<PAGE>
As filed with the Securities and Exchange Commission on July 18, 1996
(Registration No. 33-85396)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
POST EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
ON
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THREE-L ENTERPRISES, INC.
(Exact name of Registration specified in charter)
DELAWARE 6770 72-1265159
(State of Incorporation) (Primary Industrial (I.R.S. Employer
Classification Code) I.D. Number)
1109 ANDREWS
METAIRIE, LOUISIANA 70005
TEL: (504) 831-8760
(Address, including zip code of principal place of
business and telephone number, including area
code of Registrant's principal executive offices.)
HERMAN K. WATSKY
1109 ANDREWS
METAIRIE, LOUISIANA 70005
TEL: (504) 831-8760
WITH COPIES TO:
JOHN B. WILLS, ESQ.
410 SEVENTEENTH STREET, SUITE 1940
DENVER, COLORADO 80202
(303) 628-0747
FAX (303) 592-1846
(Name, address, including zip code and telephone number,
including area code of agents for service.)
Approximate date of commencement date or proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities act of
1933, check the following box [ ].
The Exhibit Index for this Registration Statement begins on sequential page
number ________________ .
<PAGE>
CROSS REFERENCE SHEET
FORM S-4
ITEM NO. CAPTION SECTIONS IN PROSPECTUS
- -------- ------- ----------------------
A. INFORMATION ABOUT THE TRANSACTION
1 Forefront of the Registration
Statement and Outside Front Cover Page
of Prospectus. . . . . . . . . . . . . Outside Front Cover Page
2 Inside Front and Outside Back Cover
Pages of Prospectus. . . . . . . . . . Inside Front Cover
Pages (i)(ii); Table of
Contents
3 Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information. . Risk Factors; Prospectus
Summary
4 Terms of the Transaction . . . . . . . Terms of the Transaction
5 Pro Forma Financial Information. . . . Not Applicable
6 Material Contracts with Company Being
Acquired . . . . . . . . . . . . . . . Not Applicable
7 Additional Information Required for
Reoffering by Persons and Parties
Deemed to Be Underwriters. . . . . . . Not Applicable
8 Interest of Named Experts and Counsel. Experts
9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities. . . . . . . . . . . . . . Statement as to
Indemnification
B. INFORMATION ABOUT THE REGISTRANT
10 Information with Respect to
S-3 Registrants. . . . . . . . . . . . Not Applicable
11 Incorporation of Certain Information
by Reference . . . . . . . . . . . . . Not Applicable
12 Information with Respect to S-2 or
S-3 Registrants. . . . . . . . . . . . Not Applicable
13 Incorporation of Certain Information
by Reference . . . . . . . . . . . . . Not Applicable
2
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14 Information with Respect to
Registrants Other Than S-3 or S-2
Registrants. . . . . . . . . . . . . . Summary; Selected
Financial Data; Three-L
Enterprises, Inc.;
Description of Securities;
Dividend Policy; Material
Changes; Three-L's
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
C. INFORMATION ABOUT COMPANY BEING
ACQUIRED
15 Information with Respect to
S-3 Companies. . . . . . . . . . . . . Not Applicable
16 Information with Respect to S-2 or
S-3 Companies. . . . . . . . . . . . . Not Applicable
17 Information with Respect to Companies
Other Than S-3 or S-2 Companies. . . . Summary; Selected
Financial Data; Intelicom
International Corporation;
Intelicom's Management's
Discussion and Analysis
D. VOTING AND MANAGEMENT INFORMATION
18 Information if Proxies, Consents or
Authorizations are to be Solicited . . The Special Meeting
19 Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer. . . Not Applicable
20 Indemnification of Directors and
Officers . . . . . . . . . . . . . . . Indemnification of
Directors and Officers
21 Exhibits and Financial Statement
Schedules . . . . . . . . . . . . . . Exhibits and Financial
Statement Schedules
22 Undertakings . . . . . . . . . . . . . Undertakings
3
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THREE-L ENTERPRISES, INC.
PROSPECTUS AND PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS OF THREE-L ENTERPRISES, INC.
TO BE HELD ON SEPTEMBER 13, 1996
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to stockholders of Three-L Enterprises, Inc., a Delaware
corporation ("Three-L"), in connection (i) with the reconfirmation of their
purchase of shares in Three-L and (ii) the solicitation of proxies by the
Board of Directors of Three-L for use at the Special Meeting of Stockholders
of Three-L (the "Three-L Special Meeting"), including any adjournments or
postponements thereof. The Special Meeting is scheduled to be held on
September 13, 1996.
RECONFIRMATION OFFER. Purchasers of shares in Three-L's public offering
("Stockholders") are being requested to reconfirm their investment (the
"Reconfirmation Offer") in Three-L based upon the information in this Proxy
Statement/Prospectus concerning the proposed Stock Exchange with Intelicom
International Corporation ("Intelicom"). Under Rule 419 adopted under the
Securities Act of 1933, as amended, (the "Act"), the shares of Common Stock
sold by Three-L in its initial public offering (the "Deposited Securities")
and the proceeds from the sale of such shares, less certain permitted
withdrawals (the "Deposited Funds"), were placed in escrow pending the
Reconfirmation Offer. The Deposited Securities and the Deposited Funds may be
released to the Stockholders and to Three-L, respectively, only if investors
representing at least 80% of the gross proceeds of the public offering (a
total of 25,646 shares sold in the offering) reconfirm their investment in
Three-L. Upon Three-L's certification to the escrow agent that the Stock
Exchange has been consummated in accordance with Rule 419, the Deposited
Securities and Deposited Funds may be released to Three-L. If the holders of
at least 25,646 shares do not reconfirm their investment in Three-L, the
Stock Exchange Proposal described below will not be consummated, and the
management of Three-L will attempt to locate another business opportunity for
Three-L. If a Stockholder determines not to reconfirm the investment in
Three-L Common Stock, or if a Stockholder's response to the Reconfirmation
Offer is not received by Three-L on or before the Special Meeting, such
Stockholder's subscription for Three-L Common Stock, together with interest
thereon, will be refunded to such Stockholder.
STOCK EXCHANGE AND RELATED MATTERS. Holders of Three-L Common Stock will
also have the opportunity to consider and vote upon a proposal (the
"Proposal") to approve and adopt the Stock Exchange Agreement between Three-L
and Intelicom, the issuance of 1,420,687 shares of Three-L Common Stock (the
"Shares" and "Share Issuance") to the three shareholders of Intelicom,
pursuant to which Intelicom will become a wholly owned subsidiary of Three-L,
and the change of Three-L's name to "Intelicom Corporation." Holders of
shares of Three-L Common Stock entitled to vote also will consider and vote
upon any other matter that may properly come before the Three-L Special
Meeting or any adjournments or postponements thereof.
This Proxy Statement/Prospectus constitutes a prospectus of Three-L with
respect to the Reconfirmation Offer.
AN INVESTMENT IN INTELICOM'S SECURITIES INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" AT PAGE 19 OF THIS PROXY STATEMENT/PROSPECTUS.
The Three-L Common Stock is not listed for trading or quoted in the
over-the-counter market and not reported through the National Quotation
Bureau's "pink sheets." As of the date of this Proxy Statement/Prospectus
there were no bid or ask quotations for the Three-L Common Stock. See
"DESCRIPTION OF THREE-L COMMON STOCK."
This Proxy Statement/Prospectus, the accompanying forms of proxy and the
other enclosed documents are first being mailed to Stockholders of Three-L on
or about August 1, 1996.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION FOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Proxy Statement/Prospectus is July , 1996.
4
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TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION............................................. 8
SUMMARY........................................................... 9
The Companies................................................... 9
The Special Meeting............................................. 10
The Share Exchange.............................................. 11
SELECTED FINANCIAL DATA
OF THREE-L ENTERPRISES, INC. ................................... 14
SELECTED CONSOLIDATED FINANCIAL DATA
OF INTELICOM INTERNATIONAL, INC. ............................... 15
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA.................... 16
RISK FACTORS...................................................... 18
THE SPECIAL MEETING............................................... 20
Matters To Be Considered at the Special Meeting................. 21
Vote Required................................................... 21
Voting of Proxies............................................... 22
Revocability of Proxies......................................... 22
Appraisal Rights................................................ 22
Solicitation of Proxies......................................... 22
Market for Common Stock......................................... 23
Resale of Three-L Common Stock.................................. 23
INTELICOM INTERNATIONAL CORPORATION............................... 23
General......................................................... 23
Industry Overview and Competition............................... 24
Plan of Operation and Description of Business................... 25
Major Contracts................................................. 26
Products and Services........................................... 26
Major Carriers and Marketing Strategies......................... 27
Government Regulation........................................... 28
Employees....................................................... 29
Properties...................................................... 30
Litigation...................................................... 30
Related Party Transactions...................................... 30
THREE-L ENTERPRISES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS...................................................... 31
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
May 31, 1996........................................ 32
5
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THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1995................................... 33
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
May 31, 1995........................................ 34
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1994................................... 35
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1993................................... 36
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Five Months Ended May 31, 1996...................... 37
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Year Ended December 31, 1995........................ 38
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Five Months Ended May 31, 1995...................... 39
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Year Ended December 31, 1994........................ 40
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Year Ended December 31, 1993........................ 41
THREE-L ENTERPRISES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS............................................ 42
POST-STOCK EXCHANGE PROFILE AND STRATEGY.......................... 43
Business........................................................ 43
Management...................................................... 43
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS.......................................................... 45
Three-L......................................................... 45
Intelicom....................................................... 45
DESCRIPTION OF CAPITAL STOCK OF THREE-L........................... 46
TRANSFER AGENT.................................................... 47
DESCRIPTION OF CAPITAL STOCK OF INTELICOM......................... 47
6
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EXPERTS........................................................... 47
LEGAL OPINIONS.................................................... 48
OTHER INFORMATION AND STOCKHOLDER PROPOSALS....................... 48
THREE-L MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................. 49
General........................................................... 49
The Intelicom Stock Exchange...................................... 49
Results of Operations............................................. 49
INTELICOM'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 50
Overview.......................................................... 50
Results of Operations............................................. 50
Liquidity and Capital Resources................................... 51
SELLING SHAREHOLDERS.............................................. 53
Selling Shareholder Plan of Distribution.......................... 53
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
THREE-L ENTERPRISES, INC. ...................................... S-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
INTELICOM INTERNATIONAL CORPORATION............................. F-1
ANNEX I........................................................... A-1
PROXY........................................................... A-1
ANNEX II.......................................................... A-3
STOCK PURCHASE AGREEMENT........................................ A-3
7
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NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THREE-L OR INTELICOM. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT
IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THREE-L OR
INTELICOM SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Three-L is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith must file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Three-L with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Three-L has filed with the Commission a Registration Statement on Form S-1
(together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Three-L Common Stock to be issued in the Share Exchange. This
Proxy Statement/Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits thereto. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Proxy Statement/Prospectus or
in any document incorporated in this Proxy Statement/Prospectus by reference
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
8
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS
MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. AS USED HEREIN, UNLESS THE
CONTEXT OTHERWISE REQUIRES, "THREE-L" MEANS THREE-L ENTERPRISES, INC., AND
"INTELICOM" MEANS INTELICOM INTERNATIONAL CORPORATION. CERTAIN
TELECOMMUNICATIONS INDUSTRY TERMS USED HEREIN ARE DEFINED IN THE GLOSSARY
INCLUDED HEREIN.
--------------------
STOCKHOLDERS OF THREE-L ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS
AND THE ANNEXES HERETO IN THEIR ENTIRETY. STOCKHOLDERS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS."
--------------------
THE COMPANIES
THREE-L ENTERPRISES, INC.
Three-L was formed on March 18, 1994. The primary purpose of the Company
has been to acquire an interest in one or more Business Combinations.
Three-L has had limited operations to date. Three-L has attempted to acquire
a participation interest in one or more business opportunities. The
acquisition of Intelicom will entail a change in the management and control
of Three-L. After the merger has taken place, the surviving entity will be
Three-L; however, Intelicom's management will replace the existing Three-L
directors and thereafter manage the operations of Three-L. The Three-L
public offering was characterized as a "blank check" due to the fact that the
company is a development stage company that issued a penny stock and that had
no specific business plan or purpose or had indicated that its business plan
or purpose was to merge with or be acquired by an unidentified company. A
penny stock includes most equity securities not excluded pursuant to
Commission rule-making. Three-L had no specific business in mind and did not
restrict its search to any particular industry.
Three-L is a Delaware corporation with executive offices located at 1109
Andrews, Metairie, Louisiana 70005, and its telephone number at that address
is (504) 831-8760.
INTELICOM INTERNATIONAL CORPORATION
Intelicom, a Florida corporation, is a national telecommunications,
marketing and consulting firm with headquarters and central operations in
Clearwater, Florida. Intelicom provides an array of communications products
and services to business users of all sizes, utilizing state-of -the-art
digital switching technology to offer world-wide transmission of voice,
facsimile documents, and data. Intelicom uses independent sales consultants
to sell its services through direct sales efforts. Revenues derived from
customers signed by Company's agents constituted approximately 87% and 95% of
Intelicom's total revenues for the five months ended May 31, 1996 and year
ended December 31, 1995, respectively. The independent sales consultants
receive commissions based upon the service or product provided. Intelicom's
principal business strategy is to develop its network of independent sales
consultants selling Intelicom's services; acquisition of customer accounts or
businesses of other resellers; and the development of additional carrier
relationships and additional products to expand Intelicom's target market and
product mix while improving profit margin potential.
Intelicom's corporate offices are presently located at 28050 U.S. Highway
19 North, Suite 202, Clearwater, FL 34621. Intelicom's telephone number is
(813) 797-9000.
9
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MANAGEMENT
At the Closing of the Stock Exchange Agreement, Three-L's Board of
Directors will resign, and two new directors that have been designated by
Intelicom (the "Intelicom Designees") will be appointed to fill the newly
created vacancies. Intelicom has informed Three-L that David Kanstoroom and
David Spezza are the Intelicom Designees. The Intelicom Designees currently
are directors of Intelicom. The terms of all directors of Three-L, including
the Intelicom Designees, will expire at the next annual meeting of
Stockholders of Three-L. See "POST STOCK EXCHANGE PROFILE AND STRATEGY -
Management."
THE SPECIAL MEETING
PURPOSE OF THE MEETING
This Proxy Statement/Prospectus is being sent to the Stockholders
pursuant to the requirements of Rule 419 of Regulation C in connection with
the Reconfirmation Offer. Under Rule 419, the Deposited Securities and the
Deposited Funds were placed in escrow pending the Reconfirmation Offer. The
Reconfirmation Offer is made to the Stockholders through this Proxy
Statement/Prospectus, which is a post-effective amendment to Three-L's
Registration Statement. Within five days after the effective date of this
Proxy Statement/Prospectus, Three-L is required to furnish investors with the
prospectus, i.e. this Proxy Statement/Prospectus, which sets forth the terms
of the Reconfirmation Offer and information regarding the proposed
acquisition candidate (i.e. Intelicom) and its business, including audited
financial statements. According to Rule 419, Stockholders must have no fewer
than 20 and no more than 45 business days from the date of this Proxy
Statement/Prospectus to decide to reconfirm their investment and remain an
investor or alternately, require the return of their investment. Any
Stockholder not making any decision within said 45 day period will
automatically have his investment funds returned. Rule 419 further provides
that if Three-L does not complete an acquisition meeting the specific
criteria of Rule 419 within 18 months of the date of its original
registration statement (i.e. by October 13, 1996), all of the Deposited Funds
in the Deposited Funds Escrow Account must be returned to the Stockholders.
The Deposited Securities and the Deposited Funds may be released to the
Stockholders and to Three-L, respectively, only if Stockholders representing
at least 80% of the gross proceeds of the public offering (a total of 25,646
shares sold in the public offering) reconfirm their investment in Three-L.
Upon Three-L's certification to the escrow agent that the Stock Exchange has
been consummated in accordance with Rule 419, the Deposited Securities and
Deposited Funds may be released to Three-L. If the holders of at least
25,646 shares do not reconfirm their investment in Three-L, the Stock
Exchange Proposal described below will not be consummated, and the management
of Three-L will attempt to locate another business opportunity for Three-L
within the remaining time provided under Rule 419. If a Stockholder
determines not be reconfirm the investment in Three-L Common Stock, or if a
Stockholder's response to the Reconfirmation Offer is not received by Three-L
on or before the Special Meeting, such Stockholder's subscription for Three-L
Common Stock, together with interest thereon, will be refunded to such
Stockholder. See "THE SPECIAL MEETING - Matters to be Considered at the
Special Meeting - Reconfirmation Offer."
TIME AND PLACE
The Three-L Special Meeting will be held at 11:00 a.m., Louisiana time,
on September 13, 1996, at 1109 Andrews, Metairie, Louisiana 70005.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Three-L Special Meeting, holders of Three-L's Common Stock will
have the opportunity (i) to reconfirm their investment in Three-L and (ii) to
consider and vote upon a proposal (the "Proposal") to approve the Stock
Exchange Agreement and the issuance of 1,420,687 shares of Three-L Common
Stock (the "Stock Issuance") in connection with the Stock Exchange Agreement,
a conformed copy of which appears as Annex II to this Proxy
Statement/Prospectus, and to change the name of Three-L to "Intelicom
Corporation". The holders of shares of Three-L Common Stock entitled to vote
also will consider and vote upon any other matter that may properly come
before the Three-L Special Meeting or any adjournments or postponements
thereof.
