As filed with the Securities and Exchange Commission on July 30, 1999
Registration File No. 333-67199
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
NORDIC EQUITY PARTNERS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 5090 13-3853305
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
135 West 50th Street
New York, New York 10020
(212) 664-1200
(Address and telephone number of
registrant's principal executive offices)
Bjorn Nysted
President & Chief Executive Officer
Nordic Equity Partners Corp.
135 West 50th Street
New York, New York 10020
(212) 664-1200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Richard A. Friedman, Esq. Jay M. Kaplowitz, Esq.
Sichenzia, Ross & Friedman LLP Gersten, Savage, Kaplowitz
135 West 50th Street & Fredericks, LLP
New York, New York 10020 101 E. 52nd Street
(212) 664-1200 New York, New York 10022-6102
Fax: (212) 664-7329 (212) 752-9700
Fax: (212) 980-5192
</TABLE>
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class Securities Amount Being Price Per Offering Registration
Being Registered Registered Security(1) Price(1) Fee
Common Stock, $.001 par
<S> <C> <C> <C> <C> <C>
value(2) 1,417,455 $ 5.00 $ 7,087,275 $2,443.89
Underwriter's Warrants(3) 1 -- 10 (4)
Common Stock, $.001
par value(5) 141,746 $ 6.00 850,476 293.27
Totals 7,937,761 $2,737.16*
========= =========
</TABLE>
* 5,968.57 previously paid.
(1) Total estimated solely for the purpose of determining the registration
fee.
(2) Includes 232,570 shares of common stock being sold by certain
stockholders of Nordic Equity Partners Corp., of which 100,000 shares of common
stock are being sold by certain principals of Nordic, and 184,885 shares of
common stock subject to sale if the underwriters for the offering purchase the
over-allotment option granted to the underwriters.
(3) Represent warrants to be issued to the underwriters to purchase 123,257
shares of common stock.
(4) No fee due pursuant to Rule 457(g).
(5) Represents shares of common stock issuable upon the exercise of the
warrants issued to underwriters, together with such indeterminate number of
securities as may be issuable by reason of anti-dilution provisions contained
therein.
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>
NORDIC EQUITY PARTNERS CORP.
CROSS-REFERENCE SHEET
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<CAPTION>
Form S-1 Item Number and Caption Captions In Prospectus
<S> <C>
1. Front of Registration Statement and Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus Cover Page, Inside Cover Page,
Outside Back Page
3. Summary Information and Risk Factors Prospectus Summary, Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page, Underwriting
6. Dilution Dilution
7. Selling Securityholders Selling Stockholders
8. Plan of Distribution Prospectus Summary, Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and Control Persons Management, Principal Stockholders
11. Security Ownership of Certain Beneficial
Owners and Management Principal Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Management
15. Organization Within Last Five Years Prospectus Summary, Business
<PAGE>
16. Description of Business Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan
of Operation Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions
20. Market for Common Equity and Related Shareholder Matters Front Cover Page, Description of Securities
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure Change in Auditors
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 30, 1999
Prospectus
__________, 1999
NORDIC EQUITY PARTNERS CORP.
1,232,570 Shares of Common Stock
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nordic Equity Partners Corp.: The Offering:
<S> <C>
* NEPC imports and distributes a comprehensive * NEPC is offering 1,000,000 of the shares and
range of electronic, electrical and audio existing stockholders are offering 232,570 shares.
visual products. We also design, install
and sell complete, customized conference * The underwriter has an option to purchase an
rooms and auditoriums and provide after additional 184,885 shares from NEPC to cover
sale service and maintenance support to any over-allotments.
our customers. All of our business and
sales are conducted in countries located * This is our initial public offering and no public
in the geographic region of Scandinavia, market currently exists for our shares.
including Norway, Sweden and Finland.
* We plan to use the proceeds from this offering
* Nordic Equity Partners Corp. to repay indebtedness, acquire other businesses,
135 West 50th Street provide working capital and for other general
New York, New York 10020 corporate purposes.
(212) 664-1200
* Proposed Nasdaq SmallCap Market Symbol:
NEPC
</TABLE>
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price $5.00 $6,162,850
Underwriting fees $0.50 $ 616,285
Proceeds to NEPC $4.50 $4,500,000
Proceeds to selling stockholders $4.50 $1,046,565
</TABLE>
This investment involves risk. See "risk factors" beginning on page 9.
Neither the SEC nor any state securities commission has determined whether
this prospectus is truthful or complete. Nor have they made, nor will they make,
any determination as to whether anyone should buy these securities. Any
representation to the contrary is criminal.
The information in this prospetcus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliting offers to buy these securities
in any state where the offer or sale is not permitted.
Mason Hill & Co., Inc.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Before making an investment decision, you should read the entire prospectus
carefully, including the consolidated financial statements and related notes, in
order to understand our business and this offering fully.
References in this prospectus to "NEPC," "We," "Our," and "Us," refer to
Nordic Equity Partners Corp., a Delaware corporation, together with its
subsidiary and their predecessors. All information in this prospectus has been
adjusted to reflect an approximate 1.473-for-one stock split of the common stock
effected in November 1998. Unless otherwise stated, all financial information is
presented in U.S. Dollars (US$).
THE COMPANY
Our Business
We import and distribute a comprehensive range of electronic, electrical
and audio visual products. Currently, our products are distributed to over 1,000
customers located throughout the Scandinavian region, including Norway, Sweden
and Finland. These products include the following:
Electronics Products. We purchase and resell a large variety of electronics
products, including components, telecommunication and data communication
equipment, as well as recording studio and communication equipment.
Electrical Products. We import and distribute a large variety of electrical
products. The electrical products we sell may be generally divided into the
following areas:
* explosion prevention/electrical containment equipment
* heavy-duty lighting equipment
* passive and active fire protection equipment
* tools and materials for electrical installations
Audio Visual Products. We sell a number of products in the audio visual
industry. The audio visual products we distribute include:
* audio equipment, such as, AV cassette recorders, microphones,
sound systems and cassettes
* overhead projectors and accessories, such as projection
screens, portable and fixed video projectors and data
interface equipment
* conference room and auditorium furniture and related equipment
and light-dimming systems
We also design, install and sell complete, customized conference rooms and
auditoriums and provide after-sale consulting services and maintenance support
to our clients regarding previously-constructed conference rooms and
auditoriums.
Our Marketing, Sales and Distribution
Our customers include retailers, end users and wholesalers in the
electronic, electrical and audio visual industries. Our sales and marketing
efforts are aimed at identifying and servicing the specific needs of each of
these groups through the following:
* our own internal sales force
* exhibitions at international and regional trade shows in
Norway and Sweden
* our own showrooms in our Oslo and Stockholm facilities
<PAGE>
Growth Strategy
We are attempting to become a leading Scandinavian distributor of
electronic, electrical and audio visual products. To achieve this objective, we
intend to expand our operations through acquisitions and expansion of our
product lines. Our acquisition strategy is aimed at acquiring businesses or
assets that complement our existing business. In particular, we intend to seek
acquisition candidates that have either:
* established agency and distribution agreements with third
parties; or
* products in niche areas which our business is not presently
engaged or which are complementary to our existing products.
We will also seek to enter into new agency and distribution agreements to
expand the products we offer. The expanded product lines will provide our
established sales force with additional products to market to our existing
customers, as well as an opportunity to expand our current customer base.
We may consider investment opportunities in other high-tech businesses.
Diversifying our business operations in this manner may help limit cyclical
business risks inherent in our industry. Our focus will be primarily on
businesses that we believe have significant growth potential.
Aspects effecting our financial statements
Until December 15 1998 we operated in the machine tool business in addition
to our present area. Due to insufficient economic results in the machine tool
company, we decided to leave this rather small, but expensive part of our
operations. With only the high-tech industry segment to focus on we obtained a
healthier structure. However, before this sale we had to depreciate the total
book value of the company as well as record an operating loss. In sum this
discontinued entity generated the total loss of NEPC in 1998. (See "Selected
Financial Information, discontinued operations").
Expenses connected to the pursuit of the public offering in the United
States have reduced our net income for the last years due to multiple delays in
the process. These expenses peaked last year. The delays have led to
insufficient supply of funds and to a large extent prevented us from following
our intended growth strategy.
From 1996 to 1998 the average exchange rate from Norwegian currency to US
dollars increased by 16.8%. This has led to a proportional reduction of our
sales measured in US dollars hiding our growth in this period. (See
"Management's Discussion and Analysis").
Our Offices
Our executive offices in the United States are located at 135 West 50th
Street, 20th Floor, New York, New York 10020 and our telephone number at that
address is (212) 664-1200.
<PAGE>
THE OFFERING
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<CAPTION>
Securities Offered:
<S> <C>
By NEPC 1,000,000 shares
By the Selling Stockholders 232,570 shares
Common Stock Outstanding Before
Offering 2,785,270 shares
Common Stock Outstanding After
Offering 3,785,270 shares
Use of Proceeds
We intend to use the offering proceeds for repaying
indebtedness, acquiring other businesses, providing working
capital and other general corporate purposes
Risk Factors
Investing in these securities involves a high degree of
risk and immediate substantial dilution of your investment.
As an investor, you should be able to bear a complete loss
of your investment. See "Risk Factors" and "Dilution" for a
more detailed discussion
Proposed NASDAQ Symbol: NEPC
</TABLE>
The 3,785,270 shares of common stock to be outstanding after this offering
is based on the 2,785,270 shares of common stock outstanding prior to the
offering, 1,000,000 shares of common stock being sold by us in this offering and
232,570 shares of common stock being sold by the selling shareholders. The
shares of common stock to be outstanding after this offering excludes:
* 184,885 shares of common stock subject to the underwriters' over-
allotment option;
* 100,000 shares of common stock issuable upon the exercise of the
underwriters' warrants; and
* 250,000 shares of common stock reserved for issuance pursuant to our
1998 Stock Option Plan.
The proposed trading symbol does not imply that a liquid and active market
will be developed or sustained for the securities upon completion of this
offering.
<PAGE>
SUMMARY FINANCIAL DATA
The summary financial data set forth below for the years ended December 31,
1996, 1997 and 1998 is derived from and should be read in conjunction with
NEPC's consolidated financial statements, including the notes thereto, appearing
elsewhere in this prospectus. The summary financial data set forth below for the
years ended December 31, 1994 and 1995 is derived from NEPC's consolidated
financial statements. The summary financial data set forth below for the interim
periods ended March 31, 1999 and 1998 has been prepared from NEPC's books and
records and reflects, in management's opinion, all adjustments necessary for a
fair presentation of the financial position, results of operations, and changes
in NEPC's financial position, as at the periods indicated therein. Results for
interim periods are not audited , nor necessarily indicative of results which
can be expected for the entire year.
Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Years Ended December 31, Three Months Ended March 31,
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ...................................3,209 21,306 22,042 21,665 22,139 5,031 5,898
Cost of goods sold ..........................1,879 12,866 13,403 13,076 13,104 2,861 3,411
Total operating expenses ....................1,206 7,973 8,131 8,248 8,431 1,983 2,359
Income from operations ...................... 124 467 508 341 604 187 128
Income (loss) from continuing operations .... 65 (29) (87) (113) 15 27 (9)
Income (loss) from discontinued
operations
Loss from disposal of discontinued .......... 232 247 210 (41) (275) (9) --
Net income (loss) ........................... 297 218 123 (154) (985) 18 (9)
Basic and diluted earnings per share, total . 1.29 33.62 0.05 (0.05) (0.36) 0.01 0.00
Weighted average number of shares outstanding
6,485 229,240 2,707,895 2,800,000 2,797,545 2,800,000 2,785,270
</TABLE>
Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, Three Months Ended March 31,
1996 1997 1998 1999 1999
---- ---- ---- ---- ----
(In thousands) Actual As Adjusted(1)
<S> <C> <C> <C> <C> <C>
Working capital(2) 1.191 1,554 295 253 3,528
Total assets 11,357 11,290 9,780 10,041 12,300
Long-term
liabilities 379 1,163 680 617 142
Total liabilities 7,600 8,160 7,738 8,061 6,570
Total shareholders'
equity 3,757 3,130 2,042 1,980 5,730
</TABLE>
(1) As adjusted to reflect the issuance of the 1,000,000 shares of Common
stock offered by NEPC and the application of the net proceeds therefrom.
(2) Working capital represents current assets less current liabilities.
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in the shares of common stock
offered hereby. The risks described below are not the only ones that we face.
Additional risks that generally apply to publicly traded companies, that are not
yet identified or that we currently think are immaterial, may also impair our
business operations.
This prospectus contains certain forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions, and the assumptions underlying or
relating to any of these statements. These statements may be identified by the
use of words such as "expects," "anticipates," "intends," and "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
prospectus. We believe that our forward looking statements are within the
meaning of the safe harbor provided by the Securities Exchange Act of 1934, as
amended.
The Concentration of Our Product Market in the Scandinavian Region and
Dependence on Foreign Manufacturing May Adversely Affect our Business
Our principal operations are highly concentrated in Norway, Sweden and
Finland and all of our revenues are derived from activities in these countries.
Further, a substantial portion of the products we distribute are manufactured
outside of Scandinavia. Since we operate in more than one country and we rely on
foreign manufacturing, we are subject to a number of risks, including:
* differences in, or changes in, legal and social conditions;
* differences in regulatory requirements in various countries;
* potentially adverse tax consequences;
* transportation delays and interruptions;
* political and economic instability;
* technology export and import restrictions or prohibitions;
* fluctuations in currency exchange rates;
* imposition tariffs and import/export controls;
* changes in governmental policies;
* language and cultural barriers; and
* seasonal reductions in business activity during the summer
months in Europe.
If we fail to successfully address these potential risks, our business,
financial condition and results of operations may be materially and adversely
affected.
Our Business May Be Adversely Affected by the Interruption or Termination
of Arrangements with Third Party Manufacturers and Suppliers
We do not own or operate any manufacturing or production facilities.
Rather, we depend on third party manufacturers and suppliers for the electrical,
electronic or audio visual products that we distribute. Typically, we have
exclusive agreements with such manufacturers and suppliers. However, these
companies may terminate their relationships with us at any time. The loss of
business from a number of manufacturers and suppliers could result in the
inability to meet customer demands or satisfy sales order. Such loss may also
limit the products available to our customers. In this event, our operations
could be materially and adversely affected.
Fluctuations in Foreign Currency Exchange Rates May Affect the Price for
Our Products
Our sales are invoiced primarily in the Norwegian Krone, the Swedish Krone
and the Finish Mark. A decreasing exchange value may make the purchase of our
products from foreign manufacturers more expensive. Moreover, translation of
such currencies into U.S. dollars for determining our financial statements could
adversely affect our results of operations. There can be no assurances that we
will be able to forecast and adjust to a rapid fluctuation in the international
currency market.
Our Product Markets Are Highly Competitive
We compete in product markets that are extremely competitive and sensitive
to changing consumer preferences and demands. We believe that competition will
continue to intensify over the next several years as a result of increased
competition from abroad in our product market. Many of our competitors are
substantially larger and have substantially greater financial, employee and
marketing resources. As a result, these competitors, as well as their products,
are more widely recognized by the public which may give them a competitive
advantage in the market. Moreover, these competitors have the ability to develop
and market products at a more competitive price than our products.
<PAGE>
Our competitors in the sale of electrical, electronic and audio visual
products include Hawke, Ltd. (England), Group Schneider, Ltd. (France), Wandel &
Golterman GmbH (Germany), Asea Brown Bowery AS (Norway) and Audio Grafisk AS
(Norway). No assurances can be given that the Company will be able to compete in
its respective markets. If we are unable to compete successfully against our
competitors, our business, financial condition and results of operation will be
adversely affected.
Our Acquisition Strategy May Be Unsuccessful
Our growth strategy includes the acquisition of outside business entities.
Although we currently have not identified any specific acquisition targets, we
intend to seek acquisition candidates with business operations and/or assets
which complement our business or other high-tech/service related businesses.
Such investments or acquisitions are subject to the following risks:
* We may not be able to identify suitable investment or acquisition
candidates.
* If the purchase price for an acquisition consists of cash, we may need
to use all or a portion of our available cash including proceeds from
this offering.
* If we do identify suitable candidates, we may not be able to obtain
financing for such acquisitions on satisfactory terms.
* Acquisitions may cause a disruption in our ongoing business, distract
our management and other resources and make it difficult to maintain
our standards, controls and procedures.
* The process of integrating acquired businesses into our own operations
may result in unforeseen difficulties and may require a
disproportionate amount of resources and management's attention.
* We may not be able to retain key employees of the acquired companies or
maintain good relations with its customers or suppliers.
* We may be required to incur additional debt.
* We may be required to issue equity securities, which may be dilutive to
existing shareholders, to pay for acquisitions.
* There can be no assurance that competition for acquisition candidates
will not escalate. This increase in competition could result in
greater acquisition costs.
Additional Financing May Be Necessary for Business Expansion
A large portion of the offering proceeds will be used to acquire companies
with related and complementary business operations. No assurance can be given
that the funds allocated for acquisitions will be sufficient to complete any
acquisition proposed. Nor can any assurance be given that, if necessary, we will
be able to obtain additional financing to complete such acquisition on
acceptable terms or at all. If necessary, we may attempt to finance future
acquisitions through equity financing, which may dilute our shareholders'
shares, or through the incurrence of additional indebtedness. In the event that
we are unable to obtain additional financing, we will not be able to achieve all
of our growth and expansion plans.
Our Management Has Broad Discretion in the Use of the Offering Proceeds
Which Increases the Risk That the Proceeds Will Not Be Applied Effectively
Approximately 57.1% of the net proceeds of this offering will be applied to
acquisitions and working capital. Accordingly, management will have broad
discretion over how to spend the proceeds of this offering. Accordingly, we may
spend the proceeds from this offering in ways which the stockholders may not
agree.
<PAGE>
Management Has Considerable Control Over Management of NEPC as a Result of
Their Substantial Stock Ownership
Following this offering, our management will beneficially own approximately
59.7% of the outstanding common stock. Accordingly, management will have the
power to elect a majority of the directors, appoint management and approve
certain actions requiring the approval of a majority of the stockholders.
Anti-Takeover Provisions May Inhibit Change of Control
Our Certificate of Incorporation allows us to issue preferred stock without
stockholder approval. Such issuances could make it more difficult for a third
party to acquire control of NEPC, even if such a change in control would be
beneficial to stockholders.
Future Sales of Our Common Stock by Our Stockholders Could Have Adverse Effects
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of common stock in the
market after this offering, or the perception that these sales may occur. These
sales might also make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate.
We currently have 2,785,270 shares of common stock outstanding that are
"restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). Following
the sale of 1,000,000 by NEPC and 232,570 shares by the selling stockholders, we
will have issued and outstanding 3,785,270 shares of our common stock, of which
2,552,700 will be "restricted securities".
In general, under Rule 144, a person who has satisfied a two-year holding
period may, under certain circumstances, sell within any three month period a
number of shares of common stock that does not exceed the greater of 1% of the
then outstanding shares of common stock or the average weekly trading volume in
such shares during the four calendar weeks prior to such sale. Rule 144 also
permits, under certain circumstances, the sale of shares without any quantity or
other limitation by a person who is not an affiliate of the company and who has
satisfied a three-year holding period. Any substantial sale of restricted
securities under Rule 144 could have a significant adverse effect on the market
price of our securities.
All of our stockholders, on the date hereof, have agreed not to publicly
sell, for a period of two (2) years from the date of this prospectus, any shares
of our common stock without the prior written consent of Mason Hill. Mason
Hill's decision whether to release such individuals from their lock-ups will be
dependent upon market conditions, including the price and volume for our
securities, as well as the need to maintain orderly market conditions.
The Book Value of the Shares Purchased in this Offering will Immediately be
Substantially Diluted
The initial public offering price per share exceeds the net tangible book
value per share. Accordingly, the investors purchasing shares in this offering
will incur immediate and substantial dilution in net tangible book value per
share, estimated at approximately 75%, or $3.75, per share.
We Do Not Expect to Pay Any Dividends on Our Common Stock in the
Foreseeable Future
The holders of common stock are entitled to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefor.
To date, no dividends have been declared or paid on the common stock, and we do
not intend to declare any dividends in the foreseeable future. It is currently
anticipated that earnings, if any, will be used to develop and finance our
proposed business operations.
The Lead Underwriter Has Limited Experience in Managing Public Offering
Underwritings.
The representative of the several underwriters, Mason Hill & Co, Inc., has
limited experience as a lead managing underwriter of public offerings. Although
Mason Hill has acted as a placement agent in private offerings and has
participated as a member of the underwriting syndicate or as a selected dealer
in public offerings, it only has acted as the lead managing underwriter in three
prior public offerings and has co-managed two other public offerings. Mason
Hill's lack of experience could adversely affect the offering and the subsequent
development of a liquid public trading market in NEPC's securities.
