As filed with the Securities and Exchange Commission on February 23, 1999
Registration No. 333-17103
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 3
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 6159 76-0498636
--------------------------- ------------------ ---------------------
(State or other of (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Identification Number)
or organization) Number)
Michael T. Fearnow
President
Flex Financial Group, Inc.
179 Ruskin Drive East 179 Ruskin Drive East
Montgomery, Texas 77356 Montgomery, Texas 77356
(409) 449-5244 (409) 449-5244
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number (Name, address, including zip
code, and telephone number, including area code, of registrant's principal
executive offices) including area code, of agent for service)
Copies to:
----------------------------
Robert L. Sonfield, Jr., Esq.
Sonfield & Sonfield
770 S. Post Oak Lane
Houston, Texas 77056
(713) 877-8333
Facsimile: (713) 877-1547
Email: [email protected]
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>
<S> <C> <C> <C> <C>
Proposed Proposed
Amount to be maximum maximum Amount of
Title of each class of Registered offering price aggregate registration
securities to be registered per share (1) offering price (1) fee
- ----------------------------------------------- ----------------- ------------------ -------------------- ----------------
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 32,666 $ .00 $ .00
the 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 32,666 $ .00 $ .00
the 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
TOTAL $288.13
</TABLE>
<PAGE>
(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) The registration statement also covers any additional securities which may
become issuable pursuant to anti-dilution provisions of the warrants.
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.
<PAGE>
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.
=============================================== ================================
Title of each class of Number to be
securities to be issued issued(1)
=============================================== ================================
Common Stock (3)............................ 80,000
- ----------------------------------------------- --------------------------------
Class A Options (2)......................... 80,000
- ----------------------------------------------- --------------------------------
Common Stock Underlying Class A Options..... 80,000
- ----------------------------------------------- --------------------------------
Unit Purchase Options - Bridge Loan (2)..... 16,333
- ----------------------------------------------- --------------------------------
Units issuable upon exercise of the Unit 16,333
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
Unit Purchase Options (2)...................
- ----------------------------------------------- --------------------------------
Class B Warrants issuable upon exercise of 32,666
the Unit Purchase Options (2)...............
- ----------------------------------------------- --------------------------------
Common Stock issuable upon exercise of 32,666
Class B Bridge Loan warrants which underlie
the Unit Purchase Options...................
- ----------------------------------------------- --------------------------------
Class C Warrants issuable upon exercise of 32,666
the Unit Purchase Options (2)...............
- ----------------------------------------------- --------------------------------
Common Stock issuable upon exercise of 32,666
Class C Bridge Loan warrants which underlie
the Unit Purchase Options...................
- ----------------------------------------------- --------------------------------
Units, each consisting of one share of common 14,000
stock, $.001 par value, two Class B Warrants
and two Class C Warrants (2)................
- ----------------------------------------------- --------------------------------
Common Stock ($.001 par value) (2) (3)...... 14,000
- ----------------------------------------------- --------------------------------
Class B Warrants (2)........................ 28,000
- ----------------------------------------------- --------------------------------
Common Stock Underlying Class B Warrants (2) 28,000
- ----------------------------------------------- --------------------------------
Class C Warrants (2)........................ 28,000
- ----------------------------------------------- --------------------------------
Common Stock Underlying Class C Warrants 28,000
- ----------------------------------------------- --------------------------------
See footnotes on following page
<PAGE>
(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) Upon consummation of the merger between Flex Acquisitions Corporation and
Flex Financial Group, Inc. described herein, 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 Transaction - Terms of the Merger," page 12.
(3) Based upon the book value of Flex Financial Group, Inc. on July 31, 1996.
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. Upon
consummation of the Merger, 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 Corporations deems appropriate or may be required by law.
<PAGE>
ADDITIONAL INFORMATION
Flex Acquisitions Corporation (the "Flex Acquisitions") 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 Flex Acquisitions 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. Such reports and other information can be
reviewed through the Commission's Electronic Data Gathering Analysis and
Retrieval System, which is publicly available through the Commission's Web site
(http://www.sec.gov).
Should the proposed merger (the "Merger") be effected, Flex Acquisitions
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. Flex Acquisitions 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 and Delaware, should the Merger be approved by the requisite
shareholder vote of each of Flex Acquisitions 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 Acquisitions
Corporation.
UNTIL _____________________, 1998 (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES MAY
BE REQUIRED TO DELIVER A PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
ADDITIONAL INFORMATION........................................................2
SUMMARY.......................................................................5
Securities Issued in Other Transactions Being Registered...................5
The Companies..............................................................5
Flex Acquisitions Corporation............................................5
Flex Financial Group, Inc................................................6
American NorTel Communications Inc.......................................6
The Transactions...........................................................7
The Merger...............................................................7
The Spin-off.............................................................7
Alternatives to the Merger.................................................8
Degree of Management Control of Vote on Merger.............................8
No Dissenters' Rights of Appraisal.........................................8
Compliance with Governmental Regulations...................................8
Tax Consequences of the Transaction........................................9
Risk Factors...............................................................9
RISK FACTORS.................................................................10
Risks Inherent in Developmental Stage Company.............................10
No Assurance of a Public Market and Likelihood of a Volatile Market.......10
Market Restrictions on Broker-Dealers.....................................10
Management Control........................................................11
Dependence on Key Personnel...............................................11
Dependence on Outside Consultants and Advisers; Conflicts of Interest.....11
Lack of Independent Directors.............................................11
Dilution..................................................................11
Tax Consequences..........................................................12
Dividends Not Likely......................................................12
Possible Future Dilution..................................................12
TERMS OF THE TRANSACTION.....................................................12
Terms of the Merger.......................................................12
Reasons for the Merger and Spin-off.......................................13
Accounting Treatment of Proposed Merger...................................14
Plan of Merger............................................................14
Federal Income Tax Consequences...........................................14
The Merger..............................................................15
The Spin-off............................................................15
Shareholders of American NorTel.........................................15
Pro Forma Financial Information and Dilution..............................15
Material Contacts among the Companies.....................................16
Reoffering by Party Deemed to Be an Underwriter...........................16
Indemnification...........................................................16
INFORMATION ABOUT FLEX ACQUISITIONS..........................................17
Description of Business and Properties....................................17
Business Strategy.........................................................17
Legal Proceedings.........................................................17
Market for Flex Financial's Common Stock and Related Stockholder Matters..17
Rule 144 and Rule 145 Restrictions on Trading.............................18
INFORMATION ABOUT FLEX FINANCIAL.............................................19
Management's Plan of Operation............................................19
Liquidity and Capital Resources...........................................20
Plan of Operation.........................................................20
Business Plan.............................................................21
Subordination and Bridge Loans............................................21
Other Investment Transactions.............................................22
Miscellaneous Matters.....................................................24
Description of Business Properties........................................25
Market for Flex Financial's Capital Stock and Related Stockholder Matters.25
Description of Securities.................................................26
Common Stock............................................................26
Redeemable Common Stock Purchase Warrants...............................26
Preferred Stock.........................................................27
Other Securities of Flex Financial......................................27
COMPARATIVE RIGHTS OF STOCKHOLDERS...........................................28
General...................................................................28
Limitation of Liability...................................................28
Indemnification...........................................................30
Defenses Against Hostile Takeovers........................................31
Introduction............................................................31
Authorized Shares of Capital Stock......................................32
Stockholder Meetings....................................................32
Classified Board of Directors and Removal of Directors..................32
Restriction of Maximum Number of Directors and Filling Vacancies
on the Board of Directors............................................32
Stockholder Vote Required to Approve Business Combinations with
Related Persons.......................................................33
Advance Notice Requirements for Nomination of Directors and
Proposal of New Business at Annual Stockholder Meetings...............33
Supermajority Voting Requirement for Amendment of Certain
Provisions of the Certificate of Incorporation........................33
VOTING AND MANAGEMENT INFORMATION............................................34
Date, Time and Place Information..........................................34
Flex Acquisitions.......................................................34
Flex Financial..........................................................34
Voting Procedure........................................................34
No Dissenters' Rights of Appraisal........................................34
No Solicitation of Proxies................................................34
Voting Securities and Principal Holders Thereof...........................35
Security Ownership of Certain Beneficial Owners and Management............35
Flex Acquisitions.......................................................35
Flex Financial..........................................................36
Directors, Executive Officers and Significant Employees...................37
Remuneration of Directors and Officers....................................37
Parents...................................................................38
INDEX TO FINANCIAL STATEMENTS OF FLEX FINANCIAL GROUP, INC...............F - 1
INDEX TO FINANCIAL STATEMENTS OF FLEX ACQUISITIONS CORPORATION...........F - 14
<PAGE>
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. Shareholders are urged to read carefully this
Prospectus in its 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 "Flex Acquisitions" means Flex
Acquisitions Corporation. The term "New Flex Financial" or the "Surviving
Corporation" means Flex Acquisitions after the Merger and its name change to
Flex Financial Group, Inc. 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 Delaware
corporation and Flex Acquisitions, a Texas corporation. When the Merger is
approved and effected, Flex Acquisitions will be the surviving entity, its name
will be changed to Flex Financial Group, Inc., it will be governed under the
General Corporation Law of Delaware ("DGCL") and will be under the management of
Flex Financial's present management (the "Surviving Corporation"). The 20,000
shares of Flex Acquisition'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.
When the proposed Merger is approved, American NorTel will distribute
certificates representing the 20,000 shares of Common Stock of New Flex
Financial to its approximately 780 shareholders (the "Spin-off") as shares of
the Surviving Corporation and thereby lay the basis for the creation of a market
for the Common Stock of the Surviving Corporation. There is presently no public
market for the Common Stock of the Surviving Corporation, 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 Spin-off described herein.
Spin-off. Simultaneous with the securities being registered as described in
this Prospectus, New Flex Financial 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 Flex
Acquisitions, to its shareholders by dividend (the "Spin-off"). The Spin-off is
conditioned upon the consummation of certain transactions including the merger
of Flex Acquisitions and Flex Financial by filing Articles of Merger with the
Secretary of State of Texas and a Certificate of Merger with the Secretary of
State of Delaware.
Securities Issued in Initial Public Offering. Concurrently with the
registration of the Spin-off, the Surviving Corporation 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 Flex Acquisitions
and Flex Financial by filing Articles of Merger with the Secretary of State of
Texas and Delaware.
The Companies
Three companies and their shareholders are affected by the Spin-off and
Merger transactions described in this Prospectus.
Flex Acquisitions Corporation. "Flex Acquisitions" 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"). Flex Acquisitions has no
business operations or significant capital and has no present intention of
engaging in any activity except to merge with Flex Financial, changing its name
to Flex Financial and as the Surviving Corporation execute the business plan of
Flex Financial. The business office of Flex Acquisitions is located at 179
Ruskin Drive East, Montgomery, Texas 77356. Its telephone number is (409)
449-5244.