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VOTES REQUIRED
The Reconfirmation Offer must be accepted by holders of at least 80% of
the gross proceeds of the public offering (a total of 25,646 shares sold in
the offering). If the holders of at least 25,646 shares do not reconfirm
their investment in Three-L, the Proposal will not be consummated, and the
management of Three-L will attempt to locate another business opportunity for
Three-L. If a Stockholder determines not to reconfirm his/her investment in
Three-L Common Stock, or if a Stockholder's response to the Reconfirmation
Offer is not received by Three-L on or before the Special Meeting, or by
September 16, 1996 (45 days from the date of this Proxy
Statement/Prospectus), whichever occurs later, such Stockholder's
subscription for Three-L Common Stock, together with interest thereon, will
be refunded to such Stockholder.
The approval of the Proposal requires the affirmative vote of a majority
of the votes cast on the Proposal, provided that the total votes cast on the
Proposal represent a majority of the outstanding shares of Three-L Common
Stock entitled to vote thereon.
Abstentions will have the effect of votes against the Proposal. See
"THE SPECIAL MEETING - Votes Required."
HOLDERS ENTITLED TO VOTE
Each purchaser in Three-L's initial public offering ("Stockholder") is
entitled to respond to the Reconfirmation Offer and the vote on the Proposal
at the Special Meeting on September 16, 1996. There are presently
outstanding 76,381 shares of Three-L Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
As of May 30, 1996, directors and executive officers of Three-L and their
affiliates were beneficial owners of an aggregate of 44,000 shares
(approximately 57.6%) of the outstanding shares of Three-L Common Stock. The
directors and executive officers of Three-L who are also Stockholders of
Three-L have committed to vote their shares of Three-L Common Stock in favor
of the Proposal.
THE SHARE EXCHANGE
TERMS OF SHARE EXCHANGE
If the Proposal is approved by the Stockholders, at the Closing, Three-L
will issue 1,420,687 shares of its Common Stock to the three shareholders of
Intelicom in exchange for the 900 shares of Intelicom currently held by them,
which represents all of Intelicom's issued and outstanding Common Stock. As
a result, Intelicom will become a wholly owned subsidiary of Three-L, which
will then be known as "Intelicom Corporation." The shares issued to the
Intelicom shareholders will be restricted securities as that term is defined
in Rule 144 adopted under the Securities Act of 1933, as amended ("the Act"),
and hence will not be able to be sold for two years from the date of Closing
and except in accordance with the terms of Rule 144.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Three-L believes that the terms of the Share
Exchange are fair to and advisable and in the best interests of the Three-L
Stockholders, and have unanimously approved the Share Exchange Agreement and
the Share Issuance, and the name change. No fairness opinion has been or
will be sought by the Board of Directors due to the high cost and lack of
available funds for such an opinion.
For a discussion of the factors considered by the Board of Directors in
selecting Intelicom please refer to other sections of this Proxy
Statement/Prospectus. See "Intelicom International Corporation" and "Three-L
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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THE BOARD OF DIRECTORS OF THREE-L UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF THREE-L COMMON STOCK APPROVE THE PROPOSAL.
EFFECTIVE TIME OF THE STOCK EXCHANGE
The Stock Exchange will become effective upon the Closing. The Closing
will occur as soon as practicable following the Special Stockholders Meeting.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND CONFLICTS OF INTEREST
The two executive officers and directors and one non-officer/director
shareholder of Intelicom hold all of the issued and outstanding shares of
Intelicom (a total of 900 shares), and hence they will receive all 1,420,687
shares of Three-L Common Stock to be issued pursuant to the Stock Exchange.
At the Closing, all of the current directors of Three-L will resign and
be replaced by the two current directors of Intelicom (the "Intelicom
Designees"). The terms of all directors of Three-L, including the Intelicom
Designees, will expire at the next annual meeting of Stockholders of Three-L.
CONDITIONS TO THE STOCK EXCHANGE
The obligations of Three-L and Intelicom to consummate the Stock Exchange
and Share Issuance are subject to various conditions, including, among other
things, the effectiveness of this Registration Statement, obtaining the
requisite approval of the Stockholders of the Reconfirmation Offer and the
Proposal, and the absence of any order or other legal restraint or
prohibition preventing the consummation of the Stock Exchange. The
obligation of Three-L to consummate the Stock Exchange is subject to the
fulfillment or waiver of various additional conditions. The obligation of
Intelicom to consummate the Stock Exchange is subject to the fulfillment or
waiver of various additional conditions, including, among other things, that
Three-L's Board of Directors shall have taken all necessary and appropriate
actions to cause the vacancies created by the resignation of the current
Three-L Directors to be filled at the Closing by the election of the
Intelicom Designees. See "POST-STOCK EXCHANGE PROFILE AND STRATEGY -
Management."
TERMINATION OF THE STOCK EXCHANGE AGREEMENT
The Stock Exchange Agreement may be terminated at any time prior to the
Effective Time (i) by mutual consent of Three-L and Intelicom, (ii) by either
Three-L or Intelicom (a) if any court or other governmental entity shall have
issued a final and nonappealable order, decree or ruling or taken any other
final and nonappealable action permanently enjoining or otherwise prohibiting
the Stock Exchange, (b) if the Stock Exchange shall not have been consummated
on or before June 30, 1996, or (c) if the requisite number of Stockholders do
not accept the Reconfirmation Offer or the Proposal is not approved by a
majority of the Three-L Stockholders.
NO RIGHTS OF APPRAISAL FOR DISSENTING SHAREHOLDERS OF THREE-L
In accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), dissenting Stockholders of Three-L will not be entitled to
appraisal rights in connection with the Stock Exchange. Stockholders who do
not approve of the Proposal should not accept the Reconfirmation Offer, which
will cause Three-L to refund the amount they paid for the Three-L Common
Stock in the public offering, together with interest thereon. "THE SPECIAL
MEETING - Appraisal Rights."
RISK FACTORS OF STOCK EXCHANGE
In determining whether to approve the transactions pursuant to the Stock
Exchange Agreement, Three-L Stockholders should consider that there will be a
change in control as a result of the approval of the Stock Exchange
Agreement, the number of shares to be issued to Intelicom was determined
arbitrarily by negotiations between the management of Three-L and Intelicom,
that no market presently exists for the Three-L Common Stock at the Effective
Date of this Proxy Statement/Prospectus and at the date of the Special
Meeting, and there can be no
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assurance that a market will develop or be sustained, even if the Stock
Exchange is consummated. The Closing will occur as soon as practicable
following the Special Meeting and the satisfaction or waiver of the other
conditions set forth in the Stock Exchange Agreement. See "RISK FACTORS."
OTHER SIGNIFICANT CONSIDERATIONS
Stockholders of Three-L should also consider that the number of shares to
be issued to Intelicom Stockholders is a fixed number, i.e. 1,420,687 shares.
Based upon 76,381 shares of Three-L Common Stock outstanding, upon approval
of the Proposal by the Three-L Stockholders and consummation of the Share
Exchange, there will be 1,527,620 shares of Three-L outstanding (including
30,552 shares issuable to the finder of the transaction). The 1,420,687
shares of Three-L Common Stock issued to shareholders of Intelicom pursuant
to the Stock Exchange Agreement will comprise approximately 93% of the total
number of shares of Three-L Common Stock then outstanding. Therefore, the
issuance of the shares to Intelicom's Stockholders will significantly dilute
the Three-L Stockholders.
RISK FACTORS OF INTELICOM
Shareholders of Three-L should also consider the risks associated with
Intelicom and the telecommunications industry including dependence on
management, dependence on services offered by carriers, competition,
dependence on sales agents, customer attrition and recent telecommunications
legislation. See "Risk Factors."
FINAL USE OF PROCEEDS
The final proceeds from the public offering when released from escrow if
the Stock Exchange is consummated and shareholders elect to remain
shareholders of Three-L is anticipated to be as follows: repayment of an
Officer loan to the Company of $7,500; legal fees of $10,000, accounting fees
of $15,000, transfer agent fees of $1,500 and the balance of $99,000 will be
applied to Intelicom's working capital.
FINDER'S FEE
In connection with the proposed Stock Exchange, Star Tel, Inc. of New
Orleans, Louisiana, acted as a finder in this transaction and will receive
30,552 shares of Three-L's Common Stock at the consummation of the Stock
Exchange. Star-Tel, Inc. was instrumental in the introduction of the
management of Intelicom to the management of Three-L and further provided a
business plan of Intelicom's operations for review by the Three-L management.
None of the Three-L Officers and Directors nor the Officers and Directors of
Intelicom are affiliates of Star Tel, Inc.
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SELECTED FINANCIAL DATA
OF THREE-L ENTERPRISES, INC.
The following table sets forth selected historical financial data of
Three-L and has been derived from and should be read in conjunction with the
audited financial statements of Three-L for the period March 18, 1994
(Inception) through December 31, 1994 and for the year ended December 31,
1995, including the respective notes thereto, and the unaudited financial
statements for the periods ended May 31, 1996 and 1995 included herein.
In the opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been included in
the unaudited interim data. Unaudited interim results are not necessarily
indicative of results which may be expected for future periods.
BALANCE SHEET
<TABLE>
<CAPTION>
FIVE MONTHS
AS AND FOR THE YEAR ENDED
ENDED MAY 31,
DECEMBER 31, 1996 1995
1995 1994 UNAUDITED UNAUDITED
-------- ------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets $395 $8,147 $340 $8,731
Other Assets $169,935 $11,796 $183,701 $155,862
Total Assets $170,330 $19,943 $184,041 $164,593
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 9,990 $0 $30,587 $1,032
Escrowed Common Stock $133,110 -- $133,110 $133,110
Stockholders' Equity $27,230 $19,943 $20,344 $30,451
Total Liabilities & Stockholders' Equity $170,330 $19,943 $184,041 $164,593
</TABLE>
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SELECTED CONSOLIDATED FINANCIAL DATA
OF INTELICOM INTERNATIONAL, INC.
The following table sets forth selected consolidated historical financial
data of Intelicom and has been derived from and should be read in conjunction
with the audited consolidated financial statements of Intelicom for each of
the two fiscal years ended December 31, 1994 and 1995, including the
respective notes thereto, and the unaudited financial statements for the
periods ended May 31, 1996 and 1995 included herein. In the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included in the unaudited interim
data. Unaudited interim results are not necessarily indicative of results
which may be expected for future periods.
FIVE MONTHS ENDED
AS OF AND FOR THE MAY 31,
YEAR ENDED DECEMBER 31, ---------------------
-------------------------- 1996 1995
1995 1994 1993 Unaudited Unaudited
---------- -------- -------- --------- ---------
Net Sales $1,691,121 $840,493 $117,288 $858,408 $673,436
Earnings from operations 82,966 102,825 1,431 36,269 62,511
Net Earnings 82,966 102,825 1,431 25,280 62,511
Net earnings per common
share $ 92.18 $ 1.14 $ 0.01 $ 28.09 $ 69.46
Shares Outstanding 900 90,000 100,000 900 900
BALANCE SHEET DATA:
AS OF AND FOR THE FIVE MONTHS ENDED
YEAR ENDED DECEMBER 31, MAY 31,
-------------------------- ---------------
1995 1994 1993 1996 1995
---------- -------- -------- -------- --------
Cash $43,639 $38,515 $3,075 $61,334 $49,606
Working capital 106,937 67,781 (17,210) 127,873 133,844
Total assets 359,952 256,460 52,132 409,619 358,110
Redeemable preferred
stock N/A N/A N/A N/A N/A
Stockholders' equity 156,453 102,556 2,002 181,733 165,067
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SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth selected unaudited pro forma consolidated
financial data of Three-L giving effect to the Stock Exchange and reflecting
certain assumptions described in the notes to the unaudited pro forma
consolidated condensed financial statements. The Selected Pro Forma
Consolidated Statements of Earnings Data set forth below assume the Stock
Exchange was consummated as of December 31, 1993, and the Selected Pro Forma
Consolidated Balance Sheet Data set forth below assume the Stock Exchange was
consummated as of December 31,1993. The pro forma consolidated financial
data is presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that would have
occurred if the Stock Exchange had been consummated on the dates indicated,
nor is it necessarily indicative of future operating results or financial
position. The pro forma consolidated financial data has been derived from
and should be read in conjunction with the unaudited pro forma consolidated
condensed financial statements, including the notes thereto, appearing
elsewhere in this Prospectus, and have been prepared to reflect the
acquisition of Three-L by Intelicom as of December 31, 1993 after giving
effect to the pro forma adjustments described in the notes. Since the
present shareholders of Intelicom own approximately 93% of Three-L after the
acquisition, Intelicom in substance has acquired Three-L. See "UNAUDITED PRO
FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS."
PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS DATA
AS OF AND FOR THE FIVE MONTHS ENDED
YEAR ENDED DECEMBER 31, MAY 31,
-------------------------- ---------------
1995 1994 1993 1996 1995
---------- -------- -------- -------- --------
Revenues:
Commissions $1,540,850 $728,318 $56,640 $748,891 $589,366
Fees 146,461 111,894 60,648 106,494 83,469
Interest 3,810 281 -- 3,023 601
Operating expenses: 1,615,658 738,350 115,857 829,025 615,207
Income before income taxes 75,463 102,143 1,431 29,383 58,229
Provision for income taxes 22,639 30,643 429 10,989 17,469
Net earnings from
continuing operations 52,824 71,500 1,002 18,394 40,760
Earnings per share
Shares outstanding 1,527,620 1,527,620 1,451,239 1,527,620 1,527,620
Net earnings from
continuing operations
per share .03 .05 .00 .01 .03
Redeemable preferred
stock -- -- -- -- --
Stockholders' equity 226,257 212,741 2,002 230,885 257,335
See notes accompanying the unaudited Pro Forma Consolidated Condensed
Financial Statements included elsewhere in this Proxy Statement/Prospectus.
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<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA
AS OF AND FOR THE FIVE MONTHS ENDED
YEAR ENDED DECEMBER 31, MAY 31,
-------------------------- ---------------
1995 1994 1993 1996 1995
---------- -------- -------- -------- --------
ASSETS
Current assets:
Cash and cash equivalents $177,144 $179,772 $3,075 $194,784 $191,447
Receivables 261,797 179,456 28,416 294,425 273,167
Notes receivable -
related parties -- 3,714 1,000 -- 4,114
Other current assets 5,000 -- -- 1,315 --
-------- -------- ------- -------- --------
Total current assets 443,941 362,942 32,491 489,209 468,728
Net property and equipment 39,516 34,775 19,641 43,860 31,223
Other assets 10,000 -- -- 10,000 --
-------- -------- ------- -------- --------
$493,457 $397,717 $52,132 $543,069 $499,951
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable 23,256 5,494 1,629 41,353 3,282
Accrued and other
liabilities 229,873 168,659 23,162 260,332 230,821
Notes Payable 14,071 10,823 25,339 10,499 8,513
-------- -------- ------- -------- --------
Total current liabilities 267,200 184,976 50,130 312,184 242,616
-------- -------- ------- -------- --------
Other long-term liabilities -- -- -- -- --
-------- -------- ------- -------- --------
Long-term debt -- -- -- -- --
-------- -------- ------- -------- --------
Deferred income taxes -- -- -- -- --
-------- -------- ------- -------- --------
Stockholders' equity:
Common Stock 152 152 152 152 152
Additional paid-in capital 234,290 217,271 1,850 220,524 266,147
Retained earnings (deficit) (8,185) (682) -- 10,209 (4,964)
Treasury stock, at cost -- (4,000) -- -- (4,000)
-------- -------- ------- -------- --------
Total stockholders'
equity 226,257 212,741 2,002 230,885 257,335
-------- -------- ------- -------- --------
$493,457 $397,717 $52,132 $543,069 $499,951
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
See notes accompanying the unaudited Pro Forma Consolidated Condensed
Financial Statements included elsewhere in this Proxy Statement/Prospectus.
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<PAGE>
RISK FACTORS
The Securities offered hereby are speculative and involve a high degree
of risk. Therefore, shareholders of Three-L and Intelicom should read this
entire Proxy Statement/Prospectus and carefully consider, among others, the
following risk factors in addition to the other information set forth
elsewhere in this Proxy Statement/Prospectus prior to making a decision as to
the proposed Stock Exchange.
DEPENDENCY ON MANAGEMENT. Continued growth and expansion of Intelicom
depends on continued active participation of the current Intelicom
management. The Company has no employment agreements with Messrs Spezza and
Kanstoroom and anticipates that it will obtain "key man" insurance on these
individuals. The cost of the "key man" insurance, if obtained, will be paid
from operating revenues of Intelicom. The loss of either of these
individuals' services could adversely affect the continuation and future
development of Intelicom's business. Currently both Mr. Kanstoroom and Mr.
Spezza devote full time to the business of Intelicom.
EFFECTIVE CHANGE IN CONTROL. As of the date of this Proxy
Statement/Prospectus Three-L's Officers, Directors and family members have
beneficial ownership of approximately 44,000 shares of Common Stock, or
approximately 57.6% of the shares currently outstanding. After completion of
the Stock Exchange such persons will beneficially own approximately 2.8% of
the shares outstanding. On the other hand, the Intelicom shareholders will
beneficially own a total of 1,420,687 shares of Common Stock or approximately
93%. As a result, Intelicom's Officers and Directors will be, and in the
foreseeable future will continue to be, without the vote of the shareholders,
in a position to control Three-L by being able to nominate Three-L's Board of
Directors and vote and approve any shareholder proposals. The Board of
Directors, pursuant to Three-L's Articles and Bylaws, establish corporate
policies and in turn have the sole authority to nominate and elect Three-L's
Officers to carry out those policies.
NO DIVIDENDS. Three-L has paid no cash dividends on its Common Stock and
has no present intention of paying cash dividends in the foreseeable future
even after the Stock Exchange. It will be the policy of the new Board of
Directors to retain all earnings to provide for the growth of Intelicom.
Payment of cash dividends in the future will depend, among other things, upon
Intelicom's future earnings, requirements for capital improvements, the
operating and financial conditions of Intelicom and other factors deemed
relevant by the Board of Directors.