<PAGE>
There is Currently No Public Market for Our Common Stock and the Offering
Price of Our Securities is Arbitrary
Prior to this offering, there has been no sustained public market for our
common stock. We do not know the extent to which investor interest in NEPC will
lead to development of a trading market or how liquid that market might be. The
initial public offering price of the common stock was arbitrarily determined
through negotiations between NEPC and Mason Hill. The offering price does not
necessarily bear any relationship to our assets, book value, results of
operations, or any other generally accepted indicia of value. Investors may not
be able to resell their shares of common stock at or above the initial public
offering price.
It May Be Difficult to Resell Our Securities If We Are Not Approved for
Listing on the Nasdaq Market
If our common stock is not listed on Nasdaq and/or the Boston Stock
Exchange, it may become subject to Rule 15g-9 under the Exchange Act. That rule
imposes additional sales practice requirements on broker-dealers that sell
low-priced securities to persons other than established customers and
institutional accredited investors. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, the rule may affect the ability of broker-dealers to sell
our shares and may affect the ability of holders to sell shares of our common
stock in the secondary market.
Our Securities May Be Delisted from the Nasdaq Market If We Fail to Comply
with Nasdaq Maintenance Requirements
We have applied for listing of the common stock on NASDAQ upon the
effective date. The Commission has approved rules for imposing criteria for
listing of securities on NASDAQ, including standards for maintenance of such
listing. If we are unable to satisfy NASDAQ maintenance criteria for listing in
the future, our securities may be delisted from NASDAQ. In such event, trading,
if any, in our securities would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets" or the NASD's Electronic Bulletin Board.
As a consequence of such delisting, an investor would likely find it more
difficult to dispose of, or to obtain quotations as to, the price of our
securities.
The Market for Our Common Stock May Suffer in the Event It is Delisted from
the Nasdaq SmallCap Market and is deemed "Penny Stock"
If our common stock were delisted from The Nasdaq SmallCap Market, our
common stock may be subject to the SEC's penny stock rules which impose
additional restrictions on sales of securities subject to these rules. The
Commission defines a "penny stock" to be any equity security that has a market
price of less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. The penny stock restrictions do not apply
if the security is listed on The Nasdaq SmallCap Market or the Boston Stock
Exchange. A listed company is also required, under the rules, to provide certain
price and volume information on a current and continuing basis, or meet required
minimum net tangible assets or average revenue criteria. Under the penny stock
rules, any broker that sells such securities must make a special determination
as to the suitability of the purchaser, and must have received the purchaser's
written consent to the transaction prior to the sale. As a result, delisting, if
it were to occur, could materially adversely affect the ability of
broker-dealers to sell our common stock, as well as the ability of purchasers in
this offering to resell their shares in the secondary market.
Exercise of the Underwriters' Warrants Could Have an Adverse Affect on the
Value of Our Outstanding Securities, and the Underwriters' Registration Rights
Could Result in Substantial Expenses to NEPC
In connection with this offering, we have agreed to sell to the
underwriters' warrants which entitle the underwriters to purchase up to 123,257
shares of common stock. The exercise of the underwriters' warrants may have the
following consequences:
* inability of NEPC to obtain additional equity capital; and
* adversely affect the market price of the common stock if the
common stock issuable upon the exercise of the underwriters'
warrants is sold in the public market.
The underwriters have been granted certain "piggyback" and demand
registration rights for a period of five years from the Effective Date with
respect to the registration under the Securities Act of the securities issuable
upon exercise of the underwriters' warrants. The exercise of such rights could
result in substantial expense to NEPC. See "Underwriting" for a more detailed
discussion of the underwriters' warrants and other compensation.
<PAGE>
Year 2000 Problems May Disrupt Our Business
Recently, national attention has focused on the potential problems and
costs resulting from computer programs being written using two digits rather
than four to define the year. After December 31, 1999, many computer systems
used today may be unable to operate properly because it will recognize the date
as the year 1900 rather than the year 2000. We have been assessing this Year
2000 issue as it relates to our business. Because we are dependent on third
party vendors, our review covers both our own computer systems and the computer
systems of our third party vendors and manufacturers. Failures and
interruptions, if any, resulting from the inability of our computing systems or
those of third party vendors to recognize the Year 2000 could have a material
adverse effect on our results of operations. For example, we may be unable to
process sales transactions, send invoices or engage in any similar normal
business activity. Although we may incur substantial costs in correcting Year
2000 issues, such costs are uncertain and cannot be estimated at this time.
<PAGE>
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
Nordic Equity Partners Corp. has filed with the Washington, D.C. office of
the Securities and Exchange Commission a registration statement under the
Securities Act with respect to the securities offered by this prospectus. This
prospectus, filed as part of the registration statement, does not contain all
the information set forth in the registration statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the company and this offering, reference is
made to the registration statement, including the exhibits filed therewith.
Statements contained in the prospectus as to the contents of any contract or
other document are not necessarily complete and reference is made to each such
contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference.
NEPC is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended. Reports and other information filed by NEPC can be
inspected, without charge, at prescribed rates from the Commission at the
Commission's public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549, or at the following Regional Offices of the Commission, at Citicorp,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 or at Northeast
Regional Office, 7 World Trade Center, New York, New York 10048. Information
regarding the operation of the Commission's public reference facilities may be
obtained by calling the SEC at 1-800-SEC-0330. The Commission maintains a World
Wide Website that contains reports, proxies and information statements and other
information regarding issuers that file electronically with the Commission. The
Commission's World Wide Website is located at http://www.sec.gov.
NEPC intends to distribute to its stockholders annual reports, containing
financial statements audited and reported upon by its independent public
accountants after the close of each fiscal year, and will make such other
periodic reports as the NEPC may determine to be appropriate or as may be
required by law. NEPC's fiscal year ends December 31st of each year.
ENFORCEMENT OF CIVIL LIABILITIES
Nordic Equity Partners Corp. was incorporated in the State of Delaware.
However, all of our directors and officers reside outside the United States in
Sweden and Norway and substantially all of our assets and those of our directors
and officers are located outside the United States. Service of process may be
effected upon the company through our American counsel, Sichenzia, Ross &
Friedman LLP, in New York. However, it may be difficult for investors to effect
service of process within the United States upon non-resident officers and
directors. Moreover, it may not be possible to enforce any judgments obtained
against the company or such persons in the United States courts predicated upon
the civil liability provisions of the federal securities laws or other laws of
the United States or any state thereof in jurisdictions outside the United
States.
NEPC has been advised by its Norwegian counsel, Komnaes, Huser & Co., that
(1)there is no treaty between Sweden and the United States or between Norway and
the United States obligating Swedish and Norwegian courts to enforce judgments
of the United States obtained in actions against the company and/or our officers
and directors predicated upon the civil liabilities provisions of the federal
securities laws, and (2) in original actions brought in courts in jurisdictions
located outside the United States, there is doubt as to the enforceability of
liabilities predicated upon the civil liability provisions of the U.S.
securities laws. Swedish and Norwegian courts, in original actions to enforce
liabilities against such persons predicated solely upon the federal securities
laws would apply the "Lex loci delicti-principle" pursuant to which the law of
the country in which damage has been done will be applied by Swedish and
Norwegian courts. This principle is complemented by the "Irma Mignon-formula"
pursuant to which the court shall apply the law of the country to which the
issue in question has the closest connection. It is the opinion of our Swedish
and Norwegian counsel that both the "Lex loci delicti-principle" and the "Irma
Mignon-formula" will most likely lead to the use of United States laws by
Swedish and Norwegian Courts in a situation where a Swedish and Norwegian
officer/director of a company located in the United States has caused damage to
such company. It is, however, not possible, with absolute certainty, to predict
the courts decision on this choice of law issue. Swedish and Norwegian counsel
consider the risks of a possible adverse court determination to be considerably
less than 50%.
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale the securities offered hereby are estimated
to be approximately $3,750,000 ($4,554,249.75) if the underwriters'
over-allotment option is exercised in full) after deducting underwriting
commissions and discounts and other expenses of the offering. We expect to use
the net proceeds approximately as follows:
<TABLE>
<CAPTION>
Approximate
Application of Approximate Percentage of
Net Proceeds Dollar Amount Net Proceeds
<S> <C> <C>
Repayment of Notes $ 757,550 20.2%
Repayment of Indebtedness 850,000 22.7%
Acquisitions 2,000,000 53.3%
Working Capital 142,450 3.8%
--------- -----
Total $3,750,000 100.0%
========= =====
</TABLE>
We believe that the net proceeds from the sale of the common stock in this
offering will be sufficient to fund our operations for at least one year
following the completion of this offering.
We intend to use a portion of the proceeds from this offering to repay
certain loans which were made to us by our subsidiary, Nortelco AS and by Mr.
Goran Haggqvist for the purpose of financing repayment of portions of the notes,
paying interest on the notes and paying certain other costs in connection with
this offering.
The notes which are payable to unaffiliated third parties were originally
payable on the earlier of the closing of this offering or February 15, 1998. The
holders of the notes have agreed to extend the due date on the notes to the
earlier of the closing of this offering or September 15, 1999. $142,500 of the
principal amount of the notes, together with accrued interest thereon, were
repaid in November 1998. An additional $45,000 of the principal amount of the
notes was repaid between January 1999 and April 1999. We have paid all accrued
interest on the remaining outstanding notes through April 15, 1999. The
remaining principal amount of the notes of $738,750 bears interest at the rate
of 10% per annum. Had the notes been repaid on July 15, 1999, the total amount
of interest to be paid to the holders of the notes would have been approximately
$18,800. The proceeds of the loans were used for corporate and general working
capital purposes, including the costs incurred in connection with a previously
withdrawn proposed public offering.
NEPC intends to use approximately $2,000,000 of the proceeds from this
offering to pursue acquisition of entities with related and complementary
business operations and/or assets. Also, we may consider investment
opportunities in other high-tech businesses. Diversifying our business
operations in this manner may help limit cyclical business risks inherent in our
industry. The amount of funds required for any proposed acquisition will depend
upon the nature, size and structure of such acquisition. No assurance can be
given that the funds allocated for acquisitions will be sufficient to complete
any acquisition proposed. In the event that NEPC requires additional funds for
any proposed acquisition, NEPC may be dependent upon its ability to obtain
additional financing to complete such acquisition. No assurance can be given
that, if necessary, we will be able to obtain additional financing to complete
such acquisition on acceptable terms, if at all. If necessary, NEPC may attempt
to finance future acquisitions through equity financing, which may dilute its
shareholder's shares, or through the incurrence of additional indebtedness. We
believe that, following the disposition of Storebro Machine AB, a former
subsidiary sold in December 1998, we will have sufficient revenues from
operations to fund transactions necessary to obtain additional financing for an
acquisition. However, there can be no assurance that our revenues will be
sufficient to obtain such acquisition financing.
The foregoing represents NEPC's current estimate of the allocation of the
net proceeds of the offering based upon certain assumptions relating to NEPC's
business. Future events, including changes in economic conditions, regulatory or
competitive conditions, and the success or lack thereof of NEPC's businesses,
may make shifts in the allocation of funds necessary or desirable. There can be
no assurance that NEPC's estimates will prove to be accurate or that unforeseen
expenses will not be incurred
<PAGE>
NEPC anticipates, based on its currently proposed plans and assumptions
relating to its operations, that the proceeds of this offering, together with
projected cash flow from operations and available cash resources, will be
sufficient to satisfy our contemplated cash requirements for at least twelve
(12) months following the consummation of this offering. In the event that our
plans change, its assumptions change or prove to be inaccurate, or if the
proceeds of this offering or cash flow otherwise prove to be insufficient to
fund operations (due to unanticipated expenses, problems, difficulties or
otherwise), we may find it necessary or advisable to reallocate some of the
proceeds within the above-described categories or may be required to seek
additional financing sooner than currently anticipated or curtail its expansion
activities. There can be no assurance that additional financing will be
available on commercially reasonable terms, or at all.
Proceeds not immediately required for the purposes described above will be
invested principally in short-term bank certificates of deposit, short-term
securities, United States Government obligations, money market instruments or
other interest-bearing investments.
<PAGE>
DILUTION
The difference between the initial public offering price per share of
common stock and the pro forma net tangible book value per share of common stock
after this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing the net tangible book
value of NEPC (total tangible assets less total liabilities) by the number of
outstanding shares of common stock.
At March 31, 1999, NEPC's tangible assets exceeded its liabilities by
approximately $976,000 and accordingly NEPC's common stock had a net tangible
book value of approximately $.35 per share. After giving effect to the receipt
of the net proceeds from the sale of the common stock offered hereby at an
initial public offering price of $5.00 per share of common stock (less
underwriting discount and offering expenses) the pro forma net tangible book
value of NEPC at March 31, 1999 would have been approximately $4,726,00 or $1.25
per share, representing an immediate increase in net tangible book value of $.90
per share to the existing stockholders and an immediate dilution of $3.75 per
share (75%) to new investors. The following table illustrates dilution to new
investors on a per share basis:
Initial public offering price $5.00
Net tangible book value per share before this Offering(1) $0.35
Increase per share attributable to new investors 0.90
Pro forma net tangible book value per share after
this Offering 1.25
------
Dilution per share to new investors(2) $3.75
======
(1) Net tangible book value per share is determined by dividing NEPC's net
tangible book value (total assets less intangible assets and total liabilities)
at March 31, 1998 by the number of shares of common stock then outstanding.
(2) Dilution per share is determined by subtracting pro forma net tangible
book value per share after the Offering from the initial public offering price
per share. The foregoing table also assumes no exercise of the underwriters'
warrant or options to purchase 250,000 shares of common stock to be granted
pursuant to NEPC's Stock Option Plan.
In the event the underwriters exercise the over-allotment option in full,
the pro forma net tangible book value per share would be approximately
$5,530,000 which would result in dilution to new investors of $3.61 per share.
The following table sets forth on a pro forma basis as of March 31, 1999
the respective positions of NEPC's existing stockholders and new investors with
respect to the number of shares of common stock purchased from NEPC, the total
cash consideration paid and the average price per share paid by the existing
stockholders and by the new investors with respect to the 1,000,000 shares of
common stock to be issued by NEPC at an initial public offering price of $5.00
per share.
<TABLE>
<CAPTION>
Shares Percentage Aggregate Percentage Average Price
Purchased(1) of Total Shares Consideration Of Total per Share
Consideration
Existing Shareholders
<S> <C> <C> <C> <C> <C>
2,785,270 73.6% $2,211,800 30.7% $0.79
New Investors........ 1,000,000 26.4% $5,000,000 69.3% $5.00
--------- ------ ---------- -----
Total................ 3,785,270 100.0% $7,211,800 100.0%
========== ====== ========== ======
</TABLE>
(1) This information does not reflect 250,000 Shares that may be issued
under NEPC's Stock Option Plan.
<PAGE>
DIVIDEND POLICY
To date, NEPC has paid no dividends on any shares of its common stock and
NEPC's Board of Directors has no present intention of paying any dividends on
its common stock in the foreseeable future, as it intends to use its earnings,
if any, to generate increased growth. The payment by NEPC of dividends in the
future, if any, rests solely within the discretion of the Board of Directors and
will depend upon, among other things, NEPC's earnings, capital requirements and
financial condition, as well as other factors deemed relevant by NEPC's Board of
Directors. Although dividends are not limited currently by any agreements, it is
anticipated that future agreements, if any, with institutional lenders or others
may also limit NEPC's ability to pay dividends.
CAPITALIZATION
The following table sets forth: (1) the actual capitalization of NEPC as of
March 31, 1999, and (2) as of March 31, 1999 as adjusted to give effect to the
sale, by NEPC, of 1,000,000 shares of common stock at initial public offering
price of $5.00 per share and the application of the net proceeds therefrom. This
table should be read in conjunction with the Consolidated Financial Statements
and the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 1999
Actual As Adjusted (1)
<S> <C> <C> <C>
Long-term debt(2) 686 -
Shareholders equity:
Common stock, $.001 par value; 24,000,000 shares authorized; 2,785,270
shares issued and outstanding as of March 31, 1999 (actual);
3,785,270 shares issued and
outstanding as adjusted 3 4
Capital in excess of par value 3,330 7,079
Retained earnings (accumulated deficit) (896) (896)
Other comprehensive income (457) (457)
----- -----
Total shareholders' equity 1,980 5,730
===== =====
Total capitalization 2,666 5,730
===== =====
</TABLE>
(1) The adjusted column reflects the changes that will occur upon
completion of this offering.
(2) Includes current portion.
MARKET FOR SECURITIES
There is presently no established public trading market for NEPC's common
stock. Present management is unaware of any active trading in NEPC's common
stock within the last five (5) years.
The approximate number of record holders of NEPC's common stock as of July
1, 1999 was approximately 630.
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below for the years ended
December 31, 1996, 1997 and 1998 is derived from and should be read in
conjunction with NEPC's consolidated financial statements, including the notes
thereto, appearing elsewhere in this prospectus and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations." The selected
financial information set forth below for the years ended December 31, 1994 and
1995 is derived from NEPC's consolidated financial statements. The selected
financial information set forth below for the interim periods ended March 31,
1999 and 1998 has been prepared from NEPC's books and records and reflects, in
management's opinion, all adjustments necessary for a fair presentation of the
financial position, results of operations, and changes in NEPC's financial
position, as at the periods indicated therein. Results for interim periods are
not audited, nor necessarily indicative of results which can be expected for the
entire year.
Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Years Ended December 31, Three Months Ended March 31,
1994 1995 1996 1997 1998 1998 1999
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ..............................3,209 21,306 22,042 21,665 22,139 5,031 5,898
Cost of goods sold .....................1,879 12,866 13,403 13,076 13,104 2,861 3,411
--------- ---------- ---------- ---------- ---------- ---------- ---------
Gross profit ...........................1,330 8,440 8,639 8,589 9,035 2,170 2,487
Sales and marketing expenses ........... 473 2,819 2,525 2,984 2,675 586 911
General and administrative expenses .... 715 4,913 5,408 5,032 5,532 1,346 1,394
Amortization of agency and
distribution rights ............ 18 241 198 232 224 53 58
---------- ---------- ---------- ---------- ---------- ---------- --------
Income from operations ................. 124 467 508 341 604 187 128
---------- ---------- ---------- ---------- ---------- ---------- --------
Interest income ........................ 2 33 24 19 37 8 8
Interest expenses ...................... (50) (514) (465) (362) (368) (98) (88)
Net foreign exchange (losses)
Gains ............................ (8) 74 42 4 (14) -- 5
---------- ---------- ---------- ---------- ---------- ---------- --------
Income from continuing operations
before taxes
68 60 109 (2) 259 97 53
---------- ---------- ---------- ---------- ---------- ---------- --------
Current income taxes
Deferred income taxes .................. 3 60 221 116 268 70 62
Total taxes ............................ -- 29 (25) (1) (24) -- --
---------- ---------- ---------- ---------- ---------- ---------- --------
Income (loss) from continuing .......... 3 89 196 115 244 70 62
---------- ---------- ---------- ---------- ---------- ---------- --------
Operations
65 (29) (87) (113) 15 27 (9)
---------- ---------- ---------- ---------- ---------- ---------- --------
Discontinued operations:
Income loss from discontinued operations
Loss from disposal of .................. 232 247 210 (41) (275) (9) --
discontinued operations
Net income (loss) ...................... -- -- -- -- (725) -- --
---------- ---------- ---------- ---------- ---------- ---------- --------
297 218 123 (154) (985) 18 (9)
========== ========== ========== ========== ========== ========== ========
Earnings per share
Basic and diluted, continuing operations:
Basic and diluted, discontinued ........ 0.28 (4.47) (0.03) (0.04) (0.00) 0.01 0.00
operations:
Basic and diluted, total ............... 1.01 38.09 0.08 (0.01) (0.36) 0.00 --
---------- ---------- ---------- ---------- ---------- ---------- --------
1.29 33.62 0.05 (0.05) (0.36) 0.01 0.00
========== ========== ========== ========== ========== ========== ========
Weighted average number of
shares outstanding
6,485 229,240 2,707,895 2,800,000 2,797,545 2,800,000 2,785,270
</TABLE>
<PAGE>
Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997 1998 1999
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Working capital (1) 1191 1,554 295 253
Total assets 11,357 11,290 9,780 10,041
Long-term
liabilities 379 1,163 680 617
Total liabilities 7,600 8,160 7,738 8,061
Total shareholders'
equity 3,757 3,132 2,042 1980
</TABLE>
- --------------
(1) Working capital represents current assets less current liabilities.
