<PAGE>2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FRANKS' EXPRESS, INC.
(Name of small business issuer in its charter)
Colorado 6770 84-1170846
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
12146 East Amherst Circle
Aurora, Colorado 80014
(303) 695-9554
(Address and telephone number of principal executive offices)
12146 East Amherst Circle
Aurora, Colorado 80014
(303) 695-9554
(Address of Principal place of business or intended
principal place of business)
Charles Burton
2903 South Uinta Street
Denver, Colorado 80231
(Name, address, and telephone number of agent for service)
Copies to:
John Holt Smith, Esq.
1925 Century Park East, Suite 500
Los Angeles, California 90067
(310) 277-1250
Approximate date of proposed sale to the public as soon as practicable
after the effective date of this Registration Statement and Prospectus.
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, as amended
(the "Securities Act") or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
No registration fee is due on a Reconfirmation Offering under Rule 419.
<PAGE>3
PROSPECTUS
FRANKS' EXPRESS, INC.
(a Colorado corporation)
RECONFIRMATION OFFER
This Prospectus relates to the Reconfirmation Offer of 100,000 shares
of common stock of Franks' Express, Inc. ("Franks'") sold in Franks'
initial public offering (the "Shares" or "Common Stock"). Pursuant to
Rule 419 ("Rule 419") of the Securities Act of 1933, as amended (the
"Securities Act"), shareholders representing at least 80% of Franks'
maximum offering proceeds ($100,00) must elect to reconfirm their
investments (the "Reconfirmation Offer"). (See "INVESTORS RIGHTS AND
SUBSTANTIVE PROTECTION UNDER RULE 419"). Pursuant to Rule 419, each
purchaser of common stock in Franks' initial public offering (the "Rule
419 Investors") shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective
amendment to notify Franks' in writing that the Rule 419Investor elects
to remain an investor. If Franks' has not recorded such written
notification by the 20th business day following the post-effective
amendment, funds held in the escrow account shall be sent by first
class mail or other equally prompt means to the Rule 419 investors
within five business days. Once a Rule 419 Investor has sent his/her
Letter of Reconfirmation to Franks', such Letter of Reconfirmation may
not be
revoked.
Pursuant to an Agreement and Plan of Reorganization between Franks' and
OSO Technologies, Inc., a corporation organized and existing under the
laws of State of California ("OSO" or the "Company), dated October 31,
1999 (the "Reorganization Agreement"), OSO shall be merged into Franks'
with Franks' as the surviving entity (the "Merger") (the "Surviving
Entity").Thus on the Effective Date (as defined in the Reorganization
Agreement), all OSO shareholders shall become shareholders of Franks'
as a result of the Merger.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING AT PAGE ____.
THE FRANKS' SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Franks' has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the common shares subject
to the Reconfirmation Offer hereto. This Prospectus does not contain
all the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect
to Franks' and the Shares, reference is made to the Registration
Statement, exhibits and schedules.
Additional information, as it relates to Franks' is available upon
request from Charles Burton 12146 East Amherst Circle, Aurora, Colorado
80014; and as it relates to OSO, is available upon request from Vipin
Sahgal, President, OSO Technologies, Inc., 9000 9th Street, Rancho
Cucamonga, California 91730.
<TABLE>
No. Of Shares Offering
sold in initial Price Per Gross Proceeds Proceeds paid Net Proceeds
public offering Share to the Company out for expenses in Escrow
<S> <C> <C> <C> <C>
100,000 $1.00 $100,000 $(1)10,000 $90,000
(1)10% of the offering proceeds of Franks' initial public offering
($10,000) were released to Franks' pursuant to Rule 419. Only
$6,460 of this amount has been expended. The remaining $3,550 remains
in a separate account.
</TABLE>
The Date of this Prospectus is July 9 1999.
<PAGE>4
The following are Franks' expenses for its initial public offering(1):
Escrow Fee........................................ $ 1,000
Securities and Exchange Commission Registration.......$ 31
Legal Fees............................................$ 21,672
Accounting Fees.............................. ........$ 3,353
Printing and Engraving................................$ 2,788
Blue Sky Qualification Fees and Expenses..............$ 0
Miscellaneous.........................................$ 3,268
Transfer Agent Fee................... ................$ 0
TOTAL.................................................$ 32,081(3)
The following are OSO's estimated expenses for the reconfirmation
offering:
Securities and Exchange Commission Registration Fee.....$ 0
Legal Fees........................................... .$15,000(2)(3)
Accounting Fees........................................$ 20,000(2)(3)
Printing and Engraving...................... ...........$ 1,000(2)
Miscellaneous...........................................$ 1,500(2)
Transfer Agent Fees......................... ...........$ 750(2)
TOTAL....................................................$33,250
(1) Have been/will be paid by Franks'
(2) Have been/will be paid by OSO
(3) This amount was paid/will be paid in part by funds received in
OSO's private placement of May 1999.
<PAGE>5
TABLE OF CONTENTS
Page #
PROSPECTUS SUMMARY 6
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION
UNDER RULE 419 8
RISK FACTORS 10
MERGER 17
USE OF PROCEEDS 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 19
BUSINESS 20
MANAGEMENT 29
DESCRIPTION OF SECURITIES 33
PRINCIPAL SHAREHOLDERS 36
CERTAIN TRANSACTIONS 38
INFORMATION CONCERNING FRANKS' 38
LEGAL MATTERS 38
EXPERTS 39
LITIGATION 39
<PAGE>6
PROSPECTUS SUMMARY
The following is a summary of certain information contained in
this Prospectus and is qualified by the more detailed information and
consolidatedfinancial statements (including notes thereto) appearing
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under the heading "Risk Factors". Unless
otherwise indicated, the capital structure, the number of shares
outstanding and the per share data and information in this Prospectus
have been adjusted to give effect to the Merger described herein.
Franks' Express Inc.
Franks' Express Inc. ("Franks'") was incorporated in the State of
Colorado on May 17, 1991 for the purpose of engaging in the retail food
service business. The Company closed its restaurants and a retail ice
cream and candy shop in November 1993 and has not conducted any
material business since that time. Franks' has no operating assets
and has not engaged in any material business activities since November
1993, other than to seek out and investigate other businesses for
potential merger or acquisition.
On May 15, 1998, Franks' commenced a "blank check" offering
pursuant to Rule 419 ("Rule 419") promulgated under the Securities Act,
which generated $100,000 in gross proceeds from approximately 32
different investors (the "Rule 419 Investors"). Pursuant to Rule 419,
all of the gross proceeds from that offering, less 10%, and the Franks'
Shares purchased by the Rule 419 Investors, are being held in escrow
pending (i) distribution of a prospectus to each of them describing any
prospective business acquisition by Franks' and (ii) the subsequent
confirmation ers of at least 80% of the shares owned by the Rule 419
Investors that they elect to remain investors. (See "INVESTORS RIGHTS
AND SUBSTANTIVE PROTECTION UNDER RULE 419").
The executive offices of Franks' are located at 12146 East Amherst
Circle, Aurora, Colorado 80014.The telephone number is (303) 695-9554.
OSO Technologies, Inc.
OSO Technologies, Inc., a development stage company ("OSO"), was
incorporated in the State of California on November 27, 1996 under the
name Water & Ice Systems, Inc. On April 1, 1997, it commenced research
and development activities. On Frbruary 11, 1998, Water & Ice Systems,
Inc. changed its name to OSO Technologies. Since April 1998, OSO has
developed two products which are presently ready for marketing: a
bottle fed drinking water dispenser and a plumbed-in point of use, each
with a built in icemaker. (See "BUSINESS - OSO").
The executive offices of OSO are located at 9000 9th Street, Rancho
Cucamonga, California 91730. OSO's phone number is (909) 466-1177.
Reconfirmation Offering Conducted in Compliance with Rule 419
Franks' is a blank check company and, consequently, this
Reconfirmation Offering is being conducted in compliance with the
Commission's Rule 419. The Rule 419 Investors have certain rights and
will receive the substantive protection provided by the rule. To that
end, the securities purchased by investors and the funds received in
Franks'initial public offering are deposited and held in an escrow
account established pursuant to Rule 419 (the "Escrow Account"), and
shall remain in the Escrow Account until an acquisition meeting
specific criteria is completed (hereinafter the "Deposited Funds" and
"Deposited Securities".) Before the acquisition can be completed and
before the Deposited Funds and Deposited Securities can be released to
Franks' and the Rule 419 Investors, respectively, Franks' is required
to update the Registration Statement with a post-effective amendment,
and within five business days after the effective date thereof,
Franks' is required to furnish the Rule 419 Investors with the
prospectus produced thereby containing the terms of a reconfirmation
offer and information regarding the proposed acquisition candidate and
its business, including audited financial statements. According to
Rule 419, investors must have no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment
to decide to reconfirm their investment and remain an investor or,
alternately, require the return of their investment, minus certain
deductions. Each Rule 419 Investors shall have 20 business days from
the date of this prospectus to reconfirm his/her investment in Franks'.
Any Rule 419 Investor not making any decision within said 20 business
day period will automatically have his/her investment funds returned.
<PAGE>7
The rule further provides that if Franks' does not complete an
acquisition meeting the specified criteria within 18 months of the
effective date of its initial public offering, all of the Deposited
Funds in the Escrow Account must be returned to Rule 419 Investors.
(See "Investors' Rights and Substantive Protection Under Rule 419 - -
Reconfirmation Offering.")
Reconfirmation Offer
This prospectus relates to a reconfirmation by Franks'
shareholders of their investments in Franks'. Pursuant to Rule 419,
the proceeds of Franks' initial public offering and the securities
purchased pursuant thereto, both of which are currently held in the
Escrow Account, will not be released from the Escrow Account until
(1)Franks' executes an agreement for an acquisition or merger meeting
certain criteria; (2) a post-effective amendment which includes the
terms of the reconfirmation offer, as well as information about the
Merger Agreement and audited financial statements is filed; and (3)
Franks' conducts a reconfirmation offer pursuant to which shareholders
representing 80% of Franks' initial public offering proceeds elect to
reconfirm their investments. This 80% shall be computed twenty (20)
business days after the effective date of this post-effective
amendment. Once an investor has sent his/her Letter of Reconfirmation
to Franks', such Letter of Reconfirmation may not be revoked. In the
event the Rule 419 Investors do not vote to reconfirm the offering, the
Deposited Funds shall be returned to investors on a pro rata basis.
Such funds will be returned within 5 business days of failure to
approve the Merger.
Terms of the Reorganization Agreement
The terms of the Merger are set forth in the Reorganization
Agreement dated May 7, 1999 and consummation of the Merger is
conditioned upon, among other things, the acceptance of the
Reconfirmation Offer by holders of at least 80% of the shares owned by
the Rule 419 Investors. (See "PROSPECTUS SUMMARY - Reconfirmation
Offer"). As a result of the consummation of the Merger, OSO will be
merged into Franks', with Franks' as the Surviving Entity. Upon
consummation of the Merger, (i) each shareholder who holds shares of
Franks' common stock registered pursuant to a registration statement
declared effective by the Securities and Exchange Commission on May 15,
1998 ("Registered Common Stock") prior to the Merger and who accepts
the Reconfirmation Offer shall continue to hold his or her share
certificate(s) representing Franks' Registered Common Stock; and (ii)
each stockholder of Registered Common Stock who rejects the
Reconfirmation Offer will be paid his or her pro rata share of the
amount in the Escrow Account of approximately $1.00 per share. In the
event the escrowed funds exceed $90,000 at the consummation of the
Merger, those funds shall be distributed on a pro rata basis to those
Franks' shareholders who reject the reconfirmation offering. At the
Effective Date of the Merger, 100% of the issued and outstanding shares
of OSO shall be canceled. Franks' shall issue 9,900,000 shares of
Franks' common stock to OSO shareholders after the Effective Date,
current Franks' shareholders shall own 1,100,000shares, representing
10% of the Surviving Entity. (See "MERGER"- Terms and Conditions of
Merger, and "Certain Transactions")
Recent Developments
The Franks' Board of Directors believes that the Merger represents
a good investment opportunity for Franks' shareholders and recommends
that the Rule 419 Investors elect to accept the Reconfirmation
Offering. Franks' Board of Directors recommends that Rule 419
Investors, when determining whether or not to reconfirm their
investments, also consider, OSO's working capital and sales revenues
(See "MERGER"- Terms and Conditions of Merger).
The Merger Agreement was approved by the directors and
shareholders of OSO by written consent dated June 10, 1999. The
Merger Agreement was confirmed by the unanimous consent of the
directors of Franks' on June 15, 1999.
Accounting Treatment
Although Franks' is the legal surviving corporation, for
accounting purposes, the Merger is treated as a purchase business
acquisition of Franks' by OSO (a reverse acquisition) and a
recapitalization of OSO. OSO is the acquirer for accounting purposes
<PAGE>8
because the former OSO stockholders received the larger portion of the
common stockholder interests and voting rights retained by the former
Franks' stockholders. Because OSO is the acquirer for accounting
purposes under APB Opinion No. 16, the Surviving Entity shall adopt
OSO's fiscal year end, December 31.
High Risk Factors
Investments in the securities of Franks' are highly speculative,
involve a high degree of risk, and only persons who can afford the
loss of their entire investment should vote to reconfirm their
investments. (See "RISK FACTORS.")
Use of Proceeds
In its initial public offering, Franks' generated $100,000 in
proceeds. Ten percent or, ($10,000), of the Deposited Funds was
released to Franks' prior to this Reconfirmation Offering. (See
"Investors' Rights and Substantive Protection Under Rule 419 -
Reconfirmation Offering.") Franks' intends to use this sum for expenses
incurred in the offering, including, but not limited to, accounting
expenses, transfer agent fees, printing fees and certificates of good
standing. The remaining $90,000 will remain in the non-interest-
bearing escrow account pursuant to Rule 419 of Regulation C. No
portion of the Deposited Funds has been or will be expended to merge
OSO into Franks'. The Deposited Funds will be transferred to Franks'
pursuant to the Merger Agreement if and when a business combination is
effected. (See "USE OF PROCEEDS.")
Certain Income Tax Consequences
In management's opinion, the Merger is intended to qualify as a
"tax-free reorganization" for purposes of the United States federal
income tax so that stockholders of Franks' and OSO subject to United
States tax will not recognize gain or loss from the transaction. In
addition, the transaction is not intended to result in the recognition
of gain or loss to either OSO or Franks' in the respective
jurisdictions where each of them is subject to taxation. NO OPINION OF
COUNSEL NOR A RULING FROM THE INTERNAL REVENUE SERVICE HAS BEEN
OBTAINED IN REFERENCE TO THE FOREGOING. THE FOREGOING IS FOR GENERAL
INFORMATION ONLY AND FRANKS' STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TRANSACTION
TO THEM.
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
Deposit of Offering Proceeds and Securities
Rule 419 requires that in a blank check offering, offering
proceeds, after deduction for underwriting commissions, underwriting
expenses and dealer allowances, and the securities purchased by
investors in such an offering, be deposited into an escrow or trust
account governed by an agreement which contains certain terms and
provisions specified by the rule. Under Rule 419, the Deposited Funds
and Deposited Securities will be released to Franks' and to the 419
Investors, respectively, only after Franks' has met the following three
basic conditions. First, Franks' must execute an agreement(s) for an
acquisition or merger meeting certain prescribed criteria. Second,
Franks' must file a post-effective amendment to its registration
statement which includes the terms of a reconfirmation offer that must
contain conditions prescribed by the rule. The post-effective
amendment must also contain information regarding the acquisition or
merger candidate(s)and its business(es), including audited financial
statements. Third, Franks' must conduct the reconfirmation offer and
satisfy all of the prescribed conditions, including the condition that
a certain minimum number of investors must elect to remain investors.
After Franks' submits a signed representation to the escrow agent that
the requirements of Rule 419 have been met, and after the acquisition
or merger is consummated, the escrow agent can release the Deposited
Funds and Deposited Securities.
Accordingly , Franks' has entered into an escrow agreement which
provides that:
(1) The proceeds are to be deposited into the Escrow Account
maintained by the Escrow Agent promptly upon receipt. Rule 419 permits
10% of the Deposited Funds to be released to Franks' prior to the
<PAGE>8
reconfirmation offering. The Deposited Funds and any dividends or
interest thereon, if any, are to be held for the sole benefit of the
investors and can only be invested in bank deposits, in money market
mutual funds or federal government securities or securities for which
the principal or interest is guaranteed by the federal government.
(2) All securities issued in connection with the offering and any
other securities issued with respect to such securities, including
securities issued with respect to stock splits, stock dividends or
similar rights are to be deposited directly into the Escrow Account
promptly upon issuance. The identity of the investors are to be
included on the stock certificates or other documents evidencing the
Deposited Securities. The Deposited Securities held in the Escrow
Account are to remain as issued and are to be held for the sole benefit
of the investors' who retain the voting rights, if any, with respect to
the Deposited Securities held in their names. The Deposited Securities
held in the Escrow Account may not be transferred, disposed of nor any
interest created therein other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986 or Table 1 of the Employee
Retirement Income Security Act.
