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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported ) October 4, 2000
COMMISSION FILE NUMBER: 0-29346
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FRM NEXUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3754422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
271 NORTH AVENUE, NEW ROCHELLE, NY 10801
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 636-3432
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ITEM 5. OTHER EVENTS
On October 4, 2000 the Board of Directors of the registrant approved
the written agreement dated as October 2, 2000 by and among the registrant and
the persons who will purchase 34,200,000 shares of common stock, par value $.001
per share, of the registrant after the distribution of the shares of MFC
Development Corp. expected to be made on November 30, 2000 to the shareholders
of the registrant. That agreement (herein the "Spin-Off Agreement") was the
subject of a Letter of Intent dated August 17, 2000 which was reported in the
registrant's Current Report (Form 8-K) dated August 30, 2000.
MFC Development Corp. was incorporated in the State of Delaware on May
18, 1990 under the name of PSI Food Services Corp, which has been a wholly-owned
subsidiary of the registrant since November 1993. That corporation was the food
services division of the registrant, consisting of two subsidiaries, Wendclark,
Inc. and Wendcello Corp. which operated 17 Wendy's Restaurants until the food
service division was discontinued on June 20, 2000. On May 14, 1999, the
outstanding capital stock of Wendclark, Inc. was sold for $975,000 in cash and
on June 20, 2000 the outstanding capital stock of Wendcello Corp. was sold for
$1,575,000 in cash. Gains of $96,303 and $381,112 respectively were recorded on
said sales. The results of operations of both subsidiaries have been classified
as discontinued operations and prior periods have been restated in the
registrants 10-Q report for the six months ended August 31, 2000, dated
September 28, 2000.
As of the close of business on August 31, 2000, the registrant assigned
to its wholly-owned subsidiary, MFC Development Corp., all of its assets (except
$10,000 in cash) subject to all of its liabilities as of that date in exchange
for additional shares of common stock to bring the registrant's ownership to
1,800,000 shares of common stock, par value $.001 per share, constituting all of
the issued and outstanding stock of MFC Development Corp. There are also
1,800,000 shares of the registrant's common stock issued and outstanding. The
Board of Directors of the registrant has adopted resolutions approving the
distribution of the shares of common stock it owns in MFC Development Corp. as
described in its Form 8K Report dated August 30, 2000. MFC Development Corp. has
filed with the Securities and Exchange Commission a Form 10 Application for
Registration of its common stock pursuant to Section12(g) of The Securities
Exchange Act of 1934, dated September 29, 2000, which may become effective on or
about November 30, 2000.
Accordingly on November 30, 2000, or such later date as the
registration of the common stock of MFC Development Corp. shall have become
effective (the "distribution date") the registrant shall distribute to its
shareholders one (1) share of common stock of MFC Development Corp. for each one
(1) share of common stock of the registrant held by its shareholders at the
close of business on November 1, 2000 (the record date). Therefore, on the
distribution date the shareholders of the registrant together will own 1,800,000
shares of both the registrant and MFC Development Corp. The registrant will not
continue to own any shares of MFC Development Corp. after the distribution date
and MFC Development Corp will own no shares of the registrant.
MFC Development Corp has filed its Form 10 Application to be a
reporting company and expects that its common stock will be accepted for trading
on the NASDAQ Bulletin Board when the registration becomes effective. Until that
time the registrant's shares will be traded on NASDAQ
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Bulletin Board (symbol FRMO together) with the MFC shares on a when issued
basis. When the MFC stock trades on its own, the registrant's stock will be
quoted and sold ex the MFC distribution.
The shares of MFC Development Corp. to be received by the shareholders
of the registrant on the distribution date will not be taxable as a dividend
distribution because the registrant will not have accumulated earnings and
profits on that date, nor will it have earnings and profits in the current
fiscal year. Shareholders' basis in the shares of MFC Development Corp will
equal the market value of the shares received by the shareholders and the
Company will inform shareholders of that market value by January 31, 2001.