ARBITRARY DETERMINATION OF EXCHANGE RATE. Prior to the Exchange
Agreement, there was no public trading market for the Shares. Consequently,
the value at which the Shares are being exchanged has been arbitrarily
determined by negotiations between the management of Three-L and Intelicom's
management and does not bear any relationship to any established valuation
criteria as assets, book value or prospective earnings. Intelicom is
entering the Exchange Agreement to become part of and own a public company.
NASDAQ INELIGIBILITY AND MANAGEMENT; LACK OF LISTING OF SECURITIES FROM
NASDAQ SYSTEM. Under the current rules promulgated by the Securities and
Exchange Commission (the "Commission"), for an initial listing on Nasdaq, a
company must have at least $4,000,000 in total assets, at least $2,000,000 in
stockholders equity, and a minimum bid price of $3.00 per share. For
continued listing, a company must maintain at least $2,000,000 in total
assets, at least $1,000,000 in stockholders equity, and a minimum bid price
of $1.00 per share.
The Three-L's Common Stock, currently and after the Exchange Agreement,
is not expected to be eligible for listing on Nasdaq under these rules.
Consequently Three-L's Common Stock and subsequent future transactions in the
Shares would become subject to the penny stock regulations which impose
additional sales practice requirements on broker-dealers who sell securities
(see "Risk of Low-Priced Stocks," below).
RISK OF LOW-PRICED STOCKS. As noted above, Three-L's Shares will not be
listed on Nasdaq, and no other exclusion from the definition of a "penny
stock" under applicable Commission regulations is available at this time,
consequently, the Shares will be subject to the penny stock rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally defined as investors with net worth in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with a
spouse). For any transaction involving a penny stock, unless exempt, the
rules require
18
<PAGE>
the delivery, prior to the transaction, of a disclosure schedule prepared by
the Commission relating to the penny stock market. The broker-dealer must
disclose the commission payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly
statements must be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
DEPENDENCE ON SERVICES OFFERED BY OTHER CARRIERS. Intelicom does not own
any transmission facilities, and its long distance services are dependent
upon BTI and Frontier for the transmission of its customers' calls.
Intelicom has not entered into long-term leases for multiple circuit capacity
and has no present plans to acquire transmission facilities. Accordingly,
Intelicom's long distance operations are subject to changes offered by such
carriers and its continued ability to obtain such services at bulk rates.
There is no assurance that Intelicom will continue to be able to obtain
access to transmission facilities sufficient to meet the needs of customers
or that it will be able to do so on a timely and cost-effective basis.
COMPETITION. The telecommunications industry is intensely competitive
and is significantly affected by the introduction of new services and the
market activities of major industry participants. Competition in the growing
telecommunications industry is based upon pricing, customer service, network
quality and value-added services. Intelicom competes with AT&T, MCI, Sprint
and other national and regional long distance carriers. Most of Intelicom's
competitors have greater name recognition, more extensive transmission
networks and greater engineering and marketing capabilities than Intelicom
and have, or have access to, substantially greater financial and personnel
resources than those available to Intelicom. Various regulatory factors can
also have an impact on Intelicom's ability to compete. For example, AT&T,
which is Intelicom's largest competitor, has achieved greater flexibility as
the divestiture laws which prohibited AT&T from anti-competitive pricing are
repealed over the years, allowing it to price its services more aggressively.
AT&T can now offer lower than tariff or "off tariff" pricing to customers in
competitive situations where a competing carrier has offered a lower price,
in writing, to the customer. The ability of Intelicom to compete effectively
in the telecommunications industry will depend upon its continued ability to
provide high quality, market-driven services at prices generally similar to,
or less than, those charged by its competitors. There can be no assurance
that Intelicom will be able to compete successfully with existing or future
companies.
GOVERNMENT REGULATION. Intelicom markets products and services utilizing
the networks of several first- and second-tier companies, which are subject
to extensive federal and state regulation, but Intelicom is not subject to
the same regulations being a non-facilities-based carrier. There can be no
assurance that the FCC or regulatory authorities in one or more states will
not take action that would subject Three-L to extensive governmental
regulation or have an adverse effect on the business or financial condition
of Intelicom.
RECENT TELECOMMUNICATIONS LEGISLATION. Congress has recently passed a
major telecommunications bill and various state legislatures have under
consideration or have passed various proposals that would allow the local
exchange carriers and large competitors such as U.S. West to enter into the
inter-LATA long distance market. Likewise Congress and numerous state
legislatures have adopted proposals which would open up the local access
currently dominated by the Bell operating companies. Intelicom is unable to
predict the impact of the various legislation; however it does believe
competition will increase in the long distance markets. See "Intelicom
International Corporation - Governmental Regulation."
OBSOLESCENCE DUE TO TECHNOLOGICAL CHANGE AND NEW SERVICES. The
telecommunications industry has been characterized by steady technological
change, frequent new service introductions and evolving industry standards.
Intelicom believes that its future success will depend on its ability to
anticipate such changes and to offer on a timely basis services that meet
these evolving industry standards. There can be no assurance that Intelicom
will have sufficient resources to make the investments necessary to acquire
new technology or to introduce new services that would satisfy an expanded
range of customer needs. See "Intelicom International Corporation - Industry
Overview and Competition."
CUSTOMER ATTRITION. A level of customer attrition is inherent in the
long distance industry. Attrition (the average number of customers from whom
revenues have terminated or been terminated as a result of non-payment or
dropped to zero usage expressed as a percentage of the total number of
customers) has averaged approximately
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<PAGE>
1.0 % to 2.0% per month. There can be no assurance that the level of
customer attrition will not continue or increase.
DEPENDENCE ON AGENTS. Intelicom depends on continuing relationships with
its independent marketing agents to acquire new customer accounts. The
majority of Intelicom's current customer accounts have arisen through
Intelicom's network of independent marketing agents. In general, Intelicom's
agreements with its independent marketing agents provide that all customers
introduced to Intelicom by the agents are Intelicom's customers. Intelicom
primarily uses independent marketing agents to sell Intelicom's services
through direct sales efforts. Revenues derived from customers introduced to
Intelicom by independent marketing agents currently constitute approximately
87% and 95% of Intelicom's total revenue for the five months ended May 31,
1996 and year ended December 31, 1995, respectively. These percentages
represent the total revenues derived from both existing and new customers
introduced to Intelicom by independent marketing agents. The independent
marketing agents receive residual commissions based on billings. Although
Intelicom has not experienced a significant turnover of its agents, there can
be no assurance that Intelicom's relationships with its independent marketing
agents will continue on a favorable basis or that such agents will continue
to sell Intelicom's services.
DEPENDENCE ON TWO CARRIERS FOR REVENUES. Intelicom receives
approximately 78% of its commission revenues from two major
telecommunications carriers. If revenues from one or both of these carriers
were to decrease, it would adversely affect the business and revenues of
Intelicom.
INABILITY TO COMPLY WITH CONDITIONS OF RULE 419. Three-L is a "blank
check" company and consequently its public offering was conducted in
compliance with the Commission's Rule 419. Under Rule 419, Stockholders have
certain rights and receive the substantive protection in connection with
their purchase of Three-L's common stock. To that end, the securities
purchased by the Stockholders and a substantial portion of the funds received
in the offering were deposited and held in the Deposited Funds Escrow Account
and the Deposited Securities Escrow Account until an acquisition meeting
specific criteria is completed. Before the acquisition can be completed and
before the Deposited Funds and Deposited Securities can be released to
Three-L and the investors, respectively, Three-L is required to update the
Registration Statement with a post-effective amendment, and within five days
after the effective date thereof, Three-L is required to furnish Stockholders
with the prospectus produced thereby containing the terms of the
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. Any Stockholders not making any
decision within said 45 day period will automatically have his investment
funds returned. Rule 419 further provides that if Three-L does not complete
an acquisition meeting the specific criteria within 18 months of the
Effective Date, all of the Deposited Funds in the Deposited Funds Escrow
Account must be returned to investors.
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to Stockholders of
Three-L in connection with the Reconfirmation Offer and the solicitation of
proxies by the Three-L Board of Directors for use at the Three-L Special
Meeting at 1109 Andrews, Metairie, Louisiana 70005, on September 13, 1996 at
11:00 A.M., Central Standard Time, and at any adjournments or postponements
thereof.
At the Three-L Special Meeting, Stockholders of Three-L will be asked (i)
to approve the Reconfirmation Offer and (ii) to approve the Proposal,
including the Stock Exchange Agreement and Stock Issuance, and the name
change. The Reconfirmation Offer must be approved by holders of Three-L
Common Stock representing at least 80% of the proceeds of Three-L's public
offering (approximately 25,646 shares). A conformed copy of the Stock
Purchase Agreement appears as Annex II to this Proxy Statement/Prospectus.
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<PAGE>
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
RECONFIRMATION OFFER. At the Three-L Special Meeting, holders of shares
of Three-L Common Stock will have the opportunity to reconfirm their
investment (the "Reconfirmation Offer") in Three-L based upon the information
in this Proxy Statement/Prospectus concerning the proposed Stock Exchange
Agreement with Intelicom. Pursuant to the requirements of Rule 419, after
Three-L's initial public offering, the Deposited Securities and the Deposited
Funds were placed in escrow pending the Reconfirmation Offer. The
Reconfirmation Offer is being made by this Proxy Statement/Prospectus, which
is a post-effective amendment to Three-L's Registration Statement. Within
five days after the effective date of this Proxy Statement/Prospectus,
Three-L is required to furnish investors with this Proxy
Statement/Prospectus, which sets forth the terms of the Reconfirmation Offer
and information regarding the proposed acquisition candidate (i.e. Intelicom)
and its business, including audited financial statements. According to Rule
419, Stockholders then have no fewer than 20 and no more than 45 business
days from the date of this Proxy Statement/Prospectus to decide to reconfirm
their investment and remain an investor or alternately, require the return of
their investment. Any Stockholder not making any decision within this 45 day
period will automatically have his investment funds returned. Rule 419
further provides that if Three-L does not complete an acquisition meeting the
specific criteria of Rule 419 within 18 months of the date of its initial
registration statement (i.e. October 13, 1996), all of the Deposited funds in
the Deposited Funds Escrow Account must be returned to the Stockholders. The
Deposited Securities and the Deposited Funds may be released to the
Stockholders and to Three-L, respectively, only if Stockholders representing
at least 80% of the gross proceeds of the public offering (a total of 25,646
shares sold in the public offering) reconfirm their investment in Three-L.
Upon Three-L's certification to the escrow agent that the Stock Exchange has
been consummated in accordance with Rule 419, the Deposited Securities and
Deposited Funds may be released to Three-L. If the holders of at least
25,646 shares do not reconfirm their investment in Three-L, the Stock
Exchange Proposal described below will not be consummated, and the management
of Three-L will attempt to locate another business opportunity for Three-L
within the remaining time provided under Rule 419. If a Stockholder
determines not be reconfirm the investment in Three-L Common Stock, or if a
Stockholder's response to the Reconfirmation Offer is not received by
Three-L, on or before the Special Meting, such Stockholder's subscription for
Three-L Common Stock, together with interest thereon, will be refunded to
such Stockholder.
STOCK EXCHANGE AND RELATED MATTERS. Holders of Three-L Common Stock will
also have the opportunity to consider and vote upon a proposal (the
"Proposal") to approve and adopt the Stock Exchange Agreement, the Share
Issuance and the change of Three-L's name to "Intelicom International
Corporation." Holders of shares of Three-L Common Stock entitled to vote
also will consider and vote upon any other matter that may properly come
before the Three-L Special Meeting or any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS OF THREE-L HAS UNANIMOUSLY APPROVED THE STOCK
EXCHANGE AGREEMENT, THE SHARE ISSUANCE AND NAME CHANGE, AND RECOMMENDS A VOTE
FOR THE APPROVAL AND ADOPTION OF THE PROPOSAL.
VOTE REQUIRED
The investment in Three-L must be confirmed by investors representing at
least 80% of the gross proceeds of Three-L's public offering (a total of
25,646 shares sold in the offering). The Stock Exchange Agreement must be
approved and adopted by the affirmative vote of a majority of the outstanding
shares of Three-L's Common Stock entitled to vote thereon.
If a Three-L Stockholder, after having received at least twenty (20) days
notice, fails to respond to the Reconfirmation Offer prior to or at the
Three-L Special Meeting or by September 16, 1996 (45 days from the date of
this Proxy Statement/Prospectus), whichever is later, the Stockholder's
subscription, together with interest thereon, will be refunded to such
Stockholder. For purposes of the Proposal, abstentions will be counted as
shares present for purposes of determining the presence of a quorum on all
matters. See "--Record Date; Stock Entitled to Vote; Quorum." Abstentions
will have the effect of votes against the approval and adoption of the
Proposal and the transactions contemplated thereby.
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As of May 1, 1996, directors and executive officers of Three-L were
beneficial owners of an aggregate of 44,000 shares (approximately 57.6%) of
the outstanding shares of Three-L Common Stock. The directors of Three-L and
a non-director shareholder have agreed to vote their shares of Three-L Common
Stock in favor of the Proposal at the Three-L Special Meeting or any
adjournments or postponements thereof. The directors of Intelicom, who are
also the only stockholders of Intelicom, do not own any shares of Three-L
Common Stock.
VOTING OF PROXIES
Shares represented by all properly executed proxies received in time for
the Special Meeting and which have not been revoked will be voted at such
meetings in the manner specified by the holders thereof. PROXIES WHICH DO
NOT CONTAIN AN INSTRUCTION TO VOTE FOR OR AGAINST OR TO ABSTAIN FROM VOTING
ON A PARTICULAR MATTER DESCRIBED IN THE PROXY WILL BE VOTED IN FAVOR OF SUCH
MATTER.
It is not expected that any matter other than those referred to herein
will be brought before the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters, unless authority to do so is
withheld in the proxy.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Three-L form of proxy (Annex I) does
not preclude a stockholder from voting in person. A stockholder may revoke a
proxy at any time prior to its exercise by submitting a later dated proxy
with respect to the same shares, by filing with the Secretary of Three-L a
duly executed revocation, or by voting in person at the meeting. Attendance
at the Special Meeting will not in and of itself constitute a revocation of a
proxy.
Only purchasers of stock in Three-L's initial public offering and its
Officers and Directors will be entitled to receive notice of and to vote at
the Three-L Special Meeting. There are presently outstanding 76,381 shares
of Three-L Common Stock. The holders of Three-L Common Stock are entitled to
one vote per share on each matter submitted to a vote at the Three-L Special
Meeting. The holders of a majority of the outstanding shares of Three-L
Common Stock entitled to vote must be present in person or by proxy at the
Three-L Special Meeting in order for a quorum to be present. Shares of
Three-L Common Stock represented by proxies which are marked "abstain" or
which are not marked as to any particular matter or matters will be counted
as shares present for purposes of determining the presence of a quorum on all
matters.
In the event a quorum is not present in person or by proxy at the Three-L
Special Meeting, the Three-L Special Meeting is expected to be adjourned or
postponed.
APPRAISAL RIGHTS
Holders of Intelicom Common Stock who vote against the Proposal will not
be entitled to appraisal rights under the DGCL if the Stock Exchange
Agreement is consummated. The DGCL generally entitles a stockholder to
exercise appraisal rights upon a merger or consolidation of the corporation
effected pursuant to the DGCL. Appraisal rights are not provided for the
issuance of additional securities by a Delaware corporation.
SOLICITATION OF PROXIES
Three-L will bear the cost of printing and mailing this Proxy
Statement/Prospectus and costs associated with the solicitation of proxies
from its Stockholders. The Directors and Officers and employees of Three-L
may solicit proxies from Stockholders of Three-L by telephone or telegram or
in person. Such directors, officers and employees will not be additionally
compensated for such solicitation but may be reimbursed for out-of-pocket
expenses in connection therewith.
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MARKET FOR COMMON STOCK
Currently the combined companies do not meet the requirements for a
Nasdaq listing. It is therefore anticipated that, if a market for the shares
of Intelicom develops, it will be listed on the Bulletin Board. There can be
no assurance that a market for the shares of Intelicom will develop, or, if
developed, that it will be sustained.
RESALE OF THREE-L COMMON STOCK
Assuming holders of the required number of Three-L shares of Common Stock
approve the Reconfirmation Offer and the Proposal, the Three-L Common Stock,
when released from escrow and distributed to the Stockholders, will be freely
transferable. The shares of Three-L Common Stock issued to the Intelicom
stockholders will be "restricted securities," as that term is defined in Rule
144 adopted under the Act. In addition, each of the Intelicom stockholders
will be deemed to be an "affiliate" (as defined under the Act and generally
including, without limitation, directors, certain executive officers and
beneficial owners of 10% or more of a class of capital stock) of Three-L and,
as such, may not transfer the Three-L Common Stock received by them pursuant
to the Stock Exchange Agreement except in compliance with Rule 144. This
Proxy Statement/Prospectus does not cover resales of Three-L Common Stock
received by the Intelicom shareholders.
INTELICOM INTERNATIONAL CORPORATION
GENERAL
Intelicom International Corporation ("Intelicom") was incorporated under
the laws of the State of Florida in October, 1994. Intelicom is the
successor in interest to Intelicom Corporation which was incorporated under
the laws of the State of Florida in November, 1992, and commenced business in
1993. Intelicom Corporation merged with and into Intelicom in December of
1995. The combined companies shall hereinafter be referred to collectively
as "Intelicom."
Prior to September, 1995, Intelicom s business purpose was restricted to
marketing retail telecommunication services (including, but not limited to,
long distance, conference calling, paging, pre-paid calling cards and voice
mail services) for other telecommunications companies through a network of
independent sales agents. In September of 1995, Intelicom entered into its
first wholesale long distance agreement which enabled the company to begin
purchasing telecommunications services from a wholesale provider and then
reselling those services under its own private label directly to end users.