Prescribed Merger Criteria
Rule 419 requires that before the Deposited Funds and the
Deposited Securities can be released, Franks' must first execute an
agreement to acquire an acquisition candidate(s) or merge with a merger
candidate(s) meeting certain specified criteria. The agreement(s) must
provide for the acquisition(s), merger(s) of a business(es) or assets
for which the fair value of the business represents at least 80% of the
maximum offering proceeds. The agreement(s) must include, as a
condition precedent to their consummation, a requirement that the
number of investors representing 80% of the maximum offering proceeds
must elect to reconfirm their investment. For purposes of the
offering, the fair value of the business(es) or assets to be acquired
must be at least $80,000 (80% of $100,000). Based on its audited
financial statements, OSO has a fair value in excess of $80,000. (See
"OSO Technologies, Inc. Financial Statements.")
Post-Effective Amendment
Once the agreement(s) governing the acquisition(s), merger(s) of a
business(es) meeting the above criteria has been executed, Rule 419
requires Franks' to update the registration statement with a post-
effective amendment. The post-effective amendment must contain
information about the proposed acquisition candidate(s) and its
business(es), including audited financial statements, the results of
this Reconfirmation Offering and the use of the funds disbursed from
the Escrow Account. The post-effective amendment must also include the
terms of the reconfirmation offer mandated by Rule 419. The
reconfirmation offer must include certain prescribed conditions which
must be satisfied before the Deposited Funds and Deposited Securities
can be released from the Escrow Account.
Reconfirmation Offering
The reconfirmation offer must commence after the effective date of
the post-effective amendment. Pursuant to Rule 419, the terms of the
reconfirmation offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will
be sent to each Rule 419 Investor whose securities are held in the
Escrow Account within 5 business days after the effective date of the
post-effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment
to notify Franks' in writing that the investor elects to remain an Rule
419 Investor. The reconfirmations will be tabulated 20 business days
from the Effective Date. Rule 419 Investors who submit their Letter of
Reconfirmation to Franks' shall not have the right to revoke such
letter.
(3) If Franks' does not receive written notification from an
investor within 20 business days following the Effective Date, the pro
rata portion of the Deposited Funds (and any related interest or
<PAGE>10
dividends) held in the Escrow Account on such Rule 419 Investor's
behalf will be returned to the investor within 5 business days by first
class mail or other equally prompt means.
(4) The acquisition(s) will be consummated only if a minimum
number of Rule 419 Investors representing 80% of the maximum offering
proceeds equaling $80,000 elect to reconfirm their investment.
(5) If a consummated acquisition has not occurred by November 15,
1999 (18 months from the date of original prospectus), the Deposited
Funds held in the Escrow Account shall be returned to all Rule 419
Investors on a pro rata basis within 5 business days by first class
mail or other equally prompt means.
Release of Deposited Securities and Deposited Funds
The Deposited Funds and Deposited Securities may be released to
Franks' and the Rule 419 Investors, respectively, after:
(1) The Escrow Agent has received a signed representation from
Franks' and any other evidence acceptable by the Escrow Agent that:
(a) Franks' has executed an agreement for the acquisition of
or merger with a target business for which the fair market value of the
business represents at least 80% of the maximum offering proceeds and
has filed the required post-effective amendment;
(b) The post-effective amendment has been declared
effective, the mandated reconfirmation offer having the conditions
prescribed by Rule 419 has been completed and that Franks' has
satisfied all of the prescribed conditions of the reconfirmation offer.
(2) The acquisition of, or merger with, a business (including
shareholder approval of the merger or acquisition) with the fair value
of at least 80% of the maximum proceeds.
RISK FACTORS
Investment in the securities offered hereby involves a high degree
of risk. Prospective investors should carefully consider, together
with the other information appearing in this Prospectus, the following
factors, among others, in evaluating OSO and its business before or
reconfirming their investments in Franks'.
Lack of Diversification
If this Merger is consummated, Franks' will be involved in no
other business combination. This lack of diversification may subject
Franks' shareholders to economic fluctuations within those industries
in which OSO conducts business.
OSO's present business is the production and sale of two products: a
bottle fed water dispenser capable of dispensing hot and cold water
with an integrated ice maker, and a plumbed-in water dispenser capable
of dispensing hot and cold water with an integrated icemaker (the
"Products"). To date, OSO's operations have been limited to the
bottled drinking water and drinking water conditioning industries,
which have well established markets. Failure of acceptance of the
Products or slow or marginal acceptance of the Products would have a
material adverse effect on OSO's business, operating results and
financial condition.
Reliance on Key Existing and Future Personnel
OSO's success will depend to a large degree upon the efforts and
abilities of its officers and key management employees, Vipin Sahgal,
President and Chief Executive Officer; Frank Lopez, Vice President-
Operations; Thomas Lucas, Vice President-Manufacturing; David
Hutchinson, Director of National Sales and Service; and Manoj
Mukherjee, Director of International Sales. The loss of the services
of one or more of these key employees could have a material adverse
effect on OSO's business prospects and potential earning capacity. OSO
has entered into employment agreements with each of these employees.
OSO has no key person life insurance on any of said employees. OSO
will need to continue to recruit and retain additional members of
<PAGE>11
senior management to manage anticipated growth, but there can be no
assurance that OSO will be able to recruit or retain additional members
of senior management on terms suitable to OSO. (See "Management -
Directors, Executive Officers and Other Key Employees.")
Limited Revenues -- Early Stage of Development
OSO has to date recognized no revenues through the sale of the
Products. OSO has to date incurred significant losses, expects to
incur substantial additional losses and has substantial negative cash
flow. At March 31, 1999, OSO had an accumulated deficit of $1.6
million. No significant portion of OSO's research and development
activities is currently funded by a third party. In addition, the OSO
may agree to pay royalties to third parties in the normal course of its
business as it develops or acquires technology. There can be no
assurance that the Products will be sold in sufficient number to be
commercially successful or that OSO will generate significant revenues
or achieve profitable operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
OSO has developed technology for a new drinking water dispenser capable
of dispensing hot and cold water with integrated icemaker into an
otherwise standard dispenser for the 5 gallon bottle and plumbed-in
markets. OSO's success initially depends largely on the acceptance and
purchase by small and medium bottled water and office coffee service
companies. OSO is at an early stage of manufacture and is subject to
all of the risks inherent in the establishment of a new manufacturing
business enterprise. To address these risks OSO must, among other
things, continue to attract, retain and motivate qualified personnel,
introducing products based on OSO's technology, broaden marketing of
its technology and respond to competitive developments.
Since the commencement of operations in November 1996, OSO has engaged
almost exclusively in the development of its proprietary technology,
principally integrating an icemaker in a conventional 5 gallon water
dispenser and plumbed-in water dispenser. The OSO's success under its
marketing strategy depends initially on acceptance and purchase of the
Products by small and medium water bottled water and office coffee
service companies. In that the 5 gallon dispenser causes an increase
in usage of bottled water by as much as 30% over that of other bottled-
fed water dispensers, management believes that the purchase by
anticipated customers of OSO's water dispenser will grant such
companies a competitive advantage in sales to water companies by reason
of increased water usage. Success in sales by small water companies
would, management believes, compel larger companies to recognize the
economic advantage of purchasing the Products and leasing it to their
customers.
Dependence on Fiscal 1999 Product Introductions
OSO's business is critically dependent on the successful introduction
and sale during 1999 of the Products. OSO expects that it will ship
to water companies during fiscal 1999 approximately 52,000 units of
the Products. There can be no assurance that shipments of the Products
during the remainder of this year will occur in a timely manner or at
all. Although initial consumer demand for the limited quantity of the
test Products shipped to water companies has been satisfactory, there
can be no assurance that this will produce sufficient sales to achieve
profitability in fiscal 1999.
A number of factors could adversely affect sales during 1999 and
beyond. These factors include, but are not limited to, sufficient
production at acceptable yields and prices, and the introduction of
competitive products or technologies. OSO has not licensed any other
company to manufacture and sell OSO's proprietary Products and will be
the sole manufacturer of the Product for the foreseeable future. Due
to lead times in manufacturing complex devices, the quantity of
Products which can be manufactured for sale in 1999 is limited. Due to
the sophistication and complexity of the Products and the desire to
introduce high quality products to the market, OSO has experienced
delays in the development of the Products. Even after market
introduction of a product, technical or quality problems may develop
that could inhibit market acceptance of the Products. If OSO does not
manufacture, distribute and market sufficient quantities of the
Products, or if technical problems with this product arise, OSO would
be adversely affected.
<PAGE>12
Acceptance of Company's Technology; Creation of New Market
OSO's success depends both upon the adoption of OSO's new technology as
a broadly accepted standard for water dispensers and upon the
acceptance of existing markets for the Products.
To establish OSO's technology as a broadly accepted format, at a
minimum, OSO must successfully manufacture and market the Products in
volume in advance of the availability of additional manufacturing lines
for the Products and the additional new products at OSO's plant. There
can be no assurance that OSO's technology will be broadly adopted by
water companies. Unit sales of the Products must be substantially
higher than those expected in 1999 before OSO's technology can become a
broadly accepted industry standard. There can be no assurance that
OSO's technology will be adopted widely as an industry standard.
OSO believes that unless the Products offer greatly enhanced qualities
such as clean ice and greater water use, it will not compete
successfully with lower priced water dispensers. Current versions of
dispensers sell for approximately $220 to $450 each, while the Products
marketed by OSO are being offered initially $295 to $485. The success
of the Products also depends on a number of other factors, such as the
availability of high quality components, broad and effective
distribution, product reliability and product support. There can be no
assurance that the Products will be accepted in the market or marketed
successfully.
Technological Change
The market for water dispensers is characterized by stability and user
established preferences. Even if the first versions of the Products
gain initial market acceptance, OSO's success will depend, among other
things, upon the ability of OSO to achieve and maintain technological
leadership in a line of new products and to remain competitive in terms
of price and product performance.
To achieve and maintain technological leadership, OSO must continue to
develop its proprietary technologies. In addition, OSO believes that
over time OSO must achieve significant reductions in the retail price
in order to market the Products successfully. Reducing the price of the
Products depends upon both incremental improvements in manufacturing
efficiency by OSO and innovations that reduce the cost of the Products'
components.
OSO's pursuit of these technical improvements and other technological
goals will require substantial expenditures, and there can be no
assurance that any of these technical improvements will be developed or
that OSO will achieve or maintain technological leadership. Any
material failure of OSO to develop or incorporate any planned
improvement would adversely affect the widespread adoption of OSO's
Products and the introduction and sale of future products based on
OSO's technology. In addition, any significant delay in the
introduction of products based on OSO's icemaker technology
substantially increases the likelihood that competitive icemaker
technologies will become broadly accepted. There can be no assurance
that products or technologies developed by others will not render OSO's
technology and the products based on the OSO's technology less
advantageous. See "Business - Technology and Product Architecture" and
"-Competition."
Dependence on Key Personnel
OSO's future success depends in large part on the continued service of
its key technical marketing, sales and management personnel. Given
OSO's early stage of development, OSO is dependent on its ability to
identify, hire, train, retain and motivate high quality personnel,
especially high skilled engineers involved in the ongoing hardware
development required to refine the existing Products and to introduce
enhancements for future applications. OSO is particularly dependent on
the skills and contributions of several key individuals, any one of
whom may voluntarily terminate employment with OSO at any time and
whose departure would have a material adverse effect on OSO's business.
OSO does not have "key person" life insurance policies on any of its
employees. While OSO has employment agreements with all key personnel
and each agreement incorporates stock option incentives, there can be
no assurance that OSO's current employees will continue to work for OSO
<PAGE>13
or that OSO will be able to retain its current employees or obtain the
services of additional personnel necessary for OSO's growth. See
"Business - Employee", "Management" and "Executive Compensation -
Employment Contracts."
Proprietary Rights and Licenses
OSO's success will depend in part on its ability to obtain and enforce
intellectual property protection for its technology in both the United
States and other countries. OSO has filed a patent application
containing 27 claims for a water and ice dispensing apparatus with the
United States Patent and Trademark Office ("U.S. Patent Office"). OSO
intends to file additional applications as it deems appropriate for
patents covering its technology in the industrial countries of the
world. The process of obtaining patent protection is expensive and
absorbs management and engineering time. No assurance can be given
that a patent will issue from this application or that, if a patent
does issue, the claims allowed will be sufficiently broad to protect
the key aspects of OSO's technology or that the patent laws will
provide effective legal or injunctive remedies to stop any infringement
of OSO's patents. In addition, no assurance can be given that any
patent issued to OSO will not be challenged, invalidated or
circumvented, that the rights granted under patents will provide
competitive advantages to OSO or that OSO's competitors will not
independently develop or patent technologies that are substantially
equivalent or superior to OSO's technology.
OSO also relies on trade secrets and proprietary know-how which it
seeks and will in the future seek to protect, in part, by
confidentiality agreements with its strategic partners, employees,
consultants, vendors and licensees. OSO expects that third parties
may attempt to reverse engineer its technology without authorization
and there can be no assurance that OSO's confidentiality agreements
will not be breached or that OSO would have adequate remedies for any
breach. There can be no assurance that OSO's trade secrets will not
otherwise become known or be independently discovered by competitors.
OSO may in the future license its name and logo for use in connection
with authorized products. There can be no assurance that OSO will
obtain sufficient trademark protection for these marks, that these
marks will not be duplicated without authorization or that OSO will
have adequate remedies for trademark infringement in any country.
Management of Growth
OSO expects during the second half of 1999 to experience a period of
significant growth in the number of its employees. OSO plans to
increase significantly the number of employees during the remainder of
the 1999 fiscal year. This growth is expected primarily in research
and development, sales and marketing, and administration and
accounting. This growth will place a substantial strain on OSO's
management, operational, financial and accounting resources. OSO's
need to manage growth effectively will also require it to continue to
implement and improve its operational, financial and management
information systems and to train, motivate and manage its employees.
OSO is moving from a phase in its growth focused on the primary goal of
completing the research and development and testing necessary to permit
introduction during fiscal 1999 of the Products to a broader range of
goals, including continued additions and improvements to its
technology. OSO's failure to manage growth in multiple areas of its
business effectively would have a material adverse effect on OSO's
results of operations and its ability to execute on its business
strategy.
Future Capital Needs; Uncertainty of Additional Funding
OSO anticipates that its existing capital resources, including the net
proceeds of this offering will not be adequate to satisfy its capital
requirements for the next 18 months. OSO expects to incur substantial
additional losses and will require additional capital in the future.
OSO's capital requirements will depend on many factors including, but
not limited to, the rate at which OSO's products are sold, the market
acceptance of such products, the levels of promotion and advertising
required to launch such products and attain a competitive position in
the marketplace, the extent to which OSO invests in technology and the
response of competitors to the products based on OSO's technology. To
the extent that the funds generated by this offering, together with
existing resources, are insufficient to fund OSO's activities, OSO will
<PAGE>14
need to raise additional funds through public or private financings.
OSO may also seek additional financing if market conditions are
favorable. If additional funds are raised through the issuance of
equity securities, the percentage ownership of then current
stockholders of OSO will be reduced and such equity securities may have
rights, preferences or privileges senior to those of the holders of
OSO's common stock. No assurance can be given that additional
financing will be available or that, if available, it will be available
on terms favorable to OSO or its stockholders. If adequate funds are
not available to satisfy capital requirements, OSO may be required to
curtail its operations significantly or to obtain funds through
arrangements with strategic partners or others that may require OSO to
relinquish material rights to certain of its technologies or potential
markets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
Control by Existing Stockholders
OSO's executive officers and directors and entities affiliated with
them will beneficially own approximately 26.3% of Franks' outstanding
shares of common stock after this offering. Accordingly, these
stockholders will be able to elect a majority of the Franks' directors
and to determine the outcome of corporate actions requiring stockholder
approval, regardless of how other stockholders of Franks' may vote.
See "Description of Capital Stock."
Shares Eligible for Future Sale
Sales of substantial amounts of the Franks' common stock in the public
market following the offering made hereby and after the "lock-up"
agreements with certain large block existing shareholders could have an
adverse effect on the trading price of the Franks' common stock. Upon
completion of this offering, Franks' will have approximately 11,000,000
shares of common stock outstanding, assuming no exercise of options
outstanding. Of these shares, 350,000 shares are available for sale in
the public market as of the date of this prospectus. On Dec__, 1999,
approximately 750,000 additional shares will become publicly tradeable
upon the expiration of the lock-up agreement with certain large block
shareholders, subject to certain volume and other resale restrictions
under Rule 144 under the 1933 Act. See "Underwriters". As of April
30, 1999 there were approximately 600,000 shares subject to outstanding
options, all of which were then issuable upon exercise thereof. These
options are also subject lock-up agreements. Any substantial amount of
sales following the expiration or earlier termination of the lock-up
agreements could have an adverse effect on the trading price of Franks'
common stock and could affect the ability of Franks' to raise
additional capital in the capital markets at a time and price favorable
to Franks'. See "Shares Eligible for Future Sale."
Marketing Strategy
OSO is pursuing an aggressive growth strategy, the success of which
will depend in large part upon its ability to enter existing segments
of the water industry. Even if OSO is successful in enhancing
profitability after selling to anticipated customers, there can be no
assurance as to how long a period of time accomplishing such
profitability will take or the levels of future profitability that can
be achieved. Introduction of new products involves a number of risks,
including any unanticipated market and economical conditions. There can
be no assurance that OSO will be able to overcome such conditions.
Successful achievement of OSO's marketing plans will depend in part
upon its ability to: (i) select and compete successfully in new
markets; (ii) hire, train and retain qualified sales personnel; (iii)
expand manufacturing facilities. OSO may incur significant start-up
costs in connection with entering new markets. There can be no
assurance that OSO will achieve its planned marketing goals on a timely
basis, if at all, or manage its growth effectively. Failure to expand
or manage its growth could have a material adverse effect on OSO's
financial condition or results of operations. See "Business -
Marketing Strategy," and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations".