<PAGE>
FORWARD-LOOKING STATEMENTS
The statements contained in this prospectus that are not historical are
forward-looking statements, including statements regarding our expectations,
intentions, beliefs or strategies regarding the future. Forward looking
statements include statements regarding liquidity, anticipated cash needs and
availability and anticipated expense levels. All forward looking statements
included in this prospectus are based on information available to us on the date
hereof and we assume no obligation to update any such forward looking
statements. It is important to note that our actual results could differ
materially from those in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the factors detailed in the
risks discussed in the " Risk Factors" section included in this prospectus at
page 9.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF CONTINUING OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere in this
prospectus. The discussion is based upon such financial statements which have
been prepared in accordance with U.S. Generally Accepted Accounting Principles
and are presented in United States dollars ($).
Results of Continuing Operations
<TABLE>
<CAPTION>
For Twelve Months
Ended December 31,
1998 1997 1996
----- ------ ------
<S> <C> <C> <C>
Net sales ........................................... 100.0% 100.0% 100.0%
Cost of goods sold .................................. 59.2% 60.4% 60.8%
----- ----- -----
Gross profit ........................................ 40.8% 39.6% 39.2%
Operating expenses:
Selling, general and administrative ................ 38.1% 38.1% 36.9%
Interest ........................................... 1.6% 1.6% 1.8%
Income (loss) from continuing operations before taxes 1.1% 0.0% 0.5%
Net income/(loss) ................................... 0.0% (0.5%) (0.4%)
</TABLE>
<TABLE>
<CAPTION>
For Three Months
Ended March 31,
---------------------------
1999 1998
-------- ---------
<S> <C> <C>
Net sales ............................................. 100.0% 100.0%
Cost of goods sold .................................... 57.8% 56.9%
Gross profit .......................................... 42.2% 43.1%
Operating expenses: Selling, general and administrative 40.0% 39.4%
Interest ............................................. 1.3% 1.8%
Income (loss) from continuing operations before taxes . 0.9% 1.9%
Net income/(loss) ..................................... (0.2%) 0.5%
</TABLE>
<PAGE>
Expressions used in the comparison of results
Net Sales
Net sales is based on revenues derived from sale of our electrical,
electronic and audiovisual components and products. Additionally, we generate
sales from complete project deliveries of conference rooms, including
construction and assembly, as well as from maintenance agreements and repairs.
Discounts are deducted from net sales.
Gross Profit
Gross profit is net sales less costs of goods sold. This will vary in
relation to sales generated, discounts granted and the prices on the products we
buy. In connection with large project deliveries, gross profit will vary
depending on product mix.
Sales and Marketing Expenses
Sales and marketing expenses are primarily related to our participation in
exhibitions, printing of customer literature, advertising, in-house
demonstrations and facilities rental. These expenses will vary with market
development, the introduction of new products and management priorities.
General and Administrative Expenses
General and administrative expenses include payroll, information technology
expenses, and management. Due to our growth strategy, we expect expenses
associated with payroll and staff training to increase as we will need more
personnel to create and sustain growth.
Other Income and Expenses
Interest Income (Expenses)
Interest income is generated on our overdue receivables and is likely to
vary according to the sales volume, the interest we charge and the payment terms
used. Interest expenses are based on our loans and the market interest rate.
Foreign Exchange Gains (and Losses)
Since we are importing products from other countries we are affected by
currency fluctuations and gains/losses connected to this. Foreign exchange gains
and losses resulting from the settlement of amounts payable denominated in a
currency other than the currencies in which the operations are primarily
conducted are charged or credited to other financial expenses or income.
Net Income (Loss) From Continuing Operations
Based on our sales volume less our expenses we come up with our results of
continuing operations. Net income or loss will naturally be affected by all the
income and expenses mentioned above.
As a registrant based outside of the United States, we may be exposed to
factors that indirectly affect our investors in the United States. So far we
have not experienced and do not expect to experience any negative effects from
governmental, economic, fiscal or political factors that could have material
impact on investments by United States nationals. However, we can not guarantee
that such factors will not arise. The discussion made below reflects the
monetary effects connected to exchange rate fluctuations between U.S. Dollars
(USD) and Norwegian kroner (NOK), Swedish kroner (SEK) or Finnish marks (FIM).
As mentioned in the prospectus summary, our sales growth over the last three
years has been hidden due to an increasing value of the USD compared to our
local currencies. In this way a positive or negative development in our results
could be suppressed when translated into USD affecting the value of the NEPC
shares. We will put effort into explaining these currency fluctuations in our
quarterly and yearly reports. (See "Risk factors").
<PAGE>
Comparison of the three Months Ended March 31, 1999 to the three Months Ended
March 31, 1998.
Prior to the recent sale of Storebro Machine AB, NEPC operated in two
industry segments. In the following discussion we comment solely on Nortelco
Nordic AS and its subsidiaries, as these are the only companies constituting our
continuing operations.
Net Sales
Our total net sales for the three months ended March 31, 1999 increased by
17.2% or $867,000 to $5,898,000 from $5,031,000 for the three months ended March
31, 1998. In Norwegian currency , the increase was approximately 20.8%. This
increase was primarily attributable to two large projects, of approximately
$650,000, within our audio-visual division delivered by Nortelco System-Teknik
AS. In addition, Nortelco AS's net sales of maritime related products increased
by $180,000 to $372,000. This increase in net sales reflects the growth in our
audio-visual division and maritime related products.
Gross Profit
Our gross profits for the three months ended March 31, 1999 increased by
14.6% or $317,000 to $2,487,000 from $2,170,000. In Norwegian currency the
increase was approximately 18%. This increase in gross profit was primarily
related to the increase in net sales from our audio-visual division and maritime
related products.
Sales and Marketing Expenses o Sales and marketing expenses for the three
months ended March 31, 1999 increased by $325,000 to $911,000 from $586,000 for
the three months ended March 31, or 55.5%. As a percentage of net sales, sales
and marketing expenses was 15.4% for the first quarter of 1999 compared to 11.6%
for the first quarter of 1998. In Norwegian currency, these expenses increased
by 60.2%. Nortelco AB has produced new brochures and has performed a nation wide
sales campaign in Sweden. Additionally, our new sales office in Denmark was
established in the first quarter of 1999. Together, this amounted to
approximately $70,000. Nortelco AS has had costs connected to a new company
brochure, development of a new internet Web-site, exhibitions and various
consulting services. In total, this amounted to approximately $85,000. Nortelco
System-Teknikk AS experienced increased costs connected to travelling as a
result of increased marketing efforts. The remaining amount is related to
various sales and marketing accounts for all three companies.
General and Administrative Expenses
General and administrative expenses for NEPC for the three months ended
March 31, 1999 increased by $48,000 to $1,394,000 from $1,346,000 for the three
months ended March 31, 1998 or 3.6%. In Norwegian currency, the increase was
approximately 6.7%. This is mainly due to annual wage increases and the
development of a new sales department in Denmark which was opened in 1999. The
expenses related to the development of the new sales department were
approximately $25,000.
Other Income and Expenses
Interest Income (Expense)
Interest income for the three months ended March 31, 1999 was the same as
for the three months ended March 31, 1998. Interest expense decreased by $10,000
from $98,000 to $88,000, or 10.2%, as a result of lower interest rates in Norway
during the first quarter of 1999 as compared to the same period in 1998.
Foreign Exchange Gains (and Losses)
Our net foreign exchange gains for the three months ended March 31, 1999
were $5,000, as compared to $0 for the three months ended March 31, 1998. This
increase was due to the effect of lower exchange rates fluctuations in 1998 from
the time an invoice was booked until it was paid.
Net Income (Loss) From Continuing Operations
As a result of the above, NEPC's net income before translation adjustments
for the three months ended March 31, 1999 decreased by $36,000 or 133.33%, to
($9,000), from $27,000 for the three months ended March 31, 1998. NEPC had a
total expense of $99,000 for the three months ended March 1999, an increase of
$17,000, or 20.7%, from the same period in 1998. This increase is mainly due to
the costs associated with our pursuit of a public offering in the United States.
<PAGE>
For the rest of 1999, we expect net income to improve due to a more healthy
company structure with a focus on our continuing operations and the possible
acquisition of new businesses. On the Norwegian market we are doing well at the
moment and we expect this trend to continue for the remaining of 1999. The
result in our Swedish subsidiary was below budget in the 1st quarter of 1999,
but market conditions look promising both in Sweden and Finland.
The pursuit of the public offering in the United States has been expensive
and there are uncertainties connected to the size of these costs in 1999. To
follow an acquisition strategy has been and will continue to be challenging. The
purchase of businesses entities requires sufficient funds and resources. To be
able to follow this strategy we are dependent on a successful completion of this
offering.
Comparison of the twelve Months Ended December 31, 1998 to the twelve
Months Ended December 31, 1997.
Net Sales
Our total net sales for 1998 increased by 2.2% or $474,000 to $22,139,000
from $21,665,000 in 1997. In Norwgian currency, the increase was approximately
9.0%. This increase was primarily attributable to an approximate $550,000
increase in revenues from the offshore oil-rig market. Additionally, we
experienced an increase of approximately $200,000 in net sales which we
generated as a result of the purchase of assets from LAC Electronic AS. Large
project sales in other areas and annual price increases had a positive effect on
sales as well. On the negative side, we experienced an approximate 29.3% or $
350,000 decrease in net sales from the sale of electronic components. This
decrease was primarily due to a decline in the Norwegian production of
electronic products.
Gross Profit
Our gross profit increased in 1998 by $446,000 from $8,589,000 in 1997 to
$9,035,000 in 1998, or approximately 5.2%. In Norwegian currency, we had an
increase of 12,2%. This was due to a rise in prices of our products and an
increase in sales volume. Additionally, products delivered to the offshore
oil-rig market have a higher percentage gross profit than our other products.
Sales and Marketing Expenses
Sales and marketing expenses decreased in 1998 by $309,000 from $2,984,000
in 1997 to $2,675,000 in 1998, or approximately 10.4%. As a percentage of net
sales, sales and marketing expenses was 12.1% in 1998 compared to 13.8% in 1997.
In Norwegian currency, these expenses decreased by 4.4%. This is mainly due to
higher expenses connected to exhibitions in 1997 than in 1998.
General and Administrative Expenses
General and administrative expenses increased in 1998 by $500,000 from
$5,032,000 in 1997 to $5,532,000 in 1998, or approximately 9.9%. In Norwegian
currency, these expenses increased by 17.3%. This is mainly due to an increase
in our total number of employees and annual wage increases to existing
employees. o o Other Income and Expenses o Interest Income (Expense)
Interest income increased in 1998 by $18,000 from $19,000 in 1997 to
$37,000 in 1998, or approximately 94.7%. In Norwegian currency, the increased
was 107.7%. This is mainly due to an increase in interest charged on overdue
receivables. Interest expense increased slightly in 1998 by $6,000 from $362,000
in 1997 to $368,000 in 1998, or approximately 1.7%. In Norwegian currency, these
expenses increased by 8.5%. This is primarily due to higher interest rates in
Norway on our loans in 1998.
Foreign Exchange Gains (and Losses)
Our foreign exchange gains in 1998 were almost similar to the previous year
with an increase of $1,000 from $46,000 in 1997 to $47,000 in 1998, or
approximately 2.1%. In Norwegian currency, these gains increased by 9.2%.
Foreign exchange losses increased in 1998 by $19,000 from $42,000 in 1997 to
$61,000 in 1998, or approximately 45.2%. In Norwegian currency, the rise was
54.9%. These increases were due to the effect of higher exchange rates
fluctuations in 1997 from the time an invoice was booked until it was paid.
<PAGE>
Net Income (Loss) From Continuing Operations
As a result of the above, NEPC's net loss from continuing operations and
before translation adjustments for the twelve month period ended December 31,
1998 was $15,000, an increase of $128,000 from 1997, when NEPC had a loss of
$113,000, or approximately 113.2%. We had total expenses of $549,000 in 1998
attributable to our pursuit of a public offering in the United States, an
increase of $224,000 or 68.9% from $325,000 in 1997. Net income from our
Nortelco subsidiaries increased by $322,000, or approximately 145.7%, from
$221,000 in 1997 to $543,000 in 1998. In Norwegian currency, the increase was
approximately 162.6%.
Comparison of the Twelve Months Ended December 31, 1997 to the Twelve Months
Ended December 31, 1996.
Net Sales
Our total net sales for 1997 decreased by 1.7% or $377,000 to $21,665,000
from $22,042,000 for 1996. In Norwegian currency, we had an increase of 7.61%.
This decrease was primarily due to a higher exchange rate for NOK and SEK into
U.S. dollars. In fact, net sales increased for all our subsidiaries by 7.6% in
Scandinavian currency. The increase in our net sales resulted primarily from an
increase of SEK 11,695,000 in net sales by Nortelco AB and an increase of NOK
5,662,000 in net sales by Nortelco System-Teknikk AS. The increase in sales for
Nortelco AB was due to a larger volume of audiovisual products, and effects from
our establishment of a sales office in Finland. The increase in sales in
Nortelco System-Teknikk AS was due to higher market shares. Additionally, we had
an annual price increase of approximately 5%.
Gross Profit
Gross profit for NEPC in 1997 decreased by $50,000 from $8,639,000 in 1996
to $8,589,000 in 1997, or approximately 0.6%, mainly as a result of a higher
exchange rate into US currency. In Scandinavian currency, gross profit increased
by approximately 8.8% as a result of higher sales volume and prices of products
sold. Additionally, we had a change in the mix of products sold resulting in a
higher gross profit margin.
Sales and Marketing
Sales and marketing expenses increased in 1997 by $459,000, from $2,525,000
in 1996 to $2,984,000 in 1997. As a percentage of net sales, sales and marketing
expenses increased from 11.5% to 13.8%. In Scandinavian currency, our
subsidiaries sales and marketing expenses increased by approximately 29.4% as a
result of higher expenses associated with participation in exhibitions in 1997
than in 1996. These increased costs were undertaken by management in order to
develop some of our business areas for future growth.
General and Administrative Expenses
General and administrative expenses decreased in 1997 by $376,000 from
$5,408,000 in 1996 to $5,032,000 in 1997, or approximately 7.0%. In Norwegian
currency, these expenses increased by 1.9%. This was mainly due to annual wage
increases.
Other Income and Expenses
Interest Income (Expense)
Interest income in 1997 declined by $5,000, from $24,000 in 1996 to $19,000
in 1997, or approximately 20.8%. In Norwegian currency, interest income declined
by 13.3%. Interest expense for 1997 decreased by 22.2% or $103,000 to $362,000
from $465,000 in 1996. In Norwegian currency, these expenses declined by 14.8%.
This decline was caused by a fall in Norwegian interest rates and exchange rate
fluctuations.
Foreign Exchange Gains (and Losses)
Our foreign exchange gains in 1997 decreased by 23.3%, or $14,000, to
$46,000 from $60,000 in 1996. In Norwegian currency, these gains decreased by
16.2%. Foreign exchange losses in 1997 increased by 133.3%, or $24,000, to
$42,000 from $18,000 in 1996. In Norwegian currency, these losses rose by
156.0%. This increase and decrease were due to the effect of lower exchange
rates fluctuations in 1997 from the time an invoice was booked until it was
paid.
Net Income (Loss) From Continuing Operations
<PAGE>
Our net loss from continuing operations and before translation adjustments
for the twelve month period ended December 31, 1997 was ($113,000), an increase
of $26,000, or approximately 30.0% compared to 1996, when we had a loss of
($87,000). In Norwegian currency, the net loss increased by 36.8%. Net income
for our Nortelco subsidiaries for 1997 decreased by $358,000, or approximately
61.8%, from $579,000 in 1996 to $221,000 in 1997. In Norwegian currency, net
loss increased by 58.2%. We had total expenses of $325,000 in 1997 attributable
to our pursuit of a public offering in the United States. This was a decrease of
$280,000 or 46.3% from 1996 when it was $605,000.
Effects of Foreign Currency
The functional currency used by each of NEPC's subsidiaries are either
Norwegian NOK, Swedish SEK or Finish FIM. NEPC's sales are invoiced in Norwegian
NOK, Swedish SEK and Finish FIM. All foreign invoices received by NEPC are
booked at the exchange rate as of the date of such invoices. Thereafter, upon
payment of such invoices by NEPC, the gain or loss resulting from the change in
exchange rate between the invoice date and the payment date will be credited or
debited to NEPC's financial costs or income. Accordingly, NEPC is subject to
foreign currency fluctuations.
Liquidity and Capital Resources
To date, NEPC has relied upon internally generated funds, trade credit,
credit facilities and loans from stockholders to finance our operations and
expansion. NEPC's need for funds arises primarily from our working capital
requirements. These requirements include our need to finance our inventory and
receivables, as well as our growth strategy of acquiring compatible businesses,
assets or product lines. NEPC's working capital was $253,000 at March 31, 1999,
$295,000 at December 31, 1998 and $1,554,000 at December 31, 1997. The decrease
in working capital at March 31, 1999 as compared to December 31, 1998 was
primarily due to expenses incurred in connection with the pursuit of our public
offering.
As part of NEPC's working capital management, we perform all customer
credit functions internally, including extension of credit and collections. Our
bad debts write-offs were less than 0.2% of net sales for the three months ended
March 31, 1999 and each of the years ended December31, 1998 and 1997.
Net cash used by operating activities for NEPC was $276,000 for the three
months ended March 31, 1999 and net cash generated by operating activities was
$107,000 for the three months ended March 31, 1998. The increase in cash used by
operating activities was due to an increase in inventory and expenses paid in
connection with the pursuit of our public offering. Net cash generated by
operating activities totaled $1,297,000 for the year ended December 31, 1998 and
net cash used by operating activities totaled $809,000 for the year ended
December 31, 1997. The increase in cash generated by operating activities for
the year ended December 31, 1998 compared to the year ended December 31, 1997
was due to a decrease in trade accounts receivable and inventory balances.
Net cash used in investing activities totaled $74,000 for the three months
ended March 31, 1999 and $253,000 for the three months ended March 31, 1998, and
related to purchases of equipment. The decrease in purchases of equipment was
due to purchase of cars in the first quarter of 1998. Net cash used to investing
activities totaled $234,000 for the year ended December 31, 1998 and $784,000
for the year ended December 31, 1997.
In August 1997, Gjensidige Bank, a Norwegian Bank, posted one year letter
of credit facilities in favor of Nortelco AS ($226,000) and Nortelco System
Teknikk AS ($126,000). Under this facility, Nortelco AS and Nortelco
System-Teknikk AS pay to Gjensidige Bank an annual fee of 1.5% payable quarterly
in advance. Such letters of credit are posted as security for NEPC's lease on
its corporate headquarters located in Oslo, Norway. Such letters of credit are
renewable annually at the option of Nortelco AS and Nortelco System-Teknikk AS.
In August 1997, Gjensidige Bank posted a letter of credit for Nortelco
SystemTeknikk AS in the aggregate principal amount of $438,000 to guarantee
projects delivered and prepayment received according to Norwegian Standard. This
standard means that our bank on our behalf and cost guarantees for 10% of the
total contract amount during the project installation period, reduced to 3% of
the total contract amount for one year after completion of the project and
reduced to 2% the second year. From the third year no guarantees are given.
Under such facility, Gjensidige charges an annual fee of 1.5% per annum payable
quarterly in advance. There are no charges for the facility, only on the amount
of issued letters of credit at any time. The amount of letters of credit issued
was $323,000 at December 31, 1998, and $325,000 at March 31, 1999.
<PAGE>
NEPC collectively has revolving working capital credit facilities in an
aggregate amount of approximately $2,160,000. Such working capital credit
facilities consist of the following: Nortelco AS has a revolving working capital
credit facility of approximately $780,000 with Gjensidige Bank, Nortelco
System-Teknikk AS has a revolving working capital credit facility of
approximately $390,000 with Gjensidige Bank, Brannteknikk AS has a revolving
working capital credit facility of approximately $65,000 with Soegne Sparebank,
a Norwegian Bank, and Nortelco AB has a revolving working capital credit of
approximately $925,000 with S-E Banken, a Swedish Bank. The Nortelco AS and
Nortelco System-Teknikk AS credit lines bear interest at the rate of 8.95% per
annum for the funds used payable quarterly. Gjensidige Bank also receives a fee
of 0.125% each quarter for all funds outstanding at such time under each such
credit facility. Nortelco AB's credit line bears interest at the rate of 5.0%
per annum for the funds used payable quarterly. S-E Banken also receives a fee
of 1.0% on the total credit line payable yearly in advance. Brannteknikk AS'
credit line bears interest at the rate of 11.75% per annum for the funds used
payable quarterly and a fee of 0.125% each quarter for all funds outstanding.
