share or
should it have had earnings in 1997, which would cause the distribution,
to the extent of such earnings, to be taxed as a dividend and as ordinary
income.
The above discussion is not based upon an advance ruling by the Treasury
Department but upon an opinion of M. Stephen Roberts, Esq., in his capacity as
tax counselor to the Company (which tax opinion is one of the exhibits to the
registration statement of which this Prospectus is a part). See "Risk
Factors-Tax Consequences."
PRO FORMA FINANCIAL INFORMATION AND DILUTION
Due to the fact that the Company has no substance or operating history -
it was organized as a shell to accommodate the desire of Flex Financial's
management to provide for the issuance of securities registered under the
Securities Act to Flex Financial's shareholders, pro forma financial
information giving effect to the Merger would not vary in any significant
respect from the financial information of Flex Financial.
Essentially, the effect of the Spinoff and Merger is to dilute by
approximately 17% the equity of the shareholders of Flex Financial by
transferring this equity to the shareholders of American NorTel. The effect
of the Merger and Spinoff on the net tangible book value a share of the
Company's Common Stock and Flex Financial's Common Stock is as follows:
<TABLE>
<CAPTION>
BEFORE MERGER SPINOFF AFTER MERGER SPINOFF
----------------------- ----------------------
<S> <C> <C>
Company's Common Stock. . . . $ 0.02 $ (0.30)
Flex Financial's Common Stock $ (0.36) $ (0.30)
</TABLE>
MATERIAL CONTACTS AMONG THE COMPANIES
Other than the proposed Spinoff and Merger described herein, there have
been no material contracts, arrangements, understandings, relationships,
negotiations or transactions among Flex Financial, the Company, and American
NorTel during the periods for which financial statements appear herein.
REOFFERING BY PARTY DEEMED TO BE AN UNDERWRITER
The Shares described herein are to be redistributed by the owner of such
Shares, American NorTel, who might be deemed to be an underwriter by reason of
its intent to distribute such Shares. (See "Terms of the Merger," above.)
After the distribution by American NorTel of the Spinoff Shares to its
shareholders, American NorTel will no longer own any shares of capital stock
of the Company, except to the extent that an uncertain number of Spinoff
Shares representing undistributed fractional an whole share interests, would
not be allocated in the rounding down process (see "Terms of the Merger").
A consequence to American NorTel, should it be deemed to be an
underwriter of the Shares to be distributed to its shareholders, is that any
person who purchases the registered Shares within three years after the
distribution could assert a claim against American NorTel under Section 11 of
the Securities Act of 1933. The purchase could be in the open market as long
as the shares purchased can be traced to the registered Shares American NorTel
distributes to its shareholders. Such a claim, to be successful, must be
based upon a showing that statements in the registration statement were false
or misleading with respect to a material fact or that the registration
statement omitted material information required to be included therein.
Open market purchasers may have to prove reliance upon the alleged
misstatement or omission, but reliance may not necessarily require a showing
that the purchaser actually read the registration statement but, instead, that
the misstatements or omissions in the registration statement were a
substantial factor in the purchase of the shares.
INTEREST OF COUNSEL
M. Stephen Roberts, Esq., counsel to the Company, is named in this
Prospectus as having given an opinion on the validity of the securities being
registered, upon certain income tax consequences of the Merger and the
Spinoff, and upon other legal matters concerning the registration or offering
of the securities described herein. Mr. Roberts is the beneficial owner of
21% of the issued and outstanding shares of Common Stock of Flex
Financial and is the beneficial owner of less than .5% of the issued and
outstanding shares of Common Stock of American NorTel and, by reason of this
ownership, shall become the beneficial owner of approximately 20,102
Shares of the Company by way of the merger and American NorTel's distribution
of the 20,000 Spinoff Shares to its shareholders.
INDEMNIFICATION
Under Texas corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are made or threatened to be
made parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same
capacity for another entity at the request of the corporation. Such
indemnification includes expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons if they acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation or, with respect to
any criminal action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful. In the case of any action or suit by or in the
right of the corporation against such persons, the corporation is authorized
to provide similar indemnification, provided that, should any such persons be
adjudged to be liable for negligence or misconduct in the performance of
duties to the corporation, the court conducting the proceeding must determine
that such persons are nevertheless fairly and reasonably entitled to
indemnification. To the extent any such persons are successful on the merits
in defense of any such action, suit or proceeding, Texas law provides that
they shall be indemnified against reasonable expenses, including attorney
fees. A corporation is authorized to advance anticipated expenses for such
suits or proceedings upon an undertaking by the person to whom such advance is
made to repay such advances if it is ultimately determined that such person is
not entitled to be indemnified by the corporation. Indemnification and
payment of expenses provided by Texas law are not deemed exclusive of any
other rights by which an officer, director, employee or agent may seek
indemnification or payment of expenses or may be entitled to under any bylaw,
agreement, or vote of shareholders or disinterested directors. In such
regard, a Texas corporation is empowered to, and may, purchase and maintain
liability insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation. As a result of such corporation law,
the Company may, at some future time, be legally obligated to pay judgments
(including amounts paid in settlement) and expenses in regard to civil or
criminal suits or proceedings brought against one or more of its officers,
directors, employees or agents, as such, with respect to matters involving the
proposed Merger or, should the Merger be effected, matters that occurred prior
to the Merger with respect to Flex Financial.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable.
INFORMATION ABOUT THE COMPANY
The Company was incorporated under the laws of the State of Texas on
March 21, 1996. It has no business or significant assets and was organized
for the purpose of entering into the Merger proposed herein (see "Terms of the
Transaction-Terms of the Merger"). It has no employees; its management will
serve without pay until the Merger should become effective.
DESCRIPTION OF BUSINESS AND PROPERTIES
Should the Merger be approved and effected, the Company shall be the
surviving company, but the Company's management shall not remain as the
management of the Company. (See "Voting and Management Information-Directors,
Executive Officers, and Significant Employees.") Control of the Company,
through the voting power to elect the entire board of directors and thereby to
replace management, shall pass to the present shareholders of Flex Financial,
and Flex Financial's present directors and officers shall become the directors
and officers of the Company.
It is the intention of Flex Financial's present management to continue
the business of Flex Financial as the business of the Company. (See
"Information about Flex Financial-Description of Business and Properties").
The Company's present management consists of one person, Michael T.
Fearnow. Mr. Fearnow has been a principal of National Association of
Securities Dealers' ("NASD") member firms which acted as securities
broker-dealers and acted as underwriters of, or members of, groups selling
securities offered to the public.
BUSINESS STRATEGY
Should the Merger not be approved and effected, the Company will be
without any property or business. The Company's management has no present
plans for this contingency but would seek to acquire, in exchange for stock of
the Company, a business or assets that would constitute a business. Should no
acquisition that would cause the Company to become a going concern be made
within 18 months after the date of the Registration Statement of which this
Prospectus is a part, the holders of the majority of the issued and
outstanding shares of Common Stock will have the voting power to cause a
dissolution of the Company, and persons who would be the holders of a majority
of these shares have indicated their intention to do so.
LEGAL PROCEEDINGS
Neither the Company nor its property is a party to or the subject of
pending legal proceedings.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
There is no public trading market for the Company's Common Stock. As of
the date of this Prospectus, there is one holder of record of the Company's
20,000 shares of issued and outstanding capital stock. After the Spinoff,
these 20,000 shares of stock shall be owned of record by American NorTel's
approximately 780 shareholders. (See "Terms of the Transaction-Terms of
the Merger.")
Should the Merger be approved and effected, (i) the Escrow Agent will
release from escrow the certificates representing the ownership of the 20,000
Spinoff Shares, which certificates would be delivered to the approximately 780
persons owning the Spinoff Shares and (ii) the 12 shareholders of Flex
Financial will receive 94,000 shares of Common Stock of the Company in
exchange for all the issued and outstanding shares of capital stock of Flex
Financial. An additional 217,665 shares of Common Stock of the Company will
be reserved for issuance against the exercise of Company options and warrants
that would replace existing options and warrants of Flex Financial.
There can be, and is, no assurance that market makers will make or
maintain a market in the stock or that, even if a market is made and
maintained in the stock, that the stock will trade at prices deemed attractive
or reasonable to the shareholders of the Company.
The Company's stock will not be eligible for quotation on the NASDAQ
Small Cap Market ("NASDAQ") (i) until it trades at a price of $3 per share or
higher and (ii) unless it meets other NASDAQ requirements regarding assets and
shareholders' equity, which it will not yet meet even if the Merger is
approved and effected. No assurance can be made that the Common Stock will
ever become eligible for quotation on NASDAQ.
The Company's stock is expected to be quoted on an NASD inter-dealer
system called "the Bulletin Board." While some Bulletin Board stocks are
actively traded, they do not draw the interest of the NASD brokerage community
held by NASDAQ stocks or exchange-listed stocks. The eligibility requirements
for listing the Company's stock on exchanges are generally as high or higher
than the requirements for eligibility for quotation on NASDAQ, and the Company
has no present plans to list its stock on an exchange. Hence, the plans of
the Company to use its stock for business acquisition purposes are likely to
be adversely affected unless and until its stock becomes eligible for
quotation on NASDAQ.
Further, holders of the Shares offered herein face the prospect, should
the Merger be approved and effected, of an indefinite period during which the
Shares will be subject to trading severities imposed on Bulletin Board,
so-called "penny stocks" (stocks that trade at less than $5 per share) by
regulations of the SEC. The effect of these trading severities is to reduce
broker-dealer and investor interest in trading or owning "penny stocks" and,
hence, could inhibit the ability of the Company's stock to reach a trading
level of $3 per share or higher and thereby become eligible for quotation on
NASDAQ even if the Company meets NASDAQ's assets and shareholders' equity
requirements in the future.
Flex Financial has obtained agreements from the beneficial owners of at
least 50% of their presently outstanding shares of capital stock to the effect
that these owners will not sell any of their shares of post-Merger Company
stock (without first obtaining the written authorization of Flex Financial's
president) for the following periods after the Merger becomes effective and
information about the Company is published in Moody's OTC Industrial Manual:
Flex Financial's shareholders-180 days.
RULE 144 AND RULE 145 RESTRICTIONS ON TRADING
Should the Merger and Spinoff transaction described herein be approved
and effected, all issued and outstanding shares of Common Stock of the Company
shall have been issued or distributed pursuant to registration with the SEC.
Nevertheless, some of the Shares, even though deemed not to be "restricted
securities," as such term is used by the SEC, will be subject to certain
restrictions on their transfer for value.
Holders of the Shares who are deemed to be affiliates of Flex Financial
at the time of the vote on the Merger, in order to sell their Shares, must
either register them for sale or comply with the resale provisions set forth
in paragraph (d) of the SEC Rule 145, unless some other
exemption-from-registration provision is available. The resale provisions of
paragraph (d) of Rule 145 refer to certain provisions of the SEC Rule 144
which require that:
- there must be available, to the public, current information about
the Company of a quality meeting certain Commission requirements,
- transfers for value by such affiliates can occur only either
through broker transactions not involving the solicitation of buyers or
directly to market-makers, and
- each such affiliate can transfer for value, during a 90-day period,
no more Shares than the greater of 1% of all issued and outstanding
shares of Common Stock of the Company (940 Shares immediately after the
Merger) or the average weekly volume of trading in such Common Stock reported
through the automated quotation system of NASDAQ during the four calendar
weeks prior to placing the sell order with a broker-dealer.
The above-described resale provisions of Rule 145 shall continue,
for persons who are affiliates of Flex Financial at the time of the vote on
the Merger, for two years after the Merger, at which time only the
current public information requirement shall continue. At such time as any
such affiliate has ceased to be an affiliate of the post-merger company for at
least three months, and provided at least three years have
elapsed since the date of the Merger, then even the current public information
requirement will no longer be required for such a former affiliate to sell any
of the Shares acquired in the Merger.