<PAGE>15
Control of Franks'
After consummation of the Merger, the current shareholders of OSO
will control the vote of 90% of Franks' issued and outstanding common
shares. As a result, the former OSO shareholders will have the ability
to control the outcome of substantially all issues submitted to Franks'
shareholders. (See "PRINCIPAL SHAREHOLDERS" and "MERGER- Terms and
Conditions of the Reorganization Agreement")
Dilution
The holders of the restricted common shares of Franks' have
acquired their interest in Franks' at an average cost per share which
was significantly less than that which the public investors paid for
their securities. Consequently, the public investors will bear the
majority of the risk of any loss that may be incurred in Franks'
operations. A confirmation of the investment in the shares of Franks'
common stock will result in an immediate substantial dilution of the
investor's investment.
Lack of Public Market for Securities/Probable Inability to Resell
Securities
Prior to the closing of the Merger, there will have been no public
trading market for Franks' common stock. Given the small size of the
initial public offering, the relatively minimal public float, and lack
of participation of a professional underwriter, there is only a very
limited likelihood of any active and liquid public trading market
developing for the shares. If such a market does develop, the price of
Franks' common stock may be volatile. Thus, investors run the risk
that they will never be able to sell their Shares. In any event, there
are additional state securities laws preventing resale transactions.
No potential market makers have been solicited by Franks'. There can
be no assurances that any broker will ever agree to make a market in
Franks' securities. (See "DESCRIPTION OF SECURITIES")
Need for Additional Financing
In order to achieve and maintain OSO's planned growth rate, OSO
believes that it may have to obtain bank financing or sell additional
debt or equity (or hybrid) securities in public and private financing.
In addition, OSO may incur debt or issue equity securities in order to
finance acquisitions. Any such financing could dilute the interests of
current shareholders in this offering. There can be no assurance that
any such additional financing will be available or, if it is available,
that it will be in such amounts and on such terms as will be
satisfactory to OSO.
Competition
The market for drinking water water dispensers is dominated by three
large well financed companies: Oasis Corporation, Sunroc Corporation,
and Cordley/Temprite, a division of Elkay Manufacturing Company. The
market is highly competitive. These manufacturers and distributors of
water dispensers have well established brand names, deep market
penetration and greater financial and other resources than OSO.
Additionally, they currently have a greater selection of products which
could be a competitive disadvantage in securing certain customers.
While OSO believes it is well positioned to deliver a technologically
advanced product geared to grow prospective customer's revenue through
increased water consumption, there can be no assurance that any such
advantage will materialize. The bottled drinking water industry is
dominated by several large companies such as The Perrier Group,
McKesson Water Products, and Suntory Water Group, which have well
established markets with anticipated growth of 5% or more. Other
competitors, some of which may have greater financial and other
resources than OSO, may also enter the market in which OSO is intending
to establish its Products, as well as those into which OSO intends to
expand.
No Dividends and None Anticipated
Franks' has not paid any dividends and does not contemplate or
anticipate paying any dividends on its common stock in the foreseeable
future.
<PAGE>16
Arbitrary Offering Price
The price at which the Franks' Shares had been offered to the
public in Franks' initial public offering had been arbitrarily
determined by Franks'. There is no relationship between the initial
offering price of the Shares to Franks' assets, book value, net worth
or other economic or recognized criteria of value. In no event should
the offering price be regarded as an indication of any future market
price of the securities.
Possible Future Rule 144 Sales
There are currently 1,000,000 Franks' restricted common shares
issued and outstanding. These shares are "restricted securities" as
defined by Rule 144 of the Securities Act. Under Rule 144, restricted
securities which have been beneficially owned for at least one year may
be sold in brokers' transactions or directly to market makers, subject
to certain quantity and other limitations. Generally, under Rule 144 a
person may sell, in any three-month period, an amount equal to the
greater of (i) the average weekly trading volume, if any, of the common
stock during the four calendar weeks preceding the sale or (ii) 1% of
the company's outstanding common stock. After the Merger, (See
"Merger") Franks' will have outstanding 11,000,000 shares of common
stock, including 750,000 shares held by certain large block
shareholders who are be subject to a lockup agreement for a period of 6
months after the Merger, but who are then free of the restriction on
resell in the Lockup Agreements (See "MERGER-Terms and Conditions of
Merger Agreement"). Shares beneficially owned for two years by non-
affiliates of the Company may be sold without regard to these quantity
or other limitations. As of the date hereof, 350,000 shares may be
sold pursuant to Rule 144. The possibility of sales of substantial
amounts of such stock could have a depressive effect on the price of
the common stock in any market which may develop.
Conflicts of Interest
Franks' officers and directors are engaged in various business
ventures. Thus, there may be conflicts of interest in the allocation
of time between Franks' business and such other businesses. These
activities may conflict with the interests of Franks'. As a result of
their other interests, they may personally benefit from decisions or
recommendations made with respect to the business of Franks'. Whereas
conflicts may arise, management is aware of its fiduciary duty to
Franks' and will act in good faith and endeavor on an equitable basis
to resolve any conflicts which may arise, on an equitable basis.
Caution to Public Investors
For all of the aforesaid reasons, and others set forth herein,
these securities involve a high and substantial degree of risk. Any
public investor considering reconfirming his/her investment in Franks'
should be aware of these and other factors as set forth in this
Prospectus. No public investor considering reconfirming his/her
investment in Franks' should do so if he/she anticipates a need for
immediate return on his investment. Reconfirmation should only be made
by investors who can afford to absorb a total loss and have no need for
immediate return on their investments.
Dependence on Qualified Personnel and Key Individuals
Upon completion of the Merger, Franks' officers and directors Will
resign, and new officers and directors will be appointed. Neither
Franks' nor OSO can assure current Franks' shareholders of the
qualifications of such persons to run a publicly owned company. OSO is
dependent on certain key officers, employees and directors. The loss
of the services of any of such persons during this period could
adversely affect Franks' prospects. See, "MANAGEMENT - Directors and
Executive Officers."
Determination of the Ratio of Shares in the Merger Transaction; No
Independent Valuation
The number of Franks' shares to be issued pursuant to the Merger
Agreement was determined by negotiation between OSO and Franks' and
does not necessarily bear any relationship to OSO's asset value, net
worth or other established criteria of value and should not be
considered indicative of the actual value of OSO. Furthermore, neither
<PAGE>17
OSO nor Franks' has obtained either an appraisal of OSO's or Franks'
securities or an opinion that the Merger is fair from a financial
perspective.
Failure of Sufficient Number of Investors to Reconfirm Investment
The Merger cannot be consummated unless, in connection with the
reconfirmation offering required by Rule 419, the Rule 419 Investors
representing 80% of the maximum offering proceeds elect to reconfirm
their investments. Rule 419 Investors must affirmatively elect to
reconfirm their investments; no response within the twenty business day
period Franks' must grant its shareholders to reconfirm will be viewed
as a vote not to reconfirm. If, after completion of the reconfirmation
offering being conducted pursuant hereto, a sufficient number of Rule
419 Investors do not reconfirm their investment, the Merger will not be
consummated. In such event, none of the deposited securities held in
escrow will be issued and the deposited funds will be returned to Rule
419 Investors on a pro rata basis. As a consequence, since Franks'
expects to use the 10% allowed to it pursuant to Rule 419, the Rule 419
Investors will be returned only 90% of their invested funds.
Penny Stock Regulation
Broker-dealer practices in connection with transactions in "penny-
stock" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the
NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange
or system). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure regarding penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules the broker-dealer
must make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny stock
rules. If Franks' Common Stock becomes subject to the penny stock
rules, investors in this offering may find it more difficult to sell
their shares.
MERGER
Background of the Merger Agreement
Franks' was organized under the laws of the State of Colorado on May
17, 1991 for the purpose of engaging in the retail food service
business. Franks' closed its restaurants and a retail ice cream and
candy shop in November 1993. In May 1998, Franks' commenced a "blank
check" offering pursuant to Rule 419 ("Rule 419") promulgated under the
Securities Act. The purpose of the offering was to cause Franks' to
become a publicly held reporting company under the Securities Exchange
Act of 1934, as amended. The offering was successful in raising
$100,000 in gross proceeds from Rule 419 Investors. Pursuant to Rule
419, $90,000 of the net proceeds from that offering, the 100,000
restricted shares of common stock and 100,000 Franks' shares purchased
by the Rule 419 Investors, were placed in escrow pending (i)
distribution of a prospectus to each of the Rule 419 Investors
describing any prospective business acquisition by Franks' and (ii) the
subsequent reconfirmation by the holders of at least 80% of the shares
owned by the Rule 419 Investors that they have elected to remain
investors.
In the event approval of the Merger is not obtained from at least
80% of the Rule 419 Investors, then the shares deposited in the Rule
419 Escrow will not be released to the Rule 419 Investors. Instead,
the $90,000 net offering proceeds in the Rule 419 Escrow will be
<PAGE>18
released to the Rule 419 Investors in proportion to their investment,
at approximately $.90 per share. In the event the escorted funds
exceed $90,000 at the consummation of the Merger, the excess funds
shall be returned on a pro rata basis to those registered common
shareholders rejecting the reconfirmation offer. The Rule 419
Investors paid $1.00 per share in Franks' initial public offering.
Pursuant to Rule 419, the value of OSO must represent at least 80%
of the maximum offering proceeds, or $80,000. Based upon independent
audited financial statements, OSO has a business value of not less than
$80,000. (See "OSO Technologies, Inc. Financial Statements.")
Terms and Conditions of Merger Agreement
STOCKHOLDERS OF FRANKS' WISHING TO OBTAIN A COPY OF THE MERGER
AGREEMENT, WHICH IS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE, MAY
OBTAIN ONE WITHOUT CHARGE BY WRITING TO Franks' Express, Inc. 12146
East Circle, Aurora, Colorado 80014.ATTENTION: Charles Burton
Pursuant to the Merger Agreement, OSO will be merged into Franks'.
Consummation of the transaction contemplated by the Merger Agreement
(the "Merger") is conditioned upon, among other things, reconfirmation
by holders of least 80% of the shares owned by the Rule 419 Investors.
Upon consummation of the Merger, (i) 9,000,000 shares of common stock
shall be issued to former OSO shareholders. Each shareholder who holds
shares of Franks' Common Stock registered pursuant to a registration
statement declared effective by the Securities and Exchange Commission
on May 15, 1998 ("Registered Common Stock") prior to the Merger and who
accepts the Reconfirmation Offer shall, after consummating of the
Merger, hold the same number of shares held prior to the Merger, but
the aggregate percentage interest in Franks' will be reduced to 10%.
OSO will merge into Franks' with Franks' as the Surviving Entity. The
name of the Company will be changed to "OSO Technologies, Inc. after
the Merger. The Merger is intended to be consummated in such a manner
as to be tax-free to all parties involved under Internal Revenue Code
Section 368(a)(1)(A); (ii) each Rule 419 investor who rejects the
Reconfirmation Offer will be paid his or her pro rata share of the
amount in the Escrow Account of approximately $___ per share; (iii)
holders of Franks' common stock, the resale of which is restricted
under United States Securities laws ("Restricted Common Stock") prior
to the Merger shall continue to hold his/her share certificate
representing Franks' Restricted Common Stock. Consummation of the
Merger is not subject to any governmental approvals.
The result of the Merger, assuming that 80% of the Franks'
stockholders reconfirm their investments, is that former OSO
shareholders shall own 90% of the Surviving Entity while current
Franks'shareholders shall own 10% of Franks'. (See "Certain
Transactions")
Stockholders of Franks' desiring to accept the Reconfirmation
Offer are directed to sign the enclosed Letter of Reconfirmation form
and return it to Franks' Express, Inc., Attention: Charles Burton, who
will forward each Letter of Reconfirmation Franks' escrow agent. Any
Franks' stockholder who fails to return his or her form so that it is
received by Mr. Charles Burton by _____ (45 business days from the date
hereof) will be deemed to have rejected the Reconfirmation Offer and
will automatically be sent a check within five business days
representing his or her pro rata share of the funds in the Escrow
Account for the benefit of the Rule 419 Investors.
Certain Income Tax Consequences
The Merger is intended to qualify as a "tax-free reorganization"
for purposes of the United States federal income tax so that
stockholders of Franks' and OSO will not recognize gain or loss from
the transaction. In addition, the transaction is not expected to
result in the recognition of gain or loss to either Franks' or OSO in
the respective jurisdictions where each of them is subject to taxation.
NO OPINION OF COUNSEL NOR A RULING FROM THE INTERNAL REVENUE SERVICE
HAS BEEN OBTAINED IN REFERENCE TO THE FOREGOING. THE FOREGOING IS FOR
GENERAL INFORMATION ONLY AND FRANKS'STOCKHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO
THEM.
<PAGE>19
Fees and Expenses
Shareholders of OSO shall bear all costs and expenses incurred in
connection with the Merger and the Reconfirmation Offering, since the
only funds available to Franks' are the $90,000 in cash held in escrow
pursuant to Rule 419, none of which may be used by either Franks' or
OSO prior to the consummation of the Merger.
USE OF PROCEEDS
The gross proceeds of Franks' initial public offering was
$100,000. Pursuant to Rule 15c2-4 under the Securities Exchange Act of
1934 (the "Exchange Act"), all of those proceeds must be held in escrow
until all of the shares are sold. Pursuant to Rule 419 under the
Securities Act, after all of the Shares are sold, 10% of the Deposited
Funds ($10,000) may be released from escrow to Franks'. Franks'
requested the release of this 10%. To date, $6,450 has been expended
for accounting and other fees with the remaining $3,550 being held in a
separate account. Upon the consummation of the Merger and the
reconfirmation thereof, which reconfirmation offering must precede such
consummation, pursuant to Rule 419, $90,000 (plus any interest or
dividends received, but less any portion disbursed to Franks' pursuant
to Rule 419(b)(2)(C)(vi) and any amount returned to investors who did
not reconfirm their investment pursuant to Rule 419 or approximately
$0) will be released to OSO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FRANKS' EXPRESS, INC.
General
Franks' was organized under the laws of the State of Colorado on
May 17, 1991 for the purpose of engaging in the retail food service
business. Franks' closed its restaurants and a retail ice cream and
candy shop in November 1993. Since November 1993, the primary activity
of Franks' has been directed to organizational efforts, and obtaining
initial financing and conducting its initial public offering pursuant
to which Franks' offered and sold 100,000 shares of common stock at
$1.00 per share. Pursuant to Rule 419, the proceeds of Franks' initial
public offering ($100,000) less 10% ($10,000) have been placed in
escrow pending consummation of a merger or acquisition. (See
"INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419"). In the
event no merger or acquisition is consummated within eighteen (18)
months from the effective date of Franks' initial public offering (May
15, 1998). Franks' shall return investors' money, less $0, on a pro
rata basis.
Franks' was organized for the purposes of creating a corporate vehicle
to seek, investigate and, if such investigation warranted, engaging in
Business combinations presented to it by persons or firms who or which
desire to employ Franks' funds in their business or to seek the
perceived advantages of a publicly-held corporation. Franks' principal
business objective is to seek long-term growth potential in a business
combination venture rather than to seek immediate, short-term earnings.
Franks' does not currently engage in any business activities which
provide any cash flow. Franks' business is sometimes referred to as a
"blank check" company because investors entrust their investment monies
to Franks' management before they have a chance to analyze any ultimate
use to which their money may be put. Although substantially all of the
Deposited Funds of this offering are intended to be utilized generally
to effect a business combination, such proceeds are not otherwise being
designated for any specific purposes. Pursuant to Rule 419,
prospective investors who invest in Franks' will have an opportunity to
evaluate the specific merits or risks of only the business combination
management decides to enter into.
Management anticipates that it may be able to effect only one
potential business combination, due primarily to Franks' limited
financing.
Results of Operations
Franks' public offering was declared effective on May 15, 1998.
Franks' offered a total of 100,000 shares (par value $.0001) at an
offering price of $1.00 per share, for an aggregate of $100,000.00. In
<PAGE>20
May 1998, Franks' closed on 100,000 shares for a total gross proceeds
of $100,000.00. Pursuant to Rule 419 of the Securities Act, net
proceeds of $90,000 together with all securities issued are being held
in escrow pending the consummation of an acquisition or merger.
After the closing of the Merger, the business of Franks' will be
the business of manufacturing and marketing bottle fed water
dispensers. (See "BUSINESS - Water Dispensers"). The resources of OSO
will be the resources available to Franks' to fulfill the business
purpose of marketing, manufacturing and distributing water dispensers.
OSO believes the combined cash resources and available credit of OSO
and Franks' will be sufficient to run operations for 3 months.
At April 30, 1999, Franks' current assets amounted to $3,550,
while current liabilities amounted to $65,000. In addition, Franks'
organization costs amounted to $4.667 for the period ended April 30,
1999.
In the event approval of the Merger is not obtained from at least
80% of the Rule 419 Investors, then the shares deposited in the Rule
419 Escrow will not be released to the Rule 419 Investors. Instead,
the $90,000 net offering proceeds in the Rule 419 Escrow will be
released to the Rule 419 Investors in proportion to their investment,
at approximately $.90 per share. In the event the escrowed funds
exceed $90,000 at the consummation of the Merger, the excess funds
shall be returned on a pro rata basis to those registered common
shareholders rejecting the reconfirmation offer. The Rule 419
Investors paid $1.00 per share in Franks' initial public offering.