As of March 31, 1999, the following companies had the following amounts
outstanding under such facilities: Nortelco AS had approximately $660,000
outstanding; Nortelco System Teknikk AS had approximately $121,000 outstanding;
and Nortelco AB had approximately $622,000 outstanding. All the revolving credit
facilities are secured by the respective companies' inventory and accounts
receivable.
In May 1997, Nortelco AS and Nortelco System-Teknikk AS entered into
seven-year working capital loans expiring in May 2004 with Gjensidige Bank in
the amounts of $396,000 and $264,000, respectively. Such loans each bear
interest at the rate of 8.95% per annum, payable quarterly, and have an annual
repayment schedule of $56,560 for Nortelco AS and $37,707 for Nortelco
System-Teknikk AS. As of March 31, 1999, Nortelco AS had $306,104 outstanding
under such loans, and Nortelco System-Teknikk AS had $235,893 outstanding under
such loans.
Under the credit facilities between Nortelco AS, Nortelco System-Teknikk AS
and Gjensidige Bank discussed above, Nortelco AS and Nortelco System-Teknikk AS
have each secured such loans by providing cross security interests in the amount
of $2,639,500 of the inventories and accounts receivable of each such
corporations. As part of the corporate restructuring described under "History of
the Company-Corporate Restructuring", Nortelco Nordic AS has been required to
provide security by pledging its shares in Nortelco AB.
We believe that NEPC's credit facilities, together with internally
generated funds and the proceeds of this Offering will be adequate to meet
NEPC's working capital requirements for at least the twelve month period
following the completion of this Offering.
Our efforts to address Year 2000 Issues
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entities in the date code field. These
systems and software need to accept four digits to manage the change to the 21st
century. As a result equipment might fail due to this fact.
We have decided to describe our efforts to address Year 2000 Issues under a
separate headline. In our business we meet several potential problems connected
to computers not handling the change to Year 2000, due to a large number of
suppliers. In this regard we are required to disclose information about our
efforts to avoid these problems.
Our state of readiness
Nortelco Nordic AS as the only operating subsidiary, has made efforts to
address the Year 2000 Issue in the following areas:
* suppliers - sent out and received a written guarantee from all supplier
regarding uninterrupted deliveries
* suppliers of electronic components - sent out and received a written guarantee
that electronic components in our product range will mange the change to the
21st century
* upgraded software on all administrative systems
* alarm system
* building access
* air conditioning system
* telephone system
Connected to the uncertainty regarding our vendors and suppliers ability to
handle the problems with the change to Year 2000, we have sent out and received
a written guarantee from all major vendors and suppliers that products
containing electronic components delivered by them affected by date will not
malfunction due to the year 2000. This guarantee goes for the computer systems
handling our interaction as well including payment systems. We have no insurance
to cover the risks associated with Year 2000 problems. To get such an insurance
is not possible.
<PAGE>
As of today, all operating entities have administrative systems designed to
handle the change to a new millenium. Our alarm, building access and air
conditioning systems will not be affected by this issue, due to a manual
adjustment possibility. Our telephone system is designed to manage the change
without any difficulty. As of April 1999 we have finished all our
IT-preparations connected to this issue.
Our costs to address the Year 2000 Issues
As of April 1999 we have had costs connected with the implementation or
upgrade of administrative systems of approximately $30,000. We do not expect any
substantial additional costs connected to investments in IT-systems. This amount
comes from the monitor costs and work connected to necessary upgrade of these
systems.
The risk of our Year 2000 Issues
We realize that problems might occur due to difficulties with smaller
vendors, suppliers or customers. This will most likely create limited extra work
load and postponement in certain deliveries and payments. However, large parts
of our routines connected to ordering, stocking and invoicing are Year 2000
Issue secured. If problems occur, we have manual routines enabling us to solve
the problems as they materialize.
Like any other distributor we are responsible for the quality of the
products we deliver. With a broad product range within electrical and electronic
components and equipment, we could be facing an increasing number of customer
questions and possible warranty claims connected to products delivered by us.
Based on our current capacity in customer support we are able to handle this
without considerable problems. Legitimate warranty claims or technical repairs
connected to Year 2000 problems should be covered by our suppliers. However, we
are not able to guarantee that we will not be forced to carry some of these
expenses on our account. An estimation of the size of these expenses will be
connected to uncertainty. On the other hand, we will not carry any economic
responsibility connected to delays in production or other losses carried by our
customers.
We can be facing a potential drop in sales in late December 1999 and early
January 2000 due to a general uncertainty in the market connected to the Year
2000 Issue. Some customers will probably be reluctant to place any new orders in
this period, trying to minimize potential internal damage the 2000 Issue might
cause. This will eventually affect our December and January sales volume and
profitability. Additionally, no assurance can be given that all our customers
are Year 2000 compliant. A failure in their administrative systems could delay
payments to us and give us an extra workload correcting these errors.
Our contingency plans
In case of delayed or cancelled deliveries from our suppliers or delayed
payments from our customers as a result of Year 2000 problems, we have manual
routines for corrective actions to deal with intermediaries affected by the
problem. Seen in connection to our ordinary routines, this will not cause
unmanageable problems. From January 3rd 2000, we will systematically go through
our orders to make sure everything is received and delivered as planned. This
applies for the payments from our customers as well. We are not expecting an
increased loss on receivables due to potential problems connected to the Year
2000 Issue.
We do not have reason to believe that we will be affected by any
substantial delays regarding deliveries of products. Our main suppliers are
highly professional organizations with considerable production capacity. Should
a Year 2000 problem arise despite of the written guarantee we have got from our
suppliers, delays of less than a week should not have a considerable negative
impact. From most of these manufacturers we have lead times of more than a
month. In case of delays reaching for a longer period of time, we have large
numbers of products in stock for immediate delivery.
Although all our administrative systems have been upgraded to manage the
change to the 21st century, no software suppliers are willing to give a written
guarantee that their products are Year 2000 secure. However, we do have
maintenance agreements with our suppliers giving us immediate support if
anything should happen.
We can give no assurance that all our intermediaries are Year 2000 secure.
Possible problems at governmental agencies, telecommunication companies etc will
be beyond our control. The failure of such entities to be Year 2000 compliant
could result in a system failure or delay our operations to some extent
affecting NEPC's business, financial conditions and results of operations. See
"Risk factors" as well.
Introduction to the Euro
<PAGE>
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and their new common Euro currency. Now, the Euro trades on currency
exchanges and is available for non-cash transactions. The existing sovereign
currencies will be valid until January 1st 2002 when the Euro is planned to
replace all these currencies.
In all years we have dealt with a lot of foreign currencies and the
complications connected to such transactions. Initially, we will deal with the
Euro as a new foreign currency without any additional cost connected to the
administrative handling of this. Despite this, we will evaluate the impact the
implementation of the Euro will have on our operation. Nortelco Nordic AS is
currently represented in Finland and FIM will gradually be replaced by the Euro.
However, Norway and Sweden are not part of the Euro currency area and will
continue to use their local currencies.
Regarding the possibility of increased price transparency, we have to a
large extent sole distribution agreements with our suppliers. These agreements
regulate the market area to be covered by each agent. In effect, this means that
price transparency is not likely to increase for Nortelco Nordic AS. On the
other side, our suppliers may adjust prices to make equal terms for all their
European agents measured in Euro. This could lead to price increases and
pressure on our profit. However, suppliers are likely to consider the degree of
competition in each market. As of May 1999, we have not experienced any price
increases connected to the introduction of the Euro.
As of May 1999, we have not identified any specific risks connected to the
Euro, but we can give no insurance that the Euro will not have any material
adverse affect on our business. German suppliers will still sell in DM, but they
are required to show Euro as a price level. The Euro conversion to USD is
subject to exchange fluctations like any other currency. Nortelco Nordic AS has
data systems in place capable to handle the Euro as well as the internal
accounting for these transactions. Foreign currency translations may be more
complicated for the next two years as all countries are allowed to reflect both
local and Euro currencies. However, this will probably not cause any significant
problem as we already operate in several currencies.
<PAGE>
HISTORY OF THE COMPANY
The Company
Nordic Equity Partners Corp. ("NEPC") was organized under the laws of
Delaware in May 1994. In May 1995, NEPC entered into an agreement and plan of
merger with Sherman, Goelz & Associates, pursuant to which Sherman, Goelz was
merged with and into NEPC. Under the terms of the merger agreement, the holders
of shares of common stock of Sherman, Goelz received one share of common stock
of NEPC for each share of Sherman, Goelz owned by them. Prior to the merger, as
described below, Sherman, Goelz had acquired 80% of the issued and outstanding
shares of common stock of Nortelco AS, and all of the shares of common stock of
Storebro Machine AB. The merger was accounted for as a reorganization of
entities under common control, and therefore treated in a manner similar to a
pooling of interest. Subsequent to the merger with Sherman, Goelz, in November
1995, NEPC acquired the remaining 20% of the issued and outstanding shares of
common stock of Nortelco AS from Nordic Business Development AS for 216,000
shares (318 post split shares) of common stock of NEPC, which shares were
provided to Nordic Business Development AS from the principal shareholders of
NEPC. This transaction was accounted for as a capital contribution in the amount
of $445,000, the estimated fair value of the 20% interest in Norteco AS.
In March 1997, we purchased the existing inventories as well as the rights
to five agency agreements from LAC Electronic AS for a total of $247,000. These
assets were recorded at whereby inventories made up $47,000 and $200,000 was
recorded agency and distribution rights. Also in March 1997, we acquired the
existing inventories and the rights to one agency agreement from Lys & Lyd for a
total of $35,000 in cash on the closing day and 4% of gross profits the first
three years from the acquisition, maximized to an aggregate of $60,000. These
assets were recorded at cost whereby inventories made up $21,000 and $14,000 was
recorded agency and distribution rights.
Nortelco AS
In November 1994, Sherman, Goelz acquired 80% of the issued and outstanding
common stock of Nortelco AS from Universal Commodity Trading Group, Inc. for an
aggregate consideration of $1,781,000. The $1,781,000 purchase price paid by
Sherman, Goelz to Universal Commodity Trading Group, Inc. was paid in a
combination of $785,000 of cash and 856 shares of common stock of Sherman,
Goelz. This transaction was accounted for using the purchase method of
accounting, and accordingly the operating results of Nortelco AS have been
included in NEPC's consolidated financial statements since the date of
acquisition.
In November 1995, NEPC acquired the remaining 20% of the issued and
outstanding shares of common stock of Nortelco AS from Nordic Business
Development AS for 216,000 shares (318 post split shares) of common stock of
NEPC, which shares were provided to Nordic Business Development AS from the
principal shareholders of NEPC. As stated above, this transaction was accounted
for as a capital contribution in the amount of $445,000, the estimated fair
value of the 20% interest in Norteco AS.
Nortelco Subsidiaries
In January 1994, Nortelco AS and Nortelco Audiatur AB (formerly known as
Audiatur AB) entered into a Stock Purchase Agreement pursuant to which Nortelco
AS acquired 80% of the issued and outstanding shares of Nortelco Audiatur for an
aggregate of $225,000. This transaction was accounted for using the purchase
method of accounting.
In July 1994, Nortelco acquired the remaining 20% of Nortelco Audiatur from
Mark Oldmar for approximately 271 shares of common stock of SGA, which shares
were, in part, transferred from NBD, and the balance of which were issued by
SGA. Nortelco had previously acquired the initial 80% of Nortelco Audiatur,
effective January 1, 1994, from Mr. Oldmar for an aggregate consideration of
approximately $225,000. This transaction was accounted for as part of the
acquisition of the 80% interest in Nortelco described above.
On September 20, 1994, Monkwell Consultants, Inc. entered into a Stock
Purchase Agreement pursuant to which it sold all of the issued and outstanding
shares of common stock of Bror Mauritz Hansen AS, a Norwegian corporation to
Nortelco System Teknikk, for approximately $145 (NOK 1,000). Subsequently, on
November 1, 1994, Bror was merged with and into Nortelco System Teknikk.
<PAGE>
Corporate Restructuring
In April 1998, NEPC incorporated Nortelco Nordic AS, a Norwegian
corporation, for the purpose of becoming the parent holding company for all of
NEPC's subsidiaries which are involved in the importation and distribution of
electrical, electronic and audio visual products. Subsequent to the completion
of this offering, NEPC intends to complete a corporate restructuring which will
result in NEPC having the following corporate structure:
<TABLE>
<CAPTION>
<S> <C> <C>
Nordic Equity
Partners Corp.
Nortelco
Nordic AS
Nortelco System Nortelco AB Nortelco AS
Teknikk AS
Brannteknikk AS
</TABLE>
Following the restructuring, NEPC will have one wholly-owned subsidiary,
Nortelco Nordic AS. Nortelco Nordic AS will have three wholly-owned
subsidiaries: Nortelco System Teknikk AS, a Norwegian corporation, Nortelco AB,
a Swedish corporation and Nortelco AS, a Norwegian corporation, and Nortelco
AS's wholly-owned subsidiary Brannteknikk AS, a Norwegian corporation. Each of
these companies engages in the importation and distribution of products for use
in the electronic, electrical and audio visual industries.
<PAGE>
BUSINESS
General
Nordic Equity Partners Corp., a Delaware corporation, imports and
distributes products for use in the electronic, electrical and audio visual
industries. We also design, install and sell complete, customized conference
rooms and auditoriums and provide after sale service and maintenance support to
our customers. All of our business and sales are conducted in countries located
in the geographical region of Scandinavia, including Norway, Sweden and Finland.
The following is a list of operating profit or (loss) from all foreign
countries in which Nordic derives revenues:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Operating profit or (loss) 1996 1997 1998
Norway 345 -6 377
Sweden 234 124 95
Finland NA 103 71
</TABLE>
The following is a list of assets held by Nordic in foreign countries:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets: 1996 1997 1998
Norway 5113 5155 5908
Sweden 3390 3348 2805
Finland NA - -
</TABLE>
Electrical, Electronic and Audio Visual Products
We import and sell approximately 13,000 select technical products to over
1,000 customers throughout Scandinavia. Products included in our product lines
are generally the same products that such manufacturers market and sell in other
countries. In determining which products to include in our product line, we
examine factors such as demand for the product in other countries, as well as
competition and customer demand within Scandinavia. The price range for our
products ranges from $1 to $100,000.
Electronic Products
We purchase and resell approximately 5,000 different products in the
electronics industry including components, telecommunication and data
communication equipment and studio and communication equipment.
Components. We sell electronic components that protect, stabilize and
monitor the proper and continuous flow of power to electronic and electrical
appliances and equipment, such as computers. These components are designed to
protect electronic equipment from disturbances and memory loss that can result
from blackouts, voltage fluctuations and transients. They include the following:
* electronic voltage regulators that protect computers by compensating
for rapid and slow variations in voltage
* electronic line conditioners to protect computers and electronics
systems from voltage variations, line noises and voltage spikes
* power supply systems that guarantee power to computers without
significant interruptions
* power line diagnostic analyzers that detect power line disturbances
such as voltage fluctuations, voltage spikes or blackouts
* high energy transient protection components such as zener diode
regulators, bridge rectifiers, gas discharge tubes and filters.
These products also include semiconductors, precision potentiometers,
resistors/capacitors, ferrites and interconnecting components that hook up
public telephone networks, data networks and optical fiber networks.
<PAGE>
Telecommunication Products. We distribute telecommunication products which
consist primarily of innovative test and measurement instruments used in the
development, installation and maintenance of sophisticated telecommunications
networks. Products included in this category include the following:
* a wide array of portable instruments and permanently located system
testers
* multi-function communicators
* analyzers which measure performance and error on a wide range of
network transmission media equipment
* modular, portable fiber optic test instruments which allow both central
office and field technicians to isolate fiber optic cable breaks and
measure degradation caused by aging connectors and related components.
Data communication Products. We distribute data communications products
which help ensure reliable communication network operations and facilitate the
transmission of computer data via private or public networks. These products
include the following:
* patches used for monitoring, testing and rearranging data
communications lines and equipment
* high performance packet switching equipment which breaks up data into
"packets" for efficient transmission over private and public data
networks, which generally is a cost effective means for companies to
transmit data over long distances.
Studio and Communication Products. This product line includes a wide array
of speakers, amplifiers, microphones, microphone systems and headphones with
related accessories and components. We also offer a wide array of video-entry
security systems for apartments and businesses, residential audio and
audio/video intercoms, and conference and simultaneous interpretation systems.
For the year ended December 31, 1998, we derived approximately 27.9% of our
total revenues from the sale of electronics products. For the year ended
December 31, 1997, we derived approximately 27.9% of our total revenues from the
sale of electronics products. For the year ended December 31, 1996, we derived
approximately 25.7% of our total revenues from the sale of electronics products.
Electrical Products
We import and distribute approximately 7,000 products for use in the
electrical field. The price ranges for these products ranges from $1 to $1,000.
Our electrical products include spark protected metering equipment and
heavy-duty lighting equipment, passive and active fire protection equipment, and
tools and materials for electrical installations.
Explosion Prevention Equipment. We offer a wide array of "explosion
prevention" equipment designed to be used in offshore drilling or other
hazardous areas, such as the following:
* protected, self-housed, high performance switches
* transformers
* terminals
* terminal blocks
* cables
* junction and distribution boxes
* a wide variety of protected, high quality line bushings and cable
entries.
Lighting. We sell approximately 200 lighting products. These products are
generally used in highly hazardous areas such as utility plants and offshore
drilling rigs, including a wide variety of special purpose lighting systems for,
among other uses, ships and offshore drilling platforms including floodlights,
hazardous arc lighting equipment, lanterns and searchlights, and products used
in the shipping industry, such as search lights used by shipyards, and
electrical installers.
<PAGE>
Fire Protection Equipment. We distribute fire protection equipment that may
be used to prevent the spread of fire and gas in hazardous areas such as ships,
oil rigs and other potentially hazardous areas. We also offer pressure-tight
systems and components which may be used to seal off construction into
watertight and fireproof sections to prevent the spread of fire or gas leaks
between sections of cables or pipes.
Installation Materials. Our installation materials include products that
protect energy and signal conductors, connectors and cable systems from
corrosion, chemicals and environmental hazards. We also distribute a variety of
miniature circuit breakers, switch gears, time switches, accessories for
cabinets, and a wide variety of electrical insulation tapes.
For the year ended December 31, 1998, we derived approximately 26.9% of our
total revenues from the sale of electrical products. For the year ended December
31, 1997, we derived approximately 23.0% of our total revenues from the sale of
electrical products. For the year ended December 31, 1996, we derived
approximately 23.5% of our total revenues from the sale of electrical products.
Audio Visual Products.
We sell approximately 1,000 products in the audio visual industry. Our
audio visual products include the following:
* audio equipment
* overhead projectors
* accessories and related equipment
* conference room and auditorium furniture and related equipment
* light-dimming systems.
The price for such products broadly ranges from $100 to $80,000. In
addition, we provide consulting services for our clients regarding
previously-built conference rooms and auditoriums. In addition, we lease
equipment such as overhead slide and film projectors.
Services. We provide consulting services to clients regarding
previously-built conference rooms and auditoriums. We also offer our customers
service and maintenance programs for systems designed or installed by us or
others, as well as installation assistance for equipment purchased.
The gross profit from the sale of electrical, electronic and audio visual
products results primarily from the difference between the price we pay for the
purchase of our products from non-affiliated third party manufacturers and the
price at which we resell such products to our customers.
For the year ended December 31, 1998, we derived approximately 45.2% of our
total revenues from the sale of audio visual products. For the year ended
December 31, 1997, we derived approximately 49.1% of our total revenues from the
sale of audio visual products. For the year ended December 31, 1996, we derived
approximately 50.8% of our total revenues from the sale of audio visual
products.
Sources of Manufacturing
We do not manufacture any of the electronic, electrical and audio visual
products we distribute. Rather, we import the products we distribute from over
fifty (50) non-affiliated, third-party manufacturers throughout the world
including Germany (approximately 15%), the United States (approximately 22%),
England (approximately 7%), and certain countries in the Far East, (aggregating
approximately 10%). We have written contracts with our product manufacturers,
most of which provide for us to act as the sole distributor in a specific
country or region. Inventory is stored at our corporate headquarters.
Sales of products manufactured by TTC, Inc. constituted 6.1% of our
revenues for the three month period ended March 31, 1999 and 8.1% of our
revenues for the year ended December 31, 1998. Sales of products manufactured by
Lycab AB constituted 5.1% of our revenues for the three month period ended March
31, 1999 and 6.9% of our revenues for the year ended December 31, 1998. No other
manufacturer's products accounted for more than 5% of our sales in 1998.