Flex Financial Group, Inc. Flex Financial was incorporated under the
business corporation laws of the State of Texas on August 16, 1995 and
reincorporated in Delaware in December 1997. The business office of Flex
Financial is located at 179 Ruskin Drive East, Montgomery, Texas 77356. Its
telephone number is (409) 449-5244.
Flex Financial was formed to participate in certain short-term financing
opportunities (terms of less than one year) in the underwriting segment of the
securities industry. Flex Financial 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").
Flex Financial 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 Flex
Financial's due diligence standards in connection with initial public offerings
and secondary financing (the "Bridge Loans"). Flex Financial also intends to
engage in "spin-off" activities such as are described herein, such spin-offs to
involve the distribution, by way of stock dividends or otherwise, of registered
shares of stock of other public companies.
Management of Flex Financial believes that financing opportunities will
become available to Flex Financial 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 "spin-off" activities such as are described herein,
such spin-offs to involve the distribution, by way of stock dividends or
otherwise, of registered shares of stock of other companies. American NorTel
organized Flex Acquisitions and, prior to the date of this Prospectus, has been
the controlling shareholder of Flex Acquisitions.
American NorTel's address is 7201 E. Camelback Road, Suite 320, Scottsdale,
Arizona 85251. Its telephone number is 602/945-1266.
The Transactions
The Merger. Following the approval and adoption of the Merger Agreement by
the requisite vote of the stockholders of Flex Acquisitions and Flex Financial
and the satisfaction or waiver of the other conditions to the Merger, Flex
Acquisitions will be merged with Flex Financial, with Flex Acquisitions
continuing as the Surviving Corporation. The Merger will become effective upon
filing with the Secretary of State of the State of Delaware and the Secretary of
State of the State of Texas a duly executed Certificate of Merger, in the form
required by and in accordance with the Delaware General Corporation Law ("DGCL")
and the Texas Business Corporation Act ("BCA"), or at such time thereafter as is
provided in the Certificate of Merger.
Pursuant to the Merger Agreement, at the effective time of the Merger
("Effective Time") all Flex Financial Securities, issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive the same number and class of duly authorized, validly issued, fully paid
and nonassessable securities of New Flex Financial.
As of the date of this Prospectus, the following table sets forth the
number of outstanding securities of each class of Flex Financial, the number of
votes attributable to each class, the number of securities of Flex Acquisitions
that would be allocated to each class, and the number of each class to be
exchanged for Flex Acquisition's securities in the Merger:
<TABLE>
<S> <C> <C> <C> <C>
Number of
Flex Acquisitions
Number of Total Number of Securities for One
Class of Flex Acquisition Voting Securities Flex Financial
Flex Financial Securities Shares Rights of Flex Acquisitions Security
Flex Financial Common 94,000 94,000 94,000 1
Class A Common Stock Option 80,000 -0- 80,000 1
Unit Purchase Options 16,333 -0- 16,300 1
Each Consisting of:
One Share of Common Stock
Two Class B Warrants
Two Class C Warrants
Class B Warrants 28,000 -0- 28,000 1
Class C Warrants 28,000 -0- 28,000 1
</TABLE>
Because the exchange and conversion will be one share for one share,
fractional shares shall not be issued. The exercise or purchase price of
outstanding Flex Financial options and warrants shall become options and
warrants of the Surviving Corporation.
The business of Flex Financial shall be conducted, after the Merger, by the
Surviving Corporation and Flex Financial's management and directors shall
continue as the management and directors of the Surviving Corporation.
The Spin-off American NorTel shall distribute to its shareholders ("the
Spin-off"), on a basis proportionate to their shareholdings in American NorTel,
20,000 Shares ("the Spin-off Shares") of Common Stock of Flex Acquisitions
presently owned by American NorTel as shares of the Surviving Corporation. Each
American NorTel shareholder shall receive one share of the Surviving Corporation
for each 588 shares of American NorTel held of record on the Distribution Record
Date. See "Terms of the Transaction."
The Spin-off transaction is being registered by the Surviving Corporation
with the SEC on a separate registration statement ("the Spin-off Registration
Statement"). See "Terms of the Transaction."
Interests of Certain Persons in the Merger. With respect to certificates
representing the ownership of fewer than five Spin-off Shares of the Surviving
Corporation, American NorTel 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 Surviving
Corporation 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.
Alternatives to the Merger.
The Merger between Flex Acquisitions and Flex Financial requires an
affirmative vote of a majority of Flex Financial's shareholders and the
affirmative vote of two-thirds of the shareholders of Flex Acquisitions. Flex
Financial shareholder voting on the proposed merger will be taken by written
consent pursuant to Delaware corporate law and Flex Financial's bylaws. The vote
of the sole shareholder of Flex Acquisitions, American NorTel, will be by
written consent.
Should the Merger not become effective, (i) Flex Financial will continue as
a closely-held company with its existing assets and business, (ii) Flex
Acquisitions will have no significant assets or business, and there will be no
trading market for its Common Stock, and (iii) the Units Offering will not be
effected. Flex Acquisition'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, Flex
Acquisitions 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 Flex Acquisition's Common Stock and will have the
voting rights to cause a dissolution of Flex Acquisitions. Flex Financial has
indicated its intentions to so exercise these voting rights to that effect at
that time.
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 Flex Acquisitions and
Delaware corporate law requires that the Merger be approved by a vote of a
majority of the outstanding voting shares of 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: Flex Acquisitions:
0%; and Flex Financial: Common Stock - 43%.
No Dissenters' Rights of Appraisal
No dissenter's rights of appraisal for the shareholders of Flex
Acquisitions come into effect with respect to the proposed Merger because all
the issued and outstanding shares of capital stock of Flex Acquisitions will be
voted by American NorTel, the sole shareholder, and a unanimous vote approving
the Merger is assured.
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 Spin-off and Merger, other than the filing of articles of
merger with the Secretary of State of Texas and Delaware 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 Flex Acquisitions is speculative and
involves a high degree of risk, whether the Merger with Flex Financial be
effected or not. See "Risk Factors."
<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.
Flex Acquisitions was organized in March 1996 and has no operating history,
revenues from operations, or assets. Flex Acquisitions 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. Flex Acquisitions 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
Flex Acquisitions. 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 Surviving Corporation will close the
Units Offering necessary for it to implement its business plan, or if it does,
that the Surviving Corporation will be able to locate and participate in
financing and investment opportunities. In addition, even if the Surviving
Corporation 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 Surviving Corporation'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 Flex Acquisitions to be issued or
distributed pursuant to this Prospectus will be free of restrictions on
transferability for all persons except "affiliates" of Flex Financial 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 Surviving Corporation 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 Surviving Corporation'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 Surviving Corporation'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 Surviving Corporation'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 Surviving Corporation'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
Surviving Corporation to use its stock for business acquisition purposes. See
"Information about Flex Financial--Market for Flex Financial's Common Stock and
Related Stockholders Matters."
Management Control.
Should the proposed Merger be approved and effected, Flex Financial's
officers and directors and their affiliates will own approximately 35% of the
common stock of Flex Financial and thereby may be able to determine the outcome
of any vote affecting the control of Flex Financial. The Board of Directors has
complete discretion in making all business decisions. Accordingly, no person
should purchase securities in Flex Acquisitions 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 Flex Financial.
Flex Financial 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 Flex Financial's
operations. Because investors will not be able to evaluate the merits of
possible business opportunities by Flex Financial, they should critically assess
the information concerning Flex Financial's management. The success of the
emergent Company is dependent upon, among other things, the services of Michael
T. Fearnow, President of Flex Financial, who will provide certain financial and
legal consulting services to Flex Financial. Flex Financial has not entered into
employment agreements with any of its officers. Flex Financial does not have,
nor does it presently intend to obtain, key man life insurance (with proceeds
payable to Flex Financial) on the life of Mr. Fearnow. The loss of the services
of Mr. Fearnow for any reason, will have a material adverse effect on the
prospects of Flex Financial.
Dependence on Outside Consultants and Advisers; Conflicts of Interest.
Mr. Fearnow will, as an officer of Flex Financial, provide, without
compensation, the ministerial duties necessary for the president of Flex
Financial and will, with respect thereto, have a continuing fiduciary obligation
to Flex Financial. Mr. Fearnow will provide as a consultant ongoing advice and
consultation with respect to business opportunities and the business activities
of Flex Financial. During the investigation of a possible business opportunity
and in order to supplement the business experience of management, Flex Financial
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 Flex Financial and Mr.
Fearnow as a result of his position as an officer and director of Flex Financial
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 Flex Financial may provide financing. In
such cases, Mr. Fearnow may have interests that conflict with those of Flex
Financial. Although Mr. Fearnow will attempt to resolve any conflicts in favor
of Flex Financial, there is no assurance that this will be the case. Flex
Financial 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 Flex Financial's board of directors will have only one director.
As such, upon effectiveness of the Merger, Flex Financial's sole director will
be Michael T. Fearnow, Flex Financial'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
Spin-off to Flex Acquisitions 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 Sonfield &
Sonfield, in his capacity as tax counselor to Flex Acquisitions (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 Flex Acquisitions, significant gain or loss might
be recognized and reportable by any of Flex Acquisitions, American NorTel, or
American NorTel's approximately 780 shareholders to whom will be distributed the
20,000 Spin-off 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
Spin-off, Flex Acquisitions 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
Flex Acquisitions 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 Spin-off 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 Flex Acquisitions 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 and
Delaware.
These conditions are not waivable.
Terms of the Merger
The terms of the proposed merger ("the Merger") are as follows:
l. Flex Acquisitions shall merge with Flex Financial, a Delaware
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 Flex Acquisitions.
3. Flex Acquisitions 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. Flex Acquisitions will change its name to Flex Financial Group, Inc.
and its state of incorporation to Delaware.
5. The business of Flex Financial shall continue to be conducted, after
the Merger, by the management and directors of Flex Financial.
6. American NorTel shall distribute to its shareholders ("the Spin-off"),
on a basis proportionate to their shareholdings in American NorTel,
20,000 Shares ("the Spin-off Shares") of Common Stock of Flex
Acquisitions now held by American NorTel. Each American NorTel
shareholder shall receive one share of the Surviving Corporation for
each 588 shares of American NorTel held of record on September 30,
1996; provided that certificates representing the ownership of fewer
than five Spin-off 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
Surviving Corporation 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.
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 Acquisitions, none of Flex Financial, Flex Acquisitions,
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 Spin-off
The management of Flex Acquisitions 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 management of Flex Acquisitions and of
Flex Financial believe that the distribution of shares to the stockholders of
American NorTel in the Spin-off 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 Spin-off 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 Spin-off. The board considered among
other factors: prior disclosures to shareholders as to expected dilution in any
merger and spin-off 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, Flex Acquisitions's proposed capital structure, possible
future capital requirements of Flex Acquisitions, 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, Flex Acquisitions'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 Flex Acquisitions, 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 Spin-off 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 spin-off transaction, the terms of the proposed Merger and Spin-off were
fair to its shareholders.