The Company believes that none of the 20,000 Spinoff Shares will be
subject to any restrictions on trading or transfers for value, by reason of
these Shares' being registered for the Spinoff. Further, none of the 94,000
Shares of the Company to be distributed in the Merger to Flex Financial
shareholders other than to Flex Financial officers and directors and to
affiliates of Flex Financial prior to the Merger will be subject to any
restrictions on transfer. Accordingly, after the effective date of the Merger
and the redistribution of the Spinoff Shares, there shall be 114,000 Shares in
the "public float," i.e., subject to no Rule 144 or other applicable
securities law restrictions on their being traded or transferred for value.
It is estimated that in excess of 300 persons will own these Shares of record,
the offering of which for sale could have a materially adverse effect on the
market price of the Company's stock. However, for a period of 180 days after
the Merger should become effective and information about the post-Merger
Company has been published in Moody's OTC Industrial Manual, at least half of
the Flex Financial outstanding Shares are subject to restrictions on trading
by reason of agreements among the shareholders owning these Shares. See
"Information about the Company - Market for the Company's Common Stock and
Related Stockholder Matters."
There is no equity of the Company subject to outstanding options or
warrants to purchase, or securities convertible into, equity of the Company.
However, under the terms of the Merger, all warrants and options of Flex
Financial which are outstanding on the Effective Date shall be canceled and
converted into warrants and options of the Company to buy an equivalent number
of shares. See "Description of Securities-Other Securities of the Company."
The Company has had no operations or earnings and has declared no
dividends on its capital stock. Should the Merger be approved and effected,
there are no restrictions that would, or are likely to, limit the ability of
the Company to pay dividends on its Common Stock, but the Company has no plans
to pay dividends in the foreseeable future and intends to use earnings for
business expansion purposes. (See "Information about the Company-Description
of Business and Properties").
FINANCIAL STATEMENTS
Set forth below are the independent auditor's report dated August 5,
1997, with respect to the Company's balance sheet as of July 31, 1997
and 1996, such balance sheet, and the notes to the balance sheet.
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
C 0 N T E N T S
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditor's Report. . . . . . . . . 2
Balance Sheets. . . . . . . . . . . . . . . . 3
Statements of Operations. . . . . . . . . . . 4
Statements of Changes in Stockholder's Equity 5
Statements of Cash Flows. . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . 7-9
</TABLE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholder and Directors of
Flex Acquisitions Corporation
(A Development Stage Company)
Houston, Texas
We have audited the accompanying balance sheets of Flex Acquisitions
Corporation (A Development Stage Company) as of July 31, 1997 and 1996,
and the related statements of operations, changes in stockholder's equity and
cash flows for the year ended July 31, 1997 and the period March 22,
1996 (date of inception) through July 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Flex Acquisitions Corporation
(A Development Stage Company) at July 31, 1997 and 1996, and the
results of its operations and its cash flows for the year and period
then ended in conformity with generally accepted accounting principles.
/s/ Harper & Pearson Company
- --------------------------------
Harper & Pearson Company
Houston, Texas
August 5, 1997
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
OTHER ASSETS
Start-up costs . . . . . . . . . . . . . . . . . $ 4,992 $ 4,992
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Note payable, Flex Financial Group, Inc. . . . . $ 4,000 $ -0-
Accounts payable . . . . . . . . . . . . . . . . 134 134
Interest payable . . . . . . . . . . . . . . . . 534 134
--------- ---------
TOTAL CURRENT LIABILITIES. . . . . . . . . . 4,668 268
--------- ---------
LONG-TERM NOTE PAYABLE, FLEX FINANCIAL GROUP, INC. -0- 4,000
--------- ---------
STOCKHOLDER'S EQUITY
Preferred stock, no par value, 10,000,000
shares authorized, none issued and
outstanding, rights, preferences,
qualifications, limitations and
restrictions and any other benefits
to be determined by the Board of
Directors. . . . . . . . . . . . . . . . . . . -0- -0-
Common stock, $.001 par value, 10,000,000
shares authorized, 20,000 shares sold
and to be issued . . . . . . . . . . . . . . . 20 20
Additional paid-in capital . . . . . . . . . . . 980 980
Deficit accumulated during the development stage (676) (276)
--------- ---------
324 724
--------- ---------
$ 4,992 $ 4,992
========= =========
</TABLE>
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEAR AND PERIOD ENDED JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
July 31, Cumulative
1997 1996(1) (2)
---------- ------------ ---------
<S> <C> <C> <C>
EXPENSES
Interest expense. . . . . . . . . . . $ 400 $ 134 $ 534
Outside services. . . . . . . . . . . -0- 80 80
Bank service charges. . . . . . . . . -0- 54 54
Postage and delivery. . . . . . . . . -0- 8 8
---------- ------------ ---------
400 276 676
---------- ------------ ---------
NET LOSS. . . . . . . . . . . . . . . . $ (400) $ (276) $ (676)
========== ============ =========
LOSS PER COMMON SHARE . . . . . . . . . $ (.02) $ (.01) $ (.03)
========== ============ =========
SHARES USED IN COMPUTING LOSS PER SHARE 20,000 20,000 20,000
========== ============ =========
<FN>
(1) March 22, 1996 (Date of Inception) to July 31, 1996
(2) March 22, 1996 (Date of Inception) to July 31, 1997
</TABLE>
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEAR ENDED JULY 31, 1997 AND PERIOD MARCH 22, 1996 THROUGH JULY 31,
1996
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital (Deficit) Total
----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sale of Common Stock. . $ -0- $ 20 $ 980 $ -0- $ 1,000
Net Loss. . . . . . . . -0- -0- -0- (276) (276)
----------- --------- --------- ---------- ----------
Balance - July 31, 1996 -0- 20 980 (276) 724
Net Loss. . . . . . . . -0- -0- -0- (400) (400)
----------- --------- --------- ---------- ----------
Balance - July 31, 1997 $ -0- $ 20 $ 980 $ (676) $ 324
=========== ========= ========= ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEAR AND PERIOD ENDED JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
July 31, Cumulative
1997 1996(1) (2)
---------- ------------ ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . $ (400) $ (276) $ (676)
---------- ------------ ---------
Adjustments to reconcile net loss to net
cash used by operating activities:
Change in operating assets and
liabilities:
Accounts payable . . . . . . . . . . . . . . . . . -0- 134 134
Interest payable . . . . . . . . . . . . . . . . . 400 134 534
---------- ------------ ---------
Total Adjustments. . . . . . . . . . . . . . . . 400 268 668
---------- ------------ ---------
Net Cash Used by Operating Activities. . . . . . -0- (8) (8)
---------- ------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Start-up costs . . . . . . . . . . . . . . . . . . -0- (4,992) (4,992)
---------- ------------ ---------
Net Cash Used by Investing Activities. . . . . . . -0- (4,992) (4,992)
---------- ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term note payable, Flex Financial Group, Inc. -0- 4,000 4,000
Proceeds from issuance of common stock . . . . . . -0- 1,000 1,000
---------- ------------ ---------
Net Cash Provided by Financing Activities. . . . -0- 5,000 5,000
---------- ------------ ---------
NET INCREASE IN CASH . . . . . . . . . . . . . . . . -0- -0- -0-
CASH AT BEGINNING OF PERIOD. . . . . . . . . . . . . -0- -0- -0-
---------- ------------ ---------
CASH AT END OF PERIOD. . . . . . . . . . . . . . . . $ -0- $ -0- $ -0-
========== ============ =========
<FN>
(1) March 22, 1996 (Date of Inception) to July 31, 1996
(2) March 22, 1996 (Date of Inception) to July 31, 1997
</TABLE>
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Flex Acquisitions Corporation (A Development Stage Company) (Acquisitions) a
wholly owned Texas subsidiary of American Nortel Communications, Inc.
(American Nortel) was incorporated on March 21, 1996 for the purpose of; (a)
merging with Flex Financial Group, Inc. (Flex Financial), an entity under
common management because of overlapping director and officers,
and (b) a proposed filing of a registration statement with the Securities and
Exchange Commission. Simultaneously with these transactions, it is anticipated
that American Nortel will then distribute its shares of the Company to
American Nortel shareholders. The newly formed public Company will then engage
in the business of participating in certain short-term financing opportunities
(terms of less than one year) in the underwriting segment of the securities
industry and in certain long-term financing and investment opportunities
(terms of greater than one year) in transactions with operating businesses
with significant growth potential.
The Company has no business operations or significant capital and does not
intend to engage in any active business until it merges with Flex
Financial. Should the merger not occur, the Company would seek other business
opportunities and if none were found, would be dissolved within eighteen
months by a vote of the majority of its common stockholders.
Common management of the Company and Flex Financial result from the
following relationships; Michael T. Fearnow, sole director and officer of the
Company holds similar positions with Flex Financial and is the sole owner of
Focus-Tech Investments, Inc., a 17.5% owner of the Company. Financial Public
Relations, Ltd. is a Texas limited partnership with all interests owned by
entities controlled or owned by M. Stephen Roberts, a 17.5% owner of the
Company. Focus-Tech Investments, Inc. is a Nevada corporation wholly owned by
Michael T. Fearnow. Mr. Fearnow is also the sole director and officer of
Focus-Tech Investments, Inc. M. Stephen Roberts, attorney at law, is a 17.5%
owner of the Company and less than .5% shareholder in American Nortel.
Merger Spin-Off - The Company agreed to merge with Flex Financial on July 1,
- ----------------
1996. Flex Financial is a developmental stage company formed to participate in
certain short-term financing opportunities (terms of less than one year) in
the underwriting segment of the securities industry and to participate in
certain long-term financing and investment opportunities (terms of greater
than one year) in transactions with operating businesses with significant
growth potential.
The Company will be the surviving corporation (Survivor) but Flex Financial
will elect all directors and officers of the Survivor. All currently
outstanding stock of Flex Financial will be canceled and converted into 94,000
shares of the Company's common stock. Flex Financial has options and warrants
currently outstanding which will be canceled and options and warrants on the
Company's common stock will be issued according to the plan of merger.
The merger is contingent upon the effectiveness of the registration
statements, and upon the shareholders of the Company and of Flex Financial
approving the proposed merger.
Management's Estimates - Management uses estimates and assumptions in
- -----------------------
preparing financial statements in accordance with generally accepted
accounting principles. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could vary
from the estimates that were used.
Loss Per Common Share - Loss per common share is computed using the weighted
- -----------------------
average number of shares of common stock outstanding during the period.
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Income Taxes - For the year and period ended July 31, 1997 and
- -------------
1996, the Company incurred net operating losses amounting to $400 and
$276 , respectively . Net perating loss carryforwards will
expire in the years 2012 and 2011, if not previously utilized.
No tax benefit for the loss carryforward has been reported in the financial
statements. Accordingly, the tax benefit of approximately $230
resulting from the utilization of the loss carryforward has been offset by a
valuation allowance of the same amount.
Start-up Costs - Represents legal and other costs associated with the
- ---------------
organization of the Company and services in connection with the anticipated
merger/spin-off with American Nortel Communications, Inc. and Flex Financial
Group, Inc. These costs will be amortized over a five year period upon
commencement of operations.
Operating Costs - Subsequent to December 31, 1996, pursuant to an agreement
---------------
with Flex Financial, the Company is provided free rent, accounting services,
management and other operating expenses.
NOTE B LONG-TERM NOTE PAYABLE, FLEX FINANCIAL GROUP, INC.