We pay the manufacturers of our electronic, electrical and audio visual
products by either letter of credit or wire transfer. Payment is made only upon
the proper fulfillment of terms established between NEPC and the manufacturer.
Most product purchases are paid in local operating currencies.
<PAGE>
Marketing, Sales and Distribution
We distribute electronic, electrical and audio visual products throughout
Scandinavia through our own sales representatives. We currently maintain an
internal sales force consisting of fifty (50) full-time sales representatives.
All of our sales representatives are highly trained, technical persons able to
explain and install the products and assist the customer in problem solving and
after sale maintenance. Our customers include retailers, end users and
wholesalers. We sell our products to our customers under either yearly contracts
or open account orders with payment terms typically varying from thirty (30) to
ninety (90) days.
We also market electronic, electrical and audio visual products at
international and regional trade shows in Norway and Sweden. In addition, we
maintain showrooms in our Oslo and Stockholm facilities where we exhibit our
products to customers.
We directly, or through our independent salespersons, accept written orders
for our products. If we have the particular item in inventory, we generally ship
it or make it available for pick-up by the customer within one day. If the
particular product is not in inventory, we order such product from the
manufacturer. Delivery of such products to our customers can take, depending on
how quickly we are able to obtain the product from the manufacturer, up to six
months.
We allow cancellation of orders for products which we generally keep in our
inventory and which are readily saleable to other customers. Cancellations of
these types of orders have never had any material effect on us due to the fact
that they have not occurred with respect to more than 1% of our orders.
Cancellations are generally made in writing and we take appropriate steps to
promptly notify our manufacturers of such cancellations. We will not, however,
accept cancellation of orders for specific parts which we do not generally keep
in our inventory and which are not readily saleable to other customers. We have
not experienced any cancellations of this nature.
We generally do not accept returns, although consistent with industry
practices, we make exceptions to this policy on a case-by-case negotiated basis.
Generally, we provide a one to three year warranty on our products pursuant to
which we replace defective products. To date, replacement of products under
warranty has not been material.
We consider backlog for the Nortelco Group to be written customer orders
received but not yet shipped by us. The Nortelco Group's backlog at March 31,
1999 was approximately $2,221,500. Backlog generally represents orders that will
be shipped within six months. Because customer orders may be canceled at any
time without penalty, we believe that backlog may not accurately indicate sales
for any future period.
We have a computer system and custom-made software which enables us to have
a fully integrated state-of-the-art distribution system. We believe that this
system saves a substantial amount of time and manpower in the distribution
process, and also allows us to order and distribute our products in a timely and
efficient manner. Our computer distribution system encompasses our entire
logistics network from purchase orders to the actual receipt of inventory in our
warehouse and from sales orders to customer invoice and collection. This system
enables us to track a product order from initiation through the ultimate cash
receipt from the customer. The system also has a built-in management information
system, which enables us to analyze our total profitability as well as
profitability by a particular product or customer.
Growth strategy
NEPC's objective is to strengthen its position and increase the volume of
our sales of high-tech or high-tech related products and/or services, including
electrical, electronic and audio visual products directed towards professional
and business customers. We will attempt to achieve this objective by:
Expanding product lines. Our product line consists, substantially, of
products which are supplemental, or add-on, products to other high volume
products. Such products are generally highly specific and sold to a very narrow
part of the market. Accordingly, we believe that a large portion our product
line consists of "niche" products. We will seek to continually expand the
breadth of our products and service offerings by reaching agreements with new
manufacturers complementary to the ones we presently have. With the expansion of
our product line, we will increase internal competence and/or number of
employees to meet requirements connected to these products.
We believe that there is a great potential for growth in the market
for high-tech or high-tech related products and/or services as the need for
improved infrastructure and communication flow continues to increase. The
technical knowledge required to successfully compete in this market is of vital
<PAGE>
importance. By focusing on this complex niche market, we are moving away from
the more simple consumer mass market. Through specialization, we are making it
more difficult for new competitors to enter the arena. Our specialized products
and services should continue to justify a higher price level than consumer
products.
Offering additional products to our customers. Our customers are primarily
using us as a total supplier to the extent that we have the products in
question. By focusing on an expanded product line by new agencies, we are/will
be in a position to increase our sale to our existing customers. In the past
this has proved to be a rapid way of increasing sales volume, due to the fact
that we often inherit an established customer portfolio from the previous agent.
Acquiring competitors or companies with complementary products. Our focus
has been on growth through acquisitions and mergers at reasonable prices. In
this regard, we have consciously been acquiring complementary businesses that
offer similar or complementary products. This growth has been motivated by the
need to stabilize and increase our revenues and profit by offering products and
services in a variety of markets, including the electrical, electronic and audio
visual. The acquisition of related businesses also allows us to reduce overhead
costs and increase efficiency. Before bringing new companies into our structure
we heavily focus on synergies and strategic fit. We have continued to focus on
expansion of our business in the Scandinavian region. By investing in Norway,
Sweden, Finland and, gradually, Denmark, we are trying to minimize risk by
spreading our business operations minimizing risk. By establishing operations in
a number of different countries, we are not totally dependent on a single market
and on the economic development in a single country. However, our acquisition
strategy requires sufficient financing.
Acquiring companies in high-tech or high-tech related businesses. In all
future acquisitions, we will continue to focus on high-tech or high-tech related
products or services. This is based on the high growth expectations in these
businesses. Currently, we are looking at investment possibilities in the
teleservice industry. The European call center (teleservice) industry is in the
growth phase some years behind the development in the USA. Estimates from
several different market research institutes give a growth rate for the European
call center industry of between 20-30% annually until year 2000 and 15-20% for
the following decade. Independent of a potential investment in the call center
business, we will aim to establish another Scandinavian concept like Nortelco
Nordic AS to try to increase stability in our revenue.
For the last couple of years we have been delayed in pursuing our growth
strategy due to insufficient funding to make acquisitions. This offering will be
of vital importance to succeed with our strategy in the future. As described
elsewhere in this prospectus, we estimate the proceeds from this offering to
adequately finance our business operation for at least one year. At present, we
have not identified any specific acquisition targets, but we are continually
evaluating potential candidates.
Product Liability
Nortelco AS has approximately $500,000 in product liability insurance with
respect to the sale of electronic, electrical and audio visual equipment. To
date, no material product liability claims have been asserted against us, and we
believe our product liability insurance policies are sufficient.
Competition
We compete in markets that are extremely competitive and sensitive to
changing consumer preferences and demands. A lot of our competitors are better
known, substantially larger, more diversified, and have substantially greater
financial, employee and marketing resources than us. They have greater name
recognition and the ability to develop and market similar products more
competitively priced than those distributed by us. Our competitors with respect
to the sale of electrical, electronic and audio visual products include Hauke,
Ltd. (England), Group Schneider, Ltd. (France), Wandel & Golterman GmbH
(Germany), Asea Brown Bowery AS (Norway) and Audio Grafisk (Norway). No
assurances can be given that NEPC will be able to compete in its markets.
We believe that the high cost of establishing and maintaining operations in
Scandinavia discourages many foreign product manufacturers from pursuing
operations in this region. As a result, many of these companies contract with us
to act as their distributor or agent in some or all of such countries. Because
we already have established operations in such countries, we believe we can
distribute products more efficiently and inexpensively.
Employees
At May 1, 1999, we employed an aggregate of approximately 85 persons.
<PAGE>
Facilities
We lease approximately 30,000 square feet in Oslo, Norway, pursuant to a
lease expiring December 31, 2003, at a rate of $370,000 per year, subject to an
escalation clause based upon the Norwegian Consumer Price Index. The premises
are used as Nortelco AS's executive offices, warehouse, showroom and business
office. We also lease approximately 12,000 square feet in Solna, Sweden, which
is used as the main sales office, executive office, warehouse and workshop for
Nortelco AB pursuant to a lease expiring December 31, 1999 at a rent of
approximately $90,000 per year. We also lease space in Gothenburg, Sweden,
pursuant to a five-year lease expiring June 30, 2001, at an annual rent of
$9,600.
Legal Proceedings
We are not party to any material legal proceedings.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of NEPC are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Bjorn Nysted 61 President, Chief Executive Officer and Director
Goran Haggqvist 55 Chairman of the Board
Tore Strand 43 Chief Financial Officer, Treasurer and Secretary
Espen Komnaes 46 Director
</TABLE>
Set forth below is a brief background of our executive officers and
directors, based on information supplied by them.
GORAN HAGGQVIST has been the Chairman of the Board of NEPC since May 1994.
From May 1994 to September 1996, Mr. Haggqvist was President of NEPC. Since
April 1993 and April 1994, Mr. Haggqvist has been the Chairman of the Board of
Directors of Storebro Machine AB and Nortelco, respectively. Since April 1994,
Mr. Haggqvist has been a director and the principal shareholder of AB
Grundstenen, a privately held company. Since 1992, Mr. Haggqvist also has been
the President and controlling shareholder of Haggqvinvest AB a privately held
international corporate finance firm that invests in and provides advisory
services in connection with domestic and international corporate transactions.
From 1985 to 1992, he was the President of Societe Generale (Sweden), the
Swedish subsidiary of Societe Generale France. Prior to such time, he held a
number of executive positions with two Swedish banks including Executive Vice
President of Gotabanken and President of Svenska Handelsbanken S.A., Luxembourg.
Mr. Haggqvist also was the Assistant to the Swedish Trade Commissioner in
Zurich. Mr. Haggqvist received a master's degree in political science from the
University of Gothenburg in 1970.
BJORN NYSTED has been the President of NEPC since September 1996, and he
has been a Director of NEPC since May 1994. From May 1994 to September 1996, Mr.
Nysted was the Treasurer of NEPC. Mr. Nysted has been the Managing Director,
President, and a Director of Nortelco since 1990 when he bought the original
company. Mr. Nysted is also the Chairman of the Board of Directors of Nordic
Business Development AS, a privately held corporation controlled by Mr. Nysted
and certain of his family members. From 1986 to 1989 he was the managing
director of Ma-bo AS and AS Uponor, companies within the porcess (plastic)
industry. From 1983 to 1986, Mr. Nysted had a similar position with AS Nor
Metal, a producer of machine tools. From 1976 to 1983, Mr. Nysted was employed
as a senior manager of NEBB AS (presently part of Asea Brown Boveri). From 1979
to 1981, Mr. Nysted was the chairman of the Electrical Union of Norway. Prior to
this, Mr. Nysted held positions as an electrical engineer with Acs Electricity
AS and National Electro AS.
TORE STRAND has been the Chief Financial Officer, Treasurer and Secretary
of NEPC since March 1997, and he has been the Chief Financial officer of
Nortelco since February 1990. From 1989 to February 1990, Mr. Strand was the
Chief Financial Officer of M-Gruppen AS, a Norwegian group which sells
kitchen-products for the professional market. From 1983, to 1989, Mr. Strand was
the Section Manager, Finance in Lefac AS, a Norwegian Lease and Finance company.
Mr. Strand received a Master of Business degree from the University of Lund,
Sweden in 1983.
ESPEN KOMNAES has been a Director of NEPC since September 1996. Since
November, 1997, Mr. Komnaes has been a partner at Komnaes & Huser ANS, an Oslo,
Norway based law firm. From 1985 to November 1997, Mr. Komnaes was a partner at
Meltvedt, Komnaes & Co., an Oslo, Norway based law firm. Mr. Komnaes received a
degree in jurisprudence from the University of Bergen in 1979.
Directors are elected annually by the stockholders and hold office until
the next annual meeting and until their respective successors are elected and
qualified. Executive officers are elected by the Board of Directors and hold
office until their respective successors are elected and qualified.
We have agreed that for a period of three years, Mason Hill will have the
right to designate a person to be a non-voting advisor to our Board of
Directors. Such person will serve only in an advisory position in order to
protect the investors in the offering. This advisor will receive the same
compensation as a non-officer member of the Board of Directors. We will
indemnify the advisor against any claims arising out of his participation at
meetings of the Board of Directors. In lieu of Mason Hill's right to designate
an advisor to the Board of Directors, Mason Hill shall have the right during
such three year period, in its sole discretion, to designate one person for
election as a director of NEPC. We will use our best efforts to obtain the
election of such person. If elected, this director shall be entitled to receive
the same compensation, expense reimbursements and other benefits as any other
director. The identity of such person has not been determined as of the date
hereof, and it is not expected that Mason Hill will exercise such right in the
immediate future. In the event that such person is elected to the Board of
Directors, we intend to obtain directors and officers insurance for such person.
<PAGE>
Executive Compensation
The following table sets forth, in U.S. dollars, the cash compensation paid
by NEPC or our subsidiaries for services rendered during the fiscal years ended
December 31, 1998, 1997 and 1996 to its chief executive officer. No other
executive officer's compensation exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Other Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#)
- --------------------------- ----- ---------- --------- ---------------- -----------
Bjorn Nysted,
President and Chief Executive Officer
<S> <C> <C> <C>
1998 105,000 0 -- --
1997 100,000 15,000 -- --
1996 82,000 10,000 -- --
</TABLE>
Employment Agreements
Our subsidiary, Nortelco Nordic AS, has entered into a five year employment
agreement with Bjorn Nysted, President and Chief Executive Officer of NEPC, as
of February 1, 1999, pursuant to which Mr. Nysted shall receive an annual base
salary of $160,000. Mr. Nysted shall agree to devote all of his business time to
the affairs of the Nortelco Group. In addition, Nortelco Nordic AS shall also
agree to pay to Mr. Nysted an $15,000 annual automobile allowance. We have the
right to terminate the employment agreement on twelve months notice, and Mr.
Nysted shall have the right to terminate the employment agreement on six months
notice. Such employment contract shall provide that in the event that Mr. Nysted
is terminated by us, he shall be entitled to receive all compensation under his
employment agreement.
Nortelco Nordic AS, has entered into a five year employment agreement with
Tore Strand, Chief Financial Officer, Treasurer and Secretary of NEPC, as of
February 1, 1999, pursuant to which Mr. Strand shall receive an annual base
salary of $82,000. Mr. Strand shall agree to devote all of his business time to
the affairs of NEPC. In addition, Nortelco Nordic AS shall also agree to provide
Mr. Strand with the use of an automobile. NEPC and Nortelco Nordic AS shall have
the right to terminate the employment agreement on twelve months notice and Mr.
Strand shall have the right to terminate the employment agreement on six months
notice. .
Messrs. Nysted and Strand shall agree not to disclose any confidential
information of NEPC during the term of employment or thereafter. In addition,
Messrs. Nysted and Strand shall agree not to compete with us during the term of
their employment and for a period of one year after the date of the termination
of their employment with NEPC.
Although each of the companies in the Nortelco Group have entered into
employment agreements with a number of their respective employees, NEPC has not
entered into any other employment agreements.
Consulting Agreement
Nortelco Nordic AS, entered into a two year consulting agreement with Goran
Haggqvist, Chairman of the Board of NEPC, as of November 11, 1998, pursuant to
which Mr. Haggqvist shall receive an annual compensation of $48,000. Pursuant to
the consulting agreement, Mr. Haggqvist shall agree to assist us with corporate
planning, financial public relations, business strategies and shareholder
relations.
1998 Stock Option Plan
Our 1998 Stock Option Plan was adopted by the Board of Directors and its
stockholders as of November 11, 1998.
The Stock Option Plan provides for the granting of options to purchase up
to 250,000 shares of our common stock that are intended to qualify either as
incentive stock options within the meaning of Section 422 of the United States
Internal Revenue Code or as non-statutory stock options that are not intended to
meet the requirements of such section. Options to purchase shares may be granted
under the Stock Option Plan to persons who, in the case of incentive stock
options, are employees (including officers) of NEPC, or, in the case of
non-statutory stock options, are employees (including officers) or non-employee
directors of NEPC or consultants to NEPC.
<PAGE>
The Stock Option Plan provides for its administration by a committee chosen
by the Board of Directors comprised of directors who are disinterested persons
(as defined in Rule 16(b)(3) under Section 16(b) of the Securities Exchange Act
of 1934). Once the committee is chosen by the Board of Directors, the stock
option committee shall have full discretionary authority, subject to certain
restrictions, to determine the number of shares for which incentive stock
options and non-statutory stock options may be granted and the individuals to
whom, the times at which, and the exercise price for which options will be
granted.
The exercise price of all incentive stock options granted under the Stock
Option Plan must be at least equal to the fair market value of such shares on
the date of the grant, or, in the case of incentive stock options granted to the
holder of 10% or more of our common stock, at least 110% of the fair market
value of such shares on the date of the grant. The maximum exercise period for
which incentive stock options may be granted is ten years from the date of grant
or five years in the case of an individual owning more than 10% of our common
stock. The aggregate fair market value of shares as determined at the date the
option is granted with respect to which incentive stock options are exercisable
for the first time by the holder of the option during any calendar year shall
not exceed $100,000. If such amount exceeds $100,000, the Board of Directors or
the stock option committee may, when the options are exercised and the shares
transferred to an employee, designate those shares that will be treated as
incentive stock options and those that will be treated as non-statutory stock
options.
As of the date hereof, no options under the Stock Option Plan have been
granted.
Compensation of Directors
Our directors do not receive compensation for their services as directors;
however, the Board of Directors may authorize the payment of compensation to
directors for their attendance at regular and special meetings of the Board and
for attendance at meetings of committees of the Board as is customary for
similar companies. Directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in connection with their duties to NEPC. As of
the date of this prospectus, no person has received compensation for serving as
a director.
Limitation on Liability of Directors
The Delaware General Corporation Law permits a corporation, through its
Certificate of Incorporation, to exonerate its directors from personal liability
to the corporation, or to its stockholders, for monetary damages for breach of
fiduciary duty of care as a director, with certain exceptions. The exceptions
include a breach of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law,
improper declarations of dividends, and transactions from which the directors
derived an improper personal benefit. Our Certificate of Incorporation
exonerates its directors from monetary liability to the extent permitted by this
statutory provision.
We have been advised that it is the position of the Commission that insofar
as the foregoing provision may be invoked to disclaim liability for damages
arising under the Act, that provision is against public policy as expressed in
the Act and is therefore unenforceable.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning beneficial
ownership of NEPC common stock as of November 1, 1998 and immediately following
the offering by
* each person owning 5% or more of the outstanding shares of common stock,
* each director, 1each executive officer named in the Summary Compensation
Table, and
* all directors and officers as a group:
The applicable percentage is based on 2,785,270 shares outstanding on June
1, 1999 and 3,785,270 to be outstanding upon consummation of this offering. The
percentage calculations do not include shares to be issued if the over-allotment
option is exercised.
<TABLE>
<CAPTION>
Amount and Percentage of Amount and Percentage of
Nature Beneficially Common Stock Nature Beneficially Common Stock
Owned Before Owned Before Owned After Owned After
Offering Offering Offering Offering
Name
<S> <C> <C> <C> <C>
Goran Haggqvist 1,208,729(3) 43.2% 1,158,729(1) 30.5%
Karlaplan 10
Stockholm, Sweden
Bjorn Nysted 1,158,818(4) 41.4% 1,108,818(2) 29.2%
c/o Nortelco Nordic AS
P.O. Box 116
Manglerud Oslo, Norway
Jan Haggqvist 185,844 6.6% 185,844 4.9%
Overas Parkvagen 18
Gothenburg, Sweden
Tore Strand 0 0 0 0
c/o Nortelco Nordic AS
P.O. Box 116
Manglerud Oslo, Norway
Espen Komnaes 0 0 0 0
c/o Komnaes & Huser ANS
P.O. Box 1661 Vika
Oslo, Norway
All Officers and 2,367,547(5) 84.6% 2,267,547(3) 59.7%
Directors as a
Group (4 persons)
</TABLE>
The applicable percentage of ownership is based upon 2,785,270 shares of
common stock issued and outstanding before the Offering and 3,785,270 shares of
common stock issued and outstanding after the Offering. However, each beneficial
owner's percentage ownership is determined by assuming that options, warrants
and other convertible securities that are held by such person and that are
exercisable or convertible within sixty (60) days have been exercised or
converted. A person is deemed to be the beneficial owner of securities that can
be acquired by such person within sixty (60) days upon the exercise of options
or warrants.
Unless otherwise provided herein, NEPC believes that all persons named in
the table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them.
<PAGE>
(1) Mr. Haggqvist is the Chairman and a Director of NEPC and a Director of
Nortelco Nordic AS. Amount and percentage of shares owned after the offering
gives effect to the sale of 50,000 shares of common stock by Mr. Haggqvist.
(2) All shares are owned by Nordic Business Development AS, a privately
held corporation controlled by Mr. Nysted and certain of his family members. Mr.
Nysted is the President and a Director of NEPC, and the Managing Director,
President, and a Director of Nortelco Nordic AS. Amount and percentage of shares
owned after the Offering gives effect to the sale of 50,000 shares of common
stock by Nordic Business Development AS.