OSO TECHNOLOGIES,INC.
OSO is engaged in several aspects of the water dispenser industry,
including manufacturing and distributing proprietary and private brands
of bottle fed water dispensers. (See "BUSINESS - Water Dispensers").
Three Months Ended March 31, 1999 compared to Three Months Ended March
31, 1998
Three Months Ended
March 31,
1999 1998
Net Sales $0.00 $0.00
Cost of Sales $0.00 $0.00
Operating Expenses $1,037,987 $568,513
Net Income (loss) $(1,037,987) $(568,513)
BUSINESS
FRANKS' EXPRESS, INC.
General
Franks' was organized under the laws of the State of Colorado on
May 17, 1991 for the purpose of engaging in the retail food service
business. Franks' closed its restaurants and a retail ice cream and
candy shop in November 1993. Since November 1993, the primary activity
of Franks' has been directed to organizational efforts, and obtaining
initial financing and conducting its initial public offering pursuant
to which Franks' offered and sold 100,000 shares of common stock at
$1.00 per share. Pursuant to Rule 419, the proceeds of Franks' initial
public offering ($100,000) less 10% ($10,000) have been placed in
escrow pending consummation of a merger or acquisition. (See
"INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419"). In the
event no merger or acquisition is consummated within eighteen (18)
months from the effective date of Franks' initial public offering (May
15, 1998). Franks' shall return investors' money, on a pro rata basis.
Franks' was organized for the purpose of engaging in the retail food
service business but closed its food service operation in November 1993
and since has been engaged in creating a corporate vehicle to seek,
investigate and, if such investigation warranted, engaging in Business
combinations presented to it by persons or firms who or which desire to
employ Franks' funds in their business or to seek the perceived
advantages of publicly-held corporation. Franks' principal business
objective is to seek long-term growth potential in a business
combination venture rather than to seek immediate, short-term earnings.
<PAGE>21
Franks' does not currently engage in any business activities which
provide any cash flow. Franks' business is sometimes referred to as a
"blank check" company because investors entrust their investment monies
to Franks' management before they have a chance to analyze any ultimate
use to which their money may be put. Although substantially all of the
Deposited Funds of this offering are intended to be utilized generally
to effect a business combination, such proceeds are not otherwise being
designated for any specific purposes. Pursuant to Rule 419,
prospective investors who invest in Franks' will have an opportunity to
evaluate the specific merits or risks of only the business combination
management decides to enter into.
Management anticipates that it may be able to effect only one
potential business combination, due primarily to Franks' limited
financing.
OSO TECHNOLOGIES, INC.
General
OSO Technologies, Inc. was incorporated pursuant to the laws of
the State of California on November 27, 1996. OSO began operations in
1996 as a research and development company to produce a water dispenser
incorporating an icemaker.
OSO Technologies, Inc.
OSO Technologies, Inc. ( "OSO") was incorporated in the State of
California on November 27, 1996 under the name "Water & Ice Systems,
Inc." and changed its name to "OSO Technologies, Inc. on February 11,
1998. OSO was formed for the purpose of designing, engineering,
manufacturing and marketing proprietary water dispensers with a built-
in icemaker, (the "Products"). The Company expended over $1,500,000
designing and developing the Products and is presently positioned to
manufacture and market the Product, provided it raises sufficient
capital, approximately $2,000,000. See "Risk Factors / Need for
Additional Capital" and "The Business of the Company / Manufacturing
and Marketing". Management of OSO believes, after a survey of the
water dispenser market, that its Products are the only such water
dispenser in the world, and on April 3, 1999 filed a patent application
with the U. S. Patent and Trademark Office, which is pending. While no
assurance can be given that a Patent will issue or that it will be
granted on all 27 claims, preliminary research encouraged Management
to proceed to file the application.
The Products
OSO has since incorporation performed the research and development
activities required to produce a bottle-fed and plumbed-in point-of-use
dispenser with an integrated icemaker, allowing the user to receive
clean ice cubes in the standard water cooler configuration with hot,
cold or room temperature water, depending on the model of the Product.
Both units are essentially similar to existing Water dispensers and
requiring the same amount of space. Plumbed-in models are designed to
maintain all features and options of the bottle fed units. A state of
the art E-Coli/Bacterial killing device may be integrated into each
model, whether plumbed-in or bottle fed. Such an option could provide
an additional competitive advantage in countries with poor water
quality. Along with or instead of this option, traditional internal
water filtration devices will allow the use of less than pure water in
locales where pure water is not otherwise available. Both Products are
to be competitively priced relative to standard water dispensers
without an icemaker and will carry a five year warranty.
Additional Products
The initial product developed, the water dispenser - icemaker provides
the core development for a series of new products to be manufactured as
the Company matures.
The first additional new product is anticipated to be a bottom-fed 5
gallon bottle water dispenser with an icemaker utilizing a low position
retractable shelf with the same features and benefits of the Products,
but eliminating the industry-wide problem of lifting a five-gallon (US)
<PAGE>22
bottle of water weighing approximately 44 pounds above waist level.
Later models may also incorporate a one or two burner coffee maker,
which will be fed with clean water from the water bottle. Such a unit
would be a truly self-contained "Drink Center".
The Bottled Water Market [Small vs. 5 Gallon]
The bottled water supply industry is experiencing a sure and steady
growth curve pattern. While the United States consumes more 5 gallon
bottled water than any other country, it ranks well below the combined
size and maturity of the Western European market. Lack of confidence
in public water supplies and the movement toward healthier living and
diet are believed to be the major factors fueling growth of the bottled
water market worldwide.
The bottled water market is generally fragmented and served by small
regional bottled water companies and brands. Most bottled water brands
around the world are marketed on a regional basis, reflecting the
historic nature of the industry and the high cost associated with
transporting water. Exceptions include Perrier, Evian and other long
established well financed suppliers.
The Domestic Market
Last year, bottled drinking water achieved its best performance yet in
the U. S. market, according to Beverage Marketing Corporation, a
leading supplier of research, consulting and financial services to the
global beverage industry, and other data of the entire beverage
industry . Both gallonage and dollar amount of sales increased and the
industry is believed to be poised for strong future growth.
In 1998, volume in the total bottled drinking water market expanded at
an exceptional double digit rate. Gallonage approached 3.8 billion
gallons on growth of 10.1%, the industry's best performance of the
decade according to just released statistics from Beverage market
Corporation.
In 1998, the average American consumed 13.9 gallons of bottled water,
an increase from 12.7 gallons the previous year. Since 1993, per
capita annual consumption has increased by 4.4 gallons.
On growth of nearly 10%, sales of bottled drinking water surpassed the
$4 billion level for the first time, and did so by a wide margin.
Premium PET (disposable bottles) water volume surpassed retail bulk
water (5 gallon bottles) volume in 1998 and will exceed direct
delivered water by 2001. Retail bulk water experienced growth of
approximately 5.5% in 1998. Direct delivered water, which currently
contributes over one-third of total market volume, posted slightly
stronger growth, but less than the rate of retail PET.
Domestic non-sparkling water is the core of the U. S. bottled water
market, accounting for over 87% of the total sales volume. Domestic
sparkling water, in contrast, accounts for just over 8% of total sales
volume, less than half the market share at the beginning of the decade.
According to Beverage Marketing Corporation, the leaders in the bottled
water business in the United States for 1997, based on wholesale sales,
are:
Perrier Group 28.1%
Suntory 9.2%
McKesson 7.2%
Danone Int'l 5.9%
Crystal Geyser 2.4%
U.S. Filter 2.3%
All Others 44.9%
The bottled water market in the United States is extremely fragmented
with more that 900 separate brands, several strong regional brands but
no clearly recognized national brand within the jug water segment of
the industry. All of the major suppliers in the industry have
purchased regional brands to acquire market share in each territory.
Hence, there is a major opportunity for a brand name at the national
level. The 1997 market share of the leading brands of bottled water in
the United States, as reported by the Beverage Marketing Corporation,
is as follows:
<PAGE>23
Poland Spring 7.6% Primarily Coolers
Arrowhead 6.8% Primarily Coolers
Evian 4.7% Supermarket (PET containers)
Sparkletts 4.7% Primarily Coolers
Hinkley & Schmitt 3.1% Primarily Coolers
Zephyrhills 2.8% Primarily Coolers
Ozarka 2.7% Primarily Coolers
Deer Park 2.5% Primarily Coolers
Crystal Geyser 2.4% Supermarket (PET containers)
Crystal Springs 2.2% Primarily Coolers
All Others 60.5%
The International Market
While the United States is the largest bottled water market in the
world, according to Hidell-Eyster Technical Services, Inc. of Hingham,
Massachusetts, Europe has the most mature bottled water markets with
per capita consumption levels in Italy and France about three times
those of the United States. Per capita consumption levels for Germany
and Spain are approximately double those of the United States.
The 5 Gallon Water Dispenser Market / Industry
The initial research conducted by OSO indicates that there are over
five million dispensers in service in the United States. Over the past
20 years the bottled water dispenser has changed slightly, if at all,
from its initial format of dispensing hot and cold water from a top
loaded plastic stand supporting a 5-gallon water bottle. Despite water
dispensers being the primary method by which people get access to their
water in 1999, the dispensers remain undifferentiated resulting in no
consumer motivation to replace their present water dispensers.
A typical replacement rate of water dispensers is every six years while
considering the growth rate forecast for the bottled water industry
indicate that the annual demand for water dispensers in the United
States will be approximately 1.2 million units in the year 2000. The
three major domestic water dispenser manufacturers (the "Majors") are:
Sunroc Corporation
Elkay Manufacturing Company
Oasis Corporation (Formerly EBCO Manufacturing)
Oasis has been the market leader with an estimated market share of
approximately 30% or $100 million in sales annually. Oasis, as EBCO
Manufacturing, has been in existence since the 40s and manufactures all
types of industrial and plumbed-in water dispensing products.
Water service companies primarily use water dispensers manufactured by
one of the three majors supplemented with models produced by other
regional manufacturers. OSO believes that one very desirable and
practical component missing in existing water dispensers is ice. It is
virtually impossible to have pure ice in an industrial or office
location as plumbing is a problem and when ice is made available, the
quality of water that is used to produce the ice is quite often
suspect.
Incorporating an icemaker in the dispenser serves a dual purpose.
First, the water company sells more water, as it requires water to make
ice. Second, the customer obtains an added feature to an existing
product with which they are familiar; a feature which is quite
important and useful. The introduction of the Product at the 1997
International Bottled Water Association's (IBWA) annual convention in
Baltimore resulted in the company getting unilateral endorsements of
its concepts.
In Europe, only recently have water companies begun marketing bottled
water in the larger containers associated with the water dispenser,
with Germany holding the lead in home delivery. According to the
June/July issue of Bottled Water Reporter, Western European growth in
dispensers hit 40% during 1997 and Eastern European growth was even
greater. Consumption of water through water dispensers jumped more
than 27% in the United Kingdom during the same period.
Information provided by Zenith International, a leading European
marketing analyst, estimates the annual demand for water dispensers in
the emerging markets of Western Europe and the UK is doubling every two
years and has already reached approximately 250,000 units. Still, the
home and commercial customer delivery portion of the bottled water
<PAGE>24
industry is in its infancy compared to the United States. Germany and
the UK lead the way in sales but even there, the percent of total
volume distributed is only about one-fourth the percentage in the U.S.
The Point-of-Use: Walter Filtration Industry
Initial research by management of OSO indicates that there are over one
million point-of-use dispensers in service in the United States.
Recent acquisitions, such as U.S. Filter's acquisition of Culligan,
demonstrate an effort to consolidate an otherwise fragmented industry.
U. S. Filter, in its annual report for 1998, states that its
subsidiary, Culligan, has 100 company owned stores and more than 1,000
independent franchised dealers marketing point-of-use dispensers
nationally.
Sales and Distribution
OSO will sell its equipment and services directly to approximately 32
independent sales organizations. The majority of its sales will be
through bottled water and water filtration distributors which purchase
the equipment for resale or lease to the end user. OSO seeks to have a
single sales organization within a particular market in order to foster
a close relationship with its sales representatives and present a
cohesive image to the market place. The sales force will be trained
to the extent as to require only minimal technical support to complete
the sale and service to the customer.
Competition
The market for water dispensers is dominated by three large well
financed companies: Oasis Corporation, Sunroc Corporation and
Cordley/Temprite, a division of Elkay Manufacturing Company, and is
highly competitive. These manufacturers and distributors of drinking
water dispensers have well established brand names, deep market
penetration and greater financial and other resources than OSO.
Additionally, they currently have a greater selection of products,
which could be a disadvantage to OSO in securing customers which desire
to offer a full line of products from one supplier. While OSO believes
that it is well positioned to deliver a technologically advanced
product geared to grow prospective customer's revenue through increased
water consumption, there can be no assurance that any such advantage
will in fact, cause drinking water distributors to purchase the
product. The bottled water industry is dominated by several large
companies such as The Perrier Group, McKesson Water Products, and
Suntory Water Group, which have well established markets with
anticipated growth of 5% or more. Other competitors, some of which may
have greater financial and other resources than OSO may also enter the
market in which OSO currently operates into which it or intends to
expand. There can be no assurance that OSO will be able to compete
successfully against these competitors.
Business Strategy
The focus of OSO to date has been to finalize the design of the water
dispensers and to evaluate consumer reactions. The key business
strategy presenting the Product is to provide a truly recognizable,
distinct product in an otherwise undifferentiated market by emphasizing
the incorporation of the icemaker in the Product.
Without any formal marketing effort OSO has to date received inquiries
from some 1500 water bottling companies and distributors in the United
States and abroad. Management believes that such inquiries could amount
to potential orders in excess of 500,000 units, but at least all of the
water dispensers it can produce at the present facility, 52,000 units
annually.
During the next phase of its operation, OSO plans to concentrate
primarily on setting up the production facility for its products and
generating water cooler sales in the domestic and international
marketplace. On the basis of inquiries received from the two IBWA
exhibitions attended by representatives of OSO and other relevant
industry data, the Company believes that its major international market
potential lies in the following areas:
<PAGE>25
Sales Area
- ------------
Canada
Western Europe
Middle East
United Kingdom
Australia
Eastern Europe
India
Japan
Hong Kong
Philippines
Indonesia
Other
Sources of Raw Materials
Except for the Icemaker, OSO is not dependent on any one vender for the
supply of the parts and raw materials required for the manufacture of
the Products. Some of the parts are manufactured for OSO by vendors
using OSO's tooling and are proprietary in nature. As the tools belong
to OSO, any number of vendors can manufacture these parts. OSO also
has some of the components manufactured overseas, which are quite
critical. Although there are other sources available, any interruption
of receipt from those countries will cause delays and may also result
in higher prices.
Patent Application
OSO has filed an application for a United States Patent with the U.S.
Patent and Trademark Office on April 3, 1999. It was assigned Serial
No. 09/285,625. The first official notification is expected in six to
nine months. There is no assurance that OSO will be granted a patent
on all of its 27 or any of its claims.
Governmental Regulation
There is no regulation of the manufacture and marketing of drinking
water dispensers.
Research and Development
OSO has ongoing research and development activities for additional
products for the drinking water industry.
Competition
OSO is engaged in a business whereby it competes with three
dominant manufacturers of bottle fed dispensers, Sunroc Corporation,
Elkay Manufacturing Company, and Oasis Corporation (formerly EBCO
Manufacturing). Additionally, OSO's proprietary new bottle fed and
plumbed-in water dispenser with integrated icemaker (the "Products")
competes with the many other brands of bottle water fed water
dispensers. Currently, the bottle water fed dispenser market is
dominated by several large companies, such as Sunroc Corporation, Elkay
Manufacturing Company, and Oasis Corporation, all of which have greater
access to capital, are more familiar with the industry, and are more
widely recognized by potential consumers.
Legal Proceedings
There are no legal proceedings pending.
Employees
OSO currently has 14 full time and no part time employees. OSO's
employees do not belong to any unions. Management of OSO enjoys good
working relationships with its employees.
Property
OSO leases its executive offices and plant located at 9000 9th
Street, Rancho Cucamonga, California 91730 from Aetna Life and Casualty
Company (the "Lessor"). The Lessor is not affiliated in any way to OSO
or its officers, directors or principal shareholders. The facility is
33,500 square feet, of which 28,000 square feet is manufacturing space
and 5,500 square feet is used for executive and administrative offices.
This lease expires November 31, 2002.
<PAGE>26
OSO's facilities are adequate for its current operations.
Year 2000 Issue
OSO's current computer system has been updated to comply with any
issues relating to the upcoming change in the century. OSO does not
anticipate incurring significant expense with regard to Year 2000
issues.
Use of Proceeds
The Company, Oso Technologies, Inc. (A Development Stage Company)
estimates the proceeds from the purchase transaction of approximately
$40,000 received from escrowed cash less debt assumed on behalf of
Frank's Express, Inc. will be used for general working capital
purposes.
Capitalization
The following table sets forth as of March 31, 1999 Oso Technologies,
Inc.'s actual capitalization and a pro forma capitalization giving
effect to the purchase transaction with Frank's Express, Inc.