Long-term note payable to Flex Financial Group, Inc. at July 31, 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Flex Financial Group, Inc. - 10% note,
at the option of the holder the note is
convertible into common stock in
multiples of $1,000 unpaid principal
at a conversion price of $.05 per share
at any time up to maturity, subordinated,
redeemable at a 10% premium due
March 31, 1998, renewable for an
additional two year term, interest
payable at redemption or maturity;
unsecured. . . . . . . . . . . . . . . . $ 4,000 $ 4,000
Less current portion. . . . . . . . . . . . 4,000 -0-
-------- --------
Long-term portion . . . . . . . . . . . . . $ -0- $ 4,000
======== ========
</TABLE>
<PAGE>
FLEX ACQUISITIONS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE C TRANSACTIONS AND BALANCES WITH FLEX FINANCIAL GROUP, INC. AND MR.
STEVE ROBERTS
Transactions and balances with Flex Financial and Mr. Roberts at July 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Flex Financial Group, Inc.
Interest expense/payable. . . . . . . . . . . . . $ 400 $ 134
======== ========
Roberts - Attorney at Law; initial registered agent
Start-up costs. . . . . . . . . . . . . . . . . $ -0- $ 4,992
======== ========
</TABLE>
INFORMATION ABOUT FLEX FINANCIAL
Flex Financial Group, Inc. ("Flex Financial") was incorporated under the
Business Corporation Law of the State of Texas on August 17, 1995.
MANAGEMENT'S PLAN OF OPERATION
The following should be read in conjunction with the Financial Statements
of Flex Financial and the Notes thereto, and the other financial and other
information included elsewhere in this Prospectus. This Prospectus contains
certain statements regarding future trends which are subject to various risks
and uncertainties. Such trends, and their anticipated impact on Flex
Financial, could differ materially from those discussed in this Prospectus.
Factors that could cause or contribute to such differences include, but are
not limited to, those discussed in "Risk Factors" and elsewhere in this
Prospectus.
Flex Financial was organized in August 1995 and is in the development
stage. Flex Financial has not yet commenced operations, has not generated any
revenues from operations to date, and will not generate any revenues from
operations until after the completion of the Units Offering, which the
company anticipates will occur in December 1997. There can be no
assurance that the company will be able to successfully generate meaningful
revenue or achieve profitable operations.
Since inception, Flex Financial has developed a business plan; developed
and disseminated promotional material to prospective clients of its business
services; identified potential clients with respect to its services; developed
a marketing strategy; and raised an aggregate of $137,200 in gross proceeds
through private equity and debt offerings.
LIQUIDITY AND CAPITAL RESOURCES. As of July 31, 1997 , Flex
Financial has approximately $10,000 in cash and cash equivalents. It
is anticipated that the company will realize $500,000 in net proceeds from the
sale of the Common Stock and Warrants offered in the Units Offering .
The net proceeds of the Units Offering will be used to pay off
the Bridge Loans, to commence investment in Bridge Loans and
Subordination Loans, and to pay for general administrative and overhead
expenses incurred in connection therewith.
Flex Financial is dependent upon the proceeds of the Units
Offering , if any, or other financing to implement its proposed business
plan. Management believes that the proceeds from the sale of the Common Stock
and Warrants offered in the Units Offering will enable Flex Financial to
satisfy its anticipated financing needs for a period of at least 12 months
following the Effective Date. However, there can be no assurance that Flex
Financial will have sufficient capital resources to permit it to fully
implement its business plan.
PLAN OF OPERATION
BUSINESS OBJECTIVES. Flex Financial was formed primarily to serve
as a vehicle to invest in short-term financing opportunities in the
underwriting segment of the securities industry. The company intends to
participate in short-term financing opportunities by (i) providing equity
subordination loans to underwriters requiring additional excess net capital
for underwriting specific issues on a firm commitment basis ("Subordination
Loans") and (ii) providing bridge loans to selected issuers to connection with
initial public offerings and secondary financing ("Bridge Loans"). The
business objectives of the company are to (i) provide Subordination Loans to
selected underwriters for specific issues on terms suiting the company's
investment requirements, and (ii) to provide Bridge Loans on a highly
selective basis within established guidelines to issuers meeting the company's
due diligence standards. Flex Financial also intends to engage in "spinoff"
activities such as are described herein, such spinoffs to involve the
distribution, by way of stock dividends or otherwise, of registered shares of
stock of other companies. The company intends to use the proceeds of the
Units Offering primarily to provide the capital to commence the investigation,
negotiation and participation in Subordination and Bridge Loans.
The company believes that financing opportunities will become available
to it due primarily to the contacts of its officers, directors and
consultants with entities and individuals participating in various segments of
the securities industry, liquidity of its assets, its future status as a
publicly-held company, and its flexibility in structuring and participating in
financing opportunities. The company has no agreement or understanding to
participate in any financing opportunity, nor does it currently have any
opportunity under investigation. Decisions as to which financing
opportunities to participate in will be made by management of the company,
which will in all probability act without the consent, vote, or approval of
Flex Financial's stockholders except when required by applicable law.
BUSINESS EXPERIENCE OF PRINCIPALS. The present executive officer and
director and certain consultants who have been retained by Flex
Financial have business experience which has provided them with certain
skills which the company believes will be helpful in identifying and
evaluating potential Bridge Loan and Subordination Loan candidates and in
negotiating the terms of Bridge Loans and Subordination Loans. They have
had significant experience in a variety of business transactions, including
providing investment banking, underwritings, bridge loans and general business
consulting to public and private companies in the $5 million to $10 million
asset range. The company expects to actively recruit board members with
extensive management, financial and entrepreneurial backgrounds to assist in
these endeavors. The company expects that future directors will have similar
experience and/or extensive business management and financial management
experience. In addition, the Board of Directors may establish an advisory
committee (the "Advisory Committee") consisting of up to eight (8) persons to
assist in finding and evaluating potential candidates for Bridge Loans and
Subordination Loans. Members of the Advisory Committee will have significant
experience in the securities industry primarily in areas of business interest
to the company. The Advisory Committee will not have any role in the
management of the business of the company, but will be available, to the
extent management may require, to consult with management as to potential
candidates for Bridge Loans and Subordination Loans.
BUSINESS PLAN.
GENERAL. Flex Financial was organized to provide Subordination
Loans to selected underwriters requiring short term additional net capital to
underwrite specific issues on a firm commitment basis; to provide Bridge Loans
on a highly selective basis within established guidelines to selected issuers
meeting the company's due diligence standards to facilitate initial public
offerings or secondary financing; and to engage in "spinoff" activities in
which the company serves as a vehicle or facility for private operating
companies to effect public status.
The company will generally use the proceeds of the Units Offering,
after paying off the Bridge Loans, to investigate and, if warranted,
participate in a financing opportunity with immediate short-term earnings
potential. Because of the company's limited financial, managerial, and other
resources, the number of suitable potential financing opportunities which will
be available to it under its criteria will be extremely limited. The company
currently has no commitment or arrangement to participate in any financing
opportunity and cannot now predict what type of opportunity may become
available to it.
Management of the company has virtually unlimited discretion in searching
out and participating in a financing opportunity. The company is unable to
predict when it may become engaged in a financing opportunity. It expects,
however, that review and analysis of specific proposals and the selection of a
financing opportunity will likely take several weeks or more following the
successful completion of this offering. There can be no assurance as to when
a financing opportunity will become available, however, management is
confident that such opportunities will become available.
Management anticipates that the company may be able to participate in
ongoing financing opportunities. This diversification should enable the
company to reduce its risks by offsetting potential losses from one financing
against gains from another.
SUBORDINATION AND BRIDGE LOANS.
SUBORDINATION LOANS. Flex Financial intends to provide
Subordination Loans to selected underwriters to facilitate the underwriting of
specific issues on a firm commitment basis. Small underwriters seek
short-term equity subordinated underwriting loans to meet excess net capital
requirements for firm commitment underwritings. The Company intends to
participate in Subordination Loans that can be structured with the following
general terms. Subordination Loans will typically be very short term loans
(maximum term of 30 to 45 days) made to an underwriter for the purpose of
meeting excess net capital requirements for a specific firm commitment
underwriting. Principals of the underwriter will in most cases be required to
personally guarantee repayment of the loan. The terms of the loan will
normally require that loan proceeds be maintained in a segregated account
invested in short term money market or similar securities. The underwriter
will normally be expected to pay a minimum of 2% of the amount of the
underwriting for the loan, yielding a return of 7% to 10% to the Company.
The Company expects to participate in up to six Subordination Loans a
year in amounts ranging from $50,000 to $150,000 each, yielding a
return in excess of 50% per year.
BRIDGE LOANS. Flex Financial intends to provide Bridge Loans to
selected issuers to facilitate an issuer's initial public offering or
secondary public financing. Bridge Loans are typically short term loans
(maximum term of one year with mandatory prepayment out of the proceeds of the
underwriting) made to an issuer for the purpose of providing funds to pay
underwriting costs and to a lesser extent general corporate expenses relating
to the underwriting. The Company intends to participate in Bridge Loans that
can be structured with the following general terms. In the typical
transaction the Company would expect the loan to be repaid from the proceeds
of the underwriting within four to six months of the loan. The loan would
typically range in amount from $50,000 to $200,000 and normally carry an
interest rate of three to five points above prime. The Company will require an
equity enhancement in the form of warrants or cheap stock designed to provide
a return of 200% to 300% of the loan amount within 12 to 18 months of the
loan. In connection with equity enhancements, the Company will require demand
and piggy back registration rights with expenses paid by the issuer.
Principals of the issuer will be expected to personally guarantee repayment of
the loan and in most cases the loan will collateralized by some assets of the
issuer.
TYPICAL SCENARIOS. Although the Company cannot predict the exact terms
and structure of any financing transaction in which it may participate, the
following represents the type of transaction structures that the Company will
attempt to negotiate.
With respect to a typical scenario for a Subordination Loan, the Company
intends to seek situations in which a small underwriter with net capital of
$500,000 or less wants to underwrite an entire issue of $4 million to $10
million on a firm commitment basis. NASD and SEC rules and regulations
require the underwriter to have excess net capital of 30% of the retention
less underwriting fees. A $5 million firm commitment underwriting would
require $5,000,000 X .90 = $4,500,000 X .30 = $1,350,000 in excess net
capital. An underwriter requiring another $850,000 in excess net capital to
underwrite the issue would require additional underwriters or a subordinated
underwriting loan to provide the additional $850,000 in excess net capital.
The Company would expect to participate in such a subordinated loan in the
amount of $150,000 which would underwrite $500,000 of the issue.
The underwriter would expect to pay a minimum of 2% of the underwritten amount
or $10,000 for the loan, yielding a return to the Company of 7% to 10%
over a 30 to 45 day period.
With respect to a typical scenario for a Bridge Loan transaction, the
Company will expect to make a one year $100,000 Bridge Loan to an
issuer to facilitate the issuer's initial public offering to be priced at
$5.00 per share. The loan would bear interest at 13% per annum with mandatory
prepayment from the proceeds of the underwriting at closing. The loan will be
personally guaranteed by the issuer's principals and collateralized by
available assets of the issuer. The Company would expect to receive a stock
purchase warrant to buy 50,000 shares of the issuer's common stock at
$2.00 per share as an equity enhancement. Six months after the loan the
underwriting closes and the Company would expect to be repaid $100,000
principal and $6,500 in interest. Twelve months after the underwriting
(18 months after the loan) assuming the issuer's stock is trading at $6.00,
the value of the warrants would be $200,000 or 200% of the original
loan. The results and return on the equity enhancement would of course be
dependent upon the performance of the issuer's publicly traded securities
and in some cases may be of no value. Normally, the securities representing
the equity enhancement is registered in the issuer's initial public offering.
The level of the Company's participation in any particular
Subordination or Bridge Loan would depend upon available capital and prudent
risk management and portfolio diversification.
GENERAL CONSIDERATIONS. Management intends to participate in a portfolio
of subordinated loans and bridge loans that will provide prudent risk and
diversification. The amount of and timing of each transaction will be
determined by management taking into account the liquid assets and net worth
of the Company, and the ongoing general and administrative costs of the
Company. Whenever possible management will further diversify by participating
with other investors in its financing opportunities.