(3) See footnotes (3) and (4).
SELLING STOCKHOLDERS
The following table set forth certain information at July 1, 1999 and as
adjusted to reflect the sale of the common stock by the Selling Stockholders.
<TABLE>
<CAPTION>
Shares
Beneficially Shares
Name of Owned Owned
Prior Shares After
Stockholder to Offering Offered Offering
<S> <C> <C> <C>
Jeff Levine 14,730 14,730 0
Ballard Property Co. #1 Ltd. 7,365 7,365 0
Richard Metsch 7,365 7,365 0
George Rutland 14,730 14,730 0
Silverio Conte 7,365 7,365 0
Wayne Wiseman 14,730 14,730 0
Joseph Raimando 7,365 7,365 0
Deborah Caruso 14,730 14,730 0
Sierra Holding Trust 14,730 14,730 0
Marcel Aronheim 7,365 7,365 0
ATB, Inc. 7,365 7,365 0
Edward Wilkins 7,365 7,365 0
Joseph DiMauro 7,365 7,365 0
</TABLE>
PLAN OF DISTRIBUTION
In Connection with this Offering, the Underwriters of this Initial Public
Offering May Effect Transactions Which Stabilize or Maintain the Market Price of
the Shares at Levels above That Which Might Otherwise Prevail in the Open
Market. Such Stabilization, If Commenced, May Be Discontinued at Any Time.
The selling stockholders are free to offer and sell their shares of common
stock at such times, in such manner and at such prices as they shall determine.
Such common stock may be offered by selling stockholders in one or more types of
transactions, which may or may not involve brokers, dealers or cash
transactions. The selling stockholders may also use Rule 144 under the
Securities Act, to sell such securities, if he meets the criteria and conform to
the requirements of such Rule. There is no underwriter or coordinating broker
acting in connection with the proposed sale of common stock by the selling
stockholders.
The selling stockholders have advised us that sales of common stock may be
effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the common stock, or a combination of such
methods of sale, at fixed price which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices, the selling
stockholders may effect such transactions by selling common stock directly to
purchasers or to or through broker/dealers which may act as agents or
principals. Such broker/dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of common stock for whom such broker/dealers may act as agents or to
whom they sell as principal, or both. Compensation to a particular broker/dealer
who may act as an agent may exceed customary commissions. The selling
stockholders and any broker/dealers that act in connection with the sale of the
common stock might be deemed to be "underwriters" within them meaning of Section
2(11) of the Securities Act, and any commissions received by them and any profit
on the resale of the common stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
<PAGE>
The selling stockholders may agree to indemnify any agent, dealer or
broker/dealer that participates in transactions involving sales of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
Because the selling stockholders may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities, they will be subject to
prospectus delivery requirements under the Securities Act. Furthermore, in the
event of a "distribution" of his common stock, the selling stockholders, any
selling broker/dealer and any "affiliated purchasers" may be subject to
Regulation M under the Exchange Act which prohibits any "stabilizing bid" or
"stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the common stock in connection with the Offering.
CERTAIN TRANSACTIONS
During November 1995, Goran Haggqvist, a director of NEPC, converted a
$1,000,000 loan that he had made to NEPC into an aggregate of 2,643,700 shares
of NEPC.
During April 1997, NEPC's subsidiary, Nortelco AS, borrowed an aggregate of
approximately $104,000 from Goran Haggqvist, a director of NEPC, in order to
provide additional funds for working capital. The loan bears interest at the
rate of 10% per annum and is payable on demand.
During February 1998, our subsidiary, Nortelco AS, borrowed an aggregate of
approximately $121,250 from Goran Haggqvist, a director of NEPC, in order to
provide additional funds for working capital. The loan bears interest at the
rate of 10% per annum and is payable on demand.
During September 1998, our subsidiary, Nortelco AS, borrowed an aggregate
of approximately $156,000 from Goran Haggqvist, a director of NEPC, in order to
provide additional funds for working capital. The loan bears interest at the
rate of 10% per annum and is payable on demand.
During October 1998, NEPC borrowed an aggregate of $150,000 from Goran
Haggqvist, a director of NEPC, in order to provide additional funds for working
capital to fund, among other things, the repurchase of certain shares of common
stock of NEPC, and to repay certain outstanding promissory notes of NEPC, and to
pay accrued interest on certain outstanding promissory notes of NEPC. The loan
bears interest at the rate of 10% per annum and is payable on demand.
In December 1998, NEPC entered into an agreement with Interaction
Development Group AS, a Norwegian corporation, pursuant to which NEPC sold 100%
of the shares of Storebro Machine AB to Interaction Development Group. The
purchase price of the transfer was a maximum of NOK2,000,000, and was payable
only upon Storebro achieving profitability in fiscal year 1999. Bjorn Nysted,
the President and a director of NEPC is the Chairman of the Board of Interaction
Development Group. NEPC's financial statements have been adjusted to reflect the
sale and discontinuance of the business of Storebro.
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
NEPC is authorized to issue up to 24,000,000 shares of common stock, $.001
par value per share, 2,785,270 of which are issued and outstanding as of the
date of this prospectus. The holders of the common stock are entitled to receive
dividends equally when, as and if declared by the Board of Directors, out of
funds legally available therefore.
Subject to the rights that may be designated by the Board of Directors to
the holders of any preferred stock, the holders of the common stock have sole
voting rights, one vote for each share held of record, and are entitled upon
liquidation of NEPC to share ratably in the net assets of NEPC available for
distribution. Shares of our common stock do not have cumulative voting rights
and vote as a class on all matters requiring stockholder approval. Therefore,
the holders of a majority of the shares of common stock may elect all of the
directors of NEPC, control its affairs and day to day operations. The shares of
common stock are not redeemable and have no preemptive or similar rights. All
outstanding shares of our common stock are fully paid for and non-assessable.
Preferred Stock
NEPC is authorized to issue 1,000,000 shares of "blank check" Preferred
Stock par value $.001 per share. The preferred stock may be issued from time to
time, in one or more series, upon authorization by our Board of Directors. The
Board of Directors, without further approval of the stockholders, will be
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
preferred stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely effect the voting power of the holders of the common
stock and, under certain circumstances, make it more difficult for a third party
to gain control of NEPC, discourage bids for our common stock at a premium or
otherwise adversely effect the market price of the common stock, if the common
stock is ever publicly traded, of which there are no assurances. As of the date
hereof, we have no plans to issue, or any present intention to issue any such
shares. Pursuant to an agreement with the underwriters, NEPC may not issue
shares of preferred stock for a period of two years from the effective date of
this prospectus, without the consent of the underwriters.
Transfer Agent and Warrant Agent
The transfer agent for NEPC's common stock is Olde Monmouth Stock Transfer
Co., Inc., Middletown, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, we will have 3,785,270 shares of common
stock outstanding (3,970,155 shares if the underwriters' over-allotment option
is exercised in full). All of the shares of common stock sold in this offering
will be freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except for any shares
purchased by an "affiliate" of the company which will be subject to certain
limitations of Rule 144 adopted under the Securities Act.
The 2,785,270 presently outstanding shares of common stock are restricted
securities and will be subject to the resale limitations provided for in Rule
144. Under Rule 144, as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the company, who
has owned restricted shares of common stock beneficially for at least two years,
is entitled to sell, within any three month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the common stock is quoted on an exchange, the average weekly
trading volume during the four calendar weeks preceding the sale. A nonaffiliate
who has not been an affiliate of the company for at least the three months
immediately preceding the sale and who has beneficially owned shares of common
stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above. In meeting the two and
three year holding periods described above, a holder who has purchased shares
can include the holding periods of a prior owner who was not an affiliate of the
company.
<PAGE>
Giving effect to the sale of 1,000,000 shares by NEPC and 232,570 shares by
the selling stockholders, we will have 3,785,270 shares of common stock issued
and outstanding of which 2,552,700 will be designated "restricted securities."
All of our securityholders, on the date hereof, have agreed not to publicly
sell, for a period of two (2) years from the date of this prospectus, any shares
of our common stock without the prior written consent of Mason Hill. Mason
Hill's decision whether to release such individuals from their lock-ups will be
dependent upon market conditions, including the price and volume of our
securities, as well as the need to maintain orderly market conditions.
Prior to this offering, there has been no sustained market for any
securities of NEPC. The effect, if any, of public sales of the restricted shares
of common stock or the availability of such shares for future sale at prevailing
market prices cannot be predicted. Nevertheless, the possibility that
substantial amounts of restricted shares may be resold in the public market may
adversely affect prevailing market prices for the common stock, if any such
market should develop.
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
between NEPC and the underwriters, for which Mason Hill & Co., Inc. is acting as
representative, NEPC and the selling stockholders have agreed to sell to each of
the underwriters named below, and each of such underwriters has severally agreed
to purchase the number of shares of common stock set forth opposite its name.
All 1,232,570 shares offered must be purchased by the several underwriters if
any are purchased. The shares are being offered by the underwriters subject to
prior sale, when, as and if delivered to and accepted by the underwriters and
subject to approval of certain legal matters by counsel and to certain other
conditions.
Underwriter Number of
Shares
Mason Hill & Co., Inc.
Total 1,232,570
Mason Hill has advised us that the underwriters propose to offer the shares
of common stock to the public at the offering price set forth on the cover page
of this prospectus and that the underwriters may allow to certain dealers who
are members in good standing with the National Association of Securities
Dealers, Inc. ("NASD") concessions, not in excess of $ ____ per share of common
stock. After the initial public offering, the public offering price and
concessions may be changed by the underwriters.
NEPC has granted the underwriters an option, exercisable for 45 days from
the date of this prospectus, to purchase up to 184,885 shares of common stock by
NEPC, at the public offering price less the underwriting discounts set forth on
the cover page of this prospectus. The underwriters may exercise this option
solely to cover over-allotments in the sale of the shares of common stock
offered hereby.
NEPC and the selling stockholders have agreed to pay the underwriters a
non-accountable expense allowance of 3% of the gross proceeds of the shares of
common stock sold in this offering, or a total of $150,000 and $34,885.50,
respectively ($177,732.75 and $34,885.50, respectively, if the over-allotment
option is exercised in full), none of which has been paid prior to the date
hereof.
The underwriting agreement provides for reciprocal indemnification between
NEPC and the underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933.
We have agreed to sell to the underwriters or their designees, at a price
of $10, warrants, which entitle the underwriters to purchase up to 123,257
shares of common stock of NEPC. The securities issuable upon exercise of the
underwriters' warrants are identical to those offered pursuant to this
prospectus. The underwriters' warrants will be exercisable at a price of $6.00
per share for a period of four years commencing one year from the date of this
prospectus, and they will not be transferable except to underwriters and
selected dealers and officers and partners thereof. Any profit realized upon any
resale of the underwriters' warrants or upon any sale of the shares of common
stock may be deemed to be additional underwriters' compensation. We have agreed
that, upon written request of the then holder(s) of at least a majority of the
underwriters' warrants, we will register or file a post-effective amendment with
respect to any registration statement registering the underwriters' warrants and
the underlying securities under the Securities Act at our sole expense. In
addition, we have also agreed to certain "piggy-back" registration rights for
the holders of the underwriters' warrants and the underlying securities.
We have agreed that for a period of three years, Mason Hill will have the
right to designate a person to be a non-voting advisor to our Board of Directors
who will receive the same compensation as a nonofficer member of the Board of
Directors and who will be indemnified by us against any claims arising out of
his participation at meetings of the Board of Directors. In lieu of Mason Hill's
right to designate an advisor to the Board of Directors, Mason Hill shall have
the right during such three year period, in its sole discretion, to designate
one person for election as a director of NEPC and we will use our best efforts
to obtain the election of such person who shall be entitled to receive the same
compensation, expense reimbursements and other benefits as any other director.
The identity of such person has not been determined as of the date hereof, and
it is not expected that such right will be exercised in the immediate future.
<PAGE>
The underwriters have informed us that they do not expect sales of shares
to be made to discretionary accounts to exceed 1% of the shares of common stock
offered hereby.
The offering is subject to the agreement by all present stockholders of
NEPC that they will not sell any shares of common stock to the public without
the prior written consent of Mason Hill for a period of twenty-four months.
We have agreed to enter into an agreement with Mason Hill retaining them as
a financial consultant for a period of three years from the date hereof,
pursuant to which they will receive fees aggregating $100,000 which fees will be
payable in full at closing.
The foregoing is a summary of the principal terms of the underwriting
agreement, the underwriters' warrant, and the consulting agreement. Reference is
made to the copies of the underwriting agreement, the underwriters' warrant
agreement and the consulting agreement which are filed as exhibits to the
Registration Statement of which this prospectus forms a part.
Prior to the offering, there has been no sustained public market for the
common stock. Consequently, the offering price of the common stock has been
determined by NEPC and the underwriters and are not related to our asset value,
earnings, book value or other such criteria of value. Factors considered in
determining the offering price of the common stock include principally, the
prospects for the industry in which NEPC operates, our management, the general
condition of the securities markets and the demand for securities in similar
industries.
Upon completion of this offering, our common stock will be listed on the
Nasdaq SmallCap Market under the symbol "NEPC." In order to maintain our listing
on Nasdaq, we are required to maintain net tangible assets of at least
$2,000,000 and to have a bid price for our common stock of at least $1.00 per
share. Upon completion of this offering we will have net tangible assets of
approximately $4,726,000.
LEGAL MATTERS
The validity of the issuance of the shares offered hereby will be passed
upon for NEPC by Sichenzia, Ross & Friedman LLP, New York, New York. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Gersten, Savage & Kaplowitz, LLP, New York, New York. Komnaes &
Huser has advised NEPC on certain legal matters in connection with this offering
with respect to the laws of Norway.
EXPERTS
The consolidated financial statements of Nordic Equity Partners Corp. at
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, appearing in this prospectus and Registration Statement have
been audited by Ernst & Young AS, independent auditors, as set forth in their
report thereon appearing elsewhere herein.
CHANGE IN AUDITORS
In April 1997, NEPC dismissed McManus & Co., P.C. as its independent
auditors, and subsequently engaged Ernst & Young AS as its independent auditors.
McManus & Co., P.C. was originally retained as NEPC's independent auditors in
connection with our previously withdrawn public offering. NEPC dismissed McManus
& Co., P.C. as a result of the refusal by the Securities and Exchange Commission
to accept the audit report rendered by McManus & Co., P.C., which refusal was
based upon the failure by McManus & Co., P.C. to properly perform their audit
and the failure by McManus & Co., P.C. to comply with applicable auditing
standards.
<PAGE>
Shareholders and Board of Directors
Nordic Equity Partners Corp.
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of Nordic
Equity Partners Corp. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income and comprehensive income,
shareholders' equity and cash flows for each of the three years in the period
ended December 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 auditing standards generally
accepted in the United States of America. 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 consolidated financial position of Nordic Equity
Partners Corp. and subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with accounting
principles generally accepted in the United States of America.
/s/ERNST & YOUNG AS
ERNST & YOUNG AS
Oslo, Norway
July 15, 1999
<PAGE>
Nordic Equity Partners Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
Note 1998 1997
(in thousands)
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents $ 543 $ 547
Restricted cash and cash equivalents 146 137
Trade accounts receivable 6 3,306 4,899
Other receivables 137 127
Inventories 5 2,722 3,765
Prepaid expenses 499 250
------------------ ------------------
Total current assets 7,353 9,725
------------------ ------------------
Property, plant and equipment, net 7,10 1,107 1,173
Prepaid pension expenses 11 242 326
Agency and distribution rights 1,055 1,295
Other assets 23 39
------------------ ------------------
Total assets $ 9,780 $ 12,558
================== ==================
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Balance Sheets
December 31,
Note 1998 1997
(in thousands)
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
Current liabilities
<S> <C> <C> <C>
Short-term borrowings ............. 8 $ 2,151 $ 3,118
Accounts payable ............. 2,346 3,112
Witholding tax and other taxes payable 860 984
Income taxes payable ............. 13 190 59
Prepayments from customers ............. 275 270
Current portions of long-term debt ..... 9 193 167
Related party debt ............. 14 604 59
Other currrent liabilities ............. 439 496
-------- --------
Total current liabilities ............. 7,058 8,265
-------- --------
Long-term liabilities
Long-term debt ............. 9 536 746
Related party debt ............. 14 -- 246
Deferred income taxes ............. 13 144 171
-------- --------
Total long term liabilities .......... 680 1,163
-------- --------
Total liabilities ............. 7,738 9,428
-------- --------
Shareholders' equity
Common stock, 0.001 par value, 24,000,000
shares authorized, 2,800,000 and 2,785,270
shares issued and, outstanding at December
31, 1997 and 1998, respectively 3 3
Capital in excess of par value ....... 3,330 3,333
Retained earnings (accumulated deficit) (887) 98
Other comprehensive income ........... (404) (304)
Total shareholders' equity ........... 2,042 3,130
-------- --------
Total liabilities and shareholders' equity $9,780 $ 12,558
======== ========
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Statements of Income and Comprehensive Income
<TABLE>
<CAPTION>
For the year ended December 31,
Note 1998 1997 1996
(in thousands except per share amounts)
<S> <C> <C> <C>
Net sales ........................................... $ 22,139 $ 21,665 $ 22,042
Cost of goods sold .................................. 13,104 13,076 13,403
Gross profit ........................................ 9,035 8,589 8,639
Sales and marketing expenses ........................ 2,675 2,984 2,525
General and administrative expenses ................. 5,532 5,032 5,408
Amortization of agency and distribution rights ...... 224 232 198
Income from operations .............................. 604 341 508
Interest income ..................................... 37 19 24
Interest expense .................................... (368) (362) (465)
Net foreign exchange (losses) gains ................. (14) 4 42
Income (loss) from continuing operations before taxes 259 2 109
Current income taxes ................................ 13 268 116 221
Deferred income taxes ............................... 13 (24) (1) (25)
Total taxes ......................................... 244 115 196
Income (loss) from continuing operations ............ 15 (113) (87)
Discontinued operations:
Income (loss) from discontinued operations .......... 4 (275) (41) 210
Loss from disposal of discontinued operations
to related parties .................................. 4 (725) -- --
Net income (loss) ................................... $ (985) $ (154) $ 123
Other comprehensive income:
Translation adjustments ............................. (100) (473) (82)
Comprehensive income (loss) ......................... (1,085) (627) 41
Earnings per share:
Basic and diluted, continuing operations ............ 16 0.00 (0.04) (0.03)
Basic and diluted, discontinued operations .......... 16 (0.36) (0.01) 0.08
Basic and diluted, total ............................ 16 (0.36) (0.05) 0.05
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the year ended December 31,
1998 1997 1996
(in thousands)
Cash flows from operations
<S> <C> <C> <C>
Net income (loss) ............................ $ (985) $ (154) $ 123
Deferred taxes ............................... (24) (1) (25)
Depreciation ................................. 252 330 275
Amortization of agency and distribution rights 224 232 198
Gain (loss) from disposal of assets .......... (2) 10 (6)
Changes in inventories ....................... 909 418 (295)
Changes in accounts receivable ............... 1,420 (1,217) (448)
Changes in accounts payable .................. (654) 71 20
Changes in other assets and liabilities ...... 157 (498) 55
Cash flows from operating activities ......... 1,297 (809) (103)
Cash flows from investing activities
Purchases of equipment ....................... (430) (533) (249)
Proceeds from disposal of assets ............. 181 36 46
Investments in other assets .................. -- (351) (76)
Proceeds from disposal of other assets ....... 15 64 --
Cash flows from investing activities ......... (234) (784) (279)
Cash flows from financing activities
Proceeds from bridge and term loans .......... 105 106 1,137
Payments on bridge and term loans ............ (542) -- --
Net change in short term cerdit lines ........ (420) 977 (99)
Proceeds from long-term debt ................. -- 763 --
Payments on long term debt ................... (210) (116) (787)
Issuances of common stock .................... -- -- 50
Cash flows from financing activities ......... (1,067) 1,730 301
Net changes in cash and cash equivalents ..... (4) 137 (81)
Cash and cash equivalents at beginning of year 547 410 491
Cash and cash equivalents at end of year ..... $ 543 $ 547 $ 410
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Statement of Changes in Shareholders' Equity
(in thousands except share amounts)
<TABLE>
<CAPTION>
Other
Common stock Paid in Retained Comprehensive
Shares Amount Capital Earnings Income Total
Balance, December 31, 1995,
<S> <C> <C> <C> <C> <C> <C>
as previously reported .......... 8,932 $ $ 1,161 $ 938 $ 298 $ 2,397
Restatement (see Note 2) ........ 2,643,700 3 2,122 (809) (47) 1,269
Restated balance, January 1, 1996 2,652,632 3 3,283 129 251 3,666
Foreign currency adjustments .... (82) (82)
Common stock issuances .......... 147,368 50 50
Net income ...................... 123 123
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 ...... 2,800,000 3 3,333 252 169 3,757
Foreign currency adjustments .... (473) (473)
Net loss ........................ (154) (154)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 ...... 2,800,000 3 3,333 98 (304) 3,130
Foreign currency adjustments .... (100) (100)
Share repurchase ................ (14,730) (3) (3)
Net loss ........................ (985) (985)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 ...... 2,785,270 $ 3 $ 3,330 $ (887) $ (404) $ 2,042
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Notes to the Consolidated Financial Statements
1. Organization and basis of presentation
Nordic Equity Partners Corp. (the "Company") was incorporated under the
laws of Delaware in May 1994 under the original name First Nordic Equity
Partners Corp. Sherman, Goelz & Associates ("SGA"), was incorporated
under the laws of Nevada in November 1986 under the original name Pearl
Ventures. In May 1995, in order to effect a change in domicile, SGA was
merged with and into the Company pursuant to an Agreement and Plan of
Merger ("Merger"), and SGA ceased to exist as a corporate entity. In the
Merger each shareholder of SGA received one share of the Company for
each share owned in SGA. At the date of the Merger, the Company had no
assets, liabilities or operations. The Merger was accounted for as a
reorganization of entities under common control, and therefore treated
in a manner similar to a pooling of interest. Accordingly, references to
the Company for periods prior to the Merger refer to transactions of
SGA. Prior to the November 1994 transactions described below, SGA had no
operations or investments.