<TABLE>
<CAPTION>
Omit $(000)
Pro Forma
Actual Pro Forma as Adjusted
<S> <C> <C> <C>
Stockholder's equity:
Preferred stock 10,000,000
shares authorized 1,250,000
issued and outstanding $ 250 $ 0 $ 250
Common stock, $.00001 and
$.05 par value respectively;
10,000,000 shares authorized
4,187,500 shares and 11,000,000
issued and outstanding,
respectively 0 (1) 55 55
Additional paid-in capital 1,161 (1)&(2)3,857 5,018
Deficit accumulated during
the development stage (1,634) (1)&(2) 331 (1,303)
Total stockholder's deficit (223) 4,243 4,020
Total capitalization $ (223) $4,243 $4,020
</TABLE>
The pro forma entries are based on the stockholders' equity of
Frank's Express, Inc. at March 31, 1999 as follows:
Common stock $ 5
Paid-in capital 68
Accumulated deficit (29)
$ 44
(1) After giving effect to eliminating entries in combining the two
companies and changing the capitalization of shares outstanding to
reflect the purchase transaction in the exchange of common stocks.
(2) After giving effect to recording an increase in basis to equity
based on the $5,000,000 valuation of the assets of Oso acquired in the
purchase transaction. The allocation among the assets is $3,000,000
(amortized over 5 years) for drawings related to proprietary tooling
and $2,000,000 for goodwill (amortized over 10 years) based on a three
year cash flow projection. Amortization expenses included in
accumulated deficit total $800,000.
(3) The pro forma capitalization does not include $271,500 in cash
for common stock issued in April and May 1999. The Pro forma
capitalization also does not reflect a preferred stockholder agreement
subject to due diligence (described
<PAGE>27
elsewhere herein) which calls for $900,000 net of fees of $100,000 of
newly issued preferred stock at a 12% per annum dividend rate.
MANAGEMENT DISCUSSION ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF OSO'S
The following discussion should be read in conjunction with our
financial statements and related notes thereto.
Overview
Oso Technologies, Inc. (A Development Stage Company) effectively began
operating in research and development activities in April, 1997 to
develop a prototype product line to market proprietary water dispensers
to water bottling distributors worldwide. After two years of product
development OSO has approximately $350,000 in sales orders for June and
July 1999 delivery. OSO has developed tooling which will be delivered
when paid for, equipment and inventory to assemble components into
finished product, a 33,000 square foot manufacturing warehouse facility
plus an infrastructure which includes sales, marketing, manufacturing,
administrative personnel and Board of Directors which includes an
outside board member that are influential in the water bottling
distribution industry.
Year Ended March 31, 1999 Compared with Year Ended March 31, 1998
Results of Operations
Revenues, costs of sales, and gross profits did not exist as OSO was in
the development stage process of bringing a product line to market.
Operating Expenses
Marketing expenses in fiscal year ended March 31, 1999 was
approximately $54,000 compared to $37,000 for the same period the prior
year; an increase of 41% as a result of getting feed back on what the
market wanted or expected.
General and administrative expenses which include mainly research and
development activities to develop a proprietary product line was
$984,000 in the year ended March 31, 1999 compared to $515,000 in the
same period a year ago, a 91% increase to get the prototype products
ready for manufacturing and sale to customers.
Interest expense in year ended March 31, 1999 was $17,000 compared to
$3,000 of income for the same period a year ago as a result of loans
used to finance OSO in the development stage of designing and making
prototype products.
Year Ended March 31, 1998 Compared with Year Ended March 31, 1997
OSO although incorporated in November 1996 did not effectively start
its development stage phase of operating until approximately April 1997
and therefore there is no comparability with the fiscal year ended
March 31, 1997.
Liquidity and Capital Resources
From inception, OSO has financed the Development Stage from private
investment including loans payable which has been used to make
proprietary prototype models for OSO in anticipating what its customer
market expects.
At March 31, 1999, OSO in the development stage has used in cash for
its research and development stage of operations $676,000 and $552,00
for the years ended March 31, 1999 and 1998 respectively.
Cash flows from investing activities was as follows:
Equipment purchases for year ended March 31, 1999 was $254,000 compared
to $65,000 the prior year. Cash raised during year ended 1999 in
preferred stock was $250,000 compared to $528,000
<PAGE>28
in common stock in the earlier year. OSO spent the $675,589 in cash
for its development stage operations in fiscal year ended March 31,
1999.
Cash flows provided from loan payable short-term debt was $361,000 in
year ended 1999. The loans payable may have to be subordinated as a
condition to get additional equity financing. The interest rate on the
debt is 10% per annum. OSO has entered into a term sheet for the sale
of preferred stock, subject to the consumation of due diligence, the
placement of which will contribute net proceeds of $900,000 and up to
$1,000,000 credit enhancement facility for account receivable,
inventory and equipment lines of credit. The Preferred stock will
receive a 12% per annum dividend compounded and at closing will receive
10% of OSO on a fully diluted basis. After three years if the
preferred stock financing is not repaid, they will own 30% of OSO and
their shares will be converted into common stock on a fully diluted
basis. The letter of intent also calls for a monthly $5,000 management
fee until the preferred stockholders are repaid plus all loan payable
to be subordinated until the preferred financing is paid in full.
OSO on May 7, 1999 entered into an agreement to be purchased by Frank's
Express, Inc., which is reporting under the Securities Act of 1934, as
amended. The above purchase transaction is considered a tax free
exchange of common stock. Frank's Express, Inc. is a blank check
Acquired Company with escrowed cash of $93,000 and assumed liabilities
of $54,000. Both companies will settle up based on May 31, 1999 cash
and payable balances. The estimated free cash is $39,000. The above
transaction must wait for a 20 to 45 day 80% shareholders confirmation
period after it is registered with the Securities and Exchange
Commission.
Oso Technologies, Inc. (A Development Stage Acquired Company), as of
March 31, 1999 had negative working capital of approximately $594,000
and a stockholder's deficit accumulated during the development stage of
approximately $224,000 and sales orders totaling $350,000. OSO also
received an additional $271,500 from private investors in April and May
1999.
OSO has a going concern issue unless it receives adequate funding from
the preferred stockholders and the credit facility against future
operating lines of credit against collateral balances related to
receivables, inventory and equipment.
OSO currently plans to spend approximately $375,000 in the next year as
follows: tooling $175,000, manufacturing equipment $125,000 and
leasehold improvements $75,000 to make the factory fully compliant to
make the finished product based on anticipated sales orders and
financing. OSO believes if its gets the preferred stock financing and
credit enhancement facility in place in a timely manner, Oso
Technologies, Inc. will have adequate capital resources for the next
twelve (12) months.
Year 2000 Contingency
OSO is aware of the issue associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000
problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year
value to "00". The issue is whether computer systems will properly
recognize date-sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. OSO is reviewing both its
information technology and its non-information technology systems to
determine whether they are year 2000 complaint, and to date OSO has not
identified any material systems, which are not year 2000 complaint.
OSO has not made a material expenditure to address the year 2000
problem and at present does not anticipate that it will be required to
make any such material expenditure in the future.
OSO has initiated formal communications with all significant suppliers
and service providers to determine the extent to which OSO is
vulnerable to those third parties' failure to remediate the year 2000
problem. Although OSO has received verbal assurances of year 2000
compliance from certain of such third parties, OSO has not yet received
written assurances of year 2000 compliance from third parties with whom
it has relationships. OSO believes its operations will not be
significantly disrupted even if third parties with whom OSO has
relationships are not year 2000 compliant.
<PAGE>29
In the event that OSO's suppliers are unable to provide sufficient
quantities of materials or goods to OSO as a result of their failure to
be year 2000 compliant, OSO believes that it can obtain adequate
supplies of materials and goods at comparable prices from other
sources.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB")issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS No. 130"). SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
adoption of this statement has had no impact on OSO's results of
operations, financial position or cash flows.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures About Segment of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for public business enterprises to report information about
operating segments in annual financial statement and requires that
those enterprises report selected information about the operating
segments in interim financial reports issued to shareholders. This
statement is effective for financial statements for periods beginning
after December 15, 1997 and need not be applied to interim periods in
the initial year of application. Comparative information for earlier
years presented is to be restated. The adoption of this statement has
had no impact on OSO's results of operations, financial position or
cash flows.
New Accounting Pronouncements (cont'd)
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded on other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value.
This statement is effective for financial statements for all fiscal
quarters of all fiscal years beginning after June 15, 1999. OSO does
not expect the adoption of this standard to have a material impact on
OSO's results of operations, financial position or cash flows.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, Reporting the Costs of Start-Up
Activities ("SOP 98-5") requires that all non-governmental entities
expense the costs of start-up activities, including organization costs,
as those costs are incurred. SOP 98-5 is effective for financial
statements for fiscal years beginning after December 15, 1998.
Management has reviewed the provisions of SOP 98-5 and does not believe
adoption of this standard will have a material effect on OSO's results
of operations, financial position or cash flows.
MANAGEMENT
Directors and Executive Officers
Set forth below is certain information regarding the directors and
executive officers of Franks' and OSO. The officers and directors of
Franks' are expected to resign upon consummation of the Merger.
FRANKS' EXPRESS, INC.
Set forth below is information regarding the officers and
directors of
Franks'.
Name Age Position with Franks'
Charles Burton 47 President, Director
Roger D. Jones 31 Secretary, Director
Address
<PAGE>30
Sandra S. Steinberg 46 Treasurer, Director
Address
(1) May be deemed "Promoters" of Franks', as that term is defined
under the Securities Act.
BIOGRAPHY
The following sets forth biographical information for at least the past
five years as to the business experience of each officer and director
of the Company and their age and positions with the Company:
PRESIDENT AND DIRECTOR. Charles Burton, age 47, currently serves
asPresident and Director of the Company, a position he has held since
April15, 1997. Mr. Burton served as Secretary and a Director of the
Company from January 2, 1997 until April 15, 1997, when he was elected
President.
Mr. Burton is a graduate of Kenyon College where he obtained a
bachelors degree in Political Science in 1971. From 1972 to 1976,
Mr.Burton served as a special assistant to George Clark Martin,
President of the National Association of Home Builders in
Louisville, Kentucky. From 1977 to 1985, Mr. Burton was employed as a
licensed securities broker with S. W. Devanney and Co., Inc. in Denver,
Colorado. He was employed with Kober Financial Inc. from 1985 to 1988
as a wholesale securities trader. Thereafter, Mr. Burton was employed
by Fitzgerald, Talman, Inc. as a wholesale securities trader for the
remainder of 1988. In 1989, Mr. Burton became self-employed as a
financial consultant. His consulting experience included rendering
advice with respect to mergers and acquisitions, and assisting various
companies in developing public trading abilities. During this time,
Mr. Burton also served as President of Wild Creek Oil Company, Inc.
From 1992 to 1993, he was employed by Paramount Investments
International, Inc. as a wholesale trader. In 1993 he left Paramount
to devote his efforts to development of LPR Cybertek, Inc., an internet
financial services company located in Denver, Colorado, where he was
co-owner and Vice-President. In May of 1996, he assisted with the
merger of Wild Creek Holding Company, Inc., a publicly traded company,
with TNB, an international trading and export concern. Mr. Burton
continues to operate his independent financial consulting service
business, but presently concentrates his efforts on assisting
individuals in making financial decisions.
SECRETARY AND DIRECTOR. Roger D. Jones, age 31, currently serves as
Secretary and a Director of the Company. Mr. Jones has served as a
Director of the Company since January 2, 1997 and prior to taking over
duties as Secretary of the Company, Mr. Jones served as its interim
Company President from January 2, 1997 until April 15, 1997.
Mr. Jones graduated from Lake Forest College Lake Forest, Illinois
in 1987 with a bachelors degree in history. Since that time, Mr. Jones
has been employed by the McDonald's Corporation in various capacities.
Mr. Jones relocated to Aurora, Colorado in April of 1988. Mr. Jones
attended the highly regarded Hamburger University sponsored by the
McDonald's Corporation in 1992, where course work included studies in
advertising, marketing, restaurant profit and loss statements,
restaurant layout and maintenance. In December of 1992, Mr. Jones
became the Restaurant Manager for McDonald's in Aurora, Colorado. Mr.
Jones has also assisted McDonald's Corporation's Regional Training
Department, training assistant managers from the seven-state Rocky
Mountain Region.
TREASURER AND DIRECTOR: Sandra S. Steinberg, age 46, has been a
Director of the Company since its inception in 1991. She currently
serves as the Treasurer of the Company, a position she has held since
January 2, 1997. Mrs. Steinberg served as the President of the
Company from 1991 until January 2, 1997, which included the period
when the Company operated retail food eateries which sold primarily hot
dogs and related items and ice cream, and a significant period where
the Company did not actively conduct business activities.
Mrs. Steinberg obtained her securities broker's license in 1985
and was employed for a period of two months by Tri-Securities, a
brokerage firm located in Englewood, Colorado that specialized in sale
of stocks and bonds. Thereafter, Mrs. Steinberg became a registered
representative with J. W. Gant, a position she held until October of
1986. She was associated with Guildcor Financial Inc. from October of
1986 until January of 1988, where she also sold securities. Mrs.
Steinberg was then employed by Capital Securities for approximately 11
<PAGE>31
months in 1988. She left that position to become President and
Chairman of the Board and Directors of Franks for the Memories, Inc.,
a food service business retailing hot dogs. Franks' Express, Inc. was
formed in 1991 to engage in the restaurant and food service business
and Mrs. Steinberg supervised its active business operations until
November, 1993.
Although it is possible that Officers and Directors of the Company
may become involved in other blank check or blind pool companies in the
future, none of such other companies will join the Company in a
Business Combination.
OSO TECHNOLOGIES, INC.
Set forth below is information regarding the officers and
directors of
OSO:
Name Age Position with the Company
Vipin Sahgal President, Chief Executive
Officer, Director
Roger Frock Chairman
Manoj " Mani" Mukherjee Director of International Sales,
Director
William Dahlman Director
Suresh Kodkani Director
Tom Lucas Vice President of Manufacturing
Frank Lopez Vice President of Operations
David Hutchinson Director of National Sales &
Service
BIOGRAPHY
Vipin Sahgal: Mr. Sahgal is currently President/CEO of OSO
Technologies, Inc. and is one of its founders. From 1994 to 1996 he
was President/CEO of STT International, Inc. an engineering and design
company. From 1975 till 1994 he was active as a management consultant
in the field of acquisitions mergers and corporate finance. Mr.
Sahgal has lived in the United States since 1968 and received a degree
in Electrical Engineering at the University of West Berlin, Germany in
1963.
Thomas A. Lucas: Vice President of Manufacturing has over 20 years
experience in manufacturing, working as either Director or Vice
President of Manufacturing for major companies including Bausch & Lomb
Surgical, Horizon Medical Products, Johnson & Johnson and Newell
Company. During his career, Mr. Lucas has managed a workforce of over
700 people, conceived and implemented Total Quality Management
Procedures, established production lines, plant engineering and
production controls. Mr. Lucas holds a BS Degree in Industrial
Engineering from Pennsylvania State University and an MBA from
Pepperdine University, California.
Frank Lopez: Vice President of Operations was for the past 3 years
Director of Operations for MXI Inc., a new products development company
where he was responsible for product design documentation. From 1990
to 1995, he was a partner and in charge of operations for The Marina
Group, a company specializing in the take-over of financially
distressed companies. For seven years prior to that he was Vice
President - Technology for the Vista Group, a venture capital, mergers
and acquisitions company. Mr. Lopez also worked for Emerson Electric,
Moog, Inc., and as a design engineer on the F-15 for McDonnell Douglas.
Mr. Lopez has a BS in Mechanical Engineering from Texas A&M University
and an MBA in Marketing from Loyola University, Chicago.
<PAGE>32
David F. Hutchinson: Director of National Sales and Service, has over
10 years of experience in the Bottled Water industry with Arrowhead
Mountain Spring Water, a Perrier Group of America Company, first as an
Operations Manager and finally as Director of Equipment Services. For
the past 2 years he was Director of sales for Kel-Jac Engineering,
Inc., a Company involved in the Design and Sale of products
specifically to the Bottled Water industry. Mr. Hutchinson is a
Graduate of University of Portland and served with the United States
Army as an Officer for 7 years and left as a Tank Company Commander.
Roger J. Frock: Mr. Frock is currently President and CEO of Business
Services International, a broad line management consulting firm located
in Annapolis, Maryland. BSI's practice includes logistics planning and
supply chain management, system integration and new venture startup
management for a wide variety of clients including airlines, soft drink
companies, motor carriers, distributors and medical care providers. He
served as a member of the Board of Directors of Federal Express
Corporation and held several other senior management positions
including General Manager and COO during the first ten years of that
company's operations. Prior to FedEx, he spent 12 years with A T
Kearney consultants as a principal in their transportation and physical
distribution practice. He is a graduate of the University of Michigan
holding degrees in Industrial Engineering and a Masters Degree in
Business Administration.
Suresh Kodkani: Mr. Kodkani has over 25 years experience as Sales,
Project and Marketing Executive with one of world's foremost
engineering and electronics company, ASEA Brown Boveri located in
Switzerland. Mr. Kodkani negotiated and successfully completed the
acquisitions of Power Plants, Steel Complexes and Technical joint
ventures in numerous countries in East Europe, Japan, China, India and
Brazil. Mr. Kodkani is currently working as an independent Consultant
for numerous international clients. He has a Masters in Electrical
Engineering from University of West Berlin, Germany. Mr. Kodkani is a
Swiss national and lives in Switzerland.
Manoj K. Mukherjee: Mr. Mukherjee is an entrepreneur, investor and an
experienced international marketing and sales executive. He has been
involved in several industries and enterprises in the United States and
Europe including as a developer of major real estate. .Mr. Mukherjee
has been in the United States since1976 and is a citizen.