OTHER INVESTMENT TRANSACTIONS
GENERAL. By reason of its participation in Subordination and Bridge
Loans, Flex Financial expects to be presented investment opportunities
resulting in the acquisition of a non-controlling equity interest in a
company that wishes to become publicly held ("Public Candidate") and
which the Company believes has growth potential. These opportunities are
expected to be in the form of "spinoff" transactions.
INVESTMENT TRANSACTIONS. The Company will not use any portion of the
proceeds of this Units Offering to investigate and enter into any definitive
agreement relating to an Investment Transaction. The Company would not expect
to acquire more than a 10% equity interest in a Public Candidate in an
Investment Transaction.
TYPICAL SCENARIOS. In a typical scenario, Flex Financial may be
approached by a Public Candidate. Flex Financial will enter into an
agreement with the Public Candidate for a proposed merger-spinoff transaction
which would result in the Public Candidate becoming a publicly held company
. The proposed merger-spinoff would be effected by Flex Financial
forming a new subsidiary which would be thinly capitalized with Flex
Financial as its sole shareholder. The Target would merge into the
subsidiary with the Target shareholders receiving approximately 90% of the
issued and outstanding shares of the subsidiary and Flex Financial retaining
10% of the shares. Subsequent to the merger, Flex Financial will
distribute some or all of the subsidiary's shares to its shareholders
(expected at that time to exceed 300 in number). Contemporaneously with the
merger-spinoff, the subsidiary would file a registration statement on Form S-4
with the SEC to register the merger shares and file a registration statement
on Form SB-2 with the SEC to register the spinoff shares. The subsidiary may
in connection with the filing of the S-4 register shelf shares for future
issuance in association with possible acquisitions and may in connection with
the filing of the SB-2 register the sale of additional shares to provide
working capital or register the resale of shares for the account of its
shareholders. As a result of the transaction, the Public Candidate
becomes a publicly-held company with Flex Financial or its shareholders
owning 10% of the public company. Flex Financial will not bear any
expense in connection with such a transaction.
METHOD OF PARTICIPATION. It is impossible to predict exactly how Flex
Financial may participate in an Investment Transaction, or if it will, but
generally speaking, the following represents the type of transaction
structures that the will attempt to negotiate. Subject to a letter of
intent, the company may agree to form a wholly-owned subsidiary. The
subsidiary may then enter into a definitive agreement under which the Public
Candidate merges into the subsidiary with the retaining a negotiated equity
interest in the surviving subsidiary (expected to be 10% of issued and
outstanding shares). The Company may then use the shares for, among other
things, distribution as a dividend to its shareholders, sale for cash,
exchange for other assets, or retention for investment purposes.
FLEX FINANCIAL MAY BE DEEMED TO BE AN UNDERWRITER. In a typical scenario
as described above, Flex Financial may be deemed an underwriter by reason of
its intent to distribute any shares that may be owned by it as a dividend
distribution to its shareholders ("Spinoff Shares").
After a distribution by Flex Financial of Spinoff Shares to its
shareholders, the company may no longer own any shares of capital stock of
the Public Candidate, except to the extent it may elect to distribute less
than all of the Spinoff Shares.
A consequence to Flex Financial should it be deemed to be an underwriter
of the shares to be distributed to its shareholders, is that any person who
purchases the registered Shares within three years after the distribution
could assert a claim against Flex Financial under Section 11 of the Securities
Act of 1933. The purchase could be in the open market as long as the shares
purchased can be traced to the registered Spinoff Shares Flex Financial
distributes to its shareholders. Such a claim, to be successful, must be
based upon a showing that statements in the registration statement were false
or misleading with respect to a material fact or that the registration
statement omitted material information required to be included therein.
Open market purchasers may have to prove reliance upon the alleged
misstatement or omission, but reliance may not necessarily require a showing
that the purchaser actually read the registration statement but, instead, that
the misstatements or omissions in the registration statement were a
substantial factor in the purchase of the shares.
FLEX FINANCIAL MAY HAVE EXPOSURE AS A CONTROL PERSON. In a typical
scenario as described above, the Company's organization of a subsidiary will
result in the company being a "control person" of the subsidiary, as that term
is defined in Section 15 of the 1933 Act from the subsidiary's organization
and until the any proposed merger should become effective.
Section 15 of the 1933 Act imposes joint and several liability on persons
who control other persons substantively liable under other sections of the
1933 Act-Section 11, for misrepresentations in a registration statement,
Section 12(1)-the unlawful sale of unregistered securities, and Section 12(2)
misrepresentations in the sale of securities. A controlling person can avoid
liability by proving "he had no knowledge of or reasonable grounds to believe
in the existence of the facts by reason of which the liability of the
controlled person is alleged to exist."
MISCELLANEOUS MATTERS
SOURCES OF OPPORTUNITIES. The principals of Flex Financial have
extensive experience in working with small underwriters and in providing
investment banking, underwritings, bridge loans, and general business and
financial consulting to smaller public and private companies. The company
anticipates that financing opportunities will be referred by various sources,
including its officers and directors, professional advisers, securities
broker-dealers, members of the financial community, and others who may present
unsolicited proposals. The company may agree to pay a finder's fee or other
compensation for services provided by unaffiliated persons who submit a
financing opportunity in which the company participates. No guideline or
policy has been adopted by the company concerning the circumstances under
which a finder's fee will be paid or the amount of such fee.
The company will seek potential financing opportunities from all known
sources, but will rely principally on personal contacts of its officers,
directors and consultants as well as indirect associations between them and
other business and professional people. In some instances, the company may
publish notices or advertisements seeking a potential financing opportunity in
financial or trade publications.
CRITERIA. Subordination Loans will only be made to underwriters
acceptable to Flex Financial and in connection with specific
underwritings for issuers acceptable to the company. Bridge Loans will only
be made to companies that can pass an extensive due diligence review of the
company's management, business, deal structure, underwriter, and public
relations firm. The company may require representation on the issuer's board
and will require substantial penalties for a loan default, although in a
default situation Flex Financial's remedies may be limited. Any
participation by the company will be subject to the issuer executing a firm
commitment underwriting letter of intent with an underwriter approved by the
company.
The company will seek to enter into transactions with mature
businesses, but may seek a transaction with a business in any industry
and in any stage of development, including an established business which needs
additional funding or a firm which is in need of additional capital to
overcome financial problems or difficulties. However, the company does
not intend to enter into such transaction with a "start up" or new company.
The analysis of financing opportunities will be undertaken by or under
the supervision of the officers and directors. Certain of the Company's
officers, directors and consultants have extensive business experience in the
securities industry, particularly regarding small public underwritings, and
are primarily engaged in the business of analyzing businesses for underwriting
suitability and negotiating, participating in and advising as to Bridge Loans
and Subordination Loans. In analyzing prospective financing opportunities,
management will consider the following factors regarding an issuer: available
technical, financial, and managerial resources, working capital and other
financial requirements; history of operations, if any; quality and experience
of management services which may be available and the depth of that
management; capability of effecting an underwriting, including quality of
underwriter and professional advisers; and other relevant factors.
The company will analyze all available factors and make a determination
based upon a composite of available facts, without reliance on any single
factor.
PROCEDURES. A thorough evaluation of an issuer prior to a Bridge Loan
will be difficult. The company will have limited time and funds available in
its search for and analysis of financing opportunities and will not be able to
expend significant funds on a complete and exhaustive investigation of any
financing opportunity. However, the company will investigate, to an extent
believed reasonable by its management, such potential opportunities by
obtaining financial and other information reasonably available concerning the
issuer and/or underwriter; conducting meetings and interviews with management
and underwriter; reviewing experience and other financial factors; and other
reasonable methods.
As part of the Company's investigation, officers and directors may meet
personally with management and key personnel of the firm sponsoring the
investment opportunity, visit and inspect material facilities, obtain
independent analysis or verification of certain information provided, check
references of management and key personnel, and conduct other reasonable
measures, to the extent allowed by the Company's limited financial resources
and management and technical expertise.
The company will participate in a financing opportunity only pursuant to
negotiation and execution of a written agreement. Although the terms cannot
be predicted, agreements generally require specific representations and
warranties by all of the parties thereto and specify certain events of
default.
The investigation of specific financing opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure
documents, and other instruments may require substantial management time and
attention and substantial costs for accountants, attorneys, and others. If a
decision is made not to participate in a specific financing opportunity, the
costs previously incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the
participation in a specific financing opportunity, the failure to consummate
that transaction may result in the loss to the company of the related costs
incurred.
COMPETITION. The company expects to encounter competition in its
efforts to locate opportunities for the employment of its capital. The
primary competition for desirable investments is expected to come from other
small companies organized and funded for similar purposes, small venture
capital partnerships and corporations, small business investment companies,
and individuals with unlimited financial resources. Many of these entities
may have significantly greater experience, resources, and managerial
capabilities than the company and will, therefore, be in a better position
than the company to obtain access to business opportunities. However, the
company believes that it has sufficient expertise and contacts to compete
successfully in this market.
DESCRIPTION OF BUSINESS PROPERTIES
Flex Financial currently shares a portion of approximately 3,000 square
feet of office space in premises occupied by Focus-Tech Investments, Inc. and
Financial Public Relations, Ltd. ("FPR") at 770 S. Post Oak Lane, Suite 515,
Houston, Texas 77056. Mr. Fearnow is a principal of Focus-Tech Investments,
Inc. ("Focus-Tech"), a Nevada corporation, that provides investment banking
consulting services to FPR. Flex Financial believes that such space and
services will be adequate for the business of Flex Financial into the
foreseeable future. The cost for such space is included in a $4,000 per month
fee charged by Focus-Tech for general and administrative services for calendar
year 1996.
Upon closing of the Units Offering, Focus-Tech has agreed to provide
to Flex Financial for as long as required for Flex Financial's business use
such general and administrative services, which will include the cost of the
use of office space, personnel, facilities and equipment, for a monthly fee of
$4,000. Flex Financial believes that such space and services will be adequate
for the business of Flex Financial into the foreseeable future. Focus-Tech
has agreed to make this space available as long as required for the use of the
Flex Financial. Focus-Tech has agreed that its fee for providing such
services shall be paid only out of 15% of net Units Offering proceeds in
excess of $200,000, and thereafter agrees to accrue the monthly fee for
payment solely out of the fees, interest earned and earnings generated by the
Company's business.
Neither Flex Financial nor any of its property is a party to or the
subject of any pending legal proceedings.
LEGAL PROCEEDINGS
Neither Flex Financial nor any of its property is a party to or the
subject of any pending legal proceedings.
MARKET FOR FLEX FINANCIAL'S CAPITAL STOCK AND RELATED STOCKHOLDER MATTERS
There is no public trading market for Flex Financial's common stock. As
of the date of this Prospectus, there are 12 holders of record of Flex
Financial's outstanding common stock. Flex Financial has declared no
dividends on its common stock. Should the merger not be approved and
effected, there are no restrictions that would or are likely to limit the
ability of flex Financial to pay dividends on its common stock, but Flex
Financial has no plans to pay dividends in the foreseeable future and intends
to use earnings for the expansion of its present business.
FINANCIAL STATEMENTS
Set forth below are the independent auditor's report dated August 5,
1997, with respect to Flex Financial's financial statements as of July 31,
1997 and 1996, and the notes to the financial statements.
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
C 0 N T E N T S
Page
------
<S> <C>
Independent Auditor's Report . . . . . . . . . . . . . . . . . 2
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations . . . . . . . . . . . . . . . . . . . 4
Statements of Changes in Stockholders' Equity (Deficit) 5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . . . 7-14
</TABLE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors of
Flex Financial Group, Inc.
(A Development Stage Company)
Houston, Texas
We have audited the accompanying balance sheets of Flex Financial Group, Inc.