In November 1994 the Company acquired 100% of the common stock of
Storebro Machine AB ("Storebro"), a Swedish company owned by one of the
Company's minority shareholders, for $215,000 in cash and the
issuance of 722 shares of the Company's common stock. The aquisition
was accounted for using the purchase method of accounting and
accordingly, the operating results of Storebor have been included in the
Company's consolidated financial statements since the date of
acquisition. The fair value of the net assets of Storebro at the date of
acquisition were equal to the book value of the net assets of $664,000.
Accordingly the value of $449,000 assigned to the 722 shares of the
Company's common stock was equal to the historical book value of the
net assets ($664,000) reduced by the cash payment ($215,000).
In December 1998, the Company sold Storebro (see Note 4).
In November 1994 the Company acquired 80% of the common stock of
Nortelco AS, a Norwegian company ("Nortelco") for $1,781,000. $785,000
of the purchase price was paid in cash and the remainder by the issuance
of 1,127 shares of the Company's common stock. The purchase price of
$1,781,000 was established by negotiations between the parties using
fair value calculations based on discounted cash flow analysis and other
accepted valuation methodologies. Accordingly, the $996,000 difference
between the cash portion of the purchase price and the total purchase
price has been attributed to the shares issued in the purchase. The
acquisition was accounted for using the purchase method of accounting
and accordingly, the operating results of Nortelco have been included in
the Company's consolidated financial statements since the date of
acquisition. The excess of the purchase price over the fair value of net
assets of Nortelco at the date of acquisition in the amount of $996,000
was allocated to agency and distribution rights. The agency and
distribution rights are being amortized on a straight line basis over 10
years. The remaining 20% of the common stock of Nortelco was contributed
to the Company in 1995 (see Note 14).
The Company has two wholly-owned Norwegian subsidiaries, Nortelco AS and
Nortelco Nordic AS. Nortelco is an operating company and has three
wholly-owned operating subsidiaries, Nortelco System Teknikk AS and
Brannteknikk AS, both incorporated in Norway, and Nortelco AB,
incorporated in Sweden. All of the operating subsidiaries are
principally engaged in the importation and distribution of products for
use in the electronic, electrical and audio visual industries. To a
lesser extent the operating subsidiaries also design, install and sell
customized conference room and auditorium facilities. Nortelco Nordic AS
is a holding company under which the Company intends to reorganize its
operating subsidiaries.
<PAGE>
2. Restatement of prior year results
In 1998, the Company determined that certain aspects of it's
accounting for the acquisitions of Nortelco and Storebro should be
corrected. The acquisiton of Nortelco have been corrected due to
miscalculation of the value assigned to the agency and distribution
rights. The acquisition of Storebro have been corrected to use the
purchase method of accounting instead of common control accounting.
Additionally, the conversion of a $1,000,000 shareholder loan in
exchange for 2,643,700 shares of the Company's common stock,
previously recorded in 1996, was determinated to have been transacted in
1995. Accordingly, the accompanying balance sheet at December 31, 1997
and related statements of income and comprehensive income and cash flows
for the years ended December 31, 1996 and 1997 have been restated to
reflect these corrections. Furthermore, the impact on periods prior to
January 1,1996 have been reflected as a restatement of shareholders
equity at that date.
The impact on net income and shareholder's equity of the restatement
is a follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
(in thousands)
<S> <C> <C>
Net income (loss) as previously reported $ (124) $ 153
Net income (loss) as restated (154) 123
$ (30) $ (30)
December 31,
1997 1996
(in thousands)
Shareholders' equity, as previously reported $ 2,921 $ 3,518
Shareholders' equity, as restated 3,130 3,757
$ 209 $ 239
======= ==========
</TABLE>
3. Summary of significant accounting policies
The consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles.
<PAGE>
Consolidation principles
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
The subsidiaries located outside of the United States use their local
currency as their functional currency. The assets and liabilities of
foreign subsidiaries are translated into US dollars using the rate of
exchange as of the balance sheet date. For the consolidated income
statement, an average exchange rate is used. Translation gains and
losses are accumulated and included as a separate component of
stockholders' equity. The balance sheet item "Other comprehensive
income" consists soley of these accumulated translation gains and
losses.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and bank deposits. Cash
equivalents are considered to all be highly liquid investments with
original maturities of three months or less at the date of acquisition.
Restricted cash and cash equivalents represent amounts required to fund
periodic remittances to the Norwegian fiscal authorities for payroll
withholdings. Under Norwegian law such amounts are required to be
segregated from the Company's operating cash and cash equivalents.
Inventories
Inventory is stated at the lower of average cost or market. Inventory
reserves are established for slow-moving and obsolete inventory based on
the passage of time and historical and projected sales activity.
Property, plant and equipment
Property, plant and equipment is recorded at cost. Depreciation is
provided using straight-line and accelerated methods.
The useful lives utilized for this purpose are:
Automobiles 4-5 years
Machinery and Equipment 3-4 years
Revenue
Revenue from the sale of products is recorded when the merchandise is
shipped to customers. Estimated returns are accrued for when the revenue
is recorded. Revenue from design and installation services is generally
recorded using the percentage of completion method. Revenue from service
and repair is recorded as the related services are performed.
<PAGE>
Income taxes
The Company accounts for certain income and expense items differently
for financial reporting purposes than for tax purposes. Provisions for
deferred taxes are made in recognition of such temporary differences,
following the requirements of Financial Accounting Standards Board No. 109
"Accounting for Income Taxes."
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrated credit risks consist primarily of cash and trade
receivables. Credit risk on trade receivables is minimized as a result
of the large and diverse nature of the Company's customer base. The
Company maintains cash and cash equivalents with various financial
institutions located throughout Norway and Sweden. The Company's policy
is designed to limit exposure to any one institution. Deposits are
required for any large orders or for orders from buyers not having
established a trading history with the Company.
Agency and distribution rights
Agency and distribution rights represent the value assigned to exclusive
distribution rights granted to Nortelco by various suppliers from whom
Nortelco purchases products for resale. These rights were acquired at
the date of the Nortelco acquisition and are being amortized on a
straight-line basis over 10 years. Accumulated amortization at December
31, 1998 and 1997 amounted to $1,168,000 and $944,000, respectively.
Impairment of Long Lived and Identifiable Intangible Assets
The Company evaluates the carrying value of long lived assets and
identifiable intangible assets for potential impairment on an ongoing
basis. An impairment loss would be recognized when the estimated
undiscounted future cash flows is less than the carrying amount of the
asset.
Fair value of financial instruments
The carrying value of financial instruments such as cash, accounts
receivable, accounts payable and short-term borrowings approximate their
fair value based on the short-term maturities of there instruments. The
carrying value of long-term debt approximates fair value based on quoted
market prices for the same or similar issues as well as the current
rates offered to the Company. The fair value of related party debt is
not determinable.
Basic and Diluted Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" (SFAS 128). SFAS 128 replaced the calculation
of primary and fully diluted earnings per share with basic and diluted
earnings per share. All earnings per share amounts for all periods have
been restated to conform to SFAS 128 requirements.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
4. Discontinued operations
In December 1998, the Company sold 100% of the common stock of Storebro
for no current consideration. The President of the Company and a major
shareholder, is a member of the Board of Directors of Interaction
Development Group ("IDG") the company which purchased Storebro. In
addition the major shareholder has an ownership interest in the company
controlling IDG. Under the terms of sale if Storebro is resold prior to
December 31, 1999, a contingent sales price of up to $263,000 is payable
to the Company. The Company retains no interest in Storebro, is no
longer responsible for its operations or managment and has not
guaranteed or retained any of Storebro's liabilities.The results of
operations of Storebro prior to the sale have been classified as
discontinued operations in the accompanying financial statements. In the
years ended December 31, 1996, 1997 and 1998, Storebro's net sales
amounted to $4,522,000 ,$3,897,000 and $2,458,000, respectively. In
connection with the sale the Company recorded a loss of $725,000 which
is equal to the book value of Storebro at the date of disposal.
5. Inventories
Inventory consists of the following:
December 31,
1998 1997
(in thousands)
Finished goods . $2,722 $3,352
Work in progress -- 413
------
$2,722 $3,765
====== ======
6. Trade accounts receivable
Trade accounts receivable consists of the following:
December 31,
1998 1997
(in thousands)
Trade accounts receivables ..... $ 3,318 $ 4,911
Provisions for doubtful accounts (12) (12)
Net accounts receivable ........ $ 3,306 $ 4,899
======= =======
Trade accounts receivable include $410,000 and $105,000 of unbilled amounts
related to the use of the percentage of completion method of accounting at
December 31, 1998 and 1997, respectively.
<PAGE>
7. Property, plant and equipment
Property and equipment and related accumulated depreciation are summarized
as follows:
December 31,
1998 1997
(in thousands)
Machinery and equipment ..... $ 2,671 $ 2,609
Automobiles .............. 603 687
Less accumulated depreciation (2,167) (2,123)
Total .............. $ 1,107 $ 1,173
======= =======
8. Short-term borrowings
The Company's subsidiaries have available short-term credit lines which
amounted to $2,060,000 at December 31, 1998. The credit arrangements do
not have fixed termination dates and are renewable annually by the banks
subject to adjustments in interest rates and collateral. Borrowings
under the credit lines bear interest at 10% as of December 31, 1998 and
7% as of December 31, 1997. The Company had $1,346,000 and $1,875,000
outstanding under these credit lines at December 31, 1998, and 1997,
respectively.
The credit lines are secured by substantially all of the Company's
accounts receivable, inventories property, plant and equipment.
The following items are also included in short-term borrowings:
<TABLE>
<CAPTION>
December 31,
Interest- Maturity Terms of repayment 1998 1997
rate date Principal Interes (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Bridge loans 10.0 % Sep. 1999 at maturity year end 805 1,093
Term loan 12.0 % April 1998 at maturity at maturity -- 150
Total $ 805 $ 1,243
</TABLE>
The bridge loans which were received in a private placement in 1996 are
unsecured term loans originally payable on the earlier of the closing of
an Initial Public Offering (IPO) of the Company or February 15, 1998. In
1998 the holders of the bridge loans agreed to extend the due date to
the closing of the IPO. Four of the original holders, representing
$237,500 in loans, have requested repayment of the borrowings. Three of
these holders have received full repayment as per December 31, 1998.
In 1999 the holders of the bridge loans agreed to further extend the due
date to the earlier of the closing of an IPO or September 15, 1999.
<PAGE>
9. Long-term debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
Bank Interest- Maturity Terms of repayment 1998 1997
rate date Principal Interest (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Gjensidige, Norway 10.5 % various monthly monthly $189 $247
Gjensidige, Norway 10.0 % Aug. 2004 quarterly quarterly 540 659
DnB, Norway ... 9.5 % various monthly monthly -- 7
Total $729 $913
less current
portion 193 167
536 746
</TABLE>
Average rate for 97 The interest rates applicable during 1997 ranged
between 5.4% and 6.4% on an annual basis. All of the 5.65% loans have
variable interest rates.
Interest paid on short-term borrowings and long-term debt amounted to
$368,000, $438,000 and $487,000 for Average rate for 96 the years ended
December 31, 1998, 1997 and 1996, respectively. 8.18%
Aggregate principal payments for the next five years subsequent to
December 31, 1998 are as follows:
1999 $ 193
2000 154
2001 122
2002 95
2003 95
Thereafter 70
Total minimum principal payments $ 729
==========
<PAGE>
10. Commitments
Leases
Equipment with a cost and accumulated amortization of $101,968 and
$76,476, respectively, at December 31, 1998 ($95,070 and $47,535,
respectively at December 31, 1997) have been leased under capital
leases. In addition, the Company leases certain property and equipment
under operating lease agreements which expire through 2002.
Future minimum annual capital and operating lease commitments at
December 31, 1998 are as follows:
Operating Capital
Leases Leases
(in thousands)
1999 $264 $ 27
2000 195 0
2001 67 0
2002 2 0
2003 0 0
Thereafter ........................ 0 0
Total minimum lease payments .......... $528 $ 27
==== ====
Amount representing interest .......... 4
Present value of minimum lease payments 23
Current portion ....................... 23
Long-term portion ..................... $ 23
====
Operating lease expenses amounted to approximately $ 328,000, $310,000
and 360,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Letters of credit
The Company has outstanding letters of credit at December 31, 1998 in
the aggregate amount of $698,000. The letters of credit secure the
Company's obligations under certain leases and its obligations under
certain uncompleted projects for customers. The Company pays fees of
1,5% of the total outstanding letters of credit.
<PAGE>
11. Pension plans and related provisions
The Company sponsors a defined benefit pension plan for its Norwegian
employees. The Company makes annual payments to the plan, which is
administered and executed by a nationally approved insurance company.
The fund complies with the applicable Norwegian laws on pension funds,
which define investment profile standards and investment assets.
Investment assets consists of debt and equity securities. Contributions
to the plan are defined by approved actuaries using employee historical
data and experience ratings. The employee benefits paid at retirement
are based on a formula related to salary at the time of retirement and
years of service.
For the company sponsored defined benefit pension plan, net periodic
pension costs included in the statement of operations includes the
following components:
December 31,
1998 1997 1996
(in thousands)
Employee service cost earned during the year ... $ 112 $ 99 $104
Interest charges on projected benefit obligation 60 66 46
Expected return on plan assets ................. (91) (89) (99)
Recognized net acturial losses ................. 4 17
Amortization of prior service cost ............. (13) (14) (15)
Total net periodic pension cost ................ $ 72 $ 79 $ 36
The following table sets forth the funded status of the defined
benefit pension plan and the corresponding amounts recognized in the
consolidated balance sheet at December 31:
December 31,
1998 1997
(in thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year $ 1,120 $ 844
Service cost .................................. 112 99
Interest cost .................................. 60 66
Actuarial (gains) losses ........................ (161) 240
Foreign currency exchange rate (gains) losses ... (41) (114)
Benefit payments ................................ (20) (15)
Projected benefit obligation at end of the year . $ 1,070 $1,120
<PAGE>
Change in plan assets:
Fair value of at beginning of year .......... $ 1,271 $ 1,459
Actual return on plan assets ................ 117 2
Foreign currency exchange rate gains (losses) (49) (175)
Benefit payments ............................ (20) (15)
Fair value at the end of the year ........... $ 1,319 $ 1,271
Funded status of the plan (overfunded) ...... $ 249 $ 151
Unrecognized actuarial (gain) loss .......... 176 378
Unrecognized prior service cost ............. (183) (203)
Prepaid pension cost ........................ $ 242 $ 326
For purposes of the above disclosure, the following assumptions were
used:
1998 1997 1996
Discount rate ........................... 6.5 % 6.5 % 6.5 %
Assumed long-term rate of return on assets 7.5 % 7.5 % 7.5 %
Rate of compensation increase ............ 3.0 % 3.0 % 3.0 %
<PAGE>
12. Shareholders' equity
Retained Earnings
The Company is a holding company with no operations of its own.
Accordingly, the retained earnings of the Company principally represent
the accumulated earnings of its foreign subsidiaries. The ability of the
Company to pay dividends is dependent on the transfer of accumulated
earnings from these subsidiaries. The accumulated earnings available for
distribution are calculated on a local statutory accounting basis and
are determined after the establishment of any required legal result. At
December 31, 1998, earnings of the Company`s foreign subsidiaries
available for distribution totaled $400,000 (calculated on the basis of
local statutory accounting). Since it is in the Company`s intention to
indefinitely reinvest these earnings, no U.S. taxes have been provided.
Determination of the amount of unrecognized deferred tax liability on
these unremitted earnings is not practicable.
Common Stock
The Company is authorized to issue up to 24,000,000 shares of Common
Stock, $.001 par value per share, 2,785,270 of which are issued and
outstanding. Authorized and issued shares have been restated for all
periods presented to reflect a 1:1000 share split in September 1995 and
a 1:1.47368 share split in November 1998. The holders of the Common
Stock are entitled to receive dividends equally, when, as and if
declared by the Board of Directors, out of funds legally available
therefore.
Subject to the rights that may be designated by the Board of Directors
to the holders of any preferred stock, the holders of the Common Stock
have sole voting rights, one vote for each share held of record, and are
entitled upon liquidation of the Company to share ratably in the net
assets of the Company available for distribution. Shares of the
Company's Common Stock do not have cumulative voting rights and vote as
a class on all matters requiring stockholder approval. The shares of
Common Stock are not redeemable and have no preemptive or similar
rights.
In July 1996 in connection with the bridge loan private placement (see
Note 8), 147,368 shares of the Company's common stock were sold for an
aggregate amount of $50,000 or $0.34 per share.
In 1998, certain investors in the Company's bridge loans (see Note 8)
requested that the loans be repaid and that the Company repurchase
common shares issued to them. The common shares repurchased amounted to
14,730 shares at an approximate repurchase price of $0.20 per share. The
repurchase price was negotiated between the Company and the investors.
The repurchased shares have been cancelled.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of "blank check"
Preferred Stock par value $.001 per share ("Preferred Stock"). The
Preferred Stock may be issued from time to time, in one or more series,
upon authorization by the Company's Board of Directors. The Board of
Directors, without further approval of the stockholders, will be
authorized to fix the dividend rights and terms, conversion rights,
voting rights, redemption rights and terms, liquidation preferences, and
any other rights, preferences, privileges and restrictions applicable to
each series of Preferred Stock. There is no preferred stock outstanding.
<PAGE>
1998 Stock Option Plan
The Company's 1998 Stock Option Plan (the "Stock Option Plan") was
adopted by the Board of Directors and the Stockholders of the Company as
of November 11, 1998.
The Stock Option Plan provides for the granting of options to purchase
up to 250,000 shares of the Company's Common Stock that are intended to
qualify either as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the United States Internal Revenue
Code or as options that are not intended to meet the requirements of
such section ("Nonstatutory Stock Options"). Options to purchase shares
may be granted under the Stock Option Plan to persons who, in the case
of Incentive Stock Options, are employees (including officers) of the
Company, or, in the case of Nonstatutory Stock Options, are employees
including officers) or non-employee directors of the Company or
consultants to the Company.
The exercise price of all Incentive Stock Options granted under the
Stock Option Plan must be at least equal to the fair market value of
such shares on the date of the grant, or, in the case of Incentive Stock
Options granted to the holder of 10% or more of the Company's Comon
Stock, at least 110% of the fair market value of such shares on the date
of the grant. The maximum exercise period for which Incentive Stock
Options may be granted is ten years from the date of grant (five years
in the case of an individual owning more than 10% of the Company's
Common Stock). The aggregate fair market value (determined at the date
the option is granted) of shares with respect to which Incentive Stock
Options are exercisable for the first time by the holder of the option
during any calendar year shall not exceed $100,000. If such amount
exceeds $100,000, the board of Directors or the Committee may, when the
Options are exercised and the shares transferred to an employee,
designate those shares that will be treated as Incentive Stock Options
and those that will be treated as Nonstatutory Stock Options.
To date, no options under the Stock Option Plan have been granted.