William Dahlman: Mr. Dahlman has over 25 years of experience in the
beverage industry. He was initially with Coca Cola and was President
and COO of Arrowhead Water Products when it was sold to The Perrier
Group of France. He was then hired by Suntory Group, Japan's leading
Distillers to start their flagship Water Company, The Suntory Water
Group. After a successful launch, some 4 years later he left to start
his own consulting practice. Mr. Dahlman has advised numerous clients
in over a dozen countries. Mr. Dahlman is presently President and CEO
of a consulting firm The Employee Group.
Executive Compensation
Franks'
Franks' has not compensated any officers, directors or employees
to date.
OSO TECHNOLOGIES, INC.
The following summary compensation table sets forth compensation
information for services performed during each of the three (3) fiscal
years ended December 31, 1998, 1997, and 1996 by OSO's executive
officers.
Summary Compensation Table
Name and Principal Fiscal Annual
Position(2) Year Compensation(1)
Vipin Sahgal(3)(4) 1998 $0
President, CEO, 1997(2) $0
Treasurer 1996 N/A
Manoj Mukheherjee(4) 1998 $0
Director of International
Sales, Secretary 1997(2) $0
1996 N/A
<PAGE>33
Tom Lucas(4)
Vice President manufacturing 1998 $90,000
1997 N/A
1996 N/A
Frank Lopez 1998 $90,000
Vice President Operations 1997 N/A
1996 N/A
(1)Includes salary, bonus, medical, pension and housing allowance.
(2)Estimated
(3)On April 22, 1999, Anthony Fox resigned from his position. On
April 22, 1999, Vipin Sahgal became Treasurer of OSO Technologies, Inc.
(4) Vipin Sahgal, Manoj Mukheherjee and Tom Lucas currently have five
year employment contracts with OSO Technologies, Inc. To date, no
amounts have been paid. Any amounts due and owing have been accrued.
(1) Both Mr. Sahgal and Mr. Mukherjee have an Employment contract with
the OSO Technolgoies, Inc. which will be ratified by the Board of
Directors after the acquisition.
DESCRIPTION OF SECURITIES - FRANKS'
CAPITALIZATION. The Company's authorized capital stock
consists of 10,000,000 shares of $.0001 par value common stock and
10,000,000 shares of .0001 par value preferred stock.
COMMON STOCK. All shares of common stock have equal voting rights
and are not assessable. Voting rights are not cumulative, and,
therefore, the holders of more than 50% of the common stock of the
Company would be able to elect all of the directors of the Company.
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities and after
the satisfaction of all priority claims by holders of the Company's
preferred stock (assuming preferred stock is issued in the
future), will be distributed pro rata to the holders of the common
stock. The holders of the common stock do not have preemptive
rights to subscribe for any securities of the Company, and have no
right to require the Company to redeem or purchase their shares.
The shares of common stock presently outstanding are, and the shares of
common stock to be sold pursuant to this offering will be, upon
issuance, fully paid and nonassessable.
Holders of common stock are entitled to share equally in
dividends when, as, and if declared by the Board of Directors of the
Company, out of funds legally available therefor, after payment of any
dividends then owing to the holders of the Company's preferred
stock, if any is outstanding. The Company has not paid any cash
dividends on its common stock, and it is unlikely that any such
dividends will be declared or paid in the foreseeable future.
PREFERRED STOCK. The Company is authorized to issue 10,000,000
shares of preferred stock, $.0001 par value. The preferred stock may
be issued in series from time to time with such designation,
rights, preferences and limitations as the Board of Directors of
the Company may determine by resolution. The rights, preferences and
limitations of separate series of preferred stock may differ with
respect to such matters as may be determined by the Board of
Directors, including, without limitation, the rate of dividends,
amounts payable on liquidation, sinking fund provisions (if any),
conversion rights (if any), and voting rights. It is therefore
possible that preferred stock might be issued which would grant
dividend preferences and liquidation preferences to preferred
shareholders superior to those of the holders of common stock.
Unless the nature of a particular transaction and applicable statutes
require such approval, the Board of Directors has the authority to
issue preferred shares without shareholder approval. The issuance of
preferred stock may have the effect of delaying or preventing a change
in control of the Company.
DIVIDENDS
The Company does not expect to pay dividends prior to the
consummation of a Business Combination. Future dividends, if any,
will be contingent upon the Company's revenues and earnings, if any,
capital requirements and general financial condition subsequent to
the consummation of a Business Combination. The payment of dividends
<PAGE>34
subsequent to the consummation of a Business Combination will be within
the discretion of the Company's board of directors existing at that
time. The Company presently intends to retain all earnings, if any,
for use in the Company's business operations and accordingly, the Board
does not anticipate declaring any dividends in the foreseeable
future.
FRANKS'
Common Stock
Franks' is authorized to issue twenty million (20,000,000) shares
of common stock, $.0001 par value per share, of which 100,000 shares
were issued and outstanding as of the date of this prospectus. 97,000
shares were issued to eight (8) shareholders in 1995. Franks' relied
on an exemption pursuant to Section 4(2) of the Securities Act of
1933, as amended, when issuing these shares. The 100,000 shares
includes the 3,000 shares of Registered Common Stock subject to the
Reconfirmation Offering. Each outstanding share of common stock of
Franks' is entitled to one vote, either in person or by proxy, on all
matters that may be voted upon by the owners thereof at meetings of the
stockholders.
The holders of Franks' common stock (i) have equal ratable rights
to dividends from funds legally available therefor, when, as and if
declared by the Board of Directors of Franks'; (ii) are entitled to
share ratably in all of the assets of Franks' available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of the affairs of Franks'; (iii) do not have preemptive,
subscription or conversion rights, or redemption or sinking fund
provisions applicable thereto; and (iv) are entitled to one non-
cumulative vote per share on all matters on which stockholders may vote
at all meetings of stockholders.
All shares of registered Common Stock which are the subject of
this Reconfirmation Offering, when issued, will be fully paid for and
non-assessable, with no personal liability attaching to the ownership
thereof. The holders of shares of common stock of Franks' do not have
cumulative voting rights, which means that the holders of more than 50%
of such outstanding shares voting for the election of directors can
elect all of the directors of Franks' if they so choose and, in such
event, the holders of the remaining shares will not be able to elect
any of Franks'directors. At the completion of the Reconfirmation
Offering, the present officers and directors and present shareholders
of Franks', including those Franks' shareholders who are also
shareholders of OSO, will beneficially own 10% of the then
outstanding shares, with the former OSO shareholders in possession of
90% of Franks' stock. (See "MERGER-Terms and Conditions of Merger" and
"Certain Transactions").
Reports to Stockholders
Franks' intends to continue to furnish its stockholders with
annual reports containing audited financial statements as soon as
practicable at the end of each fiscal year. Franks' fiscal year ends
on December 31.
Non-Cumulative Voting
The holders of shares of Franks' Common Stock do not have
cumulative voting rights, which means that the holders of more than 50%
of such outstanding shares, voting for the election of directors, can
elect all of the directors to be elected, if they so chose. In such
event, the holders of the remaining shares will not be able to elect
any of Franks' directors. Franks' current shareholders, including
those Franks' shareholders who are also shareholders of OSO, will own
10% of the common shares outstanding after the Merger. (See "Certain
Transactions.")
<PAGE>35
Dividends
Franks' has no earnings, and has paid no dividends to date. Since
Franks' is a blank check company with its only intended business being
the search for an appropriate Business combination, Franks' does not
anticipate having any earnings until such time that a business
combination is reconfirmed by the stockholders. However, there are no
assurances that upon the consummation of a business combination,
Franks' will have earnings or issue dividends. Therefore, it is not
expected that cash dividends will be paid to stockholders until after a
business combination is reconfirmed.
Transfer Agent
Franks' has appointed Corporate Stock Transfer, 370 17th Street,
Suite 2350, Denver, Colorado 80202, as the Transfer Agent for
Franks'common stock.
OSO TECHNOLOGIES, INC.
Description of Securities
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, no par value, and 10,000,000 shares of
preferred stock, no par value.
As of May 15, 1999 there were 4,405,800 shares of common stock
outstanding held of record by 62 shareholders. Holders of common stock
are entitled to one vote per share on all matters submitted to a vote
of the shareholders and may accumulate votes in the election of
directors. Holders of common stock are also entitled to receive
ratably such dividends as may be declared by the board of directors out
of funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, holders of the common stock
are entitled to share ratable in all assets remaining after payment of
liabilities of the Company. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. All the
outstanding shares of common stock to be outstanding upon completion of
this Offering will be, fully paid and nonassessable.
Preferred Stock
As of May 15, 1999 the Company has issued 1,250,000 shares of non-
voting Series A Preferred Stock. The Preferred Stock authorized may be
issued from time to time in series. The Board of Directors of the
Company is authorized to establish such series, to fix and determine
the variations and the relative rights and preferences as between
series, and to thereafter issue such stock from time to time. The
Board of Directors is also authorized to allow for conversion of the
Preferred Stock to Common Stock under terms and conditions as
determined by the Board of Directors. The ability of the Board of
Directors to determine the rights, preferences, privileges and
limitations of the Shares of Preferred Stock, specifically the voting
rights, could result in a potential anti-takeover effect of the
Preferred Stock. Such rights, preferences, privileges and limitations
as may be established by the Board of Directors could have the effect
of impeding or discouraging a change in control of the Company.
Common Stock
The holders of shares of OSO Common Stock do not have cumulative
voting rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of directors, can elect all
of the directors to be elected, if they so chose. In such event, the
holders of the remaining shares will not be able to elect any of OSO's
directors. OSO's current shareholders will own 90% of the common
shares outstanding after the Merger.
Dividends
OSO has paid no dividends to date.
Transfer Agent
OSO intends to appoint Corporate Stock Transfer, 370 17th Street, Suite
2350, Denver, Colorado 80202, as its Transfer Agent after the Merger.
<PAGE>36
PRINCIPAL SHAREHOLDERS
FRANKS'
The following table sets forth certain information regarding the
beneficial ownership of the Franks' Common Stock as of the date of this
Prospectus by (i) each person known to Franks' to beneficially own 5%
or more of Franks' Common Stock, (ii) each director of Franks' and
(iii) all directors and executive officers of Franks' as a group. All
information with respect to beneficial ownership has been furnished to
Franks' by the respective director, executive officer or 5%
shareholder, as the case may be.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING SHARES
AFTER AFTER
NO. OF DATE BEFORE MINIMUM MAXIMUM
SHARES(1) ACQUIRED OFFERING OFFERING OFFERING
<S> <C> <C> <C> <C> <C>
Charles Burton . . . . 100,000 4/15/97 10.00% 9.52% 9.09%
2903 South Uinta Street
Denver, Colorado 80231
Roger D. Jones . . . . 5,000 4/15/97 0.50% 0.48% 0.45%
1519 South Telluride Street
Aurora, Colorado 80017
Sandra S. Steinberg . . .745,000(2) 6/15/91 74.50% 70.95% 67.73%
12146 East Amherst Circle
Aurora, Colorado 80014
Daniel C. Steinberg.. . . 50,000 2/20/94 5.00% 4.76% 4.55%
747 East First Street #210
Denver, Colorado 80203
Jamie L. Steinberg. . . . 50,000 2/20/94 5.00% 4.76% 4.55%
432 East Wellington #305
Chicago, Illinois 60657
<PAGE>33
David M. Summers. . . . . 50,000 4/15/97 5.00% 4.76% 4.55%
5670 Greenwood Plaza Blvd.
Suite 422
Englewood, Colorado 80111
-------- ------- ------ -----
1,000,000 100% 100% 100%
========= ==== ===== =====
Total ownership by all
persons listed
above who are also
officers and directors
of the Company .. . . . 850,000 85.00% 80.95% 77.27%
</TABLE>
(1) Rule 13d-3, promulgated under the 1934 Act which concerns
the determination of beneficial owners of securities, includes as
beneficial owners of securities, among others, any person who directly
or indirectly ,through any contract, arrangement, understanding
relationship or otherwise has, or shares, voting power and/or
investment power with respect to such securities; and, any person
who has the right to acquire beneficial ownership of such security
within 60 days through means, including, but not limited to, the
exercise of any option, warrant or conversion of a security.
Any securities not outstanding which are subject to such
options, warrants or conversion privileges are deemed to be outstanding
for the purpose of computing the percentage of outstanding
securities of the class owned by such person, but shall not be deemed
to be outstanding for the purpose of computing the percentage of the
class by any other person.
<PAGE>37
(2) Excludes an aggregate of 100,000 shares owned by Mrs. Steinberg's
children, Daniel C. Steinberg (50,000 shares) and Jamie L. Steinberg
(50,000 shares), for which Mrs. Steinberg disclaims any beneficial
ownership interest. All common shares owned by the officers, directors
and principal shareholders listed above are "restricted or control
securities" and, as such, are subject to limitations on resale. Such
shares may be subject to contractual arrangements or pledges of the
Company's securities, known to the Company, which may at a subsequent
date result in a change of control of the Company.
<TABLE>
<CAPTION>
Amount and Nature of Amount and Nature of
Beneficial Ownership Beneficial Ownership
Prior to the Merger(1) After the Merger (2)
Number Percent Number Percent
Beneficial Owners of Shares of Class of Shares of Class
<S> <C> <C> <C> <C>
Charles Burton 100,000 9.09% 100,000 .91%
2903 South Uinta Street
Denver, Colorado 80231
Roger D. Jones 5,000 0.45% 5,000 .05%
1519 South Telluride Street
Aurora, Colorado 80017
Sandra S. Steinberg 745,000(2) 67.73% 745,000 6.77%
12146 East Amherst Circle
Aurora, Colorado 80014
Daniel C. Steinberg 50,000 4.55% 50,000 .45%
747 East First Street #210
Denver, Colorado 80203
Jamie L. Steinberg 50,000 4.55% 50,000 .45%
432 East Wellington #305
Chicago, Illinois 60657
David M. Summers 50,000 4.55% 50,000 .45%
5670 Greenwood Plaza Blvd.
Suite 422
Englewood, Colorado 80111
Total ownership by all
persons listed
above who are also
officers and directors
of the Company .. . . . 850,000 77.27% 850,000 7.73%
(1) Rule 13d-3, promulgated under the 1934 Act which concerns
the determination of beneficial owners of securities, includes as
beneficial owners of securities, among others, any person who directly
or indirectly ,through any contract, arrangement, understanding
relationship or otherwise has, or shares, voting power and/or
investment power with respect to such securities; and, any person
who has the right to acquire beneficial ownership of such security
within 60 days through means, including, but not limited to, the
exercise of any option, warrant or conversion of a security.
Any securities not outstanding which are subject to such
options, warrants or conversion privileges are deemed to be outstanding
for the purpose of computing the percentage of outstanding
securities of the class owned by such person, but shall not be deemed
to be outstanding for the purpose of computing the percentage of the
class by any other person.
(2) Excludes an aggregate of 100,000 shares owned by Mrs. Steinberg's
children, Daniel C. Steinberg (50,000 shares) and Jamie L. Steinberg
(50,000 shares), for which Mrs. Steinberg disclaims any beneficial
ownership interest. All common shares owned by the officers, directors
and principal shareholders listed above are "restricted or control
securities" and, as such, are subject to limitations on resale. Such
shares may be subject to contractual arrangements or pledges of the
Company's securities, known to the Company, which may at a subsequent
date result in a change of control of the Company.
<PAGE>38
OSO TECHNOLOGIES, INC.
The following table sets forth certain information regarding the
beneficial ownership of the OSO's Common Stock as of the date of this
Prospectus by (i) each person known to OSO to beneficially own 5% or
more of OSO's Common Stock, (ii) each director of OSO and (iii) all
directors and executive officers of OSO as a group. All information
with respect to beneficial ownership has been furnished to OSO by the
respective director, executive officer or 5% shareholder, as the case
may be.
Option Holder Number of Shares Exercise Price/Share Expire
Dr. H. K. Shamsunder 50,000 $1.00 3/00
Roger Frock 50,000 1.00 4/00
Vinod Roy 50,000 1.00 3/00
Vipin Sahgal 400,000 .10 8/02
William H. Dahlman 50,000 .10 5/00
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Owned (1) Common Stock (2)
Bharti Sahgal 600,000 13.6%
15 N. Beacon Street #704
Allston, MA 02134
Bharat Sahgal 600,000 13.6%
15 N. Beacon Street #704
Allston, MA 02134
Nitin Parikh & Family 525,000 11.9%
38 Fullerton Road
la Mirada, CA
Dr. Shamsunder & Family 250,000 5.7%
6028 William Bent Road
Hidden Hills, CA
Manoj Mukherjee & Family 760,000 17.2%
4634 Esparto Road
Woodland Hills, CA 91364
Ms. Padma Sahgal 500,000 11.3%
15103 Encanto Drive
Sherman Oaks, CA 91603
(1) To the Company's knowledge, each person has sole voting and sole
investment power with respect to the Shares shown, subject to community
property laws, where applicable.
(2) Rounded to the nearest one-tenth of one percent, based on
4,405,800 Shares of Common Stock outstanding.
Based on 11,000,000 shares to be outstanding after the merger.
CERTAIN TRANSACTIONS
Franks' Express Inc. was incorporated in Colorado on May 17, 1991. On
May 15, 1998, Franks' initial public offering was declared effective by
the Securities and Exchange Commission. Pursuant to this offering,
100,000 shares of common stock were offered at $1.00 per share on a
"best efforts, all or nothing basis." As a result of the public
offering, $100,000.00 was raised. This offering closed on May 15,
1998.