(A Development Stage Company) as of July 31, 1997 and 1996, and the
related statements of operations, changes in stockholders' equity
(deficit) and cash flows for the year ended July 31, 1997 and
the period August 17, 1995 (date of inception) through July 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Flex Financial Group, Inc. (A
Development Stage Company) at July 31, 1997 and 1996, and the results
of its operations and its cash flows for the year and period then ended
in conformity with generally accepted accounting principles.
/s/ Harper & Pearson Company
- --------------------------------
Harper & Pearson Company
Houston, Texas
August 5, 1997
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
----------
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . . . . . . . $ 9,564 $ 42,220
Interest receivable . . . . . . . . . . . . . . . . 596 1,486
Note receivable, Flex Acquisition Corporation . . . 4,000 25,000
Note receivable . . . . . . . . . . . . . . . . . . -0- 10,000
Loan origination costs, net . . . . . . . . . . . . -0- 1,250
Deferred registration costs . . . . . . . . . . . . 32,303 -0-
---------- ----------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . 46,463 79,956
---------- ----------
OTHER ASSETS
Long-term note receivable, Flex Acquisition
Corporation . . . . . . . . . . . . . . . . . . . -0- 4,000
---------- ----------
$ 46,463 $ 83,956
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- -----------------------------------------------------
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . . . . . . $ 22,218 $ 58
Notes payable . . . . . . . . . . . . . . . . . . . 50,000 50,000
Interest payable. . . . . . . . . . . . . . . . . . 8,822 3,822
Accrued overhead, Focus-Tech Investments, Inc.. . . -0- 8,891
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . 81,040 62,771
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, 10,000,000
shares authorized, none issued and outstanding,
rights, preferences, qualifications, limitations
and restrictions and any other benefits to be
determined by the Board of Directors as provided
in the corporation's Articles of Incorporation. . -0- -0-
Common stock, $.01 par value, 10,000,000 shares
authorized, 94,000 shares sold and to be issued . 940 940
Additional paid-in capital. . . . . . . . . . . . . 81,260 81,260
Deficit accumulated during the development stage. . (116,777) (61,015)
---------- ----------
(34,577) 21,185
---------- ----------
$ 46,463 $ 83,956
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
YEAR AND PERIOD ENDED JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
July 31, Cumulative
1997 1996(1) (2)
---------- ------------ ----------
<S> <C> <C> <C>
INTEREST INCOME . . . . . . . . . $ 1,004 $ 2,278 $ 3,282
---------- ------------ ----------
EXPENSES
Advertising . . . . . . . . . . -0- 2,564 2,564
Amortization. . . . . . . . . . 1,250 -0- 1,250
Bad debt expense 10,000 -0- 10,000
Consulting expenses . . . . . . -0- 16,902 16,902
Filing fees . . . . . . . . . . 4,923 510 5,433
Interest expense. . . . . . . . 5,000 7,572 12,572
Legal and professional fees . . 14,905 6,100 21,005
Other expenses. . . . . . . . . 688 350 1,038
Printing. . . . . . . . . . . . -0- 1,295 1,295
Overhead allocation, Focus-Tech
Investments, Inc. . . . . . . 20,000 19,109 39,109
Accrued overhead, Focus-Tech
Investments, Inc. . . . . . . -0- 8,891 8,891
---------- ------------ ----------
56,766 63,293 120,059
---------- ------------ ----------
NET LOSS. . . . . . . . . . $ (55,762) $ (61,015) $(116,777)
========== ============ ==========
LOSS PER COMMON SHARE . . . . . . $ (.33) $ (.38) $ (.71)
========== ============ ==========
SHARES USED IN COMPUTING
LOSS PER SHARE. . . . . . . . . 166,982 158,815 163,270
========== ============ ==========
<FN>
1. August 17, 1995 (Date of Inception) to July 31, 1996
2. August 17, 1995 (Date of Inception) to July 31, 1997
</TABLE>
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEAR ENDED JULY 31, 1997 AND PERIOD AUGUST 17, 1996 THROUGH JULY 31, 1996
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital (Deficit) Total
----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sale of Common Stock. . $ -0- $ 940 $ 81,260 $ -0- $ 82,200
Net Loss. . . . . . . . -0- -0- -0- (61,015) (61,015)
----------- --------- --------- ---------- ----------
Balance - July 31, 1996 -0- 940 81,260 (61,015) 21,185
Net Loss. . . . . . . . -0- -0- -0- (55,762) (55,762)
----------- --------- --------- ---------- ----------
Balance - July 31, 1997 $ -0- $ 940 $ 81,260 $(116,777) $ (34,577)
=========== ========= ========= ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEAR AND PERIOD ENDED JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
July 31, Cumulative
1997 1996(1) (2)
---------- ------------ ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . $ (55,762) $ (61,015) $(116,777)
---------- ------------ ----------
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization of loan origination costs, net. . 1,250 3,750 5,000
Write-off of note receivable . . . . . . . . . 10,000 -0- 10,000
Change in operating assets and liabilities:
Interest receivable. . . . . . . . . . . . . . 890 (1,486) (596)
Accounts payable . . . . . . . . . . . . . . . 22,160 58 22,218
Interest payable . . . . . . . . . . . . . . . 5,000 3,822 8,822
Accrued overhead, Focus-Tech Investments, Inc. (8,891) 8,891 -0-
---------- ------------ ----------
Total Adjustments. . . . . . . . . . . . . . 30,409 15,035 45,444
---------- ------------ ----------
Net Cash Used by Operating Activities. . . . . (25,353) (45,980) (71,333)
---------- ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred registration costs. . . . . . . . . . (32,303) -0- (32,303)
Loan origination costs . . . . . . . . . . . . -0- (5,000) (5,000)
Notes receivable . . . . . . . . . . . . . . . -0- (35,000) (35,000)
Note receivable. . . . . . . . . . . . . . . . -0- (10,000) (10,000)
Long-term note receivable,
Flex Acquisition Corporation . . . . . . . . -0- (4,000) (4,000)
Collection of notes receivable . . . . . . . . 25,000 10,000 35,000
---------- ------------ ----------
Net Cash Used by Investing Activities. . . . . (7,303) (44,000) (51,303)
---------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable. . . . . . . . . . . . . . . . . -0- 50,000 50,000
Proceeds from issuance of common stock . . . . -0- 87,200 87,200
Stock issuance costs . . . . . . . . . . . . . -0- (5,000) (5,000)
---------- ------------ ----------
Net Cash Provided by Financing Activities. . . -0- 132,200 132,200
---------- ------------ ----------
NET (DECREASE) INCREASE IN CASH. . . . . . . . . (32,656) 42,220 9,564
CASH AT BEGINNING OF PERIOD. . . . . . . . . . . 42,220 -0- -0-
---------- ------------ ----------
CASH AT END OF PERIOD. . . . . . . . . . . . . . $ 9,564 $ 42,220 $ 9,564
========== ============ ==========
<FN>
(1) August 17, 1995 (Date of Inception) to July 31, 1996
(2) August 17, 1995 (Date of Inception) to July 31, 1997
</TABLE>
See accompanying notes.
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Flex Financial Group, Inc. (A Development Stage Company) (the Company) was
incorporated in August 1995 for the purpose of engaging in the business of
providing loans to companies going public; subordinated equity loans to
underwriters; and providing a platform for taking companies public through a
merger/spin-off transaction. It is anticipated by management that the Company
will become a publicly owned corporation within the near future.
Merger Spin-off - On June 30, 1996, the Company entered into an agreement with
- ---------------
American Nortel Communications, Inc. (American Nortel), a public corporation
engaged in providing long distance telephone services and owned by
approximately 780 individuals, for a proposed merger-spin-off transaction
which would create a public market for the Company's stock. The proposed
merger-spin-off would be effected by American Nortel capitalizing a recently
formed subsidiary (Flex Acquisitions Corporation) which would sell 20,000
shares of $.001 par value common stock to American Nortel for $1,000. Flex
Acquisitions, an entity under common management because of overlapping
director and officers, has authorized 10 million shares of Common Stock
with a par value of $.001 per share and 10 million shares of Preferred Stock
with no par value. The preferences, rights, and qualities of each series of
the Preferred Stock will be set by future resolutions of Flex Acquisitions
Board of Directors. All currently outstanding stock of the Company will be
canceled and converted into 94,000 shares of common stock of Flex
Acquisitions. The Company has options and warrants currently outstanding which
will be canceled and options and warrants on Flex Acquisitions' common stock
will be issued according to the plan of merger. Subsequent to the merger,
American Nortel will distribute to its shareholders the 20,000 shares of
common stock of Flex Acquisitions previously held by American Nortel.
Contemporaneously with the merger-spin-off, Flex Acquisitions will file a
registration statement on Form S-4 with the Securities and Exchange Commission
(SEC) to register 2,094,000 shares of Common Stock and file a registration
statement on Form SB-2 with the SEC to register the spin-off of the 20,000
shares by American Nortel and the sale of 100,000 shares of common stock by
Flex Acquisitions. Of the 2,094,000 shares of Common Stock, 2,000,000 will be
considered shelf shares for future issuance in association with possible
acquisitions.
Common management of the Company and Flex Acquisitions result from the
following relationships; Michael T. Fearnow, sole director and officer of the
Company holds similar positions with Flex Acquisitions and is the sole owner
of Focus-Tech Investments, Inc., a 17.5% owner of the Company. Financial
Public Relations, Ltd. is a Texas limited partnership with all interests owned
by entities controlled or owned by M. Stephen Roberts, a 17.5% owner of the
Company. Focus-Tech Investments, Inc. is a Nevada corporation wholly owned by
Michael T. Fearnow. Mr. Fearnow is also the sole director and officer of
Focus-Tech Investments, Inc. M. Stephen Roberts, attorney at law, is a 17.5%
owner of the Company and less than .5% shareholder in American Nortel.
Management's Estimates - Management uses estimates and assumptions in
- -----------------------
preparing financial statements in accordance with generally accepted
accounting principles. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could vary
from the estimates that were used.
Concentrations of Credit - Substantially all of the Company's loans have been
- -------------------------
granted to entities under common management and a third party customer of the
Company. The concentrations of credit by type of loan are set forth in Notes B
and C.
Interest Rate Risk - The Company is principally engaged in providing
- --------------------
short-term commercial loans with fixed interest rates. These loans have been
primarily funded through short-term notes payable and the sale of the
Company's stock.
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Notes Receivable - Notes receivable are reported at the principal amount
- -----------------
outstanding. Management is of the opinion that all notes are fully
collectible, therefore, no allowance for possible credit losses is deemed
necessary.
Deferred Registration Costs - Deferred registration costs have been
-----------------------------
capitalized and will be netted against the proceeds, if any, received from the
sale of securities to the public.
Allowance for Possible Credit Losses - When deemed necessary, an allowance for
- ------------------------------------
possible credit losses is established to provide a valuation allowance for
losses expected to be incurred on loans and other commitments to extend
credit. All losses are charged to the allowance for possible credit losses
when the loss actually occurs or when a determination is made that a loss is
likely to occur. Recoveries are credited to the allowance at the time of
recovery.
Throughout the year, management estimates the likely level of losses to
determine whether the allowance for possible credit losses, when deemed
necessary, is adequate to absorb anticipated losses in the existing portfolio.
Based on these estimates, an amount is charged to the provision for possible
credit losses and credited to the allowance for possible credit losses in
order to adjust the allowance to a level determined to be adequate to absorb
losses.
Management's judgment as to the level of losses on existing loans involves the
consideration of current and anticipated economic conditions and their
potential effects on specific borrowers; an evaluation of the existing
rela-tionships among loans, potential loan losses, and the present level of
the allowance; and management's internal review of the loan portfolio. In
determining the collectibility of certain loans, management also considers the
fair value of any underlying collateral. The amounts ultimately realized may
differ from the carrying value of these assets because of economic, operating
or other conditions beyond the Company's control.