Accounting Treatment of Proposed Merger
Because Flex Acquisitions 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 Flex Acquisitions, Flex Financial, and
American NorTel is included in the registration statement of which this
Prospectus is a part. See "Plan of Merger."
Federal Income Tax Consequences
The following summary description of the material federal income tax
consequences of the Merger is based upon the opinion of Sonfield & Sonfield,
federal tax counsel for the Company ("Tax Counsel"). This summary is for general
informational purposes only and is not intended as a complete description of all
of the tax consequences of the Merger and does not discuss tax consequences
under the laws of state or local governments or of any other jurisdiction. The
Company has not requested a ruling from the Internal Revenue Service (the
"Service") with respect to these matters. Accordingly, no assurance can be given
as to the Service's interpretation with respect to these matters. Moreover, the
tax treatment of a stockholder may vary depending upon his, her or its
particular situation. In this regard, certain stockholders (including (i)
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, and persons who are not citizens or residents of the United
States or who are foreign corporations, foreign partnerships or foreign trusts
or estates as defined for United States federal income tax purposes, and (ii)
stockholders that hold shares as part of a position in a "straddle" or as part
of a "hedging" or "conversion" transaction for United States federal income tax
purposes and stockholders with a "functional currency" other than the United
States dollar) may be subject to special rules not discussed below. In addition,
this summary applies only to shares which are held as capital assets. The
following discussion may not be applicable to a stockholder who acquired his or
her shares pursuant to the exercise of stock options or otherwise as
compensation. There can be no assurance that there will not be differences of
opinion as to the interpretation of applicable law.
Tax opinions are not binding on the IRS or any court. Moreover, the tax
opinions are based upon, among other things, certain representations as to
factual matters made by Flex Financial and Flex Acquisitions, which
representations if incorrect or incomplete in certain material respects, would
jeopardize the conclusions reached in the opinions.
This information is directed to stockholders who acquire shares in the
initial distribution thereof, who are citizens or residents of the United
States, including domestic corporations and partnerships, and who hold the
shares as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other company) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein..
THE FOLLOWING DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
CODE, TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE WHICH MAY OR MAY NOT
BE RETROACTIVE, AND ANY SUCH CHANGES COULD AFFECT THE TAX CONSEQUENCES DESCRIBED
HEREIN.
EACH STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE TRANSACTION DESCRIBED
HEREIN, INCLUDING, THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS, AND THE POSSIBLE EFFECTS OF CHANGES OF APPLICABLE TAX LAWS.
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 Flex Financial is newly organized, the "step transaction doctrine" might be
applied and, accordingly, Flex Financial 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, Flex Financial believes that there should be no
recognition of taxable gain or loss to the shareholders of Flex Financial by
reason of the Merger.
The Spin-off. It is anticipated that the distribution by American NorTel to
its shareholders of the 20,000 Spin-off Shares will be a taxable event to
American NorTel and to each of its shareholders receiving any of the Spin-off
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 Flex
Financial'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 Spin-off Shares of Flex Financial, the Spin-off 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 Spin-off Shares on the date of the Spin-off should not have
increased over the $0.05 price paid by American NorTel for the 20,000 Spin-off
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 Spin-off 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. See "Risk Factors--Tax Consequences."
Pro Forma Financial Information and Dilution
Because Flex Acquisitions 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 Spin-off 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 Spin-off on the net tangible book value a share of Flex
Acquisitions's Common Stock and Flex Financial's Common Stock is as follows:
Before Merger After Merger
Spin-off Spin-off
------------- ------------
Company's Common Stock $ 0.02 $(0.30)
Flex Financial's Common Stock $(0.36) $(0.30)
Material Contacts among the Companies
Michael Fearnow has been acquainted with the chief executive officer of
American NorTel for many years and advanced the idea of the distribution. Other
than the proposed Spin-off and Merger described herein, there have been no
material contracts, arrangements, understandings, relationships, negotiations or
transactions among Flex Financial, Flex Acquisitions, 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."
After the distribution by American NorTel of the Spin-off Shares to its
shareholders, American NorTel will no longer own any shares of capital stock of
Flex Acquisitions, except to the extent that an uncertain number of Spin-off
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.
Indemnification
Under Delaware 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, Delaware 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 Delaware
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 Delaware 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, Flex Financial 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 Flex
Financial pursuant to the foregoing provisions, or otherwise, Flex Financial 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 FLEX ACQUISITIONS
Flex Acquisitions 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
When the Merger is approved and effected, New Flex Acquisitions shall be
the surviving company, and Flex Financial's management shall remain as the
management of New Flex Financial. See "Voting and Management
Information--Directors, Executive Officers, and Significant Employees." Control
of Flex Acquisitions, 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 Flex Acquisitions.
It is the intention of Flex Acquisition's present management to continue
the business of Flex Acquisitions as the business of Flex Financial. See
"Information about Flex Financial--Description of Business and Properties."
Flex Financial'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, Flex Acquisitions will be
without any property or business. Flex Acquisition's management has no present
plans for this contingency but would seek to acquire, in exchange for stock of
Flex Acquisitions, a business or assets that would constitute a business. Should
no acquisition that would cause Flex Acquisitions 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 Flex
Acquisitions, and persons who would be the holders of a majority of these shares
have indicated their intention to do so.
Legal Proceedings
Neither Flex Financial nor its property is a party to or the subject of
pending legal proceedings.
Market for Flex Financial's Common 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 is one holder of record of Flex Acquisition's
20,000 shares of issued and outstanding capital stock. After the Spin-off, 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
Spin-off Shares, which certificates would be delivered to the approximately 780
persons owning the Spin-off Shares and (ii) the 12 shareholders of Flex
Financial will continue to own 94,000 shares of Common Stock of Flex Financial.
An additional 217,665 shares of Common Stock of Flex Financial 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 Flex Financial.
Flex Financial'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.
Flex Financial'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 Flex Financial's stock on exchanges are generally as high or higher
than the requirements for eligibility for quotation on NASDAQ, and Flex
Financial has no present plans to list its stock on an exchange. Hence, the
plans of Flex Financial 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 Flex Financial's stock to reach a trading level of $3 per share
or higher and thereby become eligible for quotation on NASDAQ even if Flex
Financial 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 Flex Financial 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 Spin-off transaction described herein be approved and
effected, all issued and outstanding shares of Common Stock of Flex Financial
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 Flex
Financial 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 Flex Financial (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.
Flex Financial believes that none of the 20,000 Spin-off Shares will be
subject to any restrictions on trading or transfers for value, by reason of
these Shares' being registered for the Spin-off. Further, none of the 94,000
Shares of Flex Financial 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 Spin-off 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
Flex Financial'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
Flex Financial -- Market for Flex Financial's Common Stock and Related
Stockholder Matters."
There is no equity of Flex Acquisitions subject to outstanding options or
warrants to purchase, or securities convertible into, equity of Flex
Acquisitions. However, under the terms of the Merger, all warrants and options
of Flex Financial which are outstanding on the Effective Date shall continue as
warrants and options of Flex Financial. See "Description of Securities--Other
Securities of Flex Financial."
Flex Acquisitions 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
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
business expansion purposes. See "Information about Flex Financial--Description
of Business and Properties".
INFORMATION ABOUT FLEX FINANCIAL
Flex Financial Group, Inc. ("Flex Financial") was incorporated under the
business corporation laws of the State of Texas on August 17, 1995 and
reincorporated under the General Corporation Law of the State of Delaware in
December 1997.
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 Flex
Acquisitions anticipates will occur in December 1997. There can be no assurance
that Flex Acquisitions 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 Flex Financial 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. Flex Financial 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
Flex Financial are to (i) provide Subordination Loans to selected underwriters
for specific issues on terms suiting Flex Financial's investment requirements,
and (ii) to provide Bridge Loans on a highly selective basis within established
guidelines to issuers meeting Flex Financial's due diligence standards. Flex
Financial also intends to engage in "spin-off" activities such as are described
herein, such spin-offs to involve the distribution, by way of stock dividends or
otherwise, of registered shares of stock of other companies. Flex Financial
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.
Flex Financial 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. Flex Financial 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 Flex Financial, 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 Flex
Financial 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. Flex Financial
expects to actively recruit board members with extensive management, financial
and entrepreneurial backgrounds to assist in these endeavors. Flex Financial
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 Flex Financial. The Advisory
Committee will not have any role in the management of the business of Flex
Financial, 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 Flex
Financial's due diligence standards to facilitate initial public offerings or
secondary financing; and to engage in "spin-off" activities in which Flex
Financial serves as a vehicle or facility for private operating companies to
effect public status.
Flex Financial 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
Flex Financial'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. Flex Financial 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 Flex Financial has virtually unlimited discretion in
searching out and participating in a financing opportunity. Flex Financial 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 Flex Financial may be able to participate in
ongoing financing opportunities. This diversification should enable Flex
Financial 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. Flex Financial 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 Flex
Financial. Flex Financial 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. Flex
Financial intends to participate in Bridge Loans that can be structured with the
following general terms. In the typical transaction Flex Financial 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. Flex Financial 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, Flex
Financial 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 Flex Financial 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 Flex Financial will
attempt to negotiate.
With respect to a typical scenario for a Subordination Loan, Flex Financial
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. Flex Financial 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 Flex Financial of 7% to 10% over a 30 to 45 day period.
With respect to a typical scenario for a Bridge Loan transaction, Flex
Financial 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.
Flex Financial 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 Flex Financial 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 completely 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 Flex Financial'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 Flex
Financial, and the ongoing general and administrative costs of Flex Financial.
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 Flex Financial believes has
growth potential. These opportunities are expected to be in the form of
"spin-off" transactions.
Investment Transactions. Flex Financial 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. Flex Financial 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-spin-off transaction which would result
in the Public Candidate becoming a publicly held company. The proposed
merger-spin-off 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-spin-off, 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
spin-off 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, Flex
Financial 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). Flex Financial
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 ("Spin-off Shares").
After a distribution by Flex Financial of Spin-off Shares to its
shareholders, Flex Financial 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 Spin-off 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 Spin-off 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, Flex Financial's organization of a subsidiary will result in
Flex Financial 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. Flex Financial 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. Flex Financial may agree to pay a finder's fee or other compensation
for services provided by unaffiliated persons who submit a financing opportunity
in which Flex Financial participates. No guideline or policy has been adopted by
Flex Financial concerning the circumstances under which a finder's fee will be
paid or the amount of such fee.
Flex Financial 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, Flex Financial 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 Flex Financial. Bridge Loans will only be made to companies that
can pass an extensive due diligence review of Flex Financial's management,
business, deal structure, underwriter, and public relations firm. Flex Financial
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 Flex Financial will be subject to
the issuer executing a firm commitment underwriting letter of intent with an
underwriter approved by Flex Financial.
Flex Financial 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, Flex Financial 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 Flex Financial'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.
Flex Financial 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. Flex Financial 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, Flex Financial 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 Flex Financial'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 Flex Financial's limited financial resources
and management and technical expertise.