As part of this effort to resell telecommunications services under its own
private label, Intelicom began billing its customers directly through its own
billing system which enables it to receive revenues directly from end users
instead of having to wait to receive sales commissions for business sold by
Intelicom on behalf of other telecommunications providers. However,
Intelicom continues to complement its own private labeled services with the
services of other telecommunications providers in order to offer its
customers a wide array of product offerings and sustain positive cash flow in
the form of sales commission payments from such other providers.
Intelicom's profits are derived from three major sources. The first
source of revenues is the difference between the cost per minute of service
bought from underlying carriers and the cost per minute billed to the end
user customers. As an interexchange long distance carrier, Intelicom can
reduce its cost of long distance transmission services by committing to large
blocks of volume (measured in minutes), thereby reducing its overall cost per
minute and increasing its profit per minute. The second revenue source is
the sales commissions paid to Intelicom from other carriers who directly bill
customers signed up by Intelicom on their behalf. These sales commissions
are typically calculated as a percentage of the sum total of all long
distance services (excluding taxes) billed to the customers signed up by
Intelicom on behalf of the other carriers. The third source of profits is
the difference between the cost of materials sold to Intelicom's independent
sales agents and the price paid to Intelicom by those sales agents.
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Intelicom offers personalized services at what it believes to be
competitive prices to residences and businesses of all sizes throughout the
United States. Among the services offered are the routing equipment and phone
lines of large carriers, such as WilTel, Frontier, Sprint, BTI and other
carriers which the company may contract with in the future. To date,
Intelicom has filed with the appropriate licensing commissions throughout the
United States to offer its own long distance services, and has received its
certification as a licensed long distance carrier in 26 states. Intelicom
believes it will be fully certified nationwide by September of 1996.
Intelicom markets its telecommunications services through a nationwide
network of sales agents. Intelicom's agents are solicited in three main
ways: (i) referred by another Intelicom agent; (ii) media advertisement (i.e.
newspaper ads, trade publications, etc.) and (iii) a referral from the
Telecommunications Resellers Association ("TRA"), of which Intelicom is a
member in good standing. 95% of the independent sales agents of Intelicom
work on a part-time basis. Less than 5% of Intelicom's independent
contractors offer competing services.
All Intelicom agents are paid on a straight commission basis.
Commissions are earned in three general categories. Direct commissions are
commissions earned as a percentage of long distance usage of all customers
solicited by the agent and placed on one of Intelicom's services. Direct
commissions vary in amount and by product, and are paid for so long as the
client remains on an Intelicom service and the agent remains in good standing
with Intelicom. Agents can also earn commissions in a sales management
capacity by helping newer agents solicit and bring business to Intelicom.
These agents receive an override commission based on the amount of business
brought to Intelicom. Finally, Intelicom offers its top agents the
opportunity to share in up to 4% of Intelicom's long distance revenues based
upon preset production requirements. So long as the customers remains with
Intelicom and the agent remains in good standing with Intelicom, the agent
continues to earn commissions. Almost all customers are solicited face to
face.
Intelicom's agent program is available to individuals and businesses
nationwide. Intelicom currently has in excess of 1,000 independent agents.
Intelicom's agents have no geographical restrictions. Intelicom has two main
classifications of agents: sales agents and certified trainers. One in four
agents participates in additional training and expense to become a trainer
because of the additional compensation available for training new
consultants. Intelicom presently has approximately 250 trainers which are
located throughout the United States, with heavier concentrations in Florida,
North Carolina, Arizona, Utah, New Mexico, Idaho and California. Training
consists of three to five hours of initial training. The main topics of
instruction are product knowledge, techniques on building the agent's
business, completion of paperwork, understanding of the compensation plan and
Intelicom's policies and procedures.
INDUSTRY OVERVIEW AND COMPETITION
Since the break-up of AT&T in 1984, the domestic long distance market has
roughly doubled to an estimated $60 billion in annual revenues. AT&T has
remained dominant, retaining approximately 60% of the market, with MCI and
Sprint increasing their market shares to approximately 18% and 9% of the
market, respectively. These three companies constitute what generally is
regarded as the first-tier in the long distance market. Large regional long
distance companies, some with national capabilities, such as LDDS WorldCom
("LDDS"), Frontier Communications ("Frontier"), Cable & Wireless
Communications, Inc. and LCI International, constitute the second-tier of the
industry and, cumulatively, are believed to account for approximately 5% of
the market. The remainder of the market share is held by several hundred
smaller companies, known as third-tier carriers.
First- and second-tier companies, (most notably AT&T, MCI, Sprint and
LDDS (through its WilTel subsidiary) actively have been providing long
distance products for resale for a number of years in order to capture
incremental traffic volume.
Long distance companies can be categorized by several definitions. One
distinction is between facilities-based companies and non-facilities-based
companies, or resellers. Facilities-based companies own transmission
facilities, such as fiber optic cable or digital microwave equipment.
Profitability for facilities-based carriers is dependent not only upon their
ability to generate revenues but also upon their ability to manage complex
networking and transmission costs. Substantially all of the first- and
second-tier long distance companies are facilities-based
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carriers and generally offer service nationwide. Most facilities-based
carriers in the third-tier of the market generally offer their service only
in a limited geographic area. Some facilities-based carriers contract with
other facilities-based carriers to provide transmission where they have
geographic gaps in their facilities. Similarly, non-facilities-based
companies, such as Intelicom, contract with facilities-based carriers to
provide transmission of their customers' long distance traffic. Pricing in
such contracts is typically either on a fixed rate lease basis or a call
volume basis. Profitability for non-facilities-based carriers is based
primarily on their ability to generate and retain sufficient revenue volume
to negotiate attractive pricing with one or more facilities-based carriers.
A second distinction among long distance companies is that of switched
versus switchless carriers. Switched carriers have one or more switches,
i.e. computers that direct telecommunications traffic in accordance with
programmed instructions. All of the facilities-based carriers are switched
carriers, as are many non-facilities-based companies. Switchless carriers
depend on one or more facilities-based carriers to provide both transmission
capacity and switch facilities. In addition, switchless resellers enjoy the
benefit of offering their service on a nationwide basis, assuming that their
underlying carrier has a nationwide network. Intelicom currently is a
switchless reseller, but intends to become a switch based carrier when such a
move would be cost-effective.
Competition in the long distance industry is based upon pricing, customer
service, network quality and value-added services. The success of a
non-facilities-based carrier, such as Intelicom, depends almost entirely upon
the amount of traffic that it can commit to the underlying carrier - the
larger the commitment, the lower the cost of service. Subject to contract
restrictions and customer brand loyalty, resellers like Intelicom may
competitively bid their traffic among other national long distance carriers
to gain improvement in the cost of service. The non-facilities-based carrier
devotes its resources entirely to marketing, operations and customer service,
deferring the costs of network maintenance and management to the underlying
carrier.
The relationship between resellers and the major underlying carriers is
predicated primarily upon the pricing strategies of the first-tier companies,
which has resulted historically in higher rates to the small business
customer. Small customers typically are not able to make the volume
commitments necessary to negotiate reduced rates under individualized
contracts. The higher rates result from the higher cost of credit,
collection, billing and customer service per revenue dollar associated with
small billing level long distance customers. By committing to large volumes
of traffic, the reseller is guaranteeing traffic to the underlying carrier.
The successful reseller efficiently markets the long distance product,
processes orders, verifies credit and provides customer service to large
numbers of small accounts.
Intelicom believes that the rapid evolution of the resale industry
presents an excellent opportunity for consolidation of third-tier companies
in general, and resellers, in particular. Many of these companies are
undercapitalized and may have difficulty providing their services profitably.
Intelicom believes that many of the carriers that provide resale products,
particularly first-tier carriers, would welcome a consolidation of resellers
that would decrease the number of companies with whom they contract, leaving
only quality, well capitalized resellers with whom to deal. Consolidation
with other resellers could, in Intelicom's opinion, achieve additional
economies in both pricing with underlying carriers and in operating costs
such as customer service. Such economies are not certain and cannot be
adequately predicted.
PLAN OF OPERATION AND DESCRIPTION OF BUSINESS
From inception and until September 1995, Intelicom functioned primarily
as a telecommunications marketing and consulting firm offering the products
and services of most major long distance providers to Intelicom's customers
on a retail basis. In September of 1995, Intelicom began to purchase bulk
long distance service from Network Long Distance, Inc., a wholesale long
distance provider, and resell that service to Intelicom's customers under its
own private label. The sale pursuant to the contract were insignificant and
Intelicom will not renew the contract, upon its expiration in the fall of
1996. Intelicom's current long distance contracts allow Intelicom the
ability to provide long distance service under its own private label, invoice
its customers, and collect revenue directly from its client base. Revenues
from its wholesale division are now based on 100% of end users billings
instead of just a percentage paid to Intelicom from another carrier as sales
commission. To the best of its knowledge, Intelicom is the only nationwide
carrier that offers its customers a diverse menu of long distance
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carriers, including both Intelicom's private labeled long distance services
as well as the services of other major carriers.
MAJOR CONTRACTS
BUSINESS TELECOM INCORPORATED AGREEMENT
In December of 1993, Business Telecom Incorporated ("BTI") and Intelicom
entered into an agency agreement for Intelicom to market long distance
services on BTI's behalf to commercial and residential customers. Prior to
contracting with Intelicom, BTI had little or no presence outside of its
"on-net" areas (i.e. North Carolina, South Carolina, Georgia, Florida,
Tennessee, Alabama, Virginia and the District of Columbia). Intelicom's
management believes that, through the successful sales efforts of Intelicom's
network of independent sales agents, BTI went from being a regional based
carrier in the Southeast to being a national telecommunications concern with
customers nationwide.
BTI pays sales commissions to Intelicom on a monthly basis based on a
negotiated percentage multiplied by the long distance revenues of Intelicom's
entire customer base. BTI is responsible for all credit checks, bad debt,
collections costs and billing costs. Intelicom's commissions are paid on
billed revenues regardless if end-users pay their invoices to BTI.
Consequently, Intelicom suffers no charge backs or pay backs on delinquent or
bad accounts.
Since 1993, BTI has continued to improve the commissions and rate
structure available to Intelicom in light of Intelicom's high level of sales
and customer quality. In addition, BTI offers value added services to
Intelicom's current product line. These services include paging, conference
calling, operator services, data services and special rates and programs for
non-profit organizations.
Subsequently, in March of 1996, Intelicom entered into a wholesale
contract with BTI. This contract enables Intelicom to resell long distance
services nationwide at competitive rates while, at the same time, maintaining
margins normally attained by only much larger long distance carriers. The
contract was agreed to as a wholesale arrangement meant to compliment the
existing agency agreement already in effect between the two companies. BTI
has agreed to assist Intelicom in setting up of all credit procedures as well
as making Intelicom a "beta site" for on-line access to all information
needed by Intelicom to service its customers. Intelicom has no "take or pay"
commitments to BTI, and BTI has agreed to allow all of Intelicom's business,
both from the agency contract as well as the wholesale contract, to be
credited towards Intelicom qualifying for more favorable rates and margins
under the wholesale agreement. This additional facet of the wholesale
agreement allows Intelicom to offer its own services to switched and
dedicated customers of all sizes throughout the United States.
FRONTIER (FORMERLY WORLD CALL TELECOMMUNICATIONS, INC.) AGREEMENT
Intelicom entered into an agreement with Frontier (formerly World Cable
Telecommunications, Inc. "WCT") in June 1993 to market long distance services
to businesses and residential users across the United States. WCT pays
commissions to Intelicom on a monthly basis based on a negotiated percentage
multiplied by Intelicom's entire customer base long distance billings. WCT
is responsible for all credit checks, bad debt, collections costs and billing
costs. Intelicom's commissions are paid on billed revenue regardless if the
end users pay bills to WCT. Intelicom has no charge backs or pay backs on
accounts that are delinquent in payments or written off as bad debt.
PRODUCTS AND SERVICES
Intelicom currently markets a variety of switched and dedicated long
distance products. These products primarily fall into two categories: (i)
products from Intelicom's agent contracts with other long distance providers,
and (ii) Intelicom's own products offered through wholesale contracts,
primarily with BTI.
Intelicom's product mix includes residential and small, medium and large
commercial products. These products primarily utilize the underlying
networks of Frontier, BTI, WilTel and Sprint. Intelicom targets customers
with long distance phone bills ranging between $100 and $5,000 per month,
although Intelicom has several large
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customers billing over $20,000 per month. By offering such a wide range of
carrier products, Intelicom is able to offer greater network stability and
back up in the event of service interruption. More importantly, however, the
vast array of product options enables Intelicom the flexibility to offer
favorable rates and services to its customers. In addition, Intelicom also
offers state-of-the-art paging, conference calling and pre-paid calling cards
to meet all of its client needs. Intelicom also has contracts in place to
begin offering local dial tone and cellular services as deregulation makes
these services available.
MAJOR CARRIERS AND MARKETING STRATEGIES
MAJOR CARRIERS
Intelicom receives a substantial portion of its commission revenues from
two major telecommunication carriers namely BTI and Frontier. Approximately
78% of all commission generated under Intelicom's agent contracts comes from
BTI and Frontier.
MARKETING STRATEGIES - CURRENT
From its inception and up through 1995, Intelicom's primary strategy was
to market telecommunications services of various contract providers through
its nationwide network of independent agents. Intelicom's marketing strategy
is for its independent agents to be able to offer a menu of long distance
providers to potential customers. Intelicom currently has in excess of 1,000
full- and part-time independent agents across the United States and has a
goal, of which there can be no assurance, of increasing that number in the
next 12 - 18 months. The funds of Three-l are not viewed as significant in
this regard and future expansion will be funded from operating revenues.
MARKETING STRATEGIES - FUTURE
Intelicom will continue to market telecommunications services through its
network of sales agents. These agents will continue to sell products
available through Intelicom's agency agreements, but will increasingly be
offering the products that Intelicom offers under its own private label
through its wholesale contracts (primarily through the BTI wholesale
contract). Intelicom will also attempt to continue its expansion in the long
distance industry through acquisitions of existing long distance companies
and/or their customer accounts.
Intelicom anticipates it will be required to increase its in-house staff
of customer service and support personnel to increase the efficiency of order
processing and agent support. In addition, Intelicom will be aggressively
marketing its independent agent program to substantially increase the size of
its sales force nationwide as well as internationally. Intelicom believes it
can attract qualified sales agents due to an extensive mix of products
including the addition of local access service, favorable commission and
bonus schedules and the customer service.
ACQUISITION STRATEGY
Intelicom believes that there are in excess of 400 small to medium-sized
long distance companies operating throughout the United States which are
similar to Intelicom in terms of operating revenues and customer base. It is
anticipated that a portion of proceeds through any future equity financings
will be used to acquire other telecommunications companies. Although
Intelicom presently has no understanding, arrangement or agreement to make
any other acquisitions, based on its experience, Intelicom believes that many
existing resellers are willing to be acquired due to the lack of sufficient
volume vis-a-vis their current operating expenses. Intelicom believes it has
the ability to maximize the potential of these acquisitions through increased
operating efficiency without significant increase in overhead by eliminating
duplicate overhead and the enhanced use of Intelicom's software and
switchless resellers of long distance. There can be no assurance that the
anticipated results of such an acquisition will occur, and may be adversely
affected by competitive and other pressures.
Intelicom is also in the first stage of setting up a nationwide network
of professional training centers throughout the United States. The first
training center, which opened in March 1996, is located in Tampa, Florida.
Intelicom believes its idea of offering its independent agents
state-of-the-art training and support in the areas of writing business and
building Intelicom's sales force will increase retention of quality agents
and the attraction of
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new quality agents. Intelicom's 12 - 18 month goal is to have 100 training
centers in major metropolitan areas across the United States. Since most of
Intelicom's agents are part time, the expansion and implementation of the
training centers will require more full time agents to participate in the
training program. Therefore, there can be no assurance that all 100 training
centers will be able to be established and be functioning within the 12 - 18
month timeframe. Intelicom expects to fund the training centers from cash
flows from operations and possibly in partnership with its more aggressive
agents.
Intelicom also plans to begin offering other ancillary services such as
local dial tone, cellular and other ancillary services. Through its advanced
billing services, Intelicom will be able to begin bundling services together
on one bill and be able to offer customers a one stop shop for all of their
telecommunication needs. Intelicom believes its ability to bundle services
will increase customer retention as well as profit margins.
GOVERNMENT REGULATION
LONG DISTANCE AND LOCAL ACCESS
The terms and conditions under which Intelicom provides
telecommunications services are subject to government regulation. Federal
laws and FCC regulations apply to interstate and international
telecommunications, while particular state regulatory authorities have
jurisdiction over intrastate telecommunications.
FEDERAL
Intelicom is classified by the FCC as a non-dominant carrier. Among
domestic carriers, only AT&T and the LECs are classified as dominant
carriers. As a consequence, the FCC regulates many of their rates, charges
and services to a greater degree than Intelicom's, although AT&T has
requested that it be reclassified as a non-dominant carrier and the FCC is
reviewing this issue. If AT&T's designation as a dominant carrier were
terminated, certain pricing restrictions and regulatory oversight that
currently apply to AT&T would be eliminated which would make it easier for
AT&T to more aggressively compete directly with Intelicom for low volume long
distance customers. International carriers may also be classified as
dominant if they are affiliated with foreign carriers with substantial market
share. The FCC has generally not chosen to exercise its statutory power to
regulate the charges, practices, classifications or regulations of
non-dominant carriers, although it has the power to do so. The FCC retains
the jurisdiction to act upon complaints against any common carrier for
failure to comply with its statutory obligations. The FCC also has the
authority to impose more stringent regulatory requirements on Intelicom and
change its regulatory classification; however, Intelicom is unaware of
changes in any FCC policies except as noted below.
Intelicom has all necessary authority to provide domestic interstate
telecommunication services.