Statement of Cash Flows - For purposes of reporting cash flows, cash and cash
- ------------------------
equivalents includes only cash on hand and in demand deposit accounts with a
bank.
Loss Per Common Share - Loss per common share is computed using the weighted
- -----------------------
average number of shares of common stock outstanding during the period, as
adjusted for shares issuable upon exercise of options priced below the
anticipated IPO price per share as shown below:
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996 Cumulative
-------- -------- -----------
<S> <C> <C> <C>
Weighted average shares outstanding
for issued shares. . . . . . . . . . . . . 94,000 85,833 90,288
Shares issuable upon, exercise of options. . 80,000 80,000 80,000
Less treasury shares repurchased from
option proceeds. . . . . . . . . . . . . (7,018) (7,018) (7,018)
-------- -------- -----------
Adjusted weighted average shares outstanding 166,982 158,815 163,270
======== ======== ===========
</TABLE>
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Income Taxes - For the year and period ended July 31, 1997 and 1996,
- -------------
the Company incurred net operating losses amounting to $55,762
and $61,015 , respectively . Net operating loss carryforwards will
expire in the years 2012 and 2011, if not previously utilized.
No tax benefit for the loss carryforward has been reported in the financial
statements. Accordingly, the tax benefit of approximately $39,700
resulting from the utilization of the loss carryforwards has been offset by a
valuation allowance of the same amount.
Common Stock - Common stock sold is subject to a subscription agreement which
- -------------
provides for, among other things; (1) each purchaser is sold "units" at a
price of $4,800 which includes 1,000 shares of common stock, 2000 Class B
warrants and 2,000 Class C warrants collectively referred to as offered
securities; and (2) purchaser of offered securities will not be able to resell
them until and unless the securities are registered pursuant to a registration
statement and properly qualified for sale in each jurisdiction. The Class B
and Class C redeemable warrants entitle the holders to purchase one share of
common stock for each warrant held at $6.25 and $10.00, respectively.
80,000 shares of the 94,000 common shares sold and to be issued were sold to
"Founders", subject to a separate subscription agreement at a price of $.25
per share. This subscription agreement provides the subscribers with the
option to purchase up to an additional 80,000 common shares at a per share
price of $.50. The option for the purchase of additional shares expires
December 31, 2000 , if not previously exercised.
No compensation expense has resulted from the issuance of any of the
Company's warrants or options as the exercise prices were in excess of the
fair market value of the Company's common stock.
Operating Costs - Subsequent to December 31, 1996, pursuant to an agreement
- ----------------
with Flex Acquisitions, the Company provides Flex Acquisitions rent,
accounting services, management and other operating expenses without
compensation.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE B NOTES RECEIVABLE, RELATED PARTIES
Notes receivable due from entities under common management consist of the
following at July 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Flex Acquisition Corporation - 10% note, at
the option of the holder, the note is
convertible into common stock in multiples
of $1,000 unpaid principal at a conversion
price of $.05 per share at any time up to
maturity, subordinated, redeemable at a 10%
premium, due March 31, 1998, renewable for
an additional two year term, interest due
at maturity; unsecured . . . . . . . . . . . $ 4,000 $ 4,000
Financial Public Relations, Ltd. - 10%
demand note receivable, interest due at
maturity; secured by warrant to purchase
24,000 shares of common stock of Industrial
Holdings, Inc. . . . . . . . . . . . . . . . -0- 10,000
Financial Public Relations, Ltd. - 10%
demand note receivable, interest due at
maturity; secured by warrant to purchase
24,000 shares of common stock of Industrial
Holdings, Inc. . . . . . . . . . . . . . . . -0- 10,000
Focus-Tech Investments, Inc. - two 10%
demand notes receivable, interest due at
maturity; secured by warrant to purchase
24,000 shares of common stock of Industrial
Holdings, Inc. . . . . . . . . . . . . . . . -0- 5,000
-------- --------
4,000 29,000
Less current portion . . . . . . . . . . . . . 4,000 25,000
-------- --------
Long-term note receivable, related party . . . $ -0- $ 4,000
======== ========
</TABLE>
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE C NOTE RECEIVABLE
Note receivable consists of the following at July 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CARETECH, Inc. - 10% unsecured demand
note receivable, interest due at maturity.
During fiscal 1997, the balance was
deemed uncollectible and charged to bad
debt expense . . . . . . . . . . . . . . . $ -0- $ 10,000
======== ========
</TABLE>
NOTE D NOTES PAYABLE
Notes payable consist of the following at July 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Two 10% unsecured, subordinated notes
payable on the earlier of (1) October 15,
1996, or (2) the closing of a public
offering of the Company's securities
pursuant to the Securities Act of 1933,
as amended, representing gross proceeds
of not less than $60,000; the notes are
subject to subscription and option agreements $ 50,000 $ 50,000
======== ========
</TABLE>
Effective October 15, 1996, these notes were amended to extend the
maturity dates to March 31, 1997. By mutual consent, the applicable IPO
closing date, debt maturity date, and expiration date for exercise was
extended to March 31, 1998 and the holders were granted an additional 8,000
Option Units, or an aggregate 16,333 Option Units
In connection with the issuance of these notes, the Company granted to
the purchasers Unit Purchase Options (Option Units). The Option Units entitle
the holders to purchase such number of equivalent units of the Company's
securities as may be offered in an initial public offering at an aggregate
offering price of at least $60,000 pursuant to an effective registration
statement filed under the Securities Act that closes prior to June 30, 1996.
The number of equivalent units purchasable at a price of $.50 per unit is
determined by dividing the Units Offering price into the principal amount of
notes. Under the terms of this Units Offering, holders of the Option Units are
entitled to purchase 8,333 equivalent Units.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE E TRANSACTIONS AND BALANCES WITH ENTITIES AND AN INDIVIDUAL UNDER
COMMONMANAGEMENT
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Flex Acquisition Corporation (1)
Interest income/receivable . . . . . . . $ 400 $ 134
Financial Public Relationship, Ltd. (2)
Interest income. . . . . . . . . . . . . -0- 1,709
Interest receivable. . . . . . . . . . . -0- 917
Consulting expense . . . . . . . . . . . -0- 5,000
Focus-Tech Investments, Inc. (3)
Interest income/receivable . . . . . . . -0- 48
Overhead allocation - allocation covers
rent, telephone, fax, office supplies
and expenses, postage, repairs, use
of furniture and equipment, and
administration management as needed. . 20,000 19,109
Accrual of overhead. . . . . . . . . . . -0- 8,891
Consulting expense . . . . . . . . . . . -0- 2,500
M. Stephen Roberts - Attorney at Law;
initial registered agent (4)
Legal fees, various corporate matters. 4,850 13,550
Legal fees, registration costs . . . . 27,400 -0-
</TABLE>
(1) Michael T. Fearnow, sole director and officer of Flex Acquisitions
holds similar positions with the Company and is the sole owner of Focus-Tech
Investments, Inc., a 17.5% owner of the Company.
(2) Financial Public Relations, Ltd. is a Texas limited partnership with
all interests owned by entities controlled or owned by M. Stephen Roberts, a
17.5% owner of the Company.
(3) Focus-Tech Investments, Inc. is a Nevada corporation wholly owned by
Michael T. Fearnow. Mr. Fearnow is also the sole director and officer of
Focus-Tech Investments, Inc. Pursuant to an understanding between Focus-Tech
and Flex Financial, Focus-Tech provided to Flex Financial such general and
administrative services, including the cost of the use of office space,
personnel, facilities and equipment, as required for Flex Financial's business
in exchange for a general and administrative services fee of $4,000 per month
for the seven month period ending December 31, 1996. Flex Financial shares a
portion of approximately 3,000 square feet of office space in premises
occupied by Focus-Tech and Financial Public Relations, Ltd. at 770 S. Post Oak
Lane, Suite 515, Houston, Texas 77056. In lieu of actual payments by Flex
Financial to Focus-Tech, Flex Financial directly paid expenses of Focus-Tech
in the amount of $19,109 and received credit toward the payment of the $28,000
in general and administrative services fees owed to Focus-Tech. Overhead
allocation refers to amounts paid by Flex Financial on behalf of Focus-Tech
which were allocated as a credit against the general and administrative
services fee due Focus-Tech.
Accrual of overhead refers to the $8,891 balance due Focus-Tech against the
$28,000 in accrued general and administrative services fees after applying the
$19,109 credit given Flex Financial for its direct payments.
Management estimates that Flex Financial's expenses would have been
approximately $6,000 a month on a stand alone basis.
<PAGE>
FLEX FINANCIAL GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1996
NOTE E TRANSACTIONS AND BALANCES WITH ENTITIES AND AN INDIVIDUAL UNDER
COMMON MANAGEMENT (CONTINUED)
Until the closing of the Units Offering, Focus-Tech will continue to provide
such space and services without charge to Flex Financial. Upon closing of the
Units Offering, Focus-Tech has agreed to provide to the Company such general
and administrative services, which will include the cost of the use of office
space, personnel, facilities and equipment, as may be required for the
Company's business use on a monthly basis for a fee of $4,000 per month and to
make this space available as long as required for the use of the Company. The
Company believes that such space and services will be adequate for the
business of the Company into the foreseeable future. Focus-Tech has agreed
that its fee for providing such services shall be paid only out of 15% of net
Units Offering proceeds in excess of $200,000, and thereafter agrees to accrue
the monthly fee for payment solely out of the fees, interest earned and
earnings generated by the Company's business.
(4) M. Stephen Roberts, attorney at law, is a 17.5% owner of the Company
and less than .5% shareholder in American NorTel.
<PAGE>
VOTING AND MANAGEMENT INFORMATION
Proxies will not be solicited by Flex Financial's management with respect
to the proposed Merger described herein. Shareholder voting on the proposed
Merger by the shareholders of Flex Financial shall be taken by written
consent.
DATE, TIME AND PLACE INFORMATION
THE COMPANY. Shareholder voting on the proposed Merger by American
NorTel, the sole shareholder of the Company, shall be taken by its written
consent. It is expected that written consent to the Merger, without a meeting
being taken, shall be obtained from the sole shareholder of the Company within
five days after the date of this Prospectus. American NorTel's approval
of the Merger is required if the Merger is to be effected.
FLEX FINANCIAL. Shareholder voting on the proposed Merger by Flex
Financial shareholders shall be taken by written consent. Under Texas
corporate law and Flex Financial's bylaws, written consent must be
unanimous. It is expected that unanimous written consent to the
Merger, without a meeting being held, shall be submitted to the shareholders
by certified mail, return receipt requested, on or about December 11, 1996.
Written consents may be executed by the shareholders and returned by mail or
executed at the offices of the corporation. Management of Flex Financial does
not have unanimous control or even majority control of the sole class of
voting stock and is unable to provide assurance that the Merger will be
approved.
VOTING PROCEDURE. Voting by Flex Financial shareholders shall be by
unanimous written consent without a meeting. Shareholders of record as of
July 31, 1996 shall be entitled to vote. Because Texas corporate law and
Flex Financial's bylaws require that written consent be unanimous. The
consent of all 94,000 the outstanding shares of common stock is required to
approve the Merger. None of the shares are held of record by brokers.
DISSENTERS' RIGHTS OF APPRAISAL
No dissenter's rights of appraisal come into effect with respect to the
proposed Merger. While Texas corporate law provides dissenter's rights of
appraisal in the case of mergers, (i) all the issued and outstanding shares of
capital stock of the Company will be voted by the American NorTel sole
director, and a unanimous vote approving the Merger is assured and (ii) Flex
Financial shareholder voting on the proposed merger will be taken by written
consent pursuant to Texas corporate law and Flex Financial's bylaws which
require that written consent be unanimous, and therefore, no dissenter's
rights of appraisal would be created by either vote because a vote to
disapprove or a failure of unanimous approval would defeat the Merger.
NO SOLICITATION OF PROXIES
Solicitations of proxies will not be made by members of management of
Flex Financial for that entity. (See "Voting and Management Information
- -Date, Time and Place Information - Flex Financial.")