Flex Financial 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 Flex Financial 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 Flex Financial
and will, therefore, be in a better position than Flex Financial to obtain
access to business opportunities. However, Flex Financial 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. at 179
Ruskin Drive East, Montgomery, Texas 77356. Mr. Fearnow is a principal of
Focus-Tech Investments, Inc. ("Focus-Tech"), a Nevada corporation, that provides
investment banking consulting services. 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 Flex Financial'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.
Description of Securities
Common Stock. Flex Financial is authorized to issue 10 million shares of
Common Stock, $0.001 par value. As of the date of this Prospectus, Flex
Financial had 94,000 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 Flex Financial legally available therefor.
Liquidation Rights. Upon any liquidation, dissolution or winding up of Flex
Financial, holders of shares of Common Stock are entitled to receive pro rata
all of the assets of Flex Financial 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 Flex Financial.
Registrar and Transfer Agent. Registrar and Transfer Company, 10 Commerce
Drive, Cranford, New Jersey 07016-3572 serves as the transfer agent and
registrar of Flex Financial.
Dissenter's Rights. Under current Texas and Delaware 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
Flex Financial's certificate of incorporation.
Redeemable Common Stock Purchase Warrants. Pursuant to this Prospectus,
Flex Financial 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 Flex Financial 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 Flex Financial 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 Flex Financial.
The Class B Warrants are redeemable, at the option of Flex Financial, 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 Flex Financial or of the merger or consolidation of Flex
Financial.
Flex Financial 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 Flex Financial 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 Flex Financial 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 Flex Financial.
The Class C Warrants are redeemable, at the option of Flex Financial, 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 Flex Financial or of the merger or consolidation of Flex
Financial.
Flex Financial 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. Flex Financial 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, Flex Financial has not issued any shares of its
authorized Preferred Stock.
Other Securities of Flex Financial. Under the terms of the Merger, all
warrants and options of Flex Acquisitions which are outstanding on the Effective
Date shall be canceled and converted into warrants and options of Flex Financial
of equivalent tenor. Therefore upon the Effective Date of the Merger, Flex
Financial 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.
COMPARATIVE RIGHTS OF STOCKHOLDERS
General
Flex Financial is incorporated under the laws of the State of Delaware, and
the rights of Flex Financial stockholders are governed by Delaware law,
including the DGCL, the certificate of incorporation of Flex Financial (the
"Flex Financial Certificate"), and the bylaws of Flex Financial (the "Flex
Financial Bylaws"). Flex Acquisitions is incorporated under the laws of the
State of Texas, and the rights of Flex Acquisitions stockholders are governed by
Texas law, including the Texas Business Corporation Act ("TBCA", the certificate
of incorporation of Flex Acquisitions (the "Flex Acquisitions Certificate") and
the bylaws of Flex Acquisitions (the "Flex Acquisitions Bylaws"). At the
Closing, Flex Acquisitions stockholders will become stockholders in Flex
Financial, and their rights as Flex Financial stockholders will be governed by
Delaware law but will also be governed by the Flex Financial Certificate and the
Flex Financial Bylaws, which differ from the Flex Acquisitions Certificate and
the Flex Acquisitions Bylaws. Certain of these differences are summarized below.
The following summary is not intended to be an exhaustive examination or a
detailed description of the differences between the rights of Flex Financial
stockholders and Flex Acquisitions stockholders and is qualified in its entirety
by reference to Delaware law, the Flex Financial Certificate, the Flex Financial
Bylaws, Texas law the Flex Acquisitions Certificate and the Flex Acquisitions
Bylaws. Flex Acquisitions stockholders should carefully review the information
contained in such documents, all of which are on file with the SEC. Copies of
the Flex Financial Certificate and Flex Financial Bylaws are available without
charge, upon request, from Flex Financial. Copies of the Flex Acquisitions
Certificate and the Flex Acquisitions Bylaws are available without charge, upon
request, from Flex Acquisitions.
Limitation of Liability.
The Delaware Certificate contains a provision limiting or eliminating, with
certain exceptions, the liability of directors to Flex Financial and its
shareholders for monetary damages for breach of their fiduciary duties. The
Texas Articles contains no similar provision. The Board of Directors believes
that such provision will better enable Flex Financial to attract and retain as
directors responsible individuals with the experience and background required to
direct Flex Financial's business and affairs. It has become increasingly
difficult for corporations to obtain adequate liability insurance to protect
directors from personal losses resulting from suits or other proceedings
involving them by reason of their service as directors. Such insurance is
considered a standard condition of directors' engagement. However, coverage
under such insurance is no longer routinely offered by insurers and many
traditional insurance carriers have withdrawn from the market. To the extent
such insurance is available, the scope of coverage is often restricted, the
dollar limits of coverage are substantially reduced and the premiums have risen
dramatically.
At the same time directors have been subject to substantial monetary damage
awards in recent years. Traditionally, courts have not held directors to be
insurers against losses a corporation may suffer as a consequence of directors'
good faith exercise of business judgment, even if, in retrospect the directors'
decision was an unfortunate one. In the past, directors have had broad
discretion to make decisions on behalf of the corporation under the "business
judgment rule." The business judgment rule offers protection to directors who,
after reasonable investigation, adopt a course of action that they reasonably
and in good faith believe will benefit the corporation, but which ultimately
proves to be disadvantageous. Under those circumstances, courts have typically
been reluctant to subject directors' business judgments to further scrutiny.
Some recent court cases have, however, imposed significant personal liability on
directors for failure to exercise an informed business judgment with the result
that the potential exposure of directors to monetary damages has increased.
Consequently legal proceedings against directors relating to decisions made by
directors on behalf of corporations have significantly increased in number, cost
of defense and level of damages claimed. Whether or not such an action is
meritorious, the cost of defense can be well beyond the personal resources of a
director.
The Delaware General Assembly considered such developments a threat to the
quality and stability of the governance of Delaware corporations because of the
unwillingness of directors, in many instances, to serve without the protection
which insurance traditionally has provided and because of the deterrent effect
on entrepreneurial decision making by directors who do serve without the
protection of traditional insurance coverage. In response, in 1986 the Delaware
General Assembly adopted amendments to the Delaware GCL which permit a
corporation to include in its charter a provision to limit or eliminate, with
certain exceptions, the Personal liability Of Directors to a corporation and its
shareholders for monetary damages for breach of their fiduciary duties. Similar
charter provisions limiting a director's liability are not permitted under Texas
law.
The Board of Directors believes that the limitation on directors' liability
permitted under Delaware law will assist Flex Financial in attracting and
retaining qualified directors by limiting directors' exposure to liability. The
Reincorporation proposal will implement this limitation on liability of the
directors of Flex Financial, inasmuch as Article XVI of the Delaware Certificate
provides that to the fullest extent that the Delaware GCL now or hereafter
permits the limitation or elimination of the liability of directors, no director
will be liable to Flex Financial or its stockholders for monetary damages for
breach of fiduciary duty. Under such provision, Flex Financial's directors will
not be liable for monetary damages for acts or omissions occurring on or after
the Effective Date of the Reincorporation, even if they should fail through
negligence or gross negligence, to satisfy their duty of care (which requires
directors to exercise informed business judgment in discharging their duties).
Article XVI would not limit or eliminate any liability of directors for acts or
omissions occurring prior to the Effective Date. As provided under Delaware law,
Article XVI cannot eliminate or limit the liability of directors for breaches of
their duty of loyalty to Flex Financial; acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, paying a
dividend or effecting a stock repurchase or redemption which is illegal under
the Delaware GCL, or transactions from which a director derived an improper
personal benefit. Further, Article XVI would not affect the availability of
equitable remedies, such as an action to enjoin or rescind a transaction
involving a breach of a director's duty of care. Article XVI pertains to
breaches of duty by directors acting as directors and not to breaches of duty by
directors acting as officers (even if the individual in question is also a
director). In addition, Article XVI would not affect a director's liability to
third parties or under the federal securities laws.
Article XVI is worded to incorporate any future statutory revisions
limiting directors' liability. It provides, however, that no amendment or repeal
of its provision will apply to the liability of a director for any acts or
omissions occurring prior to such amendment or repeal, unless such amendment has
the affect of further limiting or eliminating such liability.
The Company has not received notice of any lawsuit or other proceeding to
which Article XVI might apply. In addition, Article XVI is not being included in
the Delaware Certificate in response to any director's resignation or any notice
of an intention to resign. Accordingly, the Company is not aware of any existing
circumstances to which Article XVI might apply. The Board of Directors
recognizes that Article XVI may have the effect of reducing the likelihood of
derivative litigation against directors, and may discourage or deter
stockholders from instituting litigation against directors for breach of their
duty of care, even though such an action, if successful, might benefit Flex
Financial and its shareholders. However, given the difficult environment and
potential for incurring liabilities currently facing directors of publicly held
corporations, the Board of Directors believes that Article XVI is in the best
interests of Flex Financial and its stockholders, since it should enhance Flex
Financial's ability to retain highly qualified directors and reduce a possible
deterrent to entrepreneurial decision making. In addition, the Board of
Directors believes that Article XVI may have a favorable impact over the long
term on the availability, cost, amount and scope of coverage of directors'
liability insurance, although there can be no assurance of such an effect.
Article XVI may be viewed as limiting the rights of stockholders, and the
broad scope of the indemnification provisions of Flex Financial's could result
in increased expense to Flex Financial. The Company believes, however, that
these provisions will provide a better balancing of the legal obligations of,
and protections for, directors and will contribute to the quality and stability
of Flex Financial's governance. The Board of Directors has concluded that the
benefit to stockholders of improved corporate governance outweighs any possible
adverse effects on stockholders of reducing the exposure of directors to
liability and broadening indemnification rights. Because Article XVI deals with
the potential liability of directors, the members of the Board of Directors may
be deemed to have a personal interest in effecting the Reincorporation.
Indemnification.
As part of the 1986 legislation permitting a corporation to limit or
eliminate the liability of directors, the Delaware General Assembly, for the
reasons noted under "Limitation of Liability" above also amended the provisions
of the Delaware GCL governing indemnification to clarify and broaden the
indemnification rights which corporations may provide to their directors,
officers and other corporate agents. The Texas BCA also contains broad
indemnification provisions. The Delaware Certificate reflects the provisions of
Delaware law, as recently amended, and, as discussed below, provides broad
rights to indemnification.
In recent years, investigations, actions, suits and proceedings, including
actions, suits and proceedings by or in the right of a corporation to procure a
judgment in its favor (referred to together as "proceedings"), seeking to impose
liability on, or involving as witnesses, directors and officers of publicly-held
corporations have become increasingly common. Such proceedings are typically
very expensive, whatever their eventual outcome. In view of the costs and
uncertainties of litigation in general it is often prudent to settle proceedings
in which claims against a director or officer are made. Settlement amounts, even
if material to the corporation involved and minor compared to the enormous
amounts frequently claimed, often exceed the financial resources of most
individual defendants. Even in proceedings in which a director or officer is not
named as a defendant he may incur substantial expenses and attorneys' fees if he
is called as a witness or otherwise becomes involved in the proceeding. Although
the Company's directors and officers have not incurred any liability or
significant expense as a result of any proceeding to date the potential for
substantial loss does exist. As a result, an individual may conclude that the
potential exposure to the costs and risks of proceedings in which he may become
involved may exceed any benefit to him from serving as a director or officer of
a public corporation. This is particularly true for directors who are not also
officers of the corporation. The increasing difficulty and expense of obtaining
directors' and officers' liability insurance discussed above has compounded the
problem.