Dominant and non-dominant carriers must maintain tariffs on file with the
FCC. Although the tariffs of non-dominant carriers, and the rates and
charges they specify, are subject to FCC review, they are presumed to be
lawful and are seldom contested. Until recently, domestic non-dominant
carriers were permitted by the FCC to file tariffs with a "reasonable range
of rates" instead of the detailed schedules of individual charges required of
dominant carriers. In reliance on the FCC's past practice of allowing
relaxed tariff-filing requirements for non-dominant domestic carriers,
Intelicom and many of its competitors did not maintain detailed rate
schedules for domestic offerings in their tariffs. Intelicom could be held
liable for damages for its failure to do so, although it believes that such
an outcome is highly unlikely and would not have a material adverse effect on
it. As a domestic non-dominant carrier, Intelicom is permitted to make
tariff filings on a single day's notice and without cost support to justify
specific rates. Resale carriers are also subject to a variety of
miscellaneous regulations that, for instance, govern the documentation and
verifications necessary to change a consumer's long distance carrier, limit
the use of "800" numbers for pay-per-call services, require disclosure of
operator services and restrict interlocking directors and management.
To date, the FCC has exercised its regulatory authority to control rates
only with respect to the rates of dominant carriers, and it has increasingly
relaxed its control in this area. As an example, although AT&T is classified
as a dominant carrier, the FCC has exempted most of its services, including
virtually all of the carrier's
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commercial and "800" services, from rate regulation because the FCC believes
that these services are subject to adequate competition. Similarly, the FCC
has required reduced local transport charges (i.e., the fee for use of the
LEC transmission facilities connecting the LEC's central offices and the
interexchange carrier's access point). In addition, the LECs are being
afforded a degree of pricing flexibility in setting access charges where
adequate competition exists.
The RBOCs are currently prohibited from providing inter-LATA
interexchange telecommunication services. Several motions to remove or
modify this restriction, in whole or in part, are currently pending before
the United States District Court for the District of Columbia. Many industry
observers believe that legislation will be enacted which will authorize RBOCs
to provide inter-LATA interexchange telecommunication services, and separate
bills to this effect have been passed by the House of Representatives and
Senate in 1995. The separate bills will be considered by a conference of the
House of Representatives and Senate. Such legislation, if passed, may or may
not include safeguards against anti-competitive conduct. Anti-competitive
conduct could result from an RBOC taking advantage of its access to all
customers on its existing network as well as its potentially lower costs
related to and control of the facilities used for termination and origination
of calls within its territory. Intelicom is unable to predict whether any
particular form of legislation will be enacted and, if enacted, the impact
that any such legislation would have on Intelicom's business and prospects.
In early 1996, the President signed legislation which will substantially
deregulate the telecommunications industry. The bill has far reaching impact
on the telecommunications industry and Intelicom's business in particular.
The bill effects the long distance services by allowing the seven regional
Bell companies into the long distance phone business after they have proved
to the FCC that they have opened their local phone networks to new
competitors. Intelicom believes that the increased competition will have the
effect of lowering prices overall and may provide Intelicom the ability to
offer lower costs to its customers. The bill will effect local access
service by opening local phone markets to new competitors such as AT&T, MCI
and cable TV companies and the BOC's would lose control of their current
monopoly over local phone customers. Prices may rise initially as
competitors may not have the ability to spend the large amount of funds
necessary to build their own networks and consequently they will be forced to
lease Bell lines and resell service instead. State regulation will still
dictate how the new local access and rates take place.
STATE
The intrastate long distance telecommunications operations of Intelicom
are also subject to various state laws and regulations, including prior
certification, notification and registration requirements. Currently,
Intelicom is certified and tariffed where required to provide intrastate
service to customers throughout the United States. Intelicom is subject to
varying levels of regulation in the states in which it provides intrastate
telecommunications. The vast majority of the states require Intelicom to
apply for certification to provide telecommunication services, or at least to
register or to be found exempt from regulation, before commencing intrastate
service. The vast majority of states also require Intelicom to file and
maintain detailed tariffs listing their rates for intrastate service. Many
states also impose various reporting requirements and/or require prior
approval for transfers of control of certified carriers, assignments of
carrier assets, including customer bases, carrier stock offerings and
incurrence by carriers of significant debt obligations. Certificates of
authority can generally be conditioned, modified, canceled, terminated or
revoked by state regulatory authorities for failure to comply with state law
and/or the rules, regulations, and policies of the state regulatory
authorities. Fines and other penalties, including the return of all monies
received for intrastate traffic from residents of a state, may be imposed for
such violations. In certain states, prior regulatory approval may be required
for acquisitions of telecommunications operations. In the past, Intelicom
generally has not obtained such prior approval for its acquisitions.
Intelicom believes it is currently in compliance with applicable state
regulations and has filed for the ability to sell services in the states
necessary to sell its services. See "Risk Factors - Government Regulation."
EMPLOYEES
As of March 1, 1996, Intelicom had ten (10) full time employees,
including David Kanstoroom, Intelicom's Chief Executive Officer and David
Spezza, Intelicom's President.
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PROPERTIES
Intelicom leases its office space and some of its office equipment under
noncancellable operating leases expiring in various years ranging through
2000. These leases generally require Intelicom to pay insurance, taxes, and
other expenses related to the leased property. Intelicom's executive offices
consist of 2,036 square feet located at 28050 U.S. 19 North, Suite 202,
Clearwater, Florida 34621. Monthly payments on leased office space is
approximately $2,300 per month. The lease runs through the year 2000.
LITIGATION
Intelicom is involved in litigation with a computer software company
related to a contract dispute. The case is set for trial in June 1996.
Intelicom will continue to vigorously defend their position and has filed a
Counter Complaint for the costs and expenses that it has had to incur due to
the software company's breach of the agreement. If the software company is
successful with their complaint, a judgement in the amount of approximately
$44,000 may be awarded.
RELATED PARTY TRANSACTIONS
Intelicom received working capital advances and loans from Intelicom's
shareholders. Intelicom has advanced funds to its shareholders for the
formation of two other related entities, Intelisoft and Intelicom
International (before the December 4, 1995 merger) for formation costs and
the development of computer software. There are no other transactions with
these entities.
As part of its Independent Agent Agreement with its sales
representatives, Intelicom has a 2% revenue sharing pool that its
representatives can qualify to share in if they meet certain production
requirements. Three shares of the 2% revenue sharing pool are irrevocably
reserved each month for the original three shareholders of Intelicom, with
such shares being allocated among Intelicom's Officers and Directors in
accordance with the policies as established by the Intelicom Board of
Directors. The three shareholders have waived any right to any revenue until
such time as so determined by the Board of Directors. If the three
shareholders do not take their monthly share of the revenue pool, they retain
no claim to the revenues in the pool for that month.
30
<PAGE>
THREE-L ENTERPRISES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed financial
statements reflect adjustments to the historical consolidated balance sheets
and statements of earnings of Three-L and Intelicom to give effect to the
Stock Exchange. The unaudited pro forma consolidated condensed balance
sheets, assumes the Stock Exchange was consummated as of December 31, 1993
and the unaudited pro forma consolidated condensed statements of earnings
assume the Stock Exchange was consummated as of December 31, 1993.
The following pro forma consolidated condensed financial statements have
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Three-L and Intelicom
that are included in this Proxy Statement/Prospectus, and have been prepared
to reflect the acquisition of Three-L by Intelicom as of December 31, 1993
after giving effect to the pro forma adjustments described in the notes.
Since the present shareholders of Intelicom own approximately 93% of Three-L
after the acquisition, Intelicom in substance has acquired Three-L. The pro
forma consolidated condensed statements of earnings are not necessarily
indicative of operating results that would have occurred had the Stock
Exchange been consummated as of December 31, 1993, nor are they indicative of
future operating results of the combined companies.
31
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
MAY 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------- -------------------------
Three-L Intelicom Adjustments Consolidated
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 340 $ 61,334 (1) $ 133,110 $ 194,784
Receivables 294,425 294,425
Notes receivable-related parties
Other current assets
-------- ---------- --------- ---------
Total current assets 340 355,759 133,110 489,209
Net property and equipment 43,860 43,860
(1) (133,110)
Other assets 183,701 10,000 (2) (50,591) 10,000
-------- ---------- --------- ---------
$184,041 $409,619 $ (50,591) $ 543,069
-------- ---------- --------- ---------
-------- ---------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $23,087 $ 18,266 $ 41,353
Accrued and other liabilities 206,621 (5) 53,711 260,332
Notes payable 7,500 2,999 10,499
-------- ---------- --------- ---------
Total current liabilities 30,587 227,886 312,184
-------- ---------- --------- ---------
Other long-term liabilities
-------- ---------- --------- ---------
Long-term debt
-------- ---------- --------- ---------
Deferred income taxes
-------- ---------- --------- ---------
Escrowed common stock 133,110 (1) (133,110)
-------- ---------- --------- ---------
Stockholders' equity:
(1) 3
(3) (758)
Common stock 4 900 (4) 3 152
(4) (3)
(1) 133,107
(6) 101,842
(3) 758
Additional paid-in capital 35,411 (2) (50,591) 220,524
(6) (101,842)
Retained earnings (deficit) (15,071) 180,833 (5) (53,711) 10,209
Treasury stock, at cost
-------- ---------- --------- --------
Total stockholders' equity 20,344 181,733 (28,808) 230,885
-------- ---------- --------- --------
$184,041 $ 409,619 $ (50,591) $543,069
-------- ---------- --------- --------
-------- ---------- --------- --------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
32
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------- --------------------------
Three-L Intelicom Adjustments Consolidated
------- --------- ----------- ------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $395 $ 43,639 (1) $133,110 $ 177,144
Receivables 261,797 261,797
Notes receivable - related
parties
Other current assets 5,000 5,000
--------- --------- ---------- ---------
Total current assets 395 310,436 133,110 443,941
Net property and equipment 39,516 39,516
(1) (133,110)
Other assets 169,935 10,000 (2) (36,825) 10,000
--------- --------- ---------- ---------
$ 170,330 $ 359,952 $ (36,825) $ 493,457
--------- --------- ---------- ---------
--------- --------- ---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,990 $ 18,266 $ 0 $ 23,256
Accrued and other
liabilities 176,162 (5) 53,711 229,873
Notes payable 5,000 9,071 14,071
--------- --------- ---------- ---------
Total current
liabilities 9,990 203,499 53,711 267,200
--------- --------- ---------- ---------
Other long-term liabilities
--------- --------- ---------- ---------
Long-term debt
--------- --------- ---------- ---------
Deferred income taxes
--------- --------- ---------- ---------
Escrowed common stock 133,110 (1) (133,110)
--------- --------- ---------- ---------
Stockholders' equity:
(1) 3
(3) (758)
Common stock 4 900 (4) 3 152
(1) 133,107
(4) (3)
(2) (36,825)
35,411 (3) 758 234,290
Additional paid-in capital (6) 101,842
(6) (101,842)
Retained earnings (deficit) (8,185) 155,553 (5) (53,711) (8,185)
Treasury stock, at cost
--------- --------- ---------- ---------
Total stockholders'
equity 27,230 156,453 42,574 226,257
--------- --------- ---------- ---------
$ 170,330 $ 359,952 $ (36,825) $ 493,457
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
33
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
MAY 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------- --------------------------
Three-L Intelicom Adjustments Consolidated
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 8,731 $ 49,606 (1) $ 133,110 $ 191,447
Receivables 273,167 273,167
Notes receivable-related
parties 4,114 4,114
Other current assets
-------- --------- --------- ---------
Total current assets 8,731 326,887 133,110 468,728
Net property and equipment 31,223 31,223
Other assets 155,862 (2) (22,752) (133,110)
-------- --------- (1) --------- ---------
$164,593 $ 358,110 $ (22,752) $ 499,951
-------- --------- --------- ---------
-------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,032 $ 2,250 $ 3,282
Accrued and other
liabilities 182,280 (5) 48,541 230,821
Notes payable 8,513 8,513
-------- --------- --------- ---------
Total current liabilities 1,032 193,043 48,541 242,616
-------- --------- --------- ---------
Other long-term liabilities
-------- --------- --------- ---------
Long-term debt
-------- --------- --------- ---------
Deferred income taxes
-------- --------- --------- ---------
Escrowed common stock 133,110 (1) (133,110)
-------- --------- --------- ---------
Stockholders' equity:
(1) 3
(3) (1,008)
Common stock 4 1,150 (4) 3 152
(4) (3)
(1) 133,107
(6) 118,226
(3) 1,008
Additional paid-in capital 35,411 1,150 (2) (22,752) 266,147
(5) (48,541)
Retained earnings (deficit) (4,964) 166,767 (6) (118,226) (4,964)
Treasury stock, at cost (4,000) (4,000)
-------- --------- --------- ---------
Total stockholders'
equity 30,451 165,067 61,817 257,335
-------- --------- --------- ---------
$164,593 $ 358,110 $ (22,752) $ 499,951
-------- --------- --------- ---------
-------- --------- --------- ---------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
34
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1994
HISTORICAL PRO FORMA
------------------ --------------------
ADJUST-
THREE-L INTELICOM MENTS CONSOLIDATED
------- --------- ------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,147 $ 38,515(1) $133,110 $179,772
Receivables 179,456 179,456
Notes receivable - related parties 3,714 3,714
Other current assets
------- -------- -------- --------
Total current assets 8,147 221,685 133,110 362,942
Net property and equipment 34,775 34,775
Other assets 11,796 (2) (11,796)
------- -------- -------- --------
$19,943 $256,460 $121,314 $397,717
------- -------- -------- --------
------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $ 5,494 $ $ 5,494
Accrued and other liabilities 137,587(5) 31,072 163,659
Notes payable 10,823 10,823
------- -------- -------- --------
Total current liabilities 153,904 31,072 184,976
------- -------- -------- --------
Other long-term liabilities
------- -------- -------- --------
Long-term debt
------- -------- -------- --------
Deferred income taxes
------- -------- -------- --------
Escrowed common stock
------- -------- -------- --------
Stockholders' equity:
(1) 3
(3) (1,008)
Common stock 4 1,150(4) 3 152
(1) 133,107
(4) (3)
(2) (11,796)
(3) 1,008
Additional paid-in capital 20,621 1,150(6) 73,184 217,271
Retained earnings (deficit) (688) 104,256(5) (31,072) (682)
(6) (73,184)
Treasury stock, at cost (4,000) (4,000)
------- -------- -------- --------
Total stockholders' equity 19,943 102,556 90,242 212,741
------- -------- -------- --------
$19,943 $256,460 $121,314 $397,717
------- -------- -------- --------
------- -------- -------- --------
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
35
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1993
HISTORICAL PRO FORMA
------------------ --------------------
ADJUST-
THREE-L INTELICOM MENTS CONSOLIDATED
------- --------- ------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ $ 3,075 $ $ 3,075
Receivables 28,416 28,416
Notes receivable - related parties 1,000 1,000
Other current assets
------- -------- -------- --------
Total current assets 32,491 32,491
Net property and equipment 19,641 19,641
------- -------- -------- --------
Other assets $ $ 52,132 $ $ 52,132
------- -------- -------- --------
------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
------- -------- -------- --------
Accounts payable $ $ 1,629 $ $ 1,629
Accrued and other liabilities 22,733(5) 429 23,162
Notes payable 25,339 25,339
------- -------- -------- --------
Total current liabilities 49,701 429 50,130
------- -------- -------- --------
Other long-term liabilities
------- -------- -------- --------
Long-term debt
------- -------- -------- --------
Deferred income taxes
------- -------- -------- --------
Escrowed common stock
------- -------- -------- --------
Stockholders' equity:
Common stock 1,000(3) (848) 152
(3) 848
(6) 1,002 1,850
Additional paid-in capital (5) (429)
Retained earnings (deficit) 1,431(6) (1,002)
Treasury stock, at cost
------- -------- -------- --------
Total stockholders' equity 2,431 (429) 2,002
------- -------- -------- --------
$ $ 52,132 $ $ 52,132
------- -------- -------- --------
------- -------- -------- --------
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
36
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
FIVE MONTHS ENDED MAY 31, 1996
HISTORICAL PRO FORMA
----------------- -------------------
ADJUST- CONSOL-
THREE-L INTELICOM MENTS IDATED
------- --------- ------- ------
REVENUES:
Commissions $ $ 748,891 $ $748,891
Interest Income 3,023 3,023
Other Income 106,494 106,494
------- ------- --------- ---------
858,408 858,408
------- ------- --------- ---------
Operating Expenses:
Depreciation $ $ 4,725 $ $ 4,725
General and administrative 6,886 315,612 322,498
Interest
Other 501,802 501,802
Property impairment
------- ------- --------- ---------
6,886 822,139 829,025
------- ------- --------- ---------
Earnings before income taxes (6,886) 36,269 29,383
Provision for income taxes 10,989 10,989
------- ------- --------- ---------
Net earnings from
continuing operations $(6,886) $25,280 $ $ 18,394
------- ------- --------- ---------
------- ------- --------- ---------
Shares outstanding 44,000 900 1,482,720 1,527,620
------- ------- --------- ---------
------- ------- --------- ---------
Net earnings from continuing
operations per share $ (0.16) $ 28.09 $ 0.01
------- ------- --------- ---------
------- ------- --------- ---------
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
37
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
HISTORICAL PRO FORMA
------------------------ -------------------------
THREE-L INTELICOM ADJUSTMENTS CONSOLIDATED
--------- ---------- ----------- ------------
Revenues:
Commissions $ $1,540,850 $ $1,540,850
Interest Income 3,810 3,810
Other Income 146,461 146,461
------- --------- --------- ---------
1,691,121 1,691,121
------- --------- --------- ---------
Operating expenses:
Depreciation $ $ 9,305 $ $ 9,305
General and administrative 7,503 634,593 642,096
Interest expense 67 67
Other expense 964,190 964,190
Property impairment
------- --------- --------- ---------
7,503 1,608,155 1,615,658
------- --------- --------- ---------
Earnings before income taxes (7,503) 82,966 75,463
Provision for income taxes (5) 22,639 22,639
------- --------- --------- ---------
Net earnings from continuing
operations $(7,503) $ 82,966 $ (22,639) $ 52,824
------- --------- --------- ---------
------- --------- --------- ---------
Shares outstanding 44,000 900 1,482,720 1,527,620
------- --------- --------- ---------
------- --------- --------- ---------
Net earnings from
continuing operations
per share $ (.17) $ 92.18 $ .03
------- --------- ---------
------- --------- ---------
See accompanying notes to unaudited pro forma
consolidated condensed financial statements
38
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
------------------- -----------------------------
Three-L Intelicom Adjustments Consolidated
------- --------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Commissions 589,366 589,366
Interest Income 601 601
Other Income 83,469 83,469
------- -------- ---------- ----------
673,436 673,436
------- -------- ---------- ----------
Operating expenses:
Depreciation $ $ 3,553 $ $ 3,553
General and administrative 4,282 255,464 259,746
Interest
Other 351,908 351,908
Property Impairment
------- -------- ---------- ----------
4,282 610,925 615,207
------- -------- ---------- ----------
Earnings before income taxes (4,282) 62,511 58,229
Provision for income taxes (5) 17,469 17,469
------- -------- ---------- ----------
Net earnings from
continuing operations $(4,282) $ 62,511 $ (17,469) $ 40,760
------- -------- ---------- ----------
Shares outstanding 44,000 900 1,482,720 1,527,620
------- -------- ---------- ----------
------- -------- ---------- ----------
Net earnings from continuing
operations per share $ (0.10) $ 69.46 $ 0.03
------- -------- ----------
------- -------- ----------
</TABLE>
See accompanying notes to unaudited pro forma consolidated
condensed financial statements
39
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------- -----------------------------
Three-L Intelicom Adjustments Consolidated
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ $ 728,318 $ $ 728,318
Interest Income 281 281
Other Income 111,894 111,894
-------- ---------- ---------- -----------
840,493 840,493
-------- ---------- ---------- -----------
Operating expenses:
Depreciation $ $ 4,960 $ $ 4,960
General and administrative 682 249,505 250,187
Interest expense 306 306
Other expense 482,897 482,897
Property impairment
-------- ---------- ---------- -----------
682 737,668 738,350
-------- ---------- ---------- -----------
Earnings before income taxes (682) 102,825 102,143
Provision for income taxes (5) 30,643 30,643
-------- ---------- ---------- -----------
Net earnings from continuing operations $ (682) $ 102,825 $ (30,643) $ 71,500
-------- ---------- ---------- -----------
-------- ---------- ---------- -----------
Shares outstanding 44,000 90,000 1,393,620 1,527,620
-------- ---------- ---------- -----------
-------- ---------- ---------- -----------
Net earnings from continuing
operations per share $ (.02) $ 1.14 $ .05
-------- ---------- ----------
-------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma consolidated
condensed financial statements
40
<PAGE>
THREE-L ENTERPRISES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------- -----------------------------
Three-L Intelicom Adjustments Consolidated
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ $ 56,640 $ $ 56,640
Interest Income
Other Income 60,648 60,648
------- --------- ----------- -----------
117,288 117,288
------- --------- ----------- -----------
Operating expenses:
Depreciation $ $ 1,679 $ $ 1,679
General and administrative 68,406 68,406
Interest expense 919 919
Other expense 44,853 44,853
------- --------- ----------- -----------
Property impairment 115,857 115,857
------- --------- ----------- -----------
Earnings before income taxes 1,431 1,431
Provision for income taxes (5) 429 429
------- --------- ----------- -----------
Net earnings from continuing operations $ $ 1,431 $ (429) $ 1,002
------- --------- ----------- -----------
------- --------- ----------- -----------
Shares outstanding 0 100,000 1,351,239 1,451,239
------- --------- ----------- -----------
------- --------- ----------- -----------
Net earnings from continuing
operations per share $ 0.00 $ 0.01 $ 0.00
-------- --------- -----------
-------- --------- -----------
</TABLE>
See accompanying notes to unaudited pro forma consolidated
condensed financial statements
41
<PAGE>
THREE-L ENTERPRISES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS:
(1) Represents the release of cash and escrowed Common Stock from escrow in
conjunction with Rule 419 when the holders of at least 25,646 shares of
Three-L reconfirm the investment in Three-L.