Shareholders' basis in the shares of the registrant will be reduced, though not
below zero, by an amount equal to the market value of the shares of MFC
Development Corp. received. In the event the market value of the shares so
received exceeds the basis of a shareholder's stock of the registrant, the
excess would be treated as capital gain on the distribution date.
The Board of Directors of the registrant on October 4, 2000 approved
the Certificate of Amendment of the Certificate of Incorporation which, with the
expected written consent of a majority of its shareholders, will be filed before
the distribution date in order to change the corporate name to "FRMO Corp." and
increase its authorized capital stock to 90,000,000 shares of common stock, with
a par value of $.001 per share and 2,000,000 shares of preferred stock, with a
par value of $.001 per share. There are no preferred shares outstanding. The
1,800,000 shares of common stock of the registrant after the effective date of
the amendment will be 1,800,000 shares of common stock of FRMO Corp of the par
value of $.001 per share. It will not be necessary for shareholders to exchange
their present certificates for new certificates until they are surrendered in
connection with a sale or other transfer.
After the 1,800,000 shares of MFC Development Corp have been
distributed to the registrant's shareholders on the distribution date, the
registrant, as renamed FRMO Corp, will have no subsidiaries, $10,000 in assets,
no liabilities and 1,800,000 shares of common stock, outstanding. If the
Spin-Off Agreement is consummated after the distribution date, it provides for a
total of 34,200,000 shares of common stock of FRMO Corp to be issued as follows:
(i) 28,800,000 shares of common stock of FRMO Corp. will be issued to
Peter Doyle, as Voting Trustee of 8.1% of the issued and outstanding
shares of Kinetics Asset Manage ment Inc. ("Kinetics") and Murray Stahl
(the "Stahl Bregman Group") for $2,880,000, payable as set forth below.
The Stahl Bregman Group includes Murray Stahl, Steven Bregman, John
Meditz, Peter Doyle, Catherine Bradford, Thomas C. Ewing and Katherine
Ewing, who will be in control of the registrant and are referred to
herein as the "FRMO Control Group". The 28,800,000 shares will be
issued to the Stahl Bregman Group at the Closing but will be held in
escrow and delivered as paid at the rate of ten cents ($.10) per share.
The Stahl Bregman Group is obligated to pay to FRMO Corp. the after tax
amount (fixed at 54% of the dividend) of all dividends they receive
from Kinetics until the total of $2,880,000 has been paid. Presently
those dividends are in the range of $1,000,000 per annum ($540,000
after taxes) and as received (presently monthly) they must be paid to
FRMO Corp in exchange for which shares of FRMO Corp. will delivered by
the escrow agent
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at the rate of $.10 per share. Said installment payments may be higher
or lower than the aforesaid rate depending on future dividends. The
Stahl Bregman Group may make other payments in addition each month at
its discretion but the payment based on the Kinetics dividend shall be
obligatory until the fixed purchase is paid. The members of the Stahl
Bregman Group have no obligation other than to pay the net dividends
from Kinetics until the fixed purchase price is paid. The Stahl Bregman
Group agrees that it will not divest itself of any part of its Kinetics
shares or change the character of its ownership so as to reduce the
pro-rata share of the dividends it currently receives from Kinetics
without, as a condition thereof, paying toward the fixed purchase price
of its FRMO shares the after-tax proceeds of that part divested, as if
the divestment had not occurred.
(ii) 3,600,000 shares of common stock of FRMO Corp. will be issued to
Lestar Partners, LLC, ("LPC") a New York Limited Liability Company
owned by Lester Tanner, President and a director of the registrant,
together with members of his family, for $360,000 payable as set forth
below. The 3,600,000 shares will be issued to LPC at the Closing but
will be held in escrow and delivered as paid at the rate of ten cents
($.10) per share. LPC is obligated to pay to FRMO Corp in cash an
amount equal to 12 1/2% of each payment made by the Stahl Bregman Group
until the purchase price of $360,000 is paid.
(iii) 1,800,000 shares of common stock of FRMO Corp will be issued to
Lawrence J. Goldstein at the Closing for $18,000 payable at the
Closing. Mr. Goldstein is the General Partner of Santa Monica Partners,
LP, a private fund which owns 200,000 shares of common stock of the
registrant.