Notice of written consent shall be made by the mails, by first class
mail, certified, return receipt requested, or by personal delivery. The cost
of the notices will be borne by Flex Financial.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The proposed Merger must be approved by a two-thirds vote of the
outstanding shares of Common Stock of the Company and by a unanimous vote of
the outstanding shares of Common Stock of Flex Financial.
There are presently outstanding 20,000 shares of Common Stock of the
Company, all of which are held of record by American NorTel Communications,
Inc.
There are presently outstanding 94,000 shares of Common Stock of Flex
Financial held of record by 12 shareholders. Each share is entitled
to one vote on the proposed Merger.
The record date for determining the right to vote on the proposed Merger
is July 31, 1996, for the Company and for Flex Financial.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
THE COMPANY. The following table shows information as of August 31,
1997 , with respect to each beneficial owner of more than 5% of Common
Stock of the Company and to each of the officers and directors of the Company
individually and as a group:
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
BEFORE MERGER (1) AFTER MERGER (2)
----------------- ----------------
NAME AND ADDRESS OF NUMBER PERCENT NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF CLASS OF SHARES OF CLASS
- ---------------------------------- ----------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
American NorTel Communications . . 20,000 100 0 0 (3)
7201 East Camelback Road
Suite 320
Scottsdale, Arizona 85251
Officers and Directors as a Group. 0 0 20.000 17.5 (3)
(One person before Merger, one
person after Merger) (4)
<FN>
_______________
(1) Before the proposed Merger, all 20,000 shares of the issued and outstanding shares of
Common Stock of the Company are held of record and beneficially by American NorTel
Communications Inc.
(2) After giving effect to the Merger and Spinoff.
(3) After allocating one share of Common Stock of the Company for each 588 shares of
common stock of American NorTel.
(4) After the Merger, Mr. Fearnow, President of the Company, would be deemed to be the
beneficial owner of 20,000 shares of Common Stock of the Company that would be owned of
record by Focus-Tech Investments, Inc. and would be deemed the beneficial owner of and holder
of Class A Options to purchase an additional 20,000 shares of Common Stock of the
Company.
</TABLE>
FLEX FINANCIAL. The following table describes what would be the effect
of the Merger between the Company and Flex Financial on the security ownership
of any person who is known to the Company to be a person who would be the
beneficial owner of more than 5% of the Common Stock of the Company,
the chief executive officer, the directors, and the directors and executive
officers as a group:
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
BEFORE MERGER (1) AFTER MERGER (2)
----------------- ----------------
NAME AND ADDRESS OF NUMBER PERCENT NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF CLASS OF SHARES OF CLASS
- ---------------------------------- ----------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Michael T. Fearnow . . . . . . . . 20,000 21 20,000 17.5 (2)
Focus-Tech Investments, Inc.
770 S. Post Oak Lane, Suite 515
Houston, Texas 77056
M. Stephen Roberts, Esq. . . . . . 20,000 21 20,000 17.5 (3)
770 S. Post Oak Lane, Suite 515
Houston, Texas 77056
Ruth Shepley . . . . . . . . . . . 20,000 21 20,000 17.5 (4)
7617 Del Monte
Houston, Texas 77063
Lighthouse Resources Inc.. . . . . 20,000 21 20,000 17.5 (5)
43 Bluewater Drive
Eureka Springs, Arkansas 72632
Officers and Directors as a Group. 20,000 21 20,000 17.5
(One person)
<FN>
_______________
(1) The ownership is of record unless otherwise noted.
(2) After the Merger, Mr. Fearnow would be deemed to be the beneficial owner of 20,000
shares of Common Stock of the Company that would be owned of record by Focus-Tech
Investments, Inc. and would be deemed the beneficial owner of and holder of Class A Options
to purchase an additional 20,000 shares of Common Stock of the Company.
(3) After the Merger, Mr. Roberts would own 20,000 shares of the Company's Common Stock
of record and would hold Class A Options to purchase an additional 20,000 shares.
(4) After the Merger, Ms. Shepley would own 20,000 shares of the Company's Common Stock
of record and would hold Class A Options to purchase an additional 20,000 shares.
(5) After the Merger, Lighthouse Resources Inc., an unrelated entity, would own 20,000
shares of the Company's Common Stock of record and would hold Class A Options to purchase an
additional 20,000 shares.
</TABLE>
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Set forth below are the names, ages, and terms of office of each of the
directors, executive officers and significant employees of both the Company
and Flex Financial and a description of the business experience of each.
<TABLE>
<CAPTION>
PERSON OFFICE HELD SINCE TERM OF OFFICE
- ------------------------ ------------------- --------------
<S> <C> <C> <C>
Flex Financial:
Michael T. Fearnow, 52 Director, President 1995 October 1997
and Secretary
The Company:
Michael T. Fearnow, 52 Director, President 1996 March 1998
and Secretary
<FN>
_______________
MICHAEL T. FEARNOW. Mr. Fearnow has been an independent securities
consultant to small to medium-sized growth companies in the field of
investment banking transactions, financial and broker relations, and publicly
underwritten securities since 1987. Mr. Fearnow obtained a degree in Business
Administration from the University of Kansas in 1967. He began his investment
banking career as an account executive with Merrill Lynch in 1972 and by 1978
had become a Senior Account Executive and Product Manager for new issues
underwriting. In 1978, Mr. Fearnow was a co-founder of Porcari, Fearnow &
Associates, Inc., a full service NASD broker-dealer. He served as chairman
from 1978 to 1987 and structured and participated in financing numerous
private placements, public underwritings, venture capital transactions and
tax-sheltered investments and specialized in areas of financial planning and
due diligence.
REMUNERATION OF DIRECTORS AND OFFICERS
THE COMPANY. Mr. Fearnow, the sole officer and director of the Company
is receiving no compensation for his services for the Company. No
compensation is proposed to be paid to any officer or director of the Company
prior to the proposed Merger with Flex Financial.
FLEX FINANCIAL. Mr. Fearnow, the sole officer and director of Flex
Financial, is receiving no compensation for his services for Flex Financial.
He is receiving no compensation for his services for the Company. No
compensation is proposed to be paid to any officer or director of the Company
prior to the proposed Merger with Flex Financial. Should the Merger be
effected, Mr. Fearnow shall be the sole director of the post-Merger Company.
There are no present plans, arrangements, or understandings concerning any
change in compensation for him after the Merger, should the Merger be
effected.
The following sets forth the 1995, 1996 and 1997 remuneration of
the president of Flex Financial and the 1998 remuneration payments
proposed to be made to the three highest paid persons who are officers of Flex
Financial, among whom the president is one:
</TABLE>
<TABLE>
<CAPTION>
SECURITIES
NAME OF INDIVIDUAL UNDERLYING
OR GROUP CAPACITY YEAR SALARY STOCK OPTIONS
- ------------------ ---------- --------- ------- -------------
<S> <C> <C> <C> <C>
Michael T. Fearnow President 1995-1997 $ 0.00 0
Michael T. Fearnow President 1998 $ 0.00 0
</TABLE>
STOCK OPTIONS. The Company has granted no stock options.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Flex Financial entered into a financial consulting agreement with
Financial Public Relations, Ltd. pursuant to which FPR rendered investment
banking consulting services to the Company. The services rendered by FPR
included assistance in the development of Flex Financial's business plan,
initial development of a contact list of potential clients with respect to
Subordination and Bridge Loans, and development of a marketing strategy with
respect to its business operations. Mr. Roberts is the general partner and
owner of FPR. Mr. Fearnow is a principal of Focus-Tech Investments, Inc., a
Nevada corporation, that provides investment banking consulting services to
FPR. Under the terms of the agreement, the Company paid FPR $5,000. The
services rendered to the Company by FPR were primarily for the services of and
provided through Messrs. Roberts and Fearnow.
Pursuant to an understanding between Focus-Tech and Flex Financial,
Focus-Tech provided to Flex Financial such general and administrative
services, including the cost of the use of office space, personnel, facilities
and equipment, as required for Flex Financial's business in exchange for a
general and administrative services fee of $4,000 per month for the seven
month period ending December 31, 1996. Flex Financial shares a portion of
approximately 3,000 square feet of office space in premises occupied by
Focus-Tech and Financial Public Relations, Ltd. at 770 S. Post Oak Lane, Suite
515, Houston, Texas 77056. In lieu of actual payments by Flex Financial to
Focus-Tech, Flex Financial directly paid expenses of Focus-Tech in the amount
of $19,109 and received credit for those payments against the $28,000 in
general and administrative services fees owed to Focus-Tech. Management
estimates that Flex Financial's expenses would have been approximately $6,000
a month on a stand alone basis.
Until the closing of the Units Offering Focus-Tech will continue to
provide such space and services without charge to Flex Financial. Upon
closing of the Units Offering Focus-Tech has agreed to provide to the Company
such general and administrative services, which will include the cost of the
use of office space, personnel, facilities and equipment, as may be required
for the Company's business use on a monthly basis for a fee of $4,000 per
month and to make this space available as long as required for the use of the
Company. The Company believes that such space and services will be adequate
for the business of the Company into the foreseeable future. Focus-Tech has
agreed that its fee for providing such services shall be paid only out of 15%
of net Units Offering proceeds in excess of $200,000, and thereafter agrees to
accrue the monthly fee for payment solely out of the fees, interest earned and
earnings generated by the Company's business.
Mr. Roberts negotiated the Spinoff transaction with American NorTel and
throughout 1996 and 1997 has performed legal services in organizing the
Company and Flex Financial, with respect to private placements by Flex
Financial, with respect to the Merger and Spinoff transactions, and with
respect to registering the Merger and Spinoff transaction with the SEC. For
these services and for additional legal services Mr. Roberts is to perform
with respect to the SEC should the Merger be approved by Flex Financial, Mr.
Roberts has been paid $4,992 by the Company and $22,350 by Flex Financial
through July 31, 1996, and $11,793 by Flex Financial through July 31, 1997.
It is estimated that Mr. Roberts will be paid a total of $35,000 by Flex
Financial and the Company with respect to services rendered in connection with
registering the Merger, Spinoff and Public Offering.
In connection with organizing the Company, FPR, a Texas limited
partnership wholly controlled by Mr. Roberts, paid an aggregate of $10,000 to
purchase a total of 40,000 shares of Common Stock at an average sales price of
$.25 per share. These Shares were purchased 20,000 shares for the account of
Mr. Roberts and 20,000 for the account of Focus-Tech Investments, Inc., a
Nevada corporation wholly owned by Mr. Fearnow. FPR delivered its promissory
note in the principal sum of $10,000, payable on demand and bearing interest
at 10%, to the Company in payment for the shares. On July 31, 1996, FPR paid
all principle and interest due on said note.
In February and March 1996 FPR borrowed $20,000 from Flex Financial
evidenced by two promissory notes bearing interest at 10% and secured by
marketable securities valued in excess of $100,000. Both notes were repaid
with interest on November 15, 1996.
From February through August 1996 Focus-Tech borrowed $13,000 from Flex
Financial evidenced by four promissory notes bearing interest at 10% and
secured by marketable securities valued in excess of $100,000. All four notes
were repaid with interest on November 15, 1996.
The Company and Flex Financial has retained Mr. Roberts for various
securities matters relating to its contemplated IPO for which it paid an
initial retainer of $5,000 plus hourly fees ranging form $50 to $150 per hour.
The Company believes that these services will be rendered on terms at least as
favorable as it could obtain from unaffiliated persons. In addition, Mr.
Roberts has and will act as corporate general counsel and has and will render
legal services regarding various corporate matters related thereto.
PARENTS
The direct parent of the Company is American NorTel Communications Inc.,
which owns all the issued and outstanding stock of the Company. No
shareholder of American NorTel owns sufficient stock to exercise control over
Flex Financial through stock ownership.