(2) To record the netting of deferred offering costs against the escrowed
Common Stock proceeds in conjunction with Rule 419 investment
reconfirmation.
(3) To record the issuance of 1,420,687 shares, $.0001 par value, to the
shareholders of Intelicom on the consummation of the Stock Exchange
Agreement, reclassifying the balance of Common Stock to additional paid in
capital.
(4) Represents the issuance of 30,552 shares, $.0001 per share, to a finder in
conjunction with consummation of the Stock Exchange Agreement with
Intelicom.
(5) Represents charge in lieu of income taxes for previously taxed earnings as
a Subchapter S Corporation.
(6) Represents transfer of subchapter S corporation retained earnings to
additional paid in capital.
42
<PAGE>
POST-STOCK EXCHANGE PROFILE AND STRATEGY
BUSINESS
As a result of the Stock Exchange Agreement, Three-L (which will then be
known as Intelicom Corporation) will continue as a marketer and reseller of
telecommunications services for other companies. Intelicom will continue to
buy wholesale long distance services which it will resell to customers under
its own name in addition to continuing to market other companies'
telecommunications services.
MANAGEMENT
At the Closing, Three-L's Board of Directors will resign, and the
Intelicom Designees will fill the newly created vacancies. Intelicom has
informed Three-L that David Kanstoroom and David Spezza are the Intelicom
Designees. All of the Intelicom Designees currently are directors of
Intelicom. The terms of the new directors of Three-L, who will be the
Intelicom Designees, will expire at the next annual meeting of Stockholders
of Three-L (which will then be known as Intelicom).
In addition, following the Closing, David Kanstoroom, currently the Chief
Executive Officer of Intelicom, will become Chief Executive Officer of
Three-L and David Spezza, currently the President of Intelicom, will become
the President of Three-L.
The following table sets forth, with respect to each person who is or
will be a director of Three-L at the Closing, the person's age and the
person's positions and offices with Three-L. Individual background
information concerning each of such persons follows the table.
Name Age Position with Three-L
- ---- --- ---------------------
Herman K. Watsky 69 President and Director
Roy D. Greenberg 39 Vice President and Director
Bernard A. Goldman 66 Secretary and Director
Gordon Dumont 39 Treasurer and Director
Edward P. Gothard 36 Director
David A. Kanstoroom (1) 31 Director
David Spezza (1) 36 Director
______________________
(1) Director of Intelicom who is a Intelicom Designee.
The directors of Three-L are elected to hold office until the next
annual meeting of shareholders and until their respective successors have
been elected and qualified. Officers of Three-L are elected by the Board of
Directors and hold office until their successors are elected and qualified.
Three-L has no audit or compensation committee.
The following sets forth certain biographical information concerning the
current officers and directors of Three-L and the Intelicom Designees.
43
<PAGE>
HERMAN K. WATSKY - PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS.
Herman K. Watsky is a founder, the President and a member of the Board
of Directors of Three-L. Mr. Watsky has been semi-retired since October
1992. From 1967 to 1992, he was the owner and operation of the Galleria Shoe
Boutique, Inc., a ladies shoe store in New Orleans, Louisiana.
DR. ROY D. GREENBERG - VICE PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS
Dr. Roy D. Greenberg is a founder, the Vice President and a member of the
Board of Directors of Three-L. From 1990 to present, Dr. Greenberg has been
in private practice, specializing in pediatric/child and adolescent
populations providing inpatient and outpatient services to children and
families, including standard psychological and behavioral assessment,
individual and group psychotherapy and cognitive - behavioral therapies.
Also from 1990 to the present, he has been the consultant to the Director of
Special Education Services and the staff of the Department of Special
Education at the Desoto County School system, Desoto County, Mississippi.
From 1987 to 1989, he served as a developmental specialist for children and
families referred to the Human Genetics Program at Tulane University Medical
School, New Orleans, Louisiana. Dr. Greenberg received a B.S. degree in
psychology in 1977 from Tulane University, a M.S. degree in 1982 in
psychology from Tulane and a PH.D. in psychology in 1985 also from Tulane.
He is a member of the American Psychological Association and the Society for
Pediatric Psychology.
BERNARD A. GOLDMAN - SECRETARY AND A MEMBER OF THE BOARD OF DIRECTORS.
Bernard A. Goldman is a founder, the Secretary and a member of the Board
of Directors of Three-L. From 1986 to present, Mr. Goldman has been
employed as a salesman at a men's clothing store in Metairie, Louisiana.
From 1948 to 1984, he owned and operated Goldman's, a ladies clothing store
in Bogalusa, Louisiana.
GORDON DUMONT - TREASURER AND A MEMBER OF THE BOARD OF DIRECTORS.
Gordon Dumont is a founder, the Treasurer and a member of the Board of
Directors of Three-L. From 1992 to present, he has been a marketing
consultant to Yvonne LaFleur and Namanco Products, Inc. where he created and
implemented a marketing program for a private label line of women's fragrance
products and was responsible for coordinating promotional activities. From
1976 to 1992, he was the owner of The Athlete's Foot, New Orleans, Louisiana,
a chain of 11 stores with annual sales in excess of $5 million. Mr. Dumont
received a B.S. degree in accounting from the University of New Orleans in
1977.
EDWARD P. GOTHARD - DIRECTOR.
Edward P. Gothard is a founder and the Assistant Treasurer of the
Company. From 1987 to present, he has been engaged in the practice of law at
McCloskey, Longenstein & Stoller, New Orleans, Louisiana. He is admitted to
practice in the United States Court of Appeals, Fifth Circuit and is a member
of the Louisiana State Bar Association, Louisiana Association of Defense
Counsel and the American Trial Lawyers Association.
DAVID C. KANSTOROOM - DIRECTOR.
David C. Kanstoroom received B.S.B.A. degrees in Business in Computer
Science from the University of Florida in 1987. From 1992 to the present he
has served as a Director and Chief Executive Officer of Intelicom Corporation
of Clearwater, Florida. From 1987 to 1992, he was employed by International
Business Machines as a senior marketing consultant where he was responsible
for consulting with IBM's national customers and training new customer
support representatives.
44
<PAGE>
DAVID SPEZZA - DIRECTOR.
David Spezza received an accounting degree from Hofstra University in New
York in 1987. From 1992 to the present, Mr. Spezza was a Director and
President of Intelicom Corporation of Clearwater, Florida. From 1987 to
1992, he was employed with Arthur Andersen & Co. in New York in the tax
department.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
THREE-L
The following table sets forth certain information regarding the
beneficial ownership of Three-L Common Stock as of May 31, 1996 by (i) each
director of Three-L, each executive officer of Three-L, all Directors and
executive officers of Three-L as a group, each Intelicom Designee and each
person known by Three-L to be the beneficial owner of more than 5% of the
Three-L Common Stock and (ii) the beneficial ownership of Three-L Common
Stock as of May 31, 1996, after giving effect to the issuance of 1,420,687
shares of Three-L Common Stock to the Intelicom shareholders pursuant to the
Stock Exchange Agreement, by each of the persons referred to in clause (i)
above.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF THREE-L COMMON STOCK
--------------------------------------------
PERCENT AFTER
GIVING EFFECT TO
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT THE STOCK EXCHANGE
- ------------------------------------ ------ ------- ------------------
<S> <C> <C> <C>
Herman K. Watsky........................................ 15,000 19.6% 1.0%
Gordon Dumont........................................... 15,000 19.6% 1.0%
Bernard A. Goldman...................................... 6,500 8.5% *
Roy D. Greenberg........................................ 6,500 8.5% *
Edward P. Gothard....................................... 1,000 1.3% *
All Directors and Officers as a group (5 persons)....... 44,000 57.6% 2.9%
David Kanstoroom (2).................................... 473,562 0% 31.0%
David Spezza (2)........................................ 473,562 0% 31.0%
Telecom Ventures and Acquisitions Corp.................. 473,562 0% 31.0%
</TABLE>
____________________________
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act
of 1934. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but are not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed.
(2) Intelicom Designees.
INTELICOM
The following table sets forth certain information regarding the
beneficial ownership of Intelicom Common Stock as of May 31, 1996 by (i)
each director of Intelicom, each executive officer of Intelicom, all
directors and executive officers of Intelicom as a group and each person
known by Intelicom to be the beneficial owner of more than 5% of the
Intelicom Common Stock and (ii) the beneficial ownership of Three-L
Common Stock as of May
45
<PAGE>
31, 1996, after giving effect to the Stock Exchange Agreement, by each of
the persons referred to in clause (i) above.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
BENEFICIAL OWNERSHIP THREE-L COMMON STOCK
OF INTELICOM AFTER GIVING EFFECT TO THE
COMMON STOCK (1) TRANSACTIONS
------------------ --------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- ------------------------------------ -------- --------- --------- ---------
<S> <C> <C> <C> <C>
David Kanstoroom............................. 300 33.3% 473,562.4 33.3%
David Spezza................................. 300 33.3% 473,562.3 33.3%
Telecom Ventures and Acquisitions Corp....... 300 33.3% 473,562.3 33.3%
All executive officers and directors as
a group (2 persons).......................... 900 66.6% 947,124 66.6%
_____________________________
</TABLE>
(1) For purposes of determining the numbers of shares beneficially owned
by the named individuals and by all executive officers and directors as a
group, with respect to any director or executive officer who held options
to purchase shares of Intelicom Common Stock exercisable within 60 days
of May 31, 1996, it was assumed that such options had been exercised and
the shares issued were outstanding. The respective directors and
executive officers have sole voting power and sole investment power over
all shares reflected in the table and in this note, except as described
in the notes to this table.
DESCRIPTION OF CAPITAL STOCK OF THREE-L
THE FOLLOWING STATEMENTS ARE BRIEF SUMMARIES OF CERTAIN PROVISIONS
RELATING TO THREE-L'S CAPITAL STOCK AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE PROVISIONS OF THREE-L'S CERTIFICATE OF INCORPORATION, (THE
"THREE-L CHARTER"), AND BYLAWS (THE "THREE-L BYLAWS"), WHICH ARE INCORPORATED
BY REFERENCE AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROXY
STATEMENT/PROSPECTUS IS A PART.
Three-L's authorized capital consists of 100,000,000 shares of Three-L
Common Stock, par value $.0001 per share, and 25,000,000 shares of Preferred
Stock, par value $.0001 per share ("Preferred Stock"). As of May 1, 1996,
there were 76,381 shares of Three-L Common Stock outstanding.
Dividends may be declared and paid on the Three-L Common Stock out of
legally available surplus. Such dividends may be paid in cash, property or
shares of Three-L Common Stock. The Three-L Board of Directors may set aside
reserves out of funds available for dividends for any purpose the Three-L
Board of Directors determines to be in Three-L's best interest.
Each share of Three-L Common Stock is entitled to share equally in
dividends from sources legally available therefor when, as, and if declared
by the Three-L Board of Directors and, upon liquidation or dissolution of
Three-L, whether voluntary or involuntary, to share equally in the assets of
Three-L available for distribution to the holders of the Three-L Common Stock.
All outstanding shares of Three-L Common Stock are, and all shares to be
issued by Three-L pursuant to the Merger Agreement will be, validly issued,
fully paid and nonassessable. The Three-L Board of Directors is authorized
to issue additional shares of Three-L Common Stock within the limits
authorized by the Three-L Charter, without stockholder action.
46
<PAGE>
No shares of Preferred Stock have been issued. However, the Board of
Directors of Three-L has the right to fix the rights, privileges and
preferences, including preference upon liquidation, of any class of Preferred
Stock to be issued in the future out of authorized but unissued shares of
Preferred Stock. The Three-L Board of Directors may issue these shares after
adopting and filing a certificate of designation with the Secretary of State
of the State of Delaware.
TRANSFER AGENT
The Company's transfer agent is American Securities Transfer, Inc. of
Denver, Colorado. If the Stock Exchange is approved they will continue to
serve as the Company's transfer agent.
DESCRIPTION OF CAPITAL STOCK OF INTELICOM
THE FOLLOWING STATEMENTS ARE BRIEF SUMMARIES OF CERTAIN PROVISIONS
RELATING TO INTELICOM'S CAPITAL STOCK AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE PROVISIONS OF INTELICOM'S CERTIFICATE OF INCORPORATION (THE
"INTELICOM CHARTER"), AND BYLAWS (THE "INTELICOM BYLAWS"), WHICH ARE INCLUDED
AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROXY
STATEMENT/PROSPECTUS IS A PART.
Intelicom's authorized capital consists of 1,000 shares of Intelicom
Common Stock, par value $1.00 per share. No class of Preferred Stock is
authorized. As of the date of this Proxy Statement/Prospectus, there are 900
shares of Intelicom Common Stock outstanding.
Dividends may be declared and paid on the Intelicom Common Stock out of
legally available surplus. Such dividends may be paid in cash, property or
shares of Intelicom Common Stock. The Intelicom Board of Directors may set
aside reserves out of funds available for dividends for any purpose the
Intelicom Board of Directors determines to be in Intelicom's best interest.
Each share of Intelicom Common Stock is entitled to share equally in
dividends from sources legally available therefor when, as, and if declared
by the Intelicom Board of Directors and, upon liquidation or dissolution of
Intelicom, whether voluntary or involuntary, to share equally in the assets
of Intelicom available for distribution to the holders of the Intelicom
Common Stock.
Each holder of Intelicom Common Stock is entitled to one vote per share
for all purposes. The holders of Intelicom Common Stock are not entitled to
cumulative voting in the election of directors. Moreover, the holders of
Intelicom Common Stock have no preemptive rights and there is no redemption
right or right of conversion with respect to the Intelicom Common Stock.