The broad scope of indemnification now available under Delaware law will
permit Flex Financial to continue to offer its directors and officers greater
protection against these risks. The Board of Directors believes that such
protection is reasonable and desirable in order to enhance Flex Financial's
ability to attract and retain qualified directors as well as to encourage
directors to continue to make good faith decisions on behalf of Flex Financial
with regard to the best interests of Flex Financial and its stockholders.
The Delaware Certificate is quite different from the Texas Articles and
require indemnification of Flex Financial's directors and officers to the
fullest extent permitted under applicable law as from time to time in affect,
with respect to expenses, liability or loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) actually and reasonably incurred by any person
in connection with any actual or threatened proceeding by reason of the fact
that such person is or was a director or officer of Flex Financial or is or was
serving at the request of Flex Financial as a director or officer of another
corporation or of a partnership, joint venture; trust, employee benefit plan or
other enterprise at the request of Flex Financial. The right to indemnification
includes the right to receive payment of expenses in advance of the final
disposition of such proceeding; consistent with applicable law from time to time
in effect; provided, however, that if the Delaware GCL requires the payment of
such expenses in advance of the final disposition of a proceeding, payment shall
be made only if such person undertakes to repay Flex Financial if it is
ultimately determined that he or she was not entitled to indemnification.
Directors and officers would not be indemnified for lose, liability or expenses
incurred in connection with proceedings brought against such persons otherwise
than in the capacities in which they serve Flex Financial. Under the Delaware
Flex Financial may, although it has no present intention to do so, by action of
the New Board of Directors, provide the same indemnification to its employees,
agents, attorneys and representatives as it provides to its directors and
officers. The Delaware Certificate provides that such practices are not
exclusive of any other rights to which persons seeking indemnification may
otherwise be entitled under any agreement or otherwise.
The Delaware Certificate specifies that the right to indemnification is a
contract right. The Delaware Certificate also provides that a person seeking
indemnification from Flex Financial may bring suit against Flex Financial to
recover any and all amounts entitled to such person provided that such person
has filed a written claim with Flex Financial has failed to pay such claim
within thirty days of receipt thereof. In addition, Flex Financial authorize
Flex Financial to purchase and maintain indemnity insurance, if it so chooses to
guard against future expense.
The Delaware Certificate provides for payment of all expenses incurred,
including those incurred to defend against a threatened proceeding.
Additionally, the Delaware Certificate provides that indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The Delaware also provide that to the extent any director or officer who
is, by reason of such a position, a witness in any proceeding, he or she shall
be indemnified for all reasonable expenses incurred in connection therewith.
Under Delaware law, as with Texas law, rights to indemnification and
expenses need not be limited to those provided by statute. As a result, under
Delaware law and the Delaware Certificate, Flex Financial will be permitted to
indemnity its directors and officers, within the limits established by law and
public policy, pursuant to an express contract, a by-law provision, a
stockholder vote or otherwise, any or all of which could provide indemnification
rights broader than those currently available under the Texas Articles or
expressly provided for under Texas or Delaware law.
Insofar as the Delaware Certificate provides indemnification to directors
or officers for liabilities arising under the Securities Act of 1933, it is the
position of the Securities and Exchange Commission that such indemnification
would be against public policy as expressed in such statute and, therefore,
unenforceable.
The Board of Directors recognizes that Flex Financial may in the future be
obligated to incur substantial expense as a result of the indemnification rights
conferred under the Delaware Certificate, which are intended to be as broad as
possible under applicable law. Because directors of Flex Financial may
personally benefit from the indemnification provisions of Flex Financial , the
members of the Board of Directors may be deemed to have a personal interest in
the effectuation of the Reincorporation.
Defenses Against Hostile Takeovers
Introduction. While the following discussion summarizes the reasons for,
and the operation and effects of, certain provisions of Flex Financial's
Certificate of Incorporation which management has identified as potentially
having an anti-takeover effect, it is not intended to be a complete description
of all potential anti-takeover effects, and it is qualified in its entirety by
reference to Flex Financial's Certificate of Incorporation and By Laws. A copy
of the Certificate of Incorporation is included as an exhibit to this
Information Statement which should be reviewed for more detailed information and
the By Laws are available upon request.
In general, the anti-takeover provisions in Delaware law and Flex
Financial's Certificate of Incorporation are designed to minimize Flex
Financial's susceptibility to sudden acquisitions of control which have not been
negotiated with and approved by Flex Financial's Board of Directors. As a
result, these provisions may tend to make it more difficult to remove the
incumbent members of the Board of Directors. The provisions would not prohibit
an acquisition of control of Flex Financial or a tender offer for all of Flex
Financial's capital stock. The provisions are designed to discourage any tender
offer or other attempt to gain control of Flex Financial in a transaction that
is not approved by the Board of Directors, by making it more difficult for a
person or group to obtain control of Flex Financial in a short time and then
impose its will on the remaining stockholders. However, to the extent these
provisions successfully discourage the acquisition of control of Flex Financial
or tender offers for all or part of Flex Financial's capital stock without
approval of the Board of Directors, they may have the effect of preventing an
acquisition or tender offer which might be viewed by stockholders to be in their
best interests.
Tender offers or other non-open market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control through
market purchases may cause the market price of the stock to reach levels which
are higher than would otherwise be the case. Anti-takeover provisions may
discourage such purchases, particularly those of less than all of Flex
Financial's stock, and may thereby deprive stockholders of an opportunity to
sell their stock at a temporarily higher price. These provisions may therefore
decrease the likelihood that a tender offer will be made, and, if made, will be
successful. As a result, the provisions may adversely affect those stockholders
who would desire to participate in a tender offer. These provisions may also
serve to insulate incumbent management from change and to discourage not only
sudden or hostile takeover attempts, but any attempts to acquire control which
are not approved by the Board of Directors, whether or not stockholders deem
such transactions to be in their best interests.
Authorized Shares of Capital Stock. Flex Financial's Certificate of
Incorporation authorizes the issuance of up to 10,000,000 shares of serial
preferred stock. Shares of Flex Financial's serial preferred stock with voting
rights could be issued and would then represent an additional class of stock
required to approve any proposed acquisition. This preferred stock, together
with authorized but unissued shares of Common Stock (the Certificate of
Incorporation authorizes the issuance of up to 10,000,000 shares), could
represent additional capital stock required to be purchased by an acquiror.
Issuance of such additional shares may dilute the voting interest of Flex
Financial's stockholders. If the Board of Directors of Flex Financial determined
to issue an additional class of voting preferred stock to a person opposed to a
proposed acquisition, such person might be able to prevent the acquisition
single-handedly.
Stockholder Meetings. Delaware law provides that the annual stockholder
meeting may be called by a corporation's board of directors or by such person or
persons as may be authorized by a corporation's certificate of incorporation or
By Laws. Flex Financial's Certificate of Incorporation provides that annual
stockholder meetings may be called only by Flex Financial's Board of Directors
or a duly designated committee of the Board. Although Flex Financial believes
that this provision will discourage stockholder attempts to disrupt the business
of Flex Financial between annual meetings, its effect may be to deter hostile
takeovers by making it more difficult for a person or entity to obtain immediate
control of Flex Financial between one annual meeting as a forum to address
certain other matters and discourage takeovers which are desired by the
stockholders. Flex Financial's Certificate of Incorporation also provides that
stockholder action may be taken only at a special or annual stockholder meeting
and not by written consent.
Classified Board of Directors and Removal of Directors. Flex Financial's
Certificate of Incorporation provides that Flex Financial's Board of Directors
is to be divided into three classes which shall be as nearly equal in number as
possible. The directors in each class serve for terms of three years, with the
terms of one class expiring each year. Each class currently consists of
approximately one-third of the number of directors. Each director will serve
until his successor is elected and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of Flex Financial's outstanding
stock, to force an immediate change in the composition of a majority of the
Board of Directors. Since the terms of only one-third of the incumbent directors
expire each year, it requires at least two annual elections for the stockholders
to change a majority, whereas a majority of a non-classified Board may be
changed in one year. In the absence of the provisions of Flex Financial's
Certificate of Incorporation classifying the Board, all of the directors would
be elected each year. The provision for a staggered Board of Directors affects
every election of directors and is not triggered by the occurrence of a
particular event such as a hostile takeover. Thus a staggered Board of Directors
makes it more difficult for stockholders to change the majority of directors
even when the reason for the change would be unrelated to a takeover.
Flex Financial's Certificate of Incorporation provides that a director may
not be removed except for cause by the affirmative vote of the holders of 75% of
the outstanding shares of capital stock entitled to vote at an election of
directors. This provision may, under certain circumstances, impede the removal
of a director and thus preclude the acquisition of control of Flex Financial
through the removal of existing directors and the election of nominees to fill
in the newly created vacancies. The supermajority vote requirement would make it
difficult for the stockholders of Flex Financial to remove directors, even if
the stockholders believe such removal would be beneficial.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Delaware law requires that the board of directors of a
corporation consist of one or more members and that the number of directors
shall be set by the corporation's By Laws, unless it is set by the corporation's
certificate of incorporation. Flex Financial's Certificate of Incorporation
provides that the number of directors (exclusive of directors, if any, to be
elected by the holders of preferred stock) shall not be less than one or more
than 15, as shall be provided from time to time in accordance with Flex
Financial By Laws. The power to determine the number of directors within these
numerical limitations and the power to fill vacancies, whether occurring by
reason of an increase in the number of directors or by resignation, is vested in
Flex Financial's Board of Directors. The overall effect of such provisions may
be to prevent a person or entity from quickly acquiring control of Flex
Financial through an increase in the number of Flex Financial's directors and
election of nominees to fill the newly created vacancies and thus allow existing
management to continue in office.