If and when the Closing of the Spin-Off Agreement takes place the Stahl
Bregman Group can (and is expected to), by written consent, elect a new Board of
Directors of FRMO Corp. which will be able to elect all the officers of the
corporation including Murray Stahl as Chairman, Chief Executive Officer, and
Steven Bregman as President, Chief Operating Officer.
MURRAY STAHL is Chairman and a co-founder of Horizon Asset Management,
Inc. He is the Co-Portfolio Manager of the Small Cap Opportunities Portfolio.
Prior to founding Horizon, Murray Stahl was with Bankers Trust Company for 16
years as a portfolio manager and research analyst, managing $600 million of
individual trust and institutional client assets. As the senior fund manager, he
directed the investments of three of the bank's Common Trust Funds, the Special
Opportunity, Utility and Tangible Assets Funds. Murray Stahl also served as a
member of the Equity Strategy Group as well as the Investment Strategy Group,
which established asset allocation guidelines for the Private Bank. Mr. Stahl
was also deeply involved in new product development.
STEVEN BREGMAN co-founded Horizon Asset Management, Inc. in 1994 and is
currently its President. Horizon is a New York State based research and
investment management firm and Mr. Bregman's primary duties include analysis of
business enterprises small and large for equity investment. From 1987 until he
started Horizon in 1994 Steven Bregman was an Investment Officer in Bankers
Trust Company's Private Clients Group, where he managed in excess of $600
million of
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equity and fixed income assets. At the Bank he was one of a five manager group
responsible for managing the bank's largest individual relationships and for
setting equity investment guidelines for the Private Bank. Steven Bregman served
as a member of the Special Situations Equity Strategy Group and served in a
variety of new product development projects. He has his BA degree in Economics
from the City University of New York.
Kinetics, the dividends from which will be the source of the Stahl
Bregman Group's payment for its shares of FRMO Corp., is an S. Corporation
registered under the Investment Advisers Act of 1940 and derives its income
principally from advisory fees for services to several mutual funds, including
The Internet Fund.
If the Spin-Off Agreement is consummated, Lawrence J. Goldstein has
agreed with FRMO Corp. to have one of its officers, selected by FRMO Corp,
consult with Goldstein in connection with his management of Santa Monica
Partners, LP, a private investment fund, for up to 4.5 hours in any calendar
month for which FRMO Corp. will receive around $1,800 per month in calendar year
2001 and higher or lower amounts to be calculated in subsequent years.
Each of the proposed purchasers of the 34,200,000 shares of FRMO Corp.
common stock has represented that the purchase will be for investment, for the
purchaser's account and not with a view to distribution. The certificates will
contain an appropriate legend to that effect. Each of the said purchasers, who
will be an officer, director or 10% shareholder of FRMO Corp. at the time of the
Closing, has agreed to sign a Sale Restriction and Confidentiality Agreement
when the Closing of the Spin-Off Agreement takes place. The business experience
of the purchasers who will be part of the management of FRMO Corp. has been in
financial risk management including analysis and research of public companies as
well as identification of companies in early stages of promising business
strategies. FRMO Corp's continuing business will utilize that experience but its
operations will not fall within the definition of an investment company so as to
require it to register under the Investment Act of 1940.
All statements herein that are not historical facts, including but not
limited to statements regarding the listing of MFC Development Corp. on NASDAQ
Bulletin Board, sale of new FRMO common stock pursuant to the Spin-Off
Agreement, the proposed Closing of that Agreement after the distribution date,
the future FRMO Control Group, the proposed new officers of FRMO Corp. and its
continuing business after the distribution date, are based on current
expectations. These statements are forward looking in nature and involve the
risk that the listing may not occur and the Agreement with the Stahl Bregman
Group may not be consummated in the manner described in this Report, or at all.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
FRM NEXUS, INC.
(Registrant)
Date: October 19, 2000 By: /s/ LESTER J. TANNER
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Lester J. Tanner, President
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