INFORMATION CONCERNING FRANKS'
Franks' has heretofore filed the following with the Commission
pursuant to the Securities Exchange Act of 1934, as amended:
(1) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998;
(2) Quarterly Report on Form 10-QSB for the quarterly period
ended March 31, 1999;
The above-mentioned reports are not incorporated by reference, but
copies may be obtained at the offices of the Securities and Exchange
Commission. (See "FURTHER INFORMATION.")
<PAGE>39
LEGAL MATTERS
An opinion as to the validity of the securities offered
hereby has been passed upon for Franks' by David M. Summers, 5670
Greenwood Plaza Boulevard, Suite 422, Englewood, Colorado 80111,
counsel to Franks'. No proceeds of Franks' initial public offering were
paid to David M. Summers.
EXPERTS
The financial statements of OSO included in this prospectus
have been audited by Oppenheim & Ostrick, Certified Public Accountants,
4256 Overland Avenue, Culver City, California 90230, independent
auditors, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. The
financial statements of Franks' for the years ended December 31, 1998,
December 31, 1997, December 31, 1996 included in this Prospectus have
been so included in reliance on the report of Janet Loss, 3525 South
Tamara Drive, Suite 120, Denver, Colorado 80237, Certified Public
Accountant, given on the authority of said firms as an expert in
accounting and auditing.
LITIGATION
Franks' knows of no litigation pending, threatened or
contemplated, or unsatisfied judgements against it, or any proceedings
in which it is a party. Franks' knows of no legal actions pending or
threatened or judgements entered against Franks' officers and directors
in their capacity as such.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Articles of Incorporation of Franks' provide indemnification
of directors and officers and other corporate agents to the fullest
extent permitted pursuant to the laws of Colorado. The Articles of
Incorporation also limit the personal liability of Franks' directors
to the fullest extent permitted by the Colorado Revised Statutes. The
Colorado Revised Statutes contain provisions entitling directors and
officers of Franks' to indemnification from judgments, fines amounts
paid in settlement and reasonable expenses, including attorney's fees,
as the result of an action or proceeding in which they may be involved
by reason of being or having been a director or officer of Franks',
provided said officers or directors acted in good faith and had no
reasonable basis to believe their conduct was not in the best interest
of the company or was illegal.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling Franks' pursuant to the foregoing provisions, or otherwise,
Franks' has been informed 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 Franks' of expenses incurred or paid by a director, officer
or controlling person of Franks' 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,
Franks' 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 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.
FURTHER INFORMATION
Franks' is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
will file periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such
periodic reports, proxy statements and other information filed by
Franks' can be inspected without charge at the Public Reference Room
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C.
20549 or at the Commission's web site: www.sec.gov. Copies of such
material can be obtained at prescribed rates upon request from the
Public Reference Section of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549. Franks' has filed with the Commission in
Washington, D.C., a Registration Statement under the Securities Act
with respect to the Common Stock offered by this Prospectus. This
<PAGE>40
Prospectus does not contain all of 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 Franks' and this offering,
reference is made to the Registration Statement, including the exhibits
filed therewith, copies of which may be obtained at prescribed rates
from the Commission at the public reference facilities maintained by
the Commission or at the Commission's web site: www.sec.gov.
Descriptions contained in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the Registration
Statement are not necessarily complete and each such description is
qualified by reference to such contract or document.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS - OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
Page
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Operations and
Accumulated Deficit F-3
Statement of Stockholders' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-14
UNAUDITED PRO FORMA FINANCIAL DATA - UNAUDITED
Pro Forma Financial Data F-15
Pro Forma Balance Sheet F-16
Pro Forma Statement of Income (Loss) F-17
<PAGE>41
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Oso Technologies, Inc.
(A Development Stage Company)
(A California Corporation)
Rancho Cucamonga, California
We have audited the accompanying balance sheets of Oso
Technologies, Inc. (A Development Stage Company) (A California
Corporation) as of March 31, 1999 and 1998 and the related
statement of operations, stockholders' deficit and cash flows for
the years ended March 31, 1999 and 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 audit.
We conducted the audits in accordance with generally accepted
auditing standards. These 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
the audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Oso Technologies, Inc. (A California Corporation) as of March
31, 1999 and 1998 and the results of it's operation and its cash
flows for the years ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company's significant
operating losses raise substantial doubt about its ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Oppenheim & Ostrick,
Certified Public Accountants
Culver City, California
May 28, 1999
F-1
<PAGE>42
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
BALANCE SHEETS
MARCH 31, 1999
</TABLE>
<TABLE>
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Current assets:
Certificate of deposit - pledged $ 0 $ 500,000
Inventory 236,388 0
Due from officer 5,879 0
Prepaid expenses 0 12,365
Deferred registration costs 38,250 0
Total current assets 280,517 512,365
Property & equipment (at cost) 119,904 65,600
Less accumulated depreciation (16,591) 0
Net depreciated value 103,313 65,600
Construction in progress 200,164 0
Property and equipment, net 303,477 65,600
Other assets:
Deposits 67,030 75,230
Total other assets 67,030 75,
$ 651,024 $ 653,195
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 10,642 $ 6,894
Line of credit - bank 0 500,000
Accounts payable 211,069 38,309
Accrued expenses 280,018 20,823
Income taxes payable 800 800
Contract payable 0 8,542
Customers deposit 11,060 0
Loan payable - related party 50,000 0
Loan payable - other 311,000 50,000
Total current liabilities 874,589 625,368
Stockholders' equity:
Common stock, par value $.00001, authorized
10,000,000 shares, issued and outstanding
4,187,500 and 1,762,500 42 18
Additional paid-in capital 1,161,527 594,051
Preferred stock, authorized 10,000,000 shares
issued and outstanding 1,250,000 shares in
1999, none in 1998 250,000 0
Accumulated deficit during the development stage (1,635,134) (566,242)
Total stockholders' equity (deficit) (223,565) 27,827
$ 651,024 $ 653,195
</TABLE>
See the accompanying notes and accountants' audit
report which are integral parts of this statement
F-2
<PAGE>43
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIODS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Net sales $ 0 $ 0
Cost of sales 0 0
Gross profit 0 0
Operating expenses 1,037,987 568,513
Operating loss (1,037,987) (568,513)
Other income (expense) (16,618) 3,071
Loss before taxes (1,054,605) (565,442)
Income taxes 800 800
Net loss $(1,055,405) $ (566,242)
Loss per share $ (.36) $ (.64)
Weighted number of shares outstanding 2,975,000 881,250
</TABLE>
See accompanying accountants' audit report and
notes which are integral parts of this statement
F-3
<PAGE>44
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Paid-in
Capital in
Common Stock Preferred Stock Dividend Excess Net Ending
Shares Amounts Shares Amounts Payable of Par Loss Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance 0 $ 0 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance of common
stock 1,200,000 12 0 0 0 527,807 0 527,819
Issuance of common
stock in exchange
for service 410,000 4 0 0 0 40,996 0 41,000
Issuance of common
stock in lieu of
bonus payment 2,500 0 0 0 0 250 0 250
Issuance of common
stock converted from
loan payable 150,000 2 0 0 0 24,998 0 25,000
Net loss, March 31,
1998 0 0 0 0 0 0 (566,242) (566,242)
Ending balance
March 31, 1998 1,762,500 18 0 0 0 594,051 (566,242) 27,827
Issuance of common
stock converted
from loan payable 550,000 6 0 0 0 379,994 0 380,000
Issuance of common
stock in exchange
for service 325,000 3 0 0 0 32,497 0 32,500
Issuance of common
stock in lieu of
compensation 1,550,000 15 0 0 0 154,985 0 155,000
Issuance of preferred
stock 0 0 1,250,000 250,000 0 0 0 250,000
Dividend 0 0 0 0 (13,487) 0 0 (13,487)
Net loss, March 31,
1999 0 0 0 0 0 0 (1,055,405) (1,055,405)
Ending balance
March 31, 1999 4,187,500 $ 42 1,250,000 $250,000 $(13,487) $1,161,527 $(1,621,647) $ (223,565)
</TABLE>
See accompanying accountants' audit report and
notes which are integral parts of this statement
F-4
<PAGE>45
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,055,405) $(566,242)
Non-cash expenses included in net income:
Depreciation 16,591 0
Issuance of common stock in exchange for
professional services 32,500 41,000
Issuance of common stock in lieu of
compensation 155,000 250
(Increase) decrease in:
Inventory (236,388) 0
Prepaid expenses 12,365 (12,365)
Deferred registration costs (38,250) 0
Deposits 8,200 (75,230)
Increase (decrease) in:
Accounts payable 172,760 38,309
Accrued expenses 245,708 20,823
Customer deposits 11,060 0
Income taxes payable 0 800
Net cash used by operating activities (675,859) (552,655)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property & equipment (254,468) (65,600)
(Increase) decrease in certificate of deposit 500,000 (500,000)
Issuance of common stock 0 527,819
Issuance of preferred stock 250,000 0
Net cash provided (used) by investing activities 495,532 (37,781)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) short-term borrowings-
contract payable (8,542) 8,542
Proceeds from (payments on) short-term borrowings-others 641,000 75,000
Proceeds from (payments on) short-term borrowings-
related party 50,000 0
Proceeds from (payments on) short-term borrowings-officer (5,879) 0
Proceeds from (payments on) short-term borrowings-bank (500,000) 500,000
Net cash provided by financing activities 176,579 583,542
Net decrease in cash (3,748) (6,894)
Cash, beginning of period (6,894) 0
Cash, end of period $ (10,642) $ (6,894)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 30,276 $ 3,071
Cash paid during the year for income taxes $ 800 $ 800
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Conversion of loan payable to common stock and
paid-in capital $ 380,000 $ 25,000
Dividend payable - preferred stockholder $ 13,487 $ 0
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>46
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(1) Description of Business:
Oso Technologies, Inc. (A Development Stage Company) (A California
Corporation) was incorporated as Water and Ice Systems, Inc.on November
27, 1996, however, operations did not start until April 1, 1997. The
Company changed its name from Water and Ice Systems, Inc. to its
current name on February 11, 1998. The Company entered into an
agreement with Franks Express, Inc. on May 7, 1999 to exchange shares
of common stock in which Oso Technologies, Inc. will own 90% of the
public company (Franks Express, Inc.) because under Rule 419 of the
Securities Act of 1933, as amended, which rule requires that the
shareholders of Frank's Express, Inc. reconfirm their investment after
having received a full prospectus describing the target acquisition
company. After the transaction is reconfirmed by the shareholders of
Frank's Express, Inc. and the transaction is closed, the name of the
public company will be changed to Oso Technologies, Inc.
The deferred registration costs related to Oso Technologies, Inc. (A
Development Stage Company) is estimated at $38,250 and will be applied
to paid-in capital after the completion of the post effective
amendment related to the purchase of the Company by Frank Express, Inc.
The Company engages in the business of marketing, manufacturing and
selling water dispensers to water bottling and distribution companies
worldwide. The Company plans to concentrate its sales efforts in the
first few years with commercial distributors and then later in the
residential market.
Activities from the date of inception to March 31, 1999 have been
directed primarily to developing the five gallon and plumbed - in point
of use water dispensers.
Since inception, Oso Technologies, Inc. (A Development Stage Company)
has lost money from developing operations, and has incurred negative
cash flows. The success of Oso Technologies, Inc.'s future operations
will be dependent primarily upon the Company's ability to develop brand
loyalty and receive the necessary equity funding to execute its
business plan.
Reference is made to the risk factors discussed in this post effective
amendment.
(2) Summary of significant accounting policies:
Development Stage Company:
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts to establishing a business engaging in
the design, manufacturing and sales of water dispensers to water
bottlers and distributors.
See accompanying accountants' audit report
F-6
<PAGE>47
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(2) Summary of significant accounting policies (cont'd):
Development Stage Company (cont'd):
Operating losses have created negative working capital and
stockholders' deficit. The Company is currently negotiating with an
investment banking firm to place approximately $900,000, net of fees,
in preferred stock plus up to $1,000,000 credit enhancement line, which
will be repaid from accounts receivable, an inventory line of credit
when operations begin and an equipment line of credit. Without this
equity and debt funding, the Company would find it difficult being a
going concern. The financial statements have been prepared on a going
concern basis.
Revenue Recognition:
The Company's primary source of revenue will be from water bottlers and
distributors. Revenues are recognized as goods are shipped. The
Company recognizes revenue earned from distributors in accordance with
its customer purchase orders.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and cash equivalents:
Cash equivalents consist of money market funds or other highly liquid
investments with original maturities of three months or less.
Property and equipment:
Property and equipment are stated at cost, net of accumulated
depreciation and amortization. Property and equipment are depreciated
on a straight-line basis over estimated useful lives of five years.
Depreciation expense for the years ended March 31, 1999 and 1998, was
$16,591 and none, respectively, and is included in the operating
expenses in the accompanying statements of operations.
In accordance with Statements on Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, the
Company capitalizes costs incurred in the process of creating software
for internal use. The costs capitalized by the Company represent the
payroll and payroll-related costs for employees who are directly
associated with and who devote time to the internal-use computer
software project, to the extent of the time spent directly on the
project. Capitalized software costs are amortized on a straight-line
basis over an estimated useful life of two years. As of March 31,
1999, the adoption of this statement had no impact on the financial
position or results of operations.
See accompanying accountants' audit report
F-7
<PAGE>48
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(2) Summary of significant accounting policies (cont'd):
Accounting for long-lived assets:
The Company accounts for long-lived assets in accordance with Statement
of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ("SFAS No. 121"). SFAS No. 121 establishes financial
accounting and reporting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. Management does not
believe there is any impairment of the carrying value of its long-lived
assets as of March 31, 1999.
Income taxes:
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to periods in
which the differences are expected to affect taxable income. A
valuation allowance is established when necessary to reduce deferred
tax assets to the amount more likely than not to be realized. Income
tax expense is the tax payable or refundable for the period plus or
minus the change during the period in deferred tax assets and
liabilities.
New accounting pronouncements:
In June 1997, the Financial Accounting Standards Board ("FASB")issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS No. 130"). SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
adoption of this statement has had no impact on the Company's results
of operations, financial position or cash flows.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures About Segment of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for public business enterprises to report information about
operating segments in annual financial statement and requires that
those enterprises report selected information about the operating
segments in interim financial reports issued to shareholders. This
statement is effective for financial statements for periods beginning
after December 15, 1997 and need not be applied to interim periods in
the initial year of application. Comparative information for earlier
years presented is to be restated. The adoption of this statement has
had no impact on the Company's results of operations, financial
position or cash flows.
See accompanying accountants' audit report
F-8
<PAGE>49
OSO TECHNOLOGIES, INC.
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(2) Summary of significant accounting policies (cont'd):
New accounting pronouncements (cont'd):
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded on other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value.
This statement is effective for financial statements for all fiscal
quarters of all fiscal years beginning after June 15, 1999. The
Company does not expect the adoption of this standard to have a
material impact on the Company's results of operations, financial
position or cash flows.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, Reporting the Costs of Start-Up
Activities ("SOP 98-5") requires that all non-governmental entities
expense the costs of start-up activities, including organization costs,
as those costs are incurred. SOP 98-5 is effective for financial
statements for fiscal years beginning after December 15, 1998.
Management has reviewed the provisions of SOP 98-5 and does not believe
adoption of this standard will have a material effect on the Company's
results of operations, financial position or cash flows.
Fair value of financial instruments:
The carrying amounts of cash and equivalents, accounts receivable and
accounts payable approximate fair value because of the short-term
maturity of these financial instruments.
(3) Basis of presentation and considerations related to continued
existence:
The Company's financial statements have been presented on the basis it
is a going concern which contemplates that the orders to ship
approximately $345,000 in the June and July plus the preferred stock
and credit enhancement financing arrangement will bring in enough
revenue and profitability to regain financial liquidity in the fiscal
year ending March 31, 2000. The preferred stock and credit enhancement
transaction is subject to due diligence by the investment firm
arranging the funding. The Company has raised since April 1, 1999 an
additional $271,500 in common stock representing 174,300 shares issued.
(4) Certificate of deposit - pledged and related line of credit - bank:
The above deposit was pledged against a line of credit totaling
$500,000 during fiscal year ended March 31, 1998. The credit line was
repaid in the first quarter of fiscal year ended March 31, 1999.
See accompanying accountants' audit report
F-9
<PAGE>50
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(4) Certificate of deposit - pledged and related line of credit - bank
(cont'd):
The Primary stockholder secured the line of credit loan with Sanwa Bank
by granting a security interest in the certificate of deposit loan.
This transaction was considered a capital contribution on behalf of the
above stockholder.
(5) Inventory:
The inventory of $236,388 consists of raw materials and parts which
will be used in the assembly of the finished product.
(6) Property and equipment:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Machinery and equipment $ 64,608 $ 26,755
Computer equipment 16,731 7,134
Office equipment 24,093 19,600
Tooling 1,565 0
Leasehold improvements 12,907 12,111
$ 119,904 $ 65,600
</TABLE>
Depreciation expense for Oso Technologies, Inc. (A Development Stage
Company) (A California Corporation) was $16,591 and none for the years
ended March 31, 1999 and 1998 respectively.
(7) Construction in progress:
The breakout of the above consist of the following:
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Tooling $ 135,695 $ 0
Leasehold improvements 64,469 0
$ 200,164 $ 0
</TABLE>
The tooling is part of the process to make the product. The leasehold
improvements were the costs of electrical and plumbing work to get the
manufacturing facility ready for production.