Stockholder Vote Required to Approve Business Combinations with Related
Persons. Flex Financial's Certificate of Incorporation generally requires the
approval of the holders of 75% of Flex Financial's outstanding voting stock (and
any class or series entitled to vote separately), and a majority of the
outstanding stock not beneficially owned by a related person (as defined) (up to
a maximum requirement of 85% of the outstanding voting stock), to approve
business combinations (as defined) involving the related person, except in cases
where the business combination has been approved in advance by two-thirds of
those members of Flex Financial's Board of Directors who were directors prior to
the time when the related person became a related person. Under Delaware law,
absent these provisions, business combinations generally, including mergers,
consolidations and sales of substantially all of the assets of Flex Financial
must, subject to certain exceptions, be approved by the vote of the holders of a
majority of Flex Financial's outstanding voting stock. One exception under
Delaware law to the majority approval requirement applies to business
combinations (as defined) involving stockholders owning 15% of the outstanding
voting stock of a corporation for less than three years. In order to obtain
stockholder approval of a business combination with such a related person, the
holders of two-thirds of the outstanding voting stock, excluding the stock owned
by the 15% stockholder, must approve the transaction. Alternatively, the 15%
stockholder must satisfy other requirements under Delaware law relating to (i)
the percentage of stock acquired by such person in the transaction which
resulted in such person's ownership becoming subject to the law, or (ii)
approval of the board of directors of such person's acquisition of the stock of
the Delaware corporation. Delaware law does not contain price criteria. The
supermajority stockholder vote requirements under the Certificate of
Incorporation and Delaware law may have the effect of foreclosing mergers and
other business combinations which the holders of a majority of Flex Financial's
stock deem desirable and place the power to prevent such a transaction in the
hands of a minority of Flex Financial's stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of Flex Financial's directors. The absence of cumulative voting rights
effectively means that the holders of a majority of the stock voted at a
stockholder meeting may, if they so choose, elect all directors of Flex
Financial, thus precluding a small group of stockholders from controlling the
election of one or more representatives to Flex Financial's Board of Directors.
Advance Notice Requirements for Nomination of Directors and Proposal of New
Business at Annual Stockholder Meetings. Flex Financial's Certificate of
Incorporation generally provides that any stockholder desiring to make a
nomination for the election of directors or a proposal for new business at a
stockholder meeting must submit written notice not less than 30 or more than 60
days in advance of the meeting. This advance notice requirement may give
management time to solicit its own proxies in an attempt to defeat any dissident
slate of nominations, should management determine that doing so is in the best
interests of stockholders generally. Similarly, adequate advance notice of
stockholder proposals will give management time to study such proposals and to
determine whether to recommend to the stockholders that such proposals be
adopted. In certain instances, such provisions could make it more difficult to
oppose management's nominees or proposals, even if the stockholders believe such
nominees or proposals are in their interests. Making the period for nomination
of directors and introducing new business a period not less than 30 days prior
to notice of a stockholder meeting may tend to discourage persons from bringing
up matters disclosed in the proxy materials furnished by Flex Financial and
could inhibit the ability of stockholders to bring up new business in response
to recent developments.
Supermajority Voting Requirement for Amendment of Certain Provisions of the
Certificate of Incorporation. Flex Financial's Certificate of Incorporation
provides that specified provisions contained in the Certificate of Incorporation
may not be repealed or amended except upon the affirmative vote of the holders
of not less than seventy-five percent of the outstanding stock entitled to vote.
This requirement exceeds the majority vote that would otherwise be required by
Delaware law for the repeal or amendment of the Certificate of Incorporation.
Specific provisions subject to the supermajority vote requirement are (i)
Article X, governing the calling of stockholder meetings and the requirement
that stockholder action be taken only at annual or special meetings, (ii)
Article IX, requiring written notice to Flex Financial of nominations for the
election of directors and new business proposals, (iii) Article X, governing the
number and terms of Flex Financial's directors, (iv) Article XI, governing the
removal of directors, (v) Article XIII, governing approval of business
combinations involving related persons, (vi) Article XIII, relating to the
consideration of various factors in the evaluation of business combinations,
(vii) Article XIV, providing for indemnification of directors, officers,
employees and agents, (ix) Article XVIII, limiting directors' liability, and (x)
Articles XVI and XVII, governing the required stockholder vote for amending the
By Laws and Certificate of Incorporation, respectively. Article XVII is intended
to prevent the holders of less than 75% of Flex Financial's outstanding voting
stock from circumventing any of the foregoing provisions by amending the
Certificate of Incorporation to delete or modify one of such provisions. This
provision would enable the holders of more than 25% of Flex Financial's voting
stock to prevent amendments to the Certificate of Incorporation or By Laws even
if they were favored by the holders of a majority of the voting stock.
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
Flex Acquisitions. Shareholder voting on the proposed Merger by American
NorTel, the sole shareholder of Flex Acquisitions, 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 Flex Acquisitions
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 Delaware corporate law and
Flex Financial's bylaws, written consent may be by a majority. It is expected
that a request for written consent to the Merger, without a meeting being held,
shall be submitted to the shareholders by certified mail, return receipt
requested, on or before 30 days after the date of this Prospectus. 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
majority written consent without a meeting. Shareholders of record as of the
date of this Prospectus shall be entitled to vote. Delaware corporate law and
Flex Financial's bylaws require that written consent be a majority. None of the
shares are held of record by brokers.
No Dissenters' Rights of Appraisal
No dissenter's rights of appraisal for the shareholders of Flex
Acquisitions come into effect with respect to the proposed Merger because all
the issued and outstanding shares of capital stock of Flex Acquisitions will be
voted by American NorTel, the sole shareholder, and a unanimous vote approving
the Merger is assured.
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 Flex Acquisitions and by a majority vote
of the outstanding shares of Common Stock of Flex Financial.
There are presently outstanding 20,000 shares of Common Stock of Flex
Acquisitions, 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 Flex Acquisitions and for Flex Financial.
Security Ownership of Certain Beneficial Owners and Management
Flex Acquisitions. The following table shows information as of August 31,
1997, with respect to each beneficial owner of more than 5% of Common Stock of
Flex Acquisitions and to each of the officers and directors of Flex Acquisitions
individually and as a group:
Common Stock Beneficially Owned
<TABLE>
<S> <C> <C> <C> <C>
Before Merger(1) After Merger (2)
Name and Address of Number Percent Number Percent
Beneficial Owner of Shares of Class of Shares of Class
- ------------------------ --------- -------- --------- --------
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)
- ---------------
</TABLE>
(1) Before the proposed Merger, all 20,000 shares of the issued and outstanding
shares of Common Stock of Flex Acquisitions are held of record and
beneficially by American NorTel Communications Inc.
(2) After giving effect to the Merger and Spin-off.
(3) After allocating one share of Common Stock of Flex Acquisitions for each
588 shares of common stock of American NorTel. (4) After the Merger, Mr.
Fearnow, President of Flex Financial, would be deemed to be the beneficial
owner of 20,000 shares of Common Stock of Flex Financial 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 Flex Financial.
Flex Financial. The following table describes what would be the effect of
the Merger between Flex Acquisitions and Flex Financial on the security
ownership of any person who is known to Flex Acquisitions or Flex Financial to
be a person who would be the beneficial owner of more than 5% of the Common
Stock of Flex Financial, 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
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Number Percent Number Percent
Beneficial Owner of Shares of Class of Shares of Class
- ------------------------ --------- -------- --------- --------
Focus-Tech Investments, Inc. 60,000(2) 18.09% 13.90% 7.21%
179 Ruskin Drive East
Houston, Texas 77056
Ruth Shepley (2) 40,000(3) 12.06% 9.27% 4.81%
7617 Del Monte
Houston, Texas 77063
John J. Garrett, Trustee 20,000(3) 6.03% 4.63% 2.40%
P.O. Box 130444
Houston, Texas 77219
Lighthouse Communications Inc. (3) 40,000(4) 12.06% 9.27% 4.81%
43 Bluewater Drive
Eureka Springs, Arkansas 72632
Bridge Lenders(4)
Dr. S.S. Dhother 40,832.5(5) 12.3% 9.46% 4.91%
4134 W. North Hampton Place
Houston, Texas 77098
Dave Lennox 40,832.5(5) 12.3% 9.46% 4.91%
7311 Bellerive, No. 148
Houston, Texas 77036
American NorTel Communications 20,000(6) 0% 0% 0%
7201 East Camelback Road
Suite 320
Scottsdale, Arizona 85251
Officers and Directors as a Group 60,000(2) 21 20,000 17.5
(One person)
- ------------------------
</TABLE>
(1) Includes all shares issuable in connection with options or warrants
exercisable within 60 days of this Prospectus (331,665 total) does not
include shares issuable as a part of the Units.
(2) Includes 30,000 shares owned of record by Focus-Tech Investments, Inc.,
30,000 shares issuable upon exercise of Class A Options. The beneficial
owner is Michael T. Fearnow.
(3) Includes 20,000 shares owned beneficially and of record, 20,000 shares
issuable upon exercise of Class A Options.
(4) Includes 20,000 shares owned beneficially and of record, 20,000 shares
issuable upon exercise of Class A Options.
(5) Includes 8,166.5 shares issuable upon exercise of the Option Units, 16,333
shares issuable upon exercise of Class B Warrants included in the Option
Units and 16,333 shares issuable upon exercise of Class C Warrants included
in the Option Units.
(6) After giving effect to the Merger and prior to the Distribution.
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 Flex Financial
and Flex Financial and a description of the business experience of each.
Person Office Held Since Term of Office
Flex Financial:
Michael T. Fearnow, 53 1995 October 1997
Director, President and Secretary
Flex Financial:
Michael T. Fearnow, 53 1996 March 1999
Director, President and Secretary
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
Flex Acquisitions. Mr. Fearnow, the sole officer and director of Flex
Acquisitions is receiving no compensation for his services for Flex
Acquisitions. No compensation is proposed to be paid to any officer or director
of Flex Acquisitions 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 Flex Financial. No
compensation is proposed to be paid to any officer or director of Flex Financial
prior to the proposed Merger with Flex Acquisitions. 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:
Securities
Name of Individual Underlying
or Group Capacity Year Salary Stock Options
Michael T. Fearnow President 1995-1997 $0.00 0
Michael T. Fearnow President 1998 $0.00 0
Stock Options. Flex Acquisitions 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 Flex Financial. 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.
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 179 Ruskin Drive East, Montgomery, Texas 77356. 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 Flex Financial 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 Flex
Financial'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 Flex Financial.
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
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 Flex Financial's business.
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.
Parents
The direct parent of Flex Acquisitions is American NorTel Communications
Inc., which owns all the issued and outstanding stock of Flex Acquisitions. 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>
F - 4
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
C O N T E N T S
Page
FLEX FINANCIAL GROUP, INC.
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......................................... 7-11
FLEX ACQUISITIONS CORPORATION
Independent Auditor's Report.......................................... 12
Balance Sheets........................................................ 13
Statements of Operations............................................. 14
Statements of Changes in Stockholders' Equity (Deficit).............. 15
Statements of Cash Flows............................................. 16
Notes to Financial Statements........................................ 17-18
FLEX ACQUSITIONS CORPORATION (PRO FORMA)
Accountant's Compilation Report...................................... 19
Pro Forma Consolidated Balance Sheets................................ 20
Pro Forma Consolidated Statements of Operations...................... 21
Summary of Significant Assumptions and Accounting Policies........... 22
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors of
Flex Financial Group, Inc.