EXPERTS
The financial statements of Three-L as of December 31,1994 and 1995 and
for the period March 18, 1994 (inception) to December 31, 1994 and for the
year ended December 31, 1995, have been audited by Schmidt + Associates,
P.C., independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of Intelicom as of December 31, 1993, 1994 and
1995 and for each of the three years in the period ended December 31, 1995
have been audited by Schmidt + Associates, independent auditors, as set forth
in their report thereon included therein. Such financial statements are
included herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
47
<PAGE>
LEGAL OPINIONS
The legality of the Three-L Common Stock being offered hereby is being
passed upon for Three-L by John B. Wills, Esq., Denver, Colorado.
OTHER INFORMATION AND STOCKHOLDER PROPOSALS
Three-L's management knows of no other matters that may properly be, or
which are likely to be, brought before the Intelicom Special Meeting.
However, if any other matters are properly brought before such Special
Meeting, the persons named in the enclosed proxy or their substitutes will
vote the proxies in accordance with the recommendations of management.
In order to be considered for inclusion in the proxy statement for the
next annual meeting of Stockholders of Three-L, any stockholder proposal
intended to be presented at the meeting must have been received by Three-L on
or before December 31, 1996.
48
<PAGE>
THREE-L MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS.
GENERAL
Three-L was formed for the sole purpose of acquiring an interest in an
established business which is willing to consolidate with Three-L for the
purpose of establishing a future trading market for its Common Stock and seek
additional acquisitions in related or similar business entities.
THE INTELICOM STOCK EXCHANGE
On April 13, 1995, Three-L completed its initial public offering and
commenced seeking a business acquisition. The Company's President, Herman K.
Watsky together with the Three-L legal counsel reviewed various business
plans submitted by companies ranging from software development, marine
supplies and another long distance reseller. Based on management interviews
and financial statement analysis, the Three-L Board of Directors chose
Intelicom based on its plan of operations, aggressive management and its
potential revenues from operations. Additionally, management believes the
telecommunications industry to have significant financial viability in light
of current legislation.
On November 20, 1995, Three-L entered into a letter of intent to acquire
all of the issued and outstanding shares of Intelicom. Intelicom is a
national reseller in the transmission of long distance telephone calls
through and over transmission lines owned by AT&T and other long distance
carriers at tarriffed rates. Consummation of the transaction is dependent
upon holders of at least 25,646 shares reconfirming their investment in
Three-L and the transaction in accordance with and pursuant to Delaware
corporate law and applicable SEC Regulations. After the acquisition, the
Intelicom shareholders will hold approximately ninety three percent (93%) of
Three-L's outstanding common stock.
The terms of the letter of intent were negotiated by Three-L's President
and David Kanstoroom of Intelicom. The primary issues in the negotiation
were the exchange rate of shares, a determination as to the new management
of the Company, Intelicom's current level of operations and financial
condition, and the desire of Intelicom to become a "public" company.
If approved, all members of Three-L's current board of Directors will
resign and representatives from Intelicom will be appointed to fill the
vacancies so created. Three-L and Intelicom have agreed to use their best
efforts to complete the transaction on or before September 15, 1996.
RESULTS OF OPERATIONS
Three-L has had no operations to date and its sole activity has
consisted of signing the letter of intent to acquire Intelicom. All funds
received in the public offering are currently being held in an escrow account
and will only be released in the event the Stock Exchange is approved.
49
<PAGE>
INTELICOM'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS.
OVERVIEW
Intelicom was founded in 1992, with operations beginning in 1993. Net
revenues have increased to approximately $858,408 for the five months ended
May 31, 1996 ($2,060,000 if annualized). Intelicom has financed this growth
primarily with cash flow from operations. Intelicom has increased revenues
through its attainment of marketing agreements with several telecommunication
carriers, expanding its sales representative force and its attention to
customer service. In September of 1995, Intelicom began buying wholesale
long distance services which it resells to customers under its own name
(private label products and services).
The Company expects to experience continued growth in revenues from
operations due to the introduction of its own private label
telecommunications products and services, thereby allowing the Company to
bill and collect directly from its customers for telecommunications services
rather than merely receiving commissions from other telecommunications
carriers for services provided by those other carriers. The Company also
expects its profitability to increase as a result of its own private label
billing and collection since it will be acting in the role of an actual
telecommunications carrier which buys and re-sells telecommunications
services. Through its strategy of continued growth through expansion of its
agent network, the Company expects to generate significant savings in its
transport costs by achieving volume discounts from its underlying carriers.
In addition, the Company anticipates that its ability to bill and collect
directly from its customers will enable it to provide streamlined and
efficient service to its customers, thereby generating enhanced customer
loyalty and lowering customer attrition. Finally, the Company intends to
complement its own private label billing and collection with the continued
availability of products and services of other major carriers on a sales
agency basis, thereby affording the Company the opportunity to attract and
retain customers by providing a diverse array of telecommunications products
and services. It is anticipated that these factors, combined with the
Company's stated goal of continuing to attract and train highly qualified
individuals to serve as sales agents and consultants, will provide
significantly increased potential for growth in revenues and operating profit.
RESULTS OF OPERATIONS
INTELICOM FOR THE FIVE MONTHS ENDED MAY 31, 1996, COMPARED TO THE
FIVE MONTHS ENDED MAY 31, 1995.
Revenue from operations for the five months ended May 31, 1996, was
$858,408 compared to $673, 436 for the five months ended May 31, 1995. This
increase in revenues is attributable to the increased experience of the sales
representatives, expansion of the agent network and the expanded availability
of products and services from other major carriers.
Intelicom received approximately $12,000 (1%) of revenues from sales of
it's own long distance product. These fees did not exist at May 31, 1995 and
are expected to continue to grow very rapidly.
Intelicom received approximately $106,500 (12%) of revenues from various
fees charged to it's sales representatives, compared to $83,500 (12%) for the
five months ended May 31, 1995.
Operating expenses increased $211,214 (35%) in the five months ended May
31, 1996 as a result of the 27% increase in revenues, additional professional
fees incurred to comply with SEC requirements and additional marketing
efforts.
Commissions paid to sales representatives of $473,385 represents 58% of
total operating expenses of $822,139. This percentage is consistent with
1995. Commission expenses incurred as a percentage of commission earned
increased to 63% in 1996 versus 60% in 1995.
50
<PAGE>
INTELICOM FOR THE YEAR ENDED DECEMBER 31, 1995, COMPARED TO THE
YEAR ENDED DECEMBER 31, 1994.
Revenue from operations for the twelve months ended December 31, 1995,
was $1,691,000, compared to $840,000 for the twelve months ended December
31,1994. This increase in revenues is attributable to more qualified sales
representatives, an improved incentive and benefit program for sales
representatives, more long distance reseller agreements, and increased
efforts on the part of management to stimulate sales production from its
sales representatives. Revenue increased $851,000 in 1995, or approximately
101%.
In September of 1995, Intelicom began offering its own long distance
product to end-users. This was a significant step in Intelicom's growth and
development. Through several very competitive contracts negotiated by
Intelicom, it is now able to provide services, bill end-users and collect
revenue directly from its customer base. Revenue directly from end-users in
1995 was minimal, but it is expected to expand rapidly compared to none in
1994.
Intelicom received approximately $145,000 (9%) of revenues from various
fees received from its sales representatives. These fees increased as a
result of an expanded sales force.
Operating expenses increased $870,000 (102%) in 1995 as a result of the
100% increase in revenues. Commissions paid to sales representatives of
$926,000 represents 58% of total operating expenses of $1,608,000. Intelicom
incurred significant increases in travel and marketing costs associated with
recruiting the expanded sales representative force and consummating cost
effective marketing and consulting agreements with its long distance
providers. Commission expenses incurred as a percentage of commission earned
decreased to 60% in 1995 versus 66% in 1994. It is anticipated that this
trend will continue as a result of Intelicom offering its own products under
its own name through its wholesale contracts. Management believes the
selling expenses attributed to sales representative commissions will decrease
as a percentage of net revenues as a result of Intelicom beginning to offer
its own long distance product to end-users; however, other selling expenses
will increase because of marketing efforts for more customers and qualified
sales representatives.
INTELICOM FOR THE YEAR ENDED DECEMBER 31, 1994, COMPARED TO THE
YEAR ENDED DECEMBER 31, 1993.
Revenues from operations for the twelve months ended December 31, 1994,
was $840,000, compared to $117,000 for the twelve months ended December 31,
1993. This increase is attributable to a full year of operations in 1994
versus development stage activities for the first half of 1993, beginning to
conduct business with its longest carrier, Frontier, for the second half of
1993 only, and not starting to conduct business with its other significant
carrier, BTI, until 1994. Revenues increased $723,000 in 1994, or
approximately 500%.
1994 revenues from fees attributable to its sales force were
approximately $112,000, 13% of total revenues. Fee revenue increased $51,000
(84%) in 1994 as a result of the expansion of its sales representative group.
Operating expenses increased $622,000 in 1994 (503%) as a result of the
600% increase in revenues. Commissions paid to sales representatives of
$481,000 represents 65% of total operating expenses of $738,000. Commission
expenses incurred as a percentage of commissions earned decreased to 66% in
1994 versus 79% in 1993. This decrease in commission expense, as a
percentage of commission revenue, is the result of improvement in its
compensation plan with its independent agents. The agents earn compensation
incentives based upon overall revenue goals with lesser emphasis on specific
commissions related to specific customer sales. Other operating expenses
have increased because of a full year of operating activities in 1994 versus
a portion of 1993 while Intelicom was in the development stage.
LIQUIDITY AND CAPITAL RESOURCES
Intelicom's cash position at May 31, 1996 was $61,000 and net working
capital was $128,000.
Intelicom's cash position at December 31, 1995, was $44,000 and net
working capital was $113,000. Intelicom's agency agreements with its two
primary long distance carriers result in Intelicom's commission revenues
being paid based on billed revenue regardless if end-users pay bills to the
carriers, thus improving Intelicom's
51
<PAGE>
working capital. Intelicom has no charge backs, or pay backs on accounts
that are delinquent or written off as bad debt from its two primary carriers.
Intelicom's cash position at December 31, 1994, was $39,000 and working
capital was $79,000. Intelicom's sales representative agreements do not
require Intelicom to pay its agents, which represents 65% of Intelicom's
annual cash flow obligations, until the long distance carriers have paid them
for long distance services provided; therefore, Intelicom has not incurred
working capital shortages even with its substantial growth.
Cash flows from operations for Intelicom totaled $33,000 for the five
months ended May 31, 1996 ($79,000 if annualized) compared to $46,000 for the
year ended December 31, 1995, and $75,000 for the year ended December 31,
1994. The decrease in Intelicom's cash flows from operating activities is
the result of Intelicom's substantial growth.
Cash outflows from investing activities for the five months ended May 31,
1996, year ended December 31, 1995 and year ended December 31, 1994, of
$9,000, $10,000 and $24,000, respectively, are the result of property and
equipment acquisitions.
Net cash outflows from financing activities for the five months ended May
31, 1996, year ended December 31, 1995 and year ended December 31, 1994, of
$6,000, $31,000 and $16,000, respectively, are primarily the result of net
repayments of shareholder loans/advances and 1995 distributions to
shareholders, in contemplation of Intelicom converting to C-Corporation
status for income tax purposes.
52
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number and percentage of
Warrants/Common Stock that are being "piggy backed" for sale by this Proxy
Statement/Prospectus for the account of Barron Chase Securities, Inc. and/or
its assigns pursuant to the Underwriting Agreement dated April 13, 1995
between the Company and Barron Chase Securities (the "Selling Shareholders").
The Selling Shareholders will receive shares of Common Stock upon exercise
of the Warrants to purchase Common Stock. No underwriter is obligated to
sell or purchase any of such shares. The shares of Common Stock may be sold
by such Selling Shareholders from time to time in the public marketplace.
The Company has agreed to update the information contained in this
Proxy/Prospectus to reflect any facts or events arising after the date of
this Proxy/Prospectus, which, individually, or in the aggregate, represents a
fundamental change in the information set forth in this Proxy/Prospectus and
to include any material information respecting a plan of distribution
materially different from the plan of distribution disclosed in this
Prospectus.
The Company also consents to the use of the Proxy Statement/Prospectus by
the Selling Shareholders in connection with sales of the Common Stock
registered hereunder.
NUMBER OF TOTAL NUMBER
SHARES OF OF PREFERRED
COMMON STOCK SHARES TOTAL AMOUNT
TO BE OWNED PRIOR OWNED AFTER
NAME REGISTERED TO OFFERING OFFERING
- ---- ----------- ------------ ------------
Robert T. Kirk 2,738 (1) 2,738 0
Wendy Gusrae 500 (1) 500 0
----- ----- --
Totals 3,238 3,238 0
----- ----- --
----- ----- --
___________________________
(1) Represents shares of Common Stock underlying Warrants previously issued by
the Company.
SELLING SHAREHOLDER PLAN OF DISTRIBUTION
The Selling Shareholders are not restricted as to the prices at which
they may sell their shares and sales of such shares at less than the market
price may depress the market price of the Company's Common Stock. Further,
the Selling Shareholders are not restricted as to the number of shares which
may be sold at any one time, and it is possible that a significant number of
shares could be sold at the same time which may also have a depressive effect
on the market price of the Company's Common Stock. However, it is
anticipated that the sale of the Common Stock being offered hereby will be
made through customary brokerage channels either through broker-dealers
acting as agents or brokers for the seller, or through broker-dealers acting
as principals, who may then resell the shares in the over-the-counter market,
or a private sale in the over-the-counter market or otherwise, at negotiated
prices related to prevailing market prices and customary brokerage
commissions at the time of the sales, or by a combination of such methods.
Thus, the period for sale of such shares by Selling Shareholders may occur
over an extended period of time.
There are no contractual arrangements between or among any of the Selling
Shareholders and the Company with regard to the sale of the shares and no
professional underwriter in its capacity as such will be acting for the
Selling Shareholders.
The Company will not receive any proceeds from the sale of the shares of
Common Stock by the Selling Shareholders.
53
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF THREE-L ENTERPRISES, INC.
<TABLE>
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . .S-1
Balance Sheets at December 31, 1994 and 1995 . . . . . . . . . . . . . . . . . . .S-2
Statements of Operations from March 18, 1994 (inception) to December 31, 1994
and for the year ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . .S-3
Statements of Stockholders' Equity from March 18, 1994 (inception) to
December 31, 1994 and for the year ended December 31, 1995 . . . . . . . . . . . .S-4
Statements of Cash Flows from March 18, 1994 (inception) to
December 31, 1994 and for the year ended December 31, 1995 . . . . . . . . . . . .S-5
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . S-6 - S-9
Unaudited Balance Sheets at May 31, 1996 and 1995. . . . . . . . . . . . . . . . S-10
Unaudited Statements of Operations for the five months ended May 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Unaudited Statement of Stockholders' Equity at May 31, 1996. . . . . . . . . . . S-12
Unaudited Statements of Cash Flows for the five months ended May 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
</TABLE>
S-1
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT OF INTELICOM INTERNATIONAL
CORPORATION
<TABLE>
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . .F-1
Consolidated Balance Sheets at December 31, 1993, 1994 and 1995. . . . . . . . . .F-2
Consolidated Statements of Earnings for each of the three years
in the period ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statement of Stockholders' Equity for each of the
three years in the period ended December 31, 1995. . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . . .F-5
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . F-6 - F-11
Unaudited Consolidated Balance Sheets at May 31, 1996 and 1995 . . . . . . . . . F-12
Unaudited Consolidated Statements of Earnings for the five months
ended May 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Unaudited Consolidated Statement of Stockholders' Equity at May 31, 1996 . . . . F-14
Unaudited Consolidated Statements of Cash Flows for the five months
ended May 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
</TABLE>
F-1
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
Financial Statements
with
Independent Auditors' Report
December 31, 1995
and
December 31, 1994
<PAGE>
THREE-L ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report S-1
Financial Statements:
Balance Sheets S-2
Statements of Operations S-3
Statement of Stockholders' Equity S-4
Statements of Cash Flows S-5
Notes to Financial Statements S-6 - S-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Three-L Enterprises, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Three-L Enterprises, Inc. (a
development stage company) as of December 31, 1995 and December 31, 1994, and
the related statements of operations, stockholders' equity, and cash flows for
the years then ended and the period March 18, 1994 (inception) through December
31, 1995. 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 our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Three-L Enterprises, Inc. (a
development stage company) as of December 31, 1995 and December 31, 1994, and
the results of their operations and their cash flows for the years then ended
and the period March 18, 1994 (inception) through December 31, 1995 in
conformity with generally accepted accounting principles.
SCHMIDT + ASSOCIATES, P.C.
March 12, 1996
Greenwood Village, Colorado
S-1
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
12/31/95 12/31/94
--------- --------
CURRENT ASSETS:
Cash $ 395 $ 8,147
OTHER ASSETS:
Deferred offering costs 36,825 11,796
Cash held in escrow 133,110 -
--------- --------
$ 170,330 $ 19,943
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,990 $ -
Note Payable - officer 5,000 -
--------- --------
Total Liabilities 9,990 -
--------- --------
COMMITMENTS AND CONTINGENCIES
ESCROWED COMMON STOCK 133,110 -
--------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value;
25,000,000 shares authorized;
none issued $ - $ -
Common Stock, $.0001 par value;
100,000,000 shares authorized;
44,000 issued and outstanding 4 4
Additional paid-in capital 35,411 20,621
(Deficit) accumulated during the
development stage (8,185) (682)
--------- --------
Total stockholders' equity 27,230 19,943
--------- --------
$ 170,330 $ 19,943
--------- --------
--------- --------
See accompanying notes to financial statements.