The parents of Flex Financial are its board of directors. No shareholder
of Flex Financial owns sufficient stock to exercise control over Flex
Financial through stock ownership.
<PAGE>
PLAN OF MERGER
Set forth below is a copy of the Plan of Merger between the Company and
Flex Financial Group, Inc.:
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER, dated as of July 1, 1996, between FLEX
ACQUISITIONS CORPORATION, a Texas corporation ("FAC") and FLEX FINANCIAL
GROUP, INC., a Texas corpora-tion ("FLEX FINANCIAL"); (all collectively called
the "Constituent Corporations").
The Boards of Directors of the Constituent Corporations deem it advisable
for the general welfare of the Constituent Corpora-tions and their respective
stockholders that the Constituent Cor-porations merge into a single
corporation pursuant to this Agree-ment and the Texas Business Corporation
Act.
The parties hereby agree as follows:
1. MERGER AND MODE OF CARRYING IT INTO EFFECT
1.1 Merger. The Constituent Corporations will be at the
Effective Date in the manner authorized and prescribed by the Texas Business
Corporation Act, merged into a single corporation, which corporation is FAC
(hereinafter sometimes called the "Surviving Corporation"), and the parties
hereby adopt the agreements, terms and conditions relating to the Merger and
the mode of carrying the same into ef-fect, which the parties covenant to
observe, keep and perform, set forth in this Agreement.
1.2 Effecting the Merger. This Agreement will be consummated
and the Merger effected by the filing of Articles of Merger as required by
Texas law, with the Secretary of State of the State of Texas, whereupon as of
the Effective Date the separate corporate existence of Flex Financial will
cease and Flex Financial will be merged with and into the Surviving
Corporation.
1.3 Effective Date. As used in this Agreement, the term
"Effective Date" means the date Articles of Merger will have been filed with
the Secretary of State of the State of Texas, after satisfaction of the
requirements of the applicable law of such state prerequi-site to such filing.
1.4 Articles of Merger. Upon the approval of the merger by the
shareholders of FAC and by the shareholders of Flex Financial, the officers of
FAC shall file with the Secretary of State of the State of Texas Articles of
Merger pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act; provided, however, that at any time prior to the filing of
such Articles of Merger with the Secretary of State of Texas, the Plan may be
terminated by the board of directors of Flex Financial notwithstanding
approval of this Agreement by the stockholders of Flex Financial or of FAC.
2. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS
2.1 Articles of Incorporation. The Articles of Incorpora-tion
of FAC in effect on the date of this Agreement and the Effective Date will be
the Articles of Incorporation of the Surviving Corporation until altered or
amended as provided therein and by the laws of the State of Texas.
2.2 Bylaws. The bylaws of FAC on the Effective Date of the
merger shall be the bylaws of the Surviving Corporation.
2.3 Directors. The entire Board of Directors of the Surviving
Corporation will consist of those persons who comprise the Board of Directors
of FAC on the Effective Date; who, subject to the provisions of the bylaws of
the Surviving Corporation and the laws of the State of Texas will hold office
until the first an-nual meeting of stockholders of the Surviving Corporation
held subsequent to the Effective Date or until their respective suc-cessors
are elected and qualified.
2.4 Officers. The principal officers of the Surviving
Corpora-tion, from and after the Effective Date of the merger shall be the
persons acting as the principal officers of FAC on the Effective Date; who,
subject to the provisions of the bylaws of the Surviving Corporation and the
laws of the State of Texas, will hold office until the first meeting of the
Board of Direc-tors following the first annual meeting of stockholders of the
Surviving Corporation held subsequent to the Effective Date or until their
respective successors are elected and qualified.
3. APPROVAL OF MERGER
3.1 Stockholder Approvals. This Agreement shall be submitted
separately to the shareholders of the Constituent Corporations in the manner
provided by the laws of the State of Texas for approval and pursuant to any
applicable federal securities laws.
4. CONVERSION AND ISSUE OF SECURITIES.
The manner of converting the shares of each of the Constituent
Corporations into securities of the Surviving Corporation and re-lated
provisions are as follows:
A. All shares of capital stock of Flex Financial which shall be
issued and outstanding on the Effective Date shall, on the Effective Date, be
canceled and shall be converted into that number of shares of Common Stock,
par value $0.001 per share, of FAC.
B. All 20,000 shares of Common Stock, par value $0.001 per share, of
FAC which shall be outstanding immediately prior to the Effective Date shall,
on the Effective Date, continue to be outstanding.
C. All warrants and options of Flex Financial which shall be
outstanding on the Effective Date shall, on the Effective Date, be canceled
and shall be converted into warrants and options of FAC of equivalent tenor.
5. CERTAIN EFFECTS OF THE MERGER
At the Effective Date, the separate existence and corporate organization
of Flex Financial, except insofar as it may be continued by statute, shall
cease and FAC shall continue as the Surviving Corporation, which shall
succeed, without other transfer or further act or deed whatsoever, to all the
rights, property and assets of the Constituent Corporations and shall be
subject to and liable for all the debts and liabilities of each; otherwise,
its identity, existence, purposes, rights, immunities, properties, liabilities
and obligations shall be unaffected and unimpaired by the Merger except as
expressly provided herein.
6. TAX TREATMENT
The merger of FAC and Flex Financial shall be accomplished as a tax-free
reorganization as defined in Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended.
<PAGE>
Executed on the 1st day of July 1996, at Houston, Texas.
FLEX FINANCIAL GROUP, INC.
By: /s/Michael T. Fearnow
-----------------------
Michael T. Fearnow, President
FLEX ACQUISITIONS CORPORATION
By: /s/M. Stephen Roberts
-----------------------
M. Stephen Roberts, President
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
There is set forth in the Prospectus under "Terms of the Transaction -
Indemnification for Securities Act Liabilities" a description of the laws of
Texas with respect to the indemnification of officers, directors, and agents
of corporations incorporated in Texas.
Both the Company and Flex Financial Group, Inc. have charter provisions
and bylaw provisions that insure or indemnify, to the full extent allowed by
the laws of Texas, directors, officers, employees, agents or persons serving
in similar capacities in other enterprises at the request either of the
Company or Flex Financial Group, Inc., as the case may be.
To the extent of the indemnification rights provided by the Texas
statutes and provided by the Company's and Flex Financial's charter and
bylaws, and to the extent of Flex Financial's and the Company's abilities to
meet such indemnification obligations, the officers, directors and agents of
the Company would be beneficially affected.
<PAGE>
EXHIBITS.
Separately bound but filed as part of this Form S-4 Registration
Statement are the following exhibits:
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT
ITEM
2.1 . . - Agreement of Merger of July 1, 1996 between Flex Acquisitions Corporation And Flex Financial
Group, Inc.(1)
2.2 . . - Business Combination-Spinoff Agreement of June 30, 1996 among Flex Acquisitions Corporation;
Flex Financial Group, Inc.; and American NorTel Communications, Inc.(1)
3.1 . . - Certificate of Incorporation of Flex Acquisitions Corporation(1)
3.2 . . - Certificate of Incorporation of Flex Financial Group, Inc. and amendments thereto.(1)
3.3 . . - Bylaws of Flex Acquisitions Corporation(1)
3.4 . . - Bylaws of Flex Financial Group, Inc.(1)
4.1 . . - Form of Class B Redeemable Common Stock Purchase Warrant(3)
4.2 . . - Form of Class C Redeemable Common Stock Purchase Warrant(3)
4.3 . . - Form of Class A Unit Purchase Options (deleted)
4.4 . . - Form of Common Stock Purchase Options (deleted)
4.5 . . - Form of Unit Purchase Options (3)
4.6 . . - Form of Class A Common Stock Purchase Options (3)
5.1 . . - Opinion of M. Stephen Roberts, Esq., as to the legality of the securities covered by the Form S-4
and Form SB-2 Registration Statements(3)
8.1 . . - Opinion of M. Stephen Roberts, Esq., as to tax matters and tax consequences to the shareholders(3)
10.1. . - Escrow Agreement among Flex Acquisitions Corporation; American NorTel Communications, Inc.,
and Southwest Bank of Texas N.A.(1)
10.2. . - Agreement of Flex Financial relating to compliance with S.E.C. Rule 419(3)
23.1. . - Consent of M. Stephen Roberts, Esq., to the reference to him as an attorney who has passed upon
certain information contained in the Prospectus Statement(3)
23.2. . - Consent of Harper & Pearson Company, independent auditors of Flex Acquisitions Corporation
(superceded by Exhibit 23.6)
23.3. . - Consent of Harper & Pearson Company, independent auditors of Flex Financial Group, Inc.
(superceded by Exhibit 23.7)
23.4. . - Consent of Harper & Pearson Company, independent auditors of Flex Acquisitions Corporation
(superceded by Exhibit 23.6)
23.5. . - Consent of Harper & Pearson Company, independent auditors of Flex Financial Group, Inc.
(superceded by Exhibit 23.7)
23.6. . - Consent of Harper & Pearson Company, independent auditors of Flex Acquisitions Corporation (3)
23.7. . - Consent of Harper & Pearson Company, independent auditors of Flex Financial Group, Inc. (3)
27.1. . - Financial Data Schedule (superceded by Exhibit 27.2)
27.2. . - Financial Data Schedule (3)
<FN>
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on Form SB-2 as
contemporaneously filed with the Securities and Exchange Commission on November 29, 1996; and incorporated by
reference herein and to be a part hereof from the date of filing such documents.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement as Amendment No. 1 to Form
SB-2 as contemporaneously filed with the Securities and Exchange Commission on June 23, 1997; and incorporated
by reference herein and to be a part hereof from the date of filing such documents.
(3) Previously filed as an Exhibit to the Registrant's Registration Statement as Amendment No. 2 to Form
SB-2 as contemporaneously filed with the Securities and Exchange Commission; and incorporated by reference
herein and to be a part hereof from the date of filing such documents.
</TABLE>
UNDERTAKINGS
Flex Acquisitions Corporation will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
iii) include any additional or changed material information on
the plan of distribution.
2. For determining liability under this Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("the Act") may be permitted to directors, officers and
controlling persons of Flex Acquisitions Corporation pursuant to the foregoing
provisions, or otherwise, Flex Acquisitions Corporation has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Flex Acquisitions Corporation of expenses incurred
or paid by a director, officer or controlling person of Flex Acquisitions
Corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, Flex Acquisitions Corporation will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Flex Acquisitions Corporation hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4 of this Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
Flex Acquisitions Corporation hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Houston, Texas on
September 12, 1997.
FLEX ACQUISITIONS CORPORATION
By: /s/ Michael T. Fearnow
--------------------------
Michael T. Fearnow
Chief Executive Officer, President and
Chairman of the Board of Directors
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
FLEX ACQUISITIONS CORPORATION
By: /s/ Michael T. Fearnow
---------------------------
Michael T. Fearnow
Chief Executive Officer, President,
Chief Financial Officer, Chairman
of the Board of Directors, and Director
(Principal Executive Officer)
(Principal Financial and
Accounting Officer)
Date: September 12, 1997
<PAGE>
FLEX ACQUISITIONS CORPORATION
EXHIBIT INDEX
TO
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------------------------------------------------------------------------------- ----
<C> <S> <C>
4.5 Form of Unit Purchase Options (1)
4.6 Form of Class A Common Stock Purchase Options (1)
23.6 Consent of Harper & Pearson Company, independent auditors of Flex Acquisitions
Corporation (1)
23.7 Consent of Harper & Pearson Company, independent auditors of Flex Financial Group,
Inc. (1)
27.2 Financial Data Schedule (1)
<FN>
(1) Previously filed as an Exhibit to the Registrant's Registration Statement, as Amendment No. 2
to Form SB-2 as contemporaneously filed with the Securities and Exchange Commission; and incorporated
by reference herein and to be a part hereof from the date of filing such documents.
</TABLE>