(A Development Stage Company)
Montgomery, Texas
We have audited the accompanying balance sheets of Flex Financial Group,
Inc. (A Development Stage Company) as of July 31, 1998 and 1997, and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the years ended July 31, 1998 and 1997 and the period August 17, 1995
(date of inception) through July 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for the years and period then ended in conformity
with generally accepted accounting principles.
/s/HARPER & PEARSON COMPANY
Houston, Texas
September 12, 1998
<PAGE>
FLEX FINANCIAL GROUP, INC.
A DEVELOPMENT STAGE COMPANY
BALANCE SHEETS
JULY 31, 1998 AND 1997
ASSETS
1998 1997
--------- ---------
CURRENT ASSETS
Cash $ 269 $ 9,564
Interest receivable 963 596
Note receivable, Flex Acquisition Corporation 4,000 4,000
Deferred registration costs -0- 32,303
-------- --------
$ 5,232 $ 46,463
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 3,454 $ -0-
Notes payable 50,000 50,000
Note payable, Focus-Tech Investments, Inc. 31,185 -0-
Interest payable 14,849 8,822
-------- --------
TOTAL CURRENT LIABILITIES 99,488 58,822
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value in 1998
and no par value in 1997, 10,000,000 shares
authorized, none issued and outstanding -0- -0-
Common stock, $.001 par value in 1998 and
$.01 par value in 1997, 10,000,000 shares
authorized, 94,000 shares sold and to be issued 94 940
Additional paid-in capital 82,200 81,260
Deficit accumulated during the development stage (176,550) (94,559)
-------- --------
(94,256) (12,359)
-------- --------
$ 5,232 $ 46,463
======== ========
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 1998 AND 1997 AND CUMULATIVE THROUGH JULY 31, 1998
August 17, 1995
through
1998 1997 July 31, 1998
-------- -------- --------------
INTEREST INCOME $ 366 1,004 $ 3,648
------- ------- --------
EXPENSES
Advertising -0- -0- 2,564
Amortization -0- 1,250 1,250
Bad debt expense -0- 10,000 10,000
Consulting expenses -0- -0- 16,902
Filing fees -0- 4,923 5,433
Interest expense 6,026 5,000 18,598
Legal and professional fees 43,899 12,687 62,686
Other expenses 35 688 1,073
Printing -0- -0- 1,295
Overhead allocation, Focus-Tech
Investments, Inc. -0- -0- 19,109
Accrued overhead, Focus-Tech
Investments, Inc. -0- -0- 8,891
Write-off of deferred registration costs 32,397 -0- 32,397
------- ------- --------
82,357 34,548 180,198
------- ------- --------
NET LOSS $(81,991) $(33,544) $(176,550)
======= ======== =========
LOSS PER COMMON SHARE $ (.49) $ (.20) $ (1.07)
======= ========= ==========
SHARES USED IN COMPUTING LOSS PER SHARE 166,982 166,982 164,580
======= ======= ========
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
AUGUST 17, 1995 (Date of Inception) THROUGH JULY 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital (Deficit) Total
Sale of Common
Stock - Texas $ -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- (33,544) (33,544)
-------- -------- -------- -------- --------
Balance -
July 31, 1997 -0- 940 81,260 (94,559) (12,359)
Removal of Texas
Common Stock
Previously
Issuable -0- (940) 940 -0- -0-
Sale of Common
Stock - Delaware -0- 94 -0- -0- 94
Net Loss -0- -0- -0- (81,991) (81,991)
-------- -------- -------- -------- --------
Balance -
July 31, 1998 $ -0- $ 94 $ 82,200 $(176,550) $ (94,256)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1998 AND 1997 AND CUMULATIVE THROUGH JULY 31, 1998
<TABLE>
<S> <C> <C> <C>
August 17, 1995
through
1998 1997 July 31, 1998
-------- -------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(81,991) $(33,544) $(176,550)
------- ------- --------
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization of loan origination
costs, net -0- 1,250 5,000
Write-off of note receivable -0- 10,000 10,000
Write-off of deferred registration costs 32,303 -0- 32,303
Change in operating assets and
liabilities:
Interest receivable (367) 890 (963)
Accounts payable 3,454 (58) 3,454
Interest payable 6,027 5,000 14,849
Accrued overhead, Focus-Tech
Investments, Inc. -0- (8,891) -0-
------- ------- -------
Total Adjustments 41,417 8,191 64,643
------- ------- -------
Net Cash Used by Operating Activities (40,574) (25,353) (111,907)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred registration costs -0- (32,303) (32,303)
Loan origination costs -0- -0- (5,000)
Notes receivable -0- -0- (35,000)
Note receivable -0- -0- (10,000)
Long-term note receivable, Flex
Acquisition Corporation -0- -0- (4,000)
Collection of notes receivable -0- 25,000 35,000
------- ------- -------
Net Cash Provided (Used) by
Investing Activities -0- (7,303) (51,303)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable -0- -0- 50,000
Notes payable, Focus-Tech Investments, Inc. 31,185 -0- 31,185
Proceeds from issuance of common stock 94 -0- 87,294
Stock issuance costs -0- -0- (5,000)
------- ------- -------
Net Cash Provided by Financing
Activities 31,279 -0- 163,479
------- ------- -------
NET (DECREASE) INCREASE IN CASH (9,295) (32,656) 269
CASH AT BEGINNING OF PERIOD 9,564 42,220 -0-
------- ------- -------
CASH AT END OF PERIOD $ 269 $ 9,564 $ 269
======= ======= =======
</TABLE>
See accompanying notes.
<PAGE>
FLEX FINANCIAL GROUP, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 AND 1997
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. Effective
December 8, 1997, the Company organized a Delaware corporation which purchased
substantially all assets and liabilities of the Texas Corporation incorporated
in 1995.
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 94,000 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.
Common Management - 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 former 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 predecessor Company.
Effective with the reorganization as a Delaware company, Mr. Roberts is no
longer a shareholder of the surviving company.
Going Concern - As shown in the accompanying financial statements, the
Company has a working capital and equity deficit, and has no significant
operating activities. The future viability of the Company is dependent upon the
successful procurement of additional loans or capital and the commencement of
profitable operating activities.
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 Note
B.
Interest Rate Risk - The Company intends to be 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.
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 - During 1997, deferred registration costs were
capitalized to be netted against the proceeds, if any, received from the sale of
securities to the public. During 1998, deferred registration costs were expensed
as the related offering was postponed.
Allowance for Possible Credit Losses - When deemed necessary, an allowance
for possible credit losses will be established to provide a valuation allowance
for losses expected to be incurred on loans and other commitments to extend
credit. All losses will be 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 will estimate 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 will be 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
relationships 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 will also consider
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:
1998 1997 Cumulative
-------- -------- ----------
Weighted average shares
outstanding for issued shares 94,000 94,000 91,598
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 166,982 166,982 164,580
======= ======= =======
<PAGE>
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Income Taxes - For the years ended July 31, 1998 and 1997, the Company
incurred net operating losses amounting to $81,991 and $33,544, respectively.
Net operating loss carryforwards will expire in the years 2013, 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 $60,000 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.
Preferred Stock - The Corporation's Articles of Incorporation allow the
Board of Directors to determine the rights, preferences, qualifications,
limitations and restrictions and any other benefits of the Company's preferred
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.
NOTE B NOTES RECEIVABLE, RELATED PARTIES
Notes receivable due from entities under common management consist of the
following at July 31, 1998 and 1997.
1998 1997
-------- ---------
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, 1999, renewable
for an additional two year term, interest due
at maturity; unsecured $ 4,000 $ 4,000
Less current portion 4,000 4,000
------- -------
Long-term note receivable, related party $ -0- $ -0-
======= =======
NOTE C NOTES PAYABLE
Notes payable consist of the following at July 31, 1998 and 1997:
1998 1997
------ ---------
Two 10% unsecured, subordinated notes payable
on the earlier of (1)March 31, 1999, 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
======= =======
On several occasions, these notes have been amended to extend the maturity
dates to March 31, 1997, March 31, 1998 (the holders were granted an additional
8,000 Option Units for this extension), and most recently these notes and the
option exercise dates were extended through March 31, 1999 with no further
modifications.
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 March 31, 1999. 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.
NOTE D TRANSACTIONS AND BALANCES WITH ENTITIES AND AN INDIVIDUAL UNDER
COMMON MANAGEMENT
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
-------- -------- ---------
Flex Acquisition Corporation (1)
Interest income/receivable $ 366 $ 400 $ 134
Financial Public Relationship, Ltd. (2)
Interest income -0- -0- 1,709
Interest receivable -0- -0- 917
Consulting expense -0- -0- 5,000
Focus-Tech Investments, Inc. (3)
Interest income/receivable -0- -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 -0- -0- 19,109
Accrual of overhead -0- -0- 8,891
Consulting expense -0- -0- 2,500
M. Stephen Roberts - Attorney at Law;
initial registered agent
Legal fees, various corporate
matters 4,712 4,850 13,550
Legal fees, registration costs -0- 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 predecessor Texas 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 as 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 July 31, 1996. Flex
Financial shares a portion of approximately 2,000 square feet of office
space in premises occupied by Focus-Tech at 179 Ruskin Drive East Drive,
Montgomery, Texas. 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.
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.
<PAGE>
F - 18
INDEPENDENT AUDITOR'S REPORT
To the Stockholder and Directors of
Flex Acquisitions Corporation
(A Development Stage Company)
Montgomery, Texas
We have audited the accompanying balance sheets of Flex Acquisitions
Corporation (A Development Stage Company) as of July 31, 1998 and 1997, and the
related statements of operations, changes in stockholder's equity (deficit) and
cash flows for the years ended July 31, 1998 and 1997, and the periods March 22,
1996 (date of inception) through July 31, 1998 and 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, 1998 and 1997, and the
results of its operations and its cash flows for the years and periods then
ended in conformity with generally accepted accounting principles.