13. Income taxes
The Company's Norwegian and Swedish subsidiaries are taxed at the
statutory tax rate 28% in both countries. A reconciliation between the
statutory tax rate and the effective rate shown in the consolidated
statement of operations is as follows:
December 31,
1998 1997 1996
Income tax based on statuory rate ................. 73 1 31
Losses for which no tax benefit is recorded ....... 146 76 149
Non-deductible expenses ........................... 25 38 45
Tax loss carry forward ........................... -- -- (29)
Income tax on continuing operations in statement of
operations .................................... 244 115 196
<PAGE>
Items giving rise to deferred tax assets (liabilities) were as follows:
December 31,
1998 1997
(in thousands)
Deferred tax assets:
Tax loss carry forward ...... 567 218
Inventory .............. 9 6
Other .............. 3 2
579 226
Deferred tax liabilities:
Accounts receivable ......... $ 1 $ 3
Pension .............. 68 91
Property, plant and equipment 46 44
Other .............. 41 41
156 179
Valuation allowance ......... (567) (218)
Net deferred tax liabilities $ 144 $ 171
At December 31, 1998, the Company has approximately $2,000,000 in
tax loss carryforwards. The amount has been fully reserved due to the
uncertainty as to whether such amounts will be realized.
Cash paid for taxes amounted to $137,000, $333,000 and $83,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
No tax accrual for possible repatriation of dividends from
foreign subsidiaries is provided for (see Note 12).
<PAGE>
14. Related party transactions
Amounts borrowed from related parties are as follows:
<TABLE>
<CAPTION>
December 31,
Related party Interest- Maturity Terms of repayment 1998 1997
rate date Principal Interest (in thousands)
<S> <C> <C> <C> <C> <C> <C>
NBD AS, Norway 12.0 % July 1999 at maturity year end 4 174
Bjorn Nysted 12.0 % July 1999 at maturity year end 15 22
Espen Nysted 12.0 % July 1999 at maturity year end 24 22
Olle Roy Larsen 10.0 % July 1999 at maturity year end 26 28
Goran Haggqvist 12.0 % July 1999 at maturity 535 59
Total $604 $305
</TABLE>
All interest rates are fixed.
Bjorn Nysted is President of the Company's Norwegian subsidiary,
Nortelco AS and a shareholder of the Company. NBD AS, Norway is a
shareholder of the Company and is controlled by Bj0rn Nysted. Olle Roy
Larsen and Espen Nysted are not shareholders but are relatives of Bjorn
Nysted.
Goran Haggqvist is Chairman of the Company's Board of Directors and a
shareholder of the Company. As per December 31, 1997 only the note to
Goran Haggqvist was classified as short term.
In November 1995, Bjorn Nystedt, the beneficial owner of the remaining
20 % of Nortelco, agreed to transfer his 20% interest in Nortelco to the
Company in exchange for 318 shares in the Company held by other
shareholders of the Company. The transaction has been accounted for as a
capital contribution in the amount of $445,000, the estimated fair value
of the 20% interest in Nortelco. The excess of the fair value of
$248,000 over the historical net assets was attributed to agency and
distribution rights.
In November 1995 Goran Haggqvist converted a $1,000,000 loan he made to
the Company in exchange for 2,643,700 shares of the Company's common
stock. The loan had no fixed maturity and did not provide for the
payment of interest.
In December 1998 the Company sold 100% of the common stock of Storebro
to IDG. IDG is a Norwegian corporation and related party of the Company
due to Bjorn Nysted's relation to IDG. If IDG sells Storebro prior
to December 31, 1999, a contingent sales price of up to $263,000 will be
payable by IDG. If no sale takes place no consideration will be given to
the Company. IDG was founded in June 1998 by Bjorn Nysted. Bjorn Nysted
did not own IDG at the time of the sale of Storebro, however he has an
ownership interest in the company IDG was resold to, in addition he is a
member of the Board of Directors of IDG.
<PAGE>
15. Segment information
The Company operates in one industry segment, the purchase and
distribution of electronic, electrical and audio-visual equipment. The
Company`s revenues are generated in Scandinavia, principally Sweden and
Norway. No single customer accounts for more than 10% of revenues.
16. Earnings per share
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
Numerator:
<S> <C> <C> <C>
Net income (loss) - numerator for basic and diluted $ 15 $ (113) $ (87)
loss per share, continuing operations (in thousands)
Net income (loss) - numerator for basic and diluted $ (1,000) $ (41) $ 210
loss per share, discontinued operations (in thousands)
Denominator:
Denominator for basic and diluted earnings per share - 2,797,545 2,800,000 2,707,895
weighted average shares
Basic and diluted income (loss) per share, ................ 0.00 (0.04) (0.03)
continuing operations
Basic and diluted income (loss) per share, ................ (0.36) (0.01) 0.08
discontinued operations
Basic and diluted income (loss) per share, total .......... (0.36) (0.05) 0.05
</TABLE>
17. Recent Pronouncements
The Financial Accounting Standards Board has issued Statement No.
133, "Accounting for Derivitive Instruments and Hedging Activities".
The application of this statement will be effective for years
beginning after June 15, 2000. The adoption of Statement No. 133 will
not impact the Company as it does not currently engage in derivitive
or hedging activites.
<PAGE>
Nordic Equity Partners Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
Note (Unaudited)
(in thousands)
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents .......... $ 221 $ 543
Restricted cash and cash equivalents 88 146
Trade accounts receivable .......... 3,542 3,306
Other receivables .................. 60 137
Inventories ........................2 3,334 2,722
Prepaid expenses ................... 452 499
------- -------
Total current assets ............... 7,697 7,353
------- -------
Property, plant and equipment, net . 1,091 1,107
Prepaid pension expenses ........... 240 242
Agency and distribution rights ..... 1,004 1,055
Other assets ....................... 9 23
------- -------
Total assets ....................... $10,041 $ 9,780
======= =======
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
(in thousands)
Liabilities and Shareholders' Equity
Current liabilities
<S> <C> <C>
Short-term borrowings ............................... $ 2,176 $ 2,151
Accounts payable .................................... 2,374 2,346
Witholding tax and other taxes payable .............. 977 860
Income taxes payable ................................ 248 190
Prepayments from customers .......................... 859 275
Current portions of long-term debt .................. 211 193
Related party debt .................................. 497 604
Other currrent liabilities .......................... 102 439
-------- --------
Total current liabilities ........................... 7,444 7,058
-------- --------
Long-term liabilities
Long-term debt ...................................... 475 536
Related party debt .................................. -- --
Deferred income taxes ............................... 142 144
-------- --------
Total long term liabilities ......................... 617 680
-------- --------
Total liabilities ................................... 8,061 7,738
-------- --------
Shareholders' equity
Common stock, 0.001 par value, 24,000,000 shares
authorized, 2,785,270 shares issued and outstanding,
at December 31, 1998 and March 31, 1999, respectively 3 3
Capital in excess of par value ...................... 3,330 3,330
Retained earnings (accumulated deficit) ............. (896) (887)
Other comprehensive income .......................... (457) (404)
-------- --------
Total shareholders' equity .......................... 1,980 2,042
-------- --------
Total liabilities and shareholders' equity .......... $ 10,041 $ 9,780
======== ========
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Statements of Income and Comprehensive Income
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
(Unaudited)
(in thousands except per share amounts)
<S> <C> <C>
Net sales $ 5,898 $ 5,031
Cost of goods sold ........................... 3,411 2,861
------- -------
Gross profit ................................. 2,487 2,170
Sales and marketing expenses ................. 911 586
General and administrative expenses .......... 1,394 1,346
Amortization of agency and distribution rights 54 51
------- -------
Income from operations ....................... 128 187
------- -------
Interest income .............................. 8 8
Interest expenses ............................ (88) (98)
Net foreign exchange (losses) gains .......... 5 --
------- -------
Income from continuing operations before taxes 53 97
------- -------
Current income taxes ......................... 62 70
Deferred income taxes ........................ -- --
------- -------
Total taxes .................................. 62 70
------- -------
Income (loss) from continuing operations ..... (9) 27
------- -------
Discontinued operations:
Loss from discontinued operations ............ -- (9)
------- -------
Net income (loss) ............................ $ (9) $ 18
------- -------
Other comprehensive income:
Translation adjustments ...................... (53) (91)
------- -------
Comprehensive income (loss) .................. (62) (73)
======= =======
Earnings per share:
Basic and diluted, continuing operations ..... 0.00 0.01
Basic and diluted, discontinued operations ... 0.00 0.00
------- -------
Basic and diluted, total ..................... 0.00 0.01
======= =======
</TABLE>
<PAGE>
Nordic Equity Partners Corp.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
(Unaudited)
(in thousands)
Cash flows from operations
<S> <C> <C>
Net income (loss) ..............................................$ (9) $ 18
Depreciation ................................................... 87 85
Amortization of agency and distribution rights ................. 54 51
Changes in inventories ......................................... (677) (716)
Changes in accounts receivable ................................. (314) 898
Changes in accounts payable .................................... 83 (301)
Changes in other assets and liabilities ........................ 500 72
---- ----
Cash flows from operating activities ........................... (276) 107
---- ----
Cash flows from investing activities
Purchases of equipment ......................................... (88) (289)
Proceeds from disposal of other assets ......................... 14 36
---- ----
Cash flows from investing activities ........................... (74) (253)
---- ----
Cash flows from financing activities
Proceeds fram bridge- and term loans ........................... 23 103
Payments on bridge- and term loans ............................. (63) (103)
Net change in short term borrowings ............................ 116 (182)
Proceeds from long-term debt ................................... (48) 133
Payments on long term debt ..................................... -- (46)
---- ----
Cash flows from financing activities ........................... 28 (95)
---- ----
Net changes in cash and cash equivalents ....................... (322) (241)
Cash and cash equivalents at beginning of year ................. 543 547
---- ----
Cash and cash equivalents at end of year ....................... $ 221 $ 306
---- ----
</TABLE>
<PAGE>
Notes to the Consolidated Financial Statements
Nordic Equity Partners Corp.
Note 1. General
The accompanying unaudited consolidated financial statements have been
prepared in conformity with the accounting principles stated in the
audited financial statements for the year ended December 31, 1998 and
reflect all adjustments consisting of normal recurring accruals which
are, in the opinion of the management, necessary for a fair presentation
of the financial position as of March 31, 1999 and the results of
operations for the periods presented. The operating results for the
interim periods are not necessarily
indicative of results for the full fiscal year.
Note 2. Inventory
Inventory consists of finished goods for resale.
Note 3. Share split
In October 1998 the Board of Directors of the Company declared a 1 :
1.473 stock split, resulting in increase from 1,900,625 to 2,800,000
shares outstanding. References to number of shares, except shares
authorized, and to per share information have been adjusted to reflect
the stock split on a retroactive basis.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Prospective investors may rely only on the
Information contained in this prospectus.
We have not authorized any dealer,
Salesperson or any other person to provide
Prospective investors with information
or representations different from that
Contained in this prospectus. Prospective
Investors should not rely on any 1,232,570 Shares of Common Stock
Unauthorized information. This prospectus
Is not an offer to sell any security other
than the common 1,232,570 Shares of
Common stock offered by this
Prospectus, nor does this prospectus offer
To buy or sell any securities in any NORDIC EQUITY
Jurisdiction where it is unlawful. The PARTNERS CORP.
Information in this prospectus current as
of the date of this prospectus, regardless of
the time of delivery of this prospectus or
any sale of these securities.
TABLE OF CONTENTS
Page
Prospectus Summary..............................
Risk Factors....................................
Use of Proceeds.................................
Dilution........................................
Dividend Policy.................................
Capitalization..................................
Market for Securities...........................
Selected Financial Information..................
Management's Discussion and Analysis of
Financial Condition and Results of Operations...
History of the Company..........................
Business........................................
Management......................................
Principal Stockholders..........................
Selling Stockholders............................
Plan of Distribution............................ PROSPECTUS
Certain Transactions............................
Description of Securities.......................
Shares Eligible for Future Sale.................
Underwriting....................................
Legal Matters...................................
Experts.........................................
Index to Financial Statements................F-1
Until ___________, 1999 (25 days after the date of this MASON HILL & CO., INC.
prospectus), all dealers that buy, sell or trade these
securities, whether or not participating in this offering
may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold
allotments or subscriptions.
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The estimated expenses of this Offering all of which are to be paid by
the Registrant in connection with the issuance and distribution of the
securities being registered are as follows:
SEC registration fee .......... $ 5,968.57
NASD filing fee ............... 2,532.24
NASDAQ listing and Filing fee . 10,000.00*
Printing and engraving expenses 100,000.00*
Accounting fees and expenses .. 150,000.00*
Legal fees and expenses ....... 125,000.00*
Blue sky fees and expenses .... 60,000.00*
Transfer agent fees ........... 5,000.00*
Miscellaneous expenses ........ 41,499.19*
-----------
Total .................. $ 500,000.00*
* Estimated.
Item 14. Indemnification of Directors and Officers
In general, Section 145 of the Delaware General Corporation Law
provides that persons who are officers or directors of a corporation may be
indemnified by the corporation for acts performed in their capacities as such.
The Registrant's By-Laws authorize indemnification in accordance with and to the
extent permitted by said statute.
Our Certificate of Incorporation and By-Laws provide for
indemnification to the fullest extent permitted by law.
Reference is also made to Section 8 of the Underwriting Agreement filed
as Exhibit 1.1 to this Registration Statement, pursuant to which the underwriter
has agreed to indemnify and hold harmless the company and its directors,
officers and controlling persons against certain liabilities.
Except as hereinafter set forth, there is no charter provision, by-law,
contract, arrangement or statute under which any director or officer of the
Company is indemnified in any manner against any liability which he may incur in
his capacity as such.
Article SEVENTH of our Certificate of Incorporation provides as
follows:
Directors of the corporation shall not be liable either to the
corporation or its stockholders for monetary damages for breach of
fiduciary duties unless the breach involves: (1) a director's duty of
loyalty to the corporation or its stockholders; (2) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for unlawful payments of dividends or
unlawful stock purchase or redemption by the corporation; or (4) a
transaction from which the director derived any improper personal
benefit.
Article X of our By-Laws provides as follows:
The Corporation shall indemnify to the full extent authorized
by law any person made or threatened to be made a party to an action or
proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he, his testator or intestate is or was a
director, officer or employee or agent of the Corporation or any
predecessor of the Corporation or serves or served any other enterprise
as a director, officer or employee or agent at the request of the
Corporation or any predecessor of the Corporation.
Item 15. Recent Sales of Unregistered Securities
Except as set forth below, there were no sales of unregistered
securities by the Registrant during the past three (3) years:
<PAGE>
In July 1996, the Registrant issued an aggregate of 500,000
shares of common stock to a total of 2 private investors, who paid
total gross consideration of $150,000. These transactions were exempt
from registration under the Act, under Section 4(2) and Rule 506 of
Regulation D of the Act as not involving a public offering. Mason Hill
& Co., Inc. acted as placement agent for these issuances and received
an aggregate of $19,500 in commissions (10%) and non-accountable
expense allowances (3%). The recipients of all of the foregoing
securities represented that such securities were being acquired for
investment and not with a view to the distribution thereof. In
addition, restrictive legends were placed on the certificates
evidencing such securities. In May 1998, we repurchased such securities
from the 2 private investors for a total consideration of $150,000.
In August 1996, we issued an aggregate of $950,000 principal
amount ten percent (10%) promissory notes, and 100,000 shares of common
stock to a total of 14 private investors, who paid total gross
consideration of $1,000,000. These transactions were exempt from
registration under the Act, under Section 4(2) and Rule 506 of
Regulation D of the Act as not involving a public offering. Mason Hill
& Co., Inc. acted as placement agent for these issuances and received
an aggregate of $115,000 in commissions (10%) non-accountable expenses
(1.5%). The recipients of all of the foregoing securities represented
that such securities were being acquired for investment and not with a
view to the distribution thereof. In addition, restrictive legends were
placed on the certificates evidencing such securities. In November
1998, we repaid the principal amount of, and accrued interest on, the
promissory note held by two of the investors in consideration for such
investors agreeing to return their shares of common stock to NEPC, and
we repaid the principal amount of, and accrued interest on, the
promissory note held by a third investor. In addition, between
September, 1998 and June 1999, we have repaid a portion of the
principal amount of, and accrued interest on, the promissory note held
by a fourth investor
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement*
1.2 Form of Selected Dealers Agreement*
2.1 Agreement and Plan of Merger, dated as of May 15, 1995, by and between
Sherman, Goelz and Associates and the Company**
3.1 Amended and Restated Articles of Incorporation**
3.2 By-Laws**
4.1 Form of Underwriter's Warrant*
4.2 Form of Financial Advisory and Investment Banking Agreement with the Underwriter*
4.3 Form of Common stock Certificate*
4.4 Intentionally Deleted
4.4 Form of Promissory Note used for Private Placement**
4.6 Intentionally Deleted
5.1 Opinion of Sichenzia, Ross & Friedman LLP*
10.1 Registrant's 1998 Stock Option Plan**
10.2 Employment Agreement with Bjorn Nysted**
10.3 Employment Agreement with Tore Strand**
10.4 Consulting Agreement with Goran Haggqvist**
10.5 Agreement dated May 12, 1994 by and between Universal Commodity
Trading Group, S.A. and the Registrant, as amended**
10.6 Stock Purchase Agreement dated May 16, 1994 by and between
Ovington Investments Ltd. and the Registrant, as amended**
16.1 Letter from McManus & Co.*
21.1 List of Subsidiaries of the Registrant**
23.1 Consent of Sichenzia, Ross & Friedman LLP (to be included in Exhibit 5.1)*
23.2 Consent of Ernst & Young AS
23.3 Consent of Komnaes & Huser ANS
</TABLE>
* To be filed by Amendment.
** Previously filed
All other schedules are omitted, as the required information is either
inapplicable or presented in the financial statements or related notes.
<PAGE>
Item 17. Undertakings
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(c) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering;
(4) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant 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 the registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant 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, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(5) The undersigned registrant hereby undertakes to provide
to the underwriters, at the closing, specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Oslo,
Norway, on the 28th day of July, 1999.
NORDIC EQUITY PARTNERS CORP.
By: /s/ BJORN NYSTED
Bjorn Nysted
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form S-1 has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/BJORN NYSTED President and Director July 28, 1999
Bjorn Nysted
/s/GORAN HAGGQVIST Chairman of the Board July 28, 1999
Goran Haggqvist
/s/TORE STRAND Chief Financial Officer, July 28, 1999
Tore Strand Treasurer, and Secretary
(Principal Accounting and
Financial Officer)
/s/ESPEN KOMNAES Director July 28, 1999
Espen Komnaes
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
<S> <C>
1.1 Form of Underwriting Agreement*
1.2 Form of Selected Dealers Agreement*
2.1 Agreement and Plan of Merger, dated as of May 15, 1995,
by and between Sherman, Goelz and Associates and NEPC**
3.1 Amended and Restated Articles of Incorporation**
3.2 By-Laws**
4.1 Form of Underwriter's Warrant*
4.2 Form of Financial Advisory and Investment Banking**
Agreement with the Underwriter*
4.3 Form of Common Stock Certificate*
4.4 Intentionally Deleted
4.5 Form of Promissory Note used for Private Placement**
4.6 Intentionally Deleted
5.1 Opinion of Sichenzia, Ross & Friedman LLP*
10.1 Registrant's 1998 Stock Option Plan**
10.2 Employment Agreement with Bjorn Nysted**
10.3 Employment Agreement with Tore Strand**
10.4 Consulting Agreement with Goran Haggqvist**
10.5 Agreement dated May 12, 1994 by and between Universal
Commodity Trading Group, S.A. and the Registrant, as amended**
10.6 Stock Purchase Agreement dated May 16, 1994 by and
between Ovington Investments Ltd. and the Registrant, as amended**
16.1 Letter from McManus & Co.*
21.1 List of Subsidiaries of the Registrant**
23.1 Consent of Sichenzia, Ross & Friedman LLP (to be included in
Exhibit 5.1)*
23.2 Consent of Ernst & Young AS
23.3 Consent of Komnaes & Huser ANS
</TABLE>
* To be filed by Amendment.
** Previously filed.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 15, 1999 in the Registration Statement (Form
S-1) and related prospectus of Nordic Equity Partners Corp. for the registration
of 1,232,570 shares of its Common Stock.
/s/ERNST & YOUNG AS
ERNST & YOUNG AS
Oslo, Norway
July 28, 1999
[Letterhead of Komnaes & Huser]
To the Board of Directors
Nordic Equity Partners Corp.
RE: Nordic Equity Partners Corp.
Gentlemen:
Please be advise that we consent to the use of our names and to all
references to our firm included in your registration Statement and Prospectus
filed with the Securities and Exchange Commission.
Yours sincerely
/s/ KOMNAES & HUSER ANS