(8) Accrued expenses:
Accrued expenses consists of the following:
<TABLE>
<S> <C>
Dividends payable - preferred stock $ 13,487
Interest - loans payable 20,900
Deferred registration cost payable 38,250
Wages 8,262
Payroll taxes 99,872
Rent 98,356
Miscellaneous 891
$ 280,018
</TABLE>
See accompanying accountants' audit report
F-10
<PAGE>51
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(9) Loans payable - related party:
Loans payable is to a member of the Board of Directors and is payable
no later than July 25, 1999, interest only is payable every month at
10%.
(10) Loans payable - others:
The loans payable others are loans made in fiscal year ended March 31,
1999 and 1998 from individuals. The above loans are payable upon
demand, and bear interest at the rate of 10% per annum. If the
Company receives additional funding, all of the loans payable may have
to be subordinated until the new funding is repaid.
(11) Common and preferred stock:
Common stock:
The authorized common stock is 10,000,000 shares at $.00001 par value.
Common stock issued at the balance sheet dates are 4,187,500 and
1,762,500 at March 31, 1999 and 1998 respectively.
Preferred stock:
The authorized preferred stock is 10,000,000 shares. Issued and
outstanding at March 31, 1999 is 1,250,000 preferred shares
representing a $250,000 investment at 12% per annum dividend rate.
(12) Earnings per share:
The Company has computed net income (loss) per share in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98 ("SAB No.
98"). Under the provisions of SFAS No. 128 and SAB No. 98, basic net
income (loss) per common share ("Basic EPS") is computed by dividing
net income (loss) by the weighted average number of common shares
outstanding. Diluted net income (loss) per common share ("Diluted
EPS") is computed by dividing net income (loss) by the weighted average
number of common shares and dilutive common share equivalents then
outstanding using the treasury-stock method.
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Net income (loss) $(1,055,405) $(566,242)
Less preferred stock dividend (13,487) 0
Net income (loss) available for
common shareholders - basic $(1,068,892) $(566,242)
Weighted average common shares
outstanding - basic 2,975,000 881,250
</TABLE>
See accompanying accountants' audit report
F-11
<PAGE>52
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(13) Income tax expense:
The Company as a result of losses from operations has carry forwards of
$566,242 and $1,055,405 maturing in fiscal year ending 2013 and 2014,
respectively.
The only taxes required were for the State of California. There was no
deferred tax asset recorded for timing differences.
(14) Year 2000 Contingency:
The Company is aware of the issue associated with the programming code
in existing computer systems as the year 2000 approaches. The year
2000 problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two digit
year value to "00". The issue is whether computer systems will
properly recognize date-sensitive information when the year changes to
2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail. The Company is
reviewing both its information technology and its non-information
technology systems to determine whether they are year 2000 complaint,
and to date the Company has not identified any material systems, which
are not year 2000 complaint. The Company has not made a material
expenditure to address the year 2000 problem and at present does not
anticipate that it will be required to make any such material
expenditure in the future.
The Company has initiated formal communications with all significant
suppliers and service providers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate the
year 2000 problem. Although the Company has received verbal assurances
of year 2000 compliance from certain of such third parties, the Company
has not yet received written assurances of year 2000 compliance from
third parties with whom it has relationships. The Company believes its
operations will not be significantly disrupted even if third parties
with whom the Company has relationships are not year 2000 compliant.
In the event that the Company's suppliers are unable to provide
sufficient quantities of materials or goods to the Company as a result
of their failure to be year 2000 compliant, the Company believes that
it can obtain adequate supplies of materials and goods at comparable
prices from other sources.
See accompanying accountants' audit report
F-12
<PAGE>53
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(15) Commitments:
The Company has operating leases minimum future payments under the
rental lease for its head quarters and manufacturing facility for the
years ending March 31, are:
2000 $ 124,212
2001 127,944
2002 131,784
2003 90,940
$ 474,880
The above lease is a triple net lease.
(16) Subsequent events:
Equity transactions:
In the month of April and May 1999, the Company received cash totaling
$271,500 for 174,300 of common stock shares issued.
The Company on May 7, 1999, entered into an agreement with Frank's
Express, Inc. for a tax-free common stock exchange. The transaction is
considered a purchase under accounting principles. There will be
goodwill based on the estimated discounted cash flow of the next three
years earnings and that value will appear in the combined pro forma
financial statements of the two entities. The transaction requires the
purchaser (Frank's Express, Inc.) to acquire all of the shares of
common stock of Oso Technologies, Inc. shares outstanding in exchange
for issuance to the common stock stockholders of the sellers (Oso
Technologies, Inc.) and aggregate of 9,900,000 new shares of Frank's
Express, Inc. After the transaction, Frank Express, Inc. will change
its name to Oso Technologies, Inc. and the selling shareholders will
own 9,900,000 shares of the 11,000,000 shares outstanding or 90% of
Frank's Express, Inc. The transaction calls for receiving
approximately $93,000 in cash and assuming $54,000 in related party
transactions and other expenses of the primary shareholders of Frank's
Express, Inc. In no event shall the liabilities assumed exceed $65,000.
The Company has entered into a term sheet for the sale of preferred
stock where it will receive $900,000 net proceeds of a $1,000,000
funding for 1,000,000 shares of preferred stock. The dividend rate is
12% per annum and upon funding of the transaction the preferred
stockholders will own 10% of the Company on a fully diluted basis. For
each additional full year the money is not repaid, the preferred
shareholders increase their ownership an additional 10%. After three
years the preferred stockholders will have 30% total ownership of the
Company which can be converted into common stock on a fully diluted
basis.
The preferred stock financing group will receive warrants to purchase
500,000 shares of common stock at a strike price of $2 per share
expiring three years from exercising this agreement.
See accompanying accountants' audit report
F-13
<PAGE>54
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(A CALIFORNIA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(16) Subsequent events (cont'd):
The preferred shareholders will receive $5,000 in monthly management
fees until the preferred stock financing is repaid. The shareholder
will also have one board seat for each 10% ownership of the Company.
Also the existing loan debt of individuals and related parties are
subordinated until the financing is repaid. Furthermore, the preferred
stock transaction calls for receiving warrants to purchase 300,000
common shares from the major stockholder and officer of the Company at
a price $.10 per share expiring three years from the date of the
agreement.
The entire preferred stock transaction is contingent upon the preferred
stockholders group representatives due diligence after which the final
terms and conditions will be finalized including the schedule for
specific funding amounts and dates.
The Board of Directors approved in April, 1999, the hire of a director
of national sales and marketing at a salary of $84,000 per year plus
100,000 shares vested in equal amounts over the first three year period
of the employment.
The Board of Directors approved in April, 1999 options for 235,000
common stock shares to four shareholders at $.10 to $1.00 per share
exercisable over a period not to exceed two years. These options were
for investors of which 50,000 shares are for a board member and is
considered a related party transaction.
See accompanying accountants' audit report
F-14
<PAGE>55
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined balance sheet has
been prepared to present the combined financial position of Oso
Technologies, Inc. (A Development Stage Company) and Frank's Express,
Inc. as though the purchase transaction involving the exchange for
common stocks had taken place on March 31, 1999. After the
transaction, the name of the Company will be changed to Oso
Technologies, Inc. from Frank's Express, Inc.
The Company, Frank's Express, Inc., a blank check entity reporting
under the Securities Act of 1934 as amended, entered into an agreement
to acquire on May 7, 1999 subject to 80% shareholder approval of
Frank's Express, Inc. common stock outstanding of Oso Technologies,
Inc. issuing 9,900,000 shares of new common stock to Oso Technologies,
Inc. shareholders. As a result of the above tax free transaction, Oso
Technologies, Inc. will own 90% of the then outstanding common stock of
Frank's Express, Inc. 11,000,000 common stock shares. The Pro forma
balance sheet will include an estimate of the shareholder value of Oso
Technologies, Inc. based on the discounted cash flow projection over
the next three years and the Company's ability to receive adequate
financing.
The purpose of the pro forma adjustments is to reflect the change in
value and capitalization of the acquisition with appropriate changes in
earnings per share.
The following unaudited, pro forma, condensed combined financial
statements of operations for the twelve months ended March 31, 1999 had
taken place as if the acquisition was completed on April 1, 1998.
The unaudited pro forma financial statements should be read in
conjunction with financial statement and notes included elsewhere
herein.
The following unaudited pro forma financial statements are necessary
indicative of the results of combine operations that would have
occurred had the acquired been effective April 1, 1998 or the future
results of the combined companies. All material non-recurring charge
are fully disclosed in the pro form financial statements.
F-15
<PAGE>56
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED PRO FORMA BALANCE SHEET
MARCH 31, 1999
OMIT $(000)
<TABLE>
<CAPTION>
Pro Forma
Oso Frank's Adjustments Pro Forma
Technologies Express DR CR As Adjusted
<S> <C> <C> <C> <C> <C>
Assets:
Current assets $ 281 $ 98 $ 0 (1) 54 $ 325
Property and
equipment 303 0 (3)3,000 (4) 600 2,703
Goodwill 0 0 (3)2,000 (4) 200 1,800
Other assets 67 0 0 0 67
Total assets $ 651 $ 98 $5,000 $ 854 $4,895
Liabilities:
Current liabilities $ 875 $ 54 (1) 54 $ 0 $ 875
Stockholders' equity:
Preferred stock 250 0 0 0 250
Common stock 0 5 (2) 50 55
Paid-in capital 1,161 68 (2)1,161 (3)5,000 5,018
Accumulated deficit (2) 50
during the
development stage (1,635) (29) (4) 800 (2)1,161 (1,303)
Total (224) 44 0 0 4,020
$ 651 $ 98 $2,065 $6,211 $4,895
</TABLE>
(1) The Company, Oso Technologies, Inc. (A Development Stage Company)
has approximately $93,000 in escrow cash and estimated liabilities of
$54,000 that will be assumed and paid off at the settlement date.
(2) As a result of the exchange of common stocks the common stock will
be capitalized at 11,000,000 shares at $55,000 or par value of $.05 per
share. Also as a result of the transaction, the paid-in capital and
accumulated deficit during the development stage of Oso Technologies,
Inc. is adjusted to reflect the purchase by Frank's Express, Inc.
(3)The value of the assets of Oso Technologies, Inc. based on a
valuation on management's cash flow projections for the next three
years assuming adequate financing and paying off all loan payables and
preferred stock is estimated at $5,000,000; allocated 60% to the
drawings for the proprietary tooling to make the product and 40% to
goodwill based on cash flow projections.
(4) The tooling of $3,000,000 will be amortized over five years and
the goodwill of $2,000,000 will be amortized over ten years. The
annual amortization for the tooling and goodwill is $600,000 and
$200,000 respectively.
F-16
<PAGE>57
OSO TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA STATEMENT OF INCOME (LOSS)
YEAR ENDING MARCH 31, 1999
OMIT $(000)
<TABLE>
<CAPTION>
Oso Frank's Pro Forma Pro Forma
Technologies Express Adjustments As Adjusted
<S> <C> <C> <C> <C>
Operating expenses $(1,038) $ (4) $(1)(800) $(1,842)
Interest expenses (16) (1) 0 (17)
Loss before income
taxes (1,054) (5) (800) (1,859)
Provision for taxes (1) 0 0 (1)
Net loss $(1,055) $ (5) $ (800) $(1,860)
Loss per share - Basic $ (.17)
Weighted number of shares outstanding - Basic 11,000,000
</TABLE>
Amortization of goodwill and tooling as a result of the assets values
at the time of the purchase transactions of exchanging common stocks as
described in previous sections of this post effective amendment.
F-17
<PAGE>57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 7-3-101.5 of the Colorado Revised Statutes enables a Colorado
corporation to indemnify its officers, directors, employees and agents
liabilities, damages, costs and expenses for which they are liabile in
their Official Capacities (as defined by this statute) if they acted in
good faith and had no reasonable basis to believe their conduct was not
in the best interest of the Registrant or was illegal. Article IX of
Registrant's Articles of Incorporation limits the liability of
directors to the fullest extent provided by Colorado law. Article V of
the Registrant's Bylaws provides indemnification to officers,
directors, employees and agents to the fullest extent provided by
Colorado law. The Form of Selected Dealers Agreement attached hereto as
Exhibit 1.1 provides indemnification to officers and directors of the
Registrant under certain conditions.
Item 25. Other Expenses of Issuance and Distribution.
SEC Registration Fee....................$30
Natioanl Association of
Securities Dealers, Inc. Fee ....... 100
State qualification expenses
(including legal fees) ............. 500*
Printing expenses ..................... 300*
Legal fees and expenses .............25,000*
Auditors' fees and expenses ......... 2,500*
Transfer agent and registrar fees ... 1,200*
NASDAQ listing fee .................. 6,100*
Miscellaneous expenses ............ .. 270*
Total ...............................36,000 *
Estimated
Item 26. Recent Sales of Unregistered Securities. Not Applicable.
Item 27. Exhibits
Exhibit No.
1.1 Selected Dealers Agreement - incorporated by reference to Form SB-2
1.2 Escrow Agreement -incorporated by reference to Form SB-2
3.1 Restated and Amended Articles of Incorporation - incorporated by
reference to Form SB-2
3.2 By-Laws - incorporated by reference to Form SB-2
3.3 Agreement Among Officers, Directors and 10% Shareholders -
incorporated by reference to Form SB-2.
3.4 Agreement of Merger between the Company and OSO Technologies, Inc.
5.0 Opinion of David M. Summers, Esq. regarding legality - incorporated
by reference to Form SB-2
23.1 Consent of John Holt Smith, Esquire
24 Consent of Oppenheim & Ostrick, Certified Public Accountants
99.1 Subscription Agreement- incorporated by reference to Form SB-2
99.2 Promissory Notes to Principal Shareholder - incorporated by
reference to Form SB-2.
99.3 Consulting Agreement and related Termination Agreement -
incorporated by reference to Form SB-2.
Decription of Exhibits
1.1 Form of Selected Dealers Agreement
1.2 Form of Escrow Agreement
3.1 Restated and amended Articles of Incorporation
3.2 By-Laws
3.3 Agreement Among Officers, Directors and 10% Shareholders
3.4 Agreement of Merger between the Company and OSO Technolgoies, Inc.
5.1 Opinion of David M. Summers, Esq. regarding legality
23.1 Consent of David M. Summers, Esq.
23.2 Consent of Janet Loss, C.P.A., P.C.
27 Financial Data Schedule
99.1 Subscription Agreement
99.2 Promissory Notes to Principal Shareholder
99.3 Consulting Agreement and related Termination Agreement
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1993 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
<PAGE>59
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 small business issuer of expenses
incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business
issuer 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 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.
The small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under the Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it
effective.
(2) File, during any period in which the Company offers or sells
securities, a post-effective amendment to the registration statement
to: (i) Include any prospectus required by section 10(a)(3) of the
Securities Act. (ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement; and (iii)Include any
additional or changed material information on the plan of distribution.
(3) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(4) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(5) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act (Sections 230.424(b)(1), (4)
or 230.497(h)) as part of this registration statement as of the time it
was declared effective. (
6) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered
in the registration statement, and that offering of the securities at
that time as the initial bonafied offering of those securities.
<PAGE>60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized
this Amendment No. 7 to its Registration Statement to be signed on its
behalf of the undersigned, in the City of Englewood, State of Colorado,
on July 21, 1999.
Franks' Express, Inc.
By/Charles Burton Charles Burton, President
In accordance with the requirements of the Securities Act of 1933, this
Post Effective Amendment No. 1 to Form SB-2 Registration Statement was
signed by the following persons in the capacities and on the dates
indicated.
Date: July 21, 1999
/s/Charles Burton Charles Burton, President, Chief Executive Officer,
Principal Financial Officer and Director
Date: July 21, 1999
/s/Roger D. Jones Roger D. Jones, Secretary and Director
Date: July 21, 1999
/s/Sandra S. Steinberg Sandra S. Steinberg, Treasurer, Principal
Accounting Officer and Director
JOHN HOLT SMITH
SMITH & ASSOCIATES
1925 Century Park East
Los Angeles, CA 90067
Telephone (310) 277-1250
July 20, 1999
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Dear Sirs:
Re: CONSENT OF COUNSEL TO USE OF NAME IN POST-EFFECTIVE
AMENDMENT TO THE REGISTRATION STATEMENT ON FORM SB-2 OF FRANKS'
EXPRESS, INC.
I am securities counsel for the above mentioned Company and I have
prepared the post-effective amendment to the registration statement on
Form SB-2. I hereby consent to the inclusion and reference to my name
in the Registration Statement on Form SB-2 for Franks' Express, Inc.
Yours very truly,
/s/John Holt Smith
---------------------
John Holt Smith
INDEPENDENT AUDITOR'S CONSENT
We do hereby consent to the use of our report dated May 28, 1999 on the
financial statements of OSO Technologies, Inc. included in
and made part of the post-effective amendment to the registration statement of
Franks' Express, Inc. dated July 21, 1999
July 21, 1999
/s/ Oppenheim & Ostrick,
Certified Public Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1998
<CASH> 97,524
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,635
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 97,635
<CURRENT-LIABILITIES> 53,633
<BONDS> 0
<COMMON> 5,010
0
0
<OTHER-SE> (38,992)
<TOTAL-LIABILITY-AND-EQUITY> (97,635)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (875)
<INCOME-PRETAX> (2,764)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,764)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,764)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