/s/Harper & Pearson Company
Houston, Texas
November 6, 1998
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
BALANCE SHEETS
JULY 31, 1998 AND 1997
ASSETS
1998 1997
-------- --------
OTHER ASSETS
Start-up costs $ 4,992 $ 4,992
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable, Flex Financial Group, Inc. $ 4,000 $ 4,000
Accounts payable 134 134
Interest payable 934 534
------- -------
TOTAL CURRENT LIABILITIES 5,068 4,668
------- -------
STOCKHOLDER'S 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 -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 (1,076) (676)
------- -------
(76) 324
------- -------
$ 4,992 $ 4,992
======= =======
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
YEARS AND PERIODS ENDED JULY 31, 1998, 1997 AND 1996
Cumulative
1998 1997 1996(1) (2)
--------- --------- -------- ----------
EXPENSES
Interest expense $ 400 $ 400 $ 134 $ 934
Outside services -0- -0- 80 80
Bank service charges -0- -0- 54 54
Postage and delivery -0- -0- 8 8
-------- -------- -------- ---------
400 400 276 1,076
------- ------- ------- -------
NET LOSS $ (400) $ (400) $ (276) $ (1,076)
======= ======= ======= =======
LOSS PER COMMON SHARE $ (.02) $ (.02) $ (.01) $ (.05)
======= ======= ======= =======
SHARES USED IN COMPUTING
LOSS PER SHARE 20,000 20,000 20,000 20,000
====== ======= ======= =======
(1) March 22, 1996 (Date of Inception) to July 31, 1996
(2) March 22, 1996 (Date of Inception) to July 31, 1998
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
YEARS ENDED JULY 31, 1998, 1997 AND PERIOD ENDED JULY 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital (Deficit) Total
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
Net Loss -0- -0- -0- (400) (400)
-------- -------- -------- -------- --------
Balance -
July 31, 1998 $ -0- $ 20 $ 980 $ (1,076) $ (76)
======== ======== ======== ======== =========
</TABLE>
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
YEARS AND PERIODS ENDED JULY 31, 1998, 1997 AND 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Cumulative
1998 1997 1996(1) (2)
-------- -------- -------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (400) $ (400) $ (276) $ (1,076)
------- ------- ------- --------
Adjustments to reconcile net loss to net
cash used by operating activities:
Change in operating assets and
liabilities:
Accounts payable -0- -0- 134 134
Interest payable 400 400 134 934
------- ------- ------- -------
Total Adjustments 400 400 268 1,068
------- ------- ------- -------
Net Cash Used by Operating
Activities -0- -0- (8) (8)
-------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Start-up costs -0- -0- (4,992) (4,992)
------- ------- ------- -------
Net Cash Used by Investing
Activities -0- -0- (4,992) (4,992)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term note payable, Flex Financial
Group, Inc. -0- -0- 4,000 4,000
Proceeds from issuance of common stock -0- -0- 1,000 1,000
------- ------- ------- -------
Net Cash Provided by Financing
Activities -0- -0- 5,000 5,000
------- ------- ------- -------
NET INCREASE IN CASH -0- -0- -0- -0-
CASH AT BEGINNING OF PERIOD -0- -0- -0- -0-
CASH AT END OF PERIOD $ -0- $ -0- $ -0- $ -0-
======= ======= ======= ========
</TABLE>
(1) March 22, 1996 (Date of Inception) to July 31, 1996
(2) March 22, 1996 (Date of Inception) to July 31, 1998
See accompanying notes.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 AND 1997
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 Acquisitions and Flex Financial result from the
following relationships; Michael T. Fearnow, sole director and officer of
Acquisitions holds similar positions with Flex Financial and is the sole owner
of Focus-Tech Investments, Inc., a 17.5% owner of Acquisitions. 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
Acquisitions. 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 Acquisitions and less than .5% shareholder in American Nortel.
Merger Spin-Off - In July 1996, the Company agreed to merge with Flex
Financial. 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.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
YEARS ENDED JULY 31, 1998, 1997 AND PERIOD ENDED JULY 31, 1996
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Loss Per Common Share - Loss per common share is computed using the
weighted average number of shares of common stock outstanding during the period.
Income Taxes - For the years and period ended July 31, 1998 and 1997, the
Company incurred net operating losses amounting to $400 each period. 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 $360 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 TRANSACTIONS AND BALANCES WITH FLEX FINANCIAL GROUP, INC.
AND MR. STEVE ROBERTS
Transactions and balances with Flex Financial and Mr. Roberts for the
periods ended July 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
-------- -------- --------
Flex Financial Group, Inc.
Interest expense/payable $ 400 $ 400 $ 134
======= ======== ========
Roberts - Attorney at Law;
initial registered agent
Start-up costs $ -0- $ -0- $ 4,992
======= ========= =======
<PAGE>
ACCOUNTANTS' REPORT
To the Stockholder and Directors of
Flex Financial Group, Inc. and Flex Acquisitions Corporation
(A Development Stage Company)
Montgomery, Texas
We have compiled the accompanying pro forma consolidated balance sheets of
Flex Acquisitions Corporation as of July 31, 1998, 1997 and 1996, and the
related pro forma consolidated statements of operations for the years then
ended.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the merger between Flex Financial Group, Inc. and Flex Acquisitions Corporation
occurred at July 31, 1996. However, the pro forma consolidated financial
statements are not necessarily indicative of the results of operations or
related effects on financial position that would have been attained had the
above-mentioned transaction actually occurred earlier.
The accompanying presentation and this report were prepared for the Flex
Financial Group, Inc. Form SB-2 and should not be used for any other purpose.
A compilation is limited to presenting in the form of pro forma financial
statement information that is the representation of management and does not
include evaluation of the support for the assumptions underlying the pro forma
transactions. We have not examined or reviewed the accompanying pro forma
consolidated financial statements and, accordingly, do not express an opinion or
any other form of assurance on them.
Houston, Texas
November 6, 1998
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
JULY 31, 1998, 1997 AND 1996
ASSETS
<TABLE>
<S> <C> <C> <C>
July 31, July 31, July 31,
1998 1997 1996
CURRENT ASSETS
Cash $ 269 $ 9,564 $ 42,220
Interest receivable 29 62 1,352
Note receivable, Flex Acquisition Corporation -0- -0- 25,000
Note receivable, Flex Delaware -0- -0- 10,000
Loan origination costs, net -0- -0- 1,250
Deferred registration costs -0- 32,303 -0-
--------- -------- --------
TOTAL CURRENT ASSETS 298 41,929 79,822
-------- -------- --------
OTHER ASSETS
Start-up costs 4,992 4,992 4,992
-------- -------- --------
$ 5,290 $ 46,921 $ 84,814
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 3,588 $ 134 $ 192
Notes payable 50,000 50,000 50,000
Interest payable 14,849 8,822 3,822
Note payable, Focus-Tech Investments, Inc. 31,185 -0- -0-
Accrued overhead, Focus-Tech Investments, Inc. -0- -0- 8,891
--------- -------- --------
TOTAL CURRENT LIABILITIES 99,622 58,956 62,905
--------- -------- --------
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 Articles of Incorporation -0- -0- -0-
Common stock, $.01 par value, 10,000,000 shares
authorized, 94,000 shares sold and to be issued 114 114 114
Additional paid-in capital 83,180 83,180 83,086
Deficit accumulated during the development stage (177,626) (95,235) (61,291)
-------- -------- --------
(94,332) (12,035) 21,909
-------- -------- --------
$ 5,290 $ 46,921 $ 84,814
======== ======== ========
</TABLE>
See summary of significant assumptions and accounting policies and accountants'
report.
<PAGE>
FLEX ACQUISITIONS CORPORATION
A DEVELOPMENT STAGE COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996
<TABLE>
<S> <C> <C> <C>
Year Year Year
Ended Ended Ended
July 31, July 31, July 31,
1998 1997 1996
------ ------- ------
INTEREST INCOME $ -0- $ 604 $ 2,144
------- ------- --------
EXPENSES
Advertising -0- -0- 2,564
Amortization -0- 1,250 -0-
Bad debt expense -0- 10,000 -0-
Consulting expenses -0- -0- 16,982
Filing fees -0- 4,523 510
Interest expense 6,060 5,400 7,572
Legal and professional fees 43,899 12,687 6,100
Other expenses 35 688 1,707
Write-off of deferred registration costs 32,397 -0- -0-
Accrued overhead, Focus-Tech Investments, Inc. -0- -0- 8,891
Overhead allocation, Focus-Tech Investments, Inc. -0- -0- 19,109
------- ------- --------
82,391 34,548 63,435
------- ------- --------
NET LOSS $(82,391) $(33,944) $ (61,291)
======= ======= ========
</TABLE>
See summary of significant assumptions and accounting policies and accountants'
report.
<PAGE>
F - 23
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The pro forma consolidated financial statements are based upon the
historical financial statements of Flex Financial Group, Inc. (A Development
Stage Company) (FFGI) and Flex Acquisitions Corporation (FAC) and their proposed
merger, as if the merger was effective July 31, 1996. All intercompany
transactions and balances have been eliminated (primarily notes
payable/receivable and interest income/expense). No changes have been made to
the accounting policies of the merged entities.
The pro forma consolidated financial statements should be read in
conjunction with the historical financial statements of the merged entities and
the pro forma information is not necessarily indicative of the results that
would have been attained if the merger had actually taken place July 31, 1996.
<PAGE>
II-5
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 Flex Acquisitions 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 Flex
Acquisitions 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 Flex Acquisition's and Flex Financial's charter and
bylaws, and to the extent of Flex Financial's and Flex Acquisition's abilities
to meet such indemnification obligations, the officers, directors and agents of
Flex Acquisitions would be beneficially affected.
<PAGE>
EXHIBITS.
Separately bound but filed as part of this Form S-4 Registration Statement
are the following exhibits:
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-Spin-off 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 Sonfield & Sonfield, as to the legality of the securities
covered by the Form S-4 and Form SB-2 Registration Statements(3)
8.1 Opinion of Sonfield & Sonfield, 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 Sonfield & Sonfield (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)
- ----------------------------------
(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.
UNDERTAKINGS
Flex Financial Group, Inc. 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 Financial Group, Inc. pursuant to the foregoing provisions, or
otherwise, Flex Financial Group, Inc. 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 Financial Group, Inc. of expenses incurred or
paid by a director, officer or controlling person of Flex Financial Group, Inc.
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 Financial Group, Inc. 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 Financial Group, Inc. 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 Financial Group, Inc. 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 July
___, 1998.
FLEX FINANCIAL GROUP, INC.
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 FINANCIAL GROUP, INC.
By: /s/ Michael T. Fearnow
-------------------------
Michael T. Fearnow
Chief Executive Officer, President,
Chief Financial Officer, Chairman
the Board of Directors, and Director
(Principal Executive Officer)
(Principal Financial and
Accounting Officer)
Date: July___, 1998
<PAGE>
FLEX FINANCIAL GROUP, INC.
EXHIBIT INDEX
TO
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
Exhibit List
No Description
- -- -----------
2.1 Agreement of Merger between Flex Acquisitions Corporation and Flex
Financial Group, Inc. (1)
3.1 Certificate of Incorporation of Flex Acquisitions Corporation (2)
3.2 Bylaws of Flex Acquisitions Corporation (2)
4.1 Form of Unit Purchase Options (2)
4.2 Form of Class A Common Stock Purchase Options (2)
5.1 Opinion of Sonfield & Sonfield as to the legality of the securities(1)
8.1 Opinion of Sonfield & Sonfield as to tax matters (included in Exhibit 5.1)
23.1 Consent of Sonfield & Sonfield (included in Exhibit 5.1)
23.2 Consent of Harper & Pearson Company, independent auditors of Flex
Acquisitions Corporation (1)
23.3 Consent of Harper & Pearson Company, independent auditors of Flex Financial
Group, Inc. (1))
27.1 Financial Data Schedule (1)
- -------------------------------------------
(1) Filed herewith
(2) Previously filed as an Exhibit to Amendment No. 2 to the Registration
Statement, on Form SB-2 of Flex Financial Group, Inc.; and incorporated by
reference herein.