S-2
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995 and 1994
March 18,
1994
(Inception)
to
December 31,
1995 1994 1995
-------- -------- ----
REVENUES $ - $ - $ -
-------- -------- --------
EXPENSES:
General and administrative 7,503 682 8,185
-------- -------- --------
NET (LOSS) $ (7,503) $ (682) $ (8,185)
-------- -------- --------
-------- -------- --------
NET (LOSS) PER SHARE OF
COMMON STOCK $ (.17) $ (.02) $ (.19)
-------- -------- --------
-------- -------- --------
Weighted average number of
common shares outstanding 44,000 44,000 44,000
-------- -------- --------
-------- -------- --------
See accompanying notes to financial statements.
S-3
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(Deficit)
Accumulated
During
Common Stock Additional the
----------------- Paid-In Development
Shares Amount Capital Stage
------ ------ ------- -----
Balances, March 18, 1994
(inception) - $ - $ - $ -
Issuance of common stock
for cash, $.46875 per
share 44,000 4 20,621 -
Net (loss) for period
March 18, 1994 (inception),
to December 31, 1994 - - - (682)
------ --- ------- -------
Balances, December 31, 1994 44,000 4 20,621 (682)
Net proceeds received from
public offering (see Note 2) - - 14,790 -
Net (loss) for period - - - (7,503)
------ --- ------- -------
Balances, December 31, 1995 44,000 $ 4 $ 35,411 $ (8,185)
------ --- -------- --------
------ --- -------- --------
See accompanying notes to financial statements.
S-4
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 and 1994
March 18,
1994
(Inception)
to
December 31,
1995 1994 1995
--------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $ (7,503) $ (682) $ (8,185)
Increase in accounts payable 4,990 - 4,990
--------- --------- ---------
Net cash (used) by operating
activities (2,513) (682) (3,195)
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES: - - -
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common
stock - 20,625 20,625
Proceeds from sale of escrowed
common stock (see Note 2) 14,790 - 14,790
Proceeds from borrowings from
note payable - officer 5,000 - 5,000
(Increase) in deferred offering
costs (25,029) (11,796) (36,825)
--------- --------- ---------
Net cash provided (used) by
financing activities (5,239) 8,829 3,590
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (7,752) 8,147 395
CASH, beginning of period 8,147 - -
--------- --------- ---------
CASH, end of year $ 395 $ 8,147 $ 395
--------- --------- ---------
--------- --------- ---------
See accompanying notes to financial statements.
S-5
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION
Three-L Enterprises, Inc. (a development stage company) ("the Company") was
incorporated under the laws of the State of Delaware on March 18, 1994, for
the purpose of providing a vehicle to be used to raise capital and seek
business opportunities believed to hold a potential for profit. The
Company is in the development stage as defined in the Statement of
Financial Accounting Standards No. 7. There have been no operations since
incorporation.
DEFERRED OFFERING COSTS
Deferred offering costs represent expenses incurred by the Company in
connection with its initial public offering (Note 2) and will be charged
against the proceeds of the offering, if the proposed merger or acquisition
is successful, or expensed if unsuccessful.
(LOSS) PER COMMON SHARE
(Loss) per common share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares
outstanding during the period.
INCOME TAXES
The Company has adopted the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards No. 109. Under
this method, deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis
of the assets and liabilities and their financial amounts at year-end. The
Company will provide a valuation allowance to reduce deferred tax assets to
their net realizable value. For financial reporting, start-up costs are
expensed as incurred; for tax purposes they are capitalized and will be
amortized over five years when operations begin. The Company is not in
operation at this date.
S-6
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
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 at 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.
2. INITIAL PUBLIC OFFERING
In April, 1995, the Company completed an initial public offering of 32,381
shares of $.0001 par value common stock, through an underwriter on a "firm
commitment" basis at $5.25 per share. The offering, which was made under
Rule 419 of Regulation C, required that the proceeds, less certain
allowable deductions and all the securities purchased by investors, be
placed into an escrow account until the offering has been reconfirmed by
the Company's shareholders and the Company becomes a party to a merger or
acquisition with another business in accordance with the provisions of Rule
419. The proceeds have been placed in a non-interest bearing account. In
the event an acquisition is not consummated within 18 months of the
effective date of this offering, which was April 13, 1995, the proceeds
held in escrow will be returned to all investors, and none of the
securities will be issued.
The following summarizes the public offering:
Gross proceeds from sale of
common stock $ 170,000
Underwriter commissions and
nonaccountable expenses paid
directly from proceeds (22,100)
Funds received by the Company
as permitted under Rule 419 (14,790)
---------
Net proceeds held in escrow $ 133,110
---------
---------
S-7
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. INITIAL PUBLIC OFFERING (Continued)
Because the conditions of Rule 419 have not been met, the Company is
reporting the sale of the 32,381 shares of common stock between the
liability and stockholders' equity sections of the balance sheets.
The Company also issued the underwriter warrants to purchase 3,238 shares
of common stock, which will be exercisable for a period of four years,
commencing one year from the date of closing, which was April 13, 1995, at
an exercise price of $6.30 per shares, subject to adjustment in certain
events. The shares underlying the warrants are subject to piggybank
registration rights, expiring seven years after the effective date of the
offering.
3. RELATED PARTY TRANSACTIONS
The Company maintains its offices in space provided by the Company's
President pursuant to an oral agreement on rent-free basis with
reimbursement for out-of-pocket expenses, such as telephone. In addition,
the Company borrowed $5,000 from the Company's president to pay legal fees.
This note is due on demand, non-interest bearing, and dated December 29,
1995.
4. STOCKHOLDERS' EQUITY
In connection with organizing the Company, the Company issued 2,200,000
shares of its common stock to its officers and directors for an aggregate
of $20,625 in cash.
On February 6, 1995, the Company completed a one share for 50 shares
reverse split of its common stock, resulting in a reduction of the
Company's outstanding shares from 2,200,000 to 44,000 shares. All
accompanying financial information and (loss) per share have been
retroactively adjusted in the accompanying financial statements to reflect
the stock split.
The Company has authorized 25,000,000 shares of $.0001 par value preferred
stock. No rights and preferences have been determined and no shares have
been issued.
S-8
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Concluded)
5. FINDER'S FEE
Three-L has entered into a finder's fee agreement with a telecommunications
consulting firm. In conformity with the restrictions set forth in
Three-L's S-1 Registration Form and Prospectus, Three-L shall issue
30,552 shares of Three-L common stock to finder if the proposed business
combination discussed below is consummated.
6. PROPOSED BUSINESS COMBINATION
On November 20, 1995, the Company entered into a letter of intent to
acquire all of the issued and outstanding shares of Intelicom International
Corporation (Intelicom). Consummation of the transaction is dependent upon
the shareholders of the Company reconfirming their investment in the
Company in accordance with Rule 419 and approving the issuance of 1,420,687
shares of the Company's common stock to the holders of Intelicom's common
stock. The Company is in the process of preparing the required Amendment
to its registration statement to comply with Rule 419 and obtain the
shareholders consent.
The Company proposes to acquire Intelicom in a transaction intended to be a
tax free exchange under the Internal Revenue Code, in exchange for
"restricted shares" of Three-L Enterprises, Inc. common stock. Intelicom
must have a minimum fair market value of $134,639 at the time of the
merger.
S-9
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
May 31, 1996 and 1995
ASSETS
5/31/96 5/31/95
--------- ---------
CURRENT ASSETS:
Cash $ 340 $ 8,731
OTHER ASSETS:
Deferred offering costs 50,591 22,752
Cash held in escrow 133,110 133,110
--------- ---------
$ 184,041 $ 164,593
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 23,087 $ 1,032
Note Payable - officer 7,500 -
--------- ---------
Total Liabilities 30,587 1,032
--------- ---------
COMMITMENTS AND CONTINGENCIES
ESCROWED COMMON STOCK 133,110 133,110
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value;
25,000,000 shares authorized;
none issued $ - $ -
Common Stock, $.0001 par value;
100,000,000 shares authorized;
44,000 issued and outstanding 4 4
Additional paid-in capital 35,411 35,411
(Deficit) accumulated during the
development stage (15,071) (4,964)
--------- ---------
Total stockholders' equity 20,344 30,451
--------- ---------
$ 184,041 $ 164,593
--------- ---------
--------- ---------
S-10
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Five Months Ended May 31, 1996 and 1995
March 18,
1994
(Inception)
to
5/31/96 5/31/95 May 31, 1996
-------- -------- ------------
REVENUES $ - $ - $ -
-------- -------- --------
EXPENSES:
General and administrative 6,886 4,282 15,071
-------- -------- --------
NET (LOSS) $ (6,886) $ (4,282) $(15,071)
-------- -------- --------
-------- -------- --------
NET (LOSS) PER SHARE OF
COMMON STOCK $ (.16) $ (.10) $ (.34)
-------- -------- --------
-------- -------- --------
Weighted average number of
common shares outstanding 44,000 44,000 44,000
-------- -------- --------
-------- -------- --------
S-11
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(Deficit)
During Accumulated
Common Stock Additional the
----------------- Paid-In Development
Shares Amount Capital Stage
------ ------ ------- -----------
Balances, March 18, 1994
(inception) - $ - $ - $ -
Issuance of common stock
for cash, $.46875 per
share 44,000 4 20,621 -
Net (loss) for period
March 18, 1994 (inception),
to December 31, 1994 - - - (682)
------ --- -------- --------
Balances, December 31, 1994 44,000 4 20,621 (682)
Net proceeds received from
public offering (see Note 2) - - 14,790 -
Net (loss) for period - - - (7,503)
------ --- -------- --------
Balances, December 31, 1995 44,000 $ 4 $ 35,411 $ (8,185)
Net (loss) for period - - - (6,886)
------ --- -------- --------
Balances, May 31, 1996 44,000 $ 4 $ 35,411 $(15,071)
------ --- -------- --------
------ --- -------- --------
S-12
<PAGE>
THREE-L ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Five Months Ended May 31, 1996 and 1995
March 18,
1994
(Inception)
to
5/31/96 5/31/95 May 31, 1996
--------- --------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $ (6,886) $ (4,282) $ (15,071)
Increase in accounts payable 18,097 1,032 23,087
--------- --------- ---------
Net cash (used) by operating
activities 11,211 (3,250) 8,016
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES: - - -
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common
stock - - 20,625
Proceeds from sale of escrowed
common stock (see Note 2) - 14,790 14,790
Proceeds from borrowings from
note payable - officer 2,500 - 7,500
(Increase) in deferred offering
costs (13,766) (10,956) (50,591)
--------- --------- ---------
Net cash provided (used) by
financing activities (11,266) 3,834 (7,676)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH ( 55) 584 340
CASH, beginning of period 395 8,147 -
--------- --------- ---------
CASH, end of year $ 340 $ 8,731 $ 340
--------- --------- ---------
--------- --------- ---------
S-13
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
Financial Statements
with
Independent Auditors' Report
December 31, 1995
and
December 31, 1994
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
--------
Independent Auditors' Report F-1
Financial Statements:
Balance Sheets F-2
Statements of Earnings F-3
Statement of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Intelicom International Corporation
Clearwater, Florida
We have audited the accompanying balance sheets of Intelicom International
Corporation (a Florida corporation) as of December 31, 1995 and December 31,
1994, and the related statements of earnings, stockholders' equity, and cash
flows for the years ended December 31, 1995, December 31, 1994 and December 31,
1993. 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 our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intelicom International
Corporation as of December 31, 1995 and December 31, 1994, and the results of
its operations and its cash flows for the years ended December 31, 1995,
December 31, 1994 and December 31, 1993, in conformity with generally accepted
accounting principles.
SCHMIDT + ASSOCIATES, P.C.
January 27, 1996
Greenwood Village, Colorado
F-1
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
12/31/95 12/31/94
-------- --------
Current assets:
Cash 43,639 38,515
Accounts receivable - trade 261,797 179,456
Notes receivable - related parties - 3,714
Prepaid expenses 5,000 -
-------- --------
Total current assets 310,436 221,685
-------- --------
Property and equipment:
Furniture & equipment 55,459 41,414
Accumulated depreciation (15,943) (6,639)
-------- --------
Net property and equipment 39,516 34,775
-------- --------
Other assets:
Deposits 10,000 -
-------- --------
Total Assets $359,952 $256,460
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 18,266 5,494
Accrued expenses 176,162 137,587
Notes payable - shareholders 6,091 10,823
Current portion of long-term debt 2,980 -
-------- --------
Total current liabilities 203,499 153,904
-------- --------
Stockholders' equity:
Common stock (1,000 shares
authorized, 900 shares issued
and outstanding at $1.00 par
value on December 31, 1995) 900 1,150
Additional paid-in capital - 1,150
Retained earnings 155,553 104,256
Treasury stock, at cost - (4,000)
-------- --------
Total stockholders' equity 156,453 102,556
-------- --------
Total Liabilities &
Stockholders' Equity $359,952 $256,460
-------- --------
-------- --------
See accompany notes to financial statements.
F-2
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENTS OF EARNINGS
December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Revenues:
Commissions $ 1,540,850 $ 728,318 $ 56,640
Fees 146,461 111,894 60,648
Interest 3,810 281 -
----------- --------- -----------
Total revenues 1,691,121 840,493 117,288
----------- --------- -----------
Operating expenses:
Charitable contributions 200 100 -
Commissions 925,693 480,945 44,841
Computer expense 91,273 43,819 3,308
Prepaid calling cards 15,372 - -
Depreciation 9,305 4,960 1,679
Insurance 15,741 1,952 12
Interest 67 306 919
Marketing costs 45,619 10,167 10,495
Meals 114 - -
Miscellaneous 2,968 2,339 125
Office supplies 35,944 17,575 6,428
Postage 25,049 11,569 6,213
Printing 37,664 3,791 -
Professional fees 38,219 5,232 35
Rent 47,254 19,004 10,566
Salaries 153,529 98,783 15,731
Taxes/filing fees 25,967 9,118 50
Telephone 35,337 13,435 10,341
Trade publications 4,621 160 -
Travel 90,835 14,413 5,114
Long distance billing
services 7,384 - -
----------- --------- -----------
Total operating expenses 1,608,155 737,668 115,857
----------- --------- -----------
Net earnings $ 82,966 $ 102,825 $ 1,431
----------- --------- -----------
----------- --------- -----------
Proforma information:
Historical net earnings $ 82,966 $ 102,825 $ 1,431
Charge in lieu of income
taxes for subchapter S
corporation 24,890 30,850 429
----------- --------- -----------
Proforma net earnings $ 58,076 $ 71,975 $ 1,002
----------- --------- -----------
----------- --------- -----------
See accompany notes to financial statements.
F-3
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 -- $ -- $ -- $ -- -- $ --
Issued 100,000 shares on
July 6, 1993 100,000 1,000
Net earnings 1,431
------- --------- -------- -------- ------ --------
Balances, December 31, 1993 100,000 1,000 -- 1,431 -- --
Purchased 25,000 shares of
founding stockholder's stock,
June 15, 1994 (25,000) (4,000)
Issued 15,000 shares to
remaining stockholders on
June 15, 1994 15,000 150 1,150
Net earnings 102,825
------- --------- -------- -------- ------ --------
Balances, December 31, 1994 115,000 1,150 1,150 104,256 (25,000) (4,000)
Recapitalization on merger
with International on
December 4, 1995 (114,100) (250) (1,150) 25,000 4,000
Net earnings 82,966
Distributions to stockholders (31,669)
------- --------- -------- -------- ------- --------
Balances, December 31, 1995 900 $900 $ -- $155,553 -- $ --
------- --------- -------- -------- ------- --------
------- --------- -------- -------- ------- --------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENTS OF CASH FLOWS
December 31, 1995, 1994 and 1993
1995 1994 1993
--------- --------- ---------
Cash flows from operating
activities:
Net income $ 82,966 $ 102,825 $ 1,431
Adjustment to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation 9,305 4,959 1,679
(Increase) in accounts receivable (82,341) (151,040) (28,416)
(Increase) in prepaid expenses (5,000) - -
(Increase) in deposits (10,000) - -
Increase in:
Accounts payable - trade 12,772 3,865 1,629
Accrued expenses 38,574 114,854 22,733
--------- ---------- ---------
Net cash provided by
operating activities 46,276 75,463 (944)
--------- ---------- ---------
Cash flows from investing
activities:
Acquisition of property and
equipment (14,045) (20,094) (21,320)
(Increase) decrease in notes
receivable 3,715 (3,715) -
--------- ---------- ---------
Net cash (used) by
investing activities (10,330) (23,809) (21,320)
--------- ---------- ---------
Cash flows from financing
activities:
Payments on notes payable -
shareholders (32,104) (30,343) (2,667)
Stock issuance/purchases 2,600 (1,700) -
Borrowing from note payable 2,980 - -
Distributions to shareholders (31,669) - -
Borrowing from shareholders 27,371 15,829 28,006
--------- ---------- ---------
Net cash (used) by
financing activities (30,822) (16,214) 25,339
--------- ---------- ---------
Net increase in cash 5,124 35,440 3,075
Cash, beginning of year 38,515 3,075 -
--------- ---------- ---------
Cash, end of year $ 43,639 $ 38,515 $ 3,075
--------- ---------- ---------
--------- ---------- ---------
Cash paid during the year for:
Interest $ 67 $ 306 $ 919
--------- ---------- ---------
--------- ---------- ---------
See accompanying notes to financial statements.
F-5
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Intelicom International Corporation ("Intelicom" or "the Company") was
incorporated under the laws of the State of Florida in October, 1994. The
Company did not have any business activities until its tax free merger with
Intelicom Corporation in December of 1995. Intelicom Corporation was
incorporated under the laws of the State of Florida in November of 1992,
and began conducting business in 1993. The officers and directors approved
the merger of Intelicom and Intelicom Corporation effective December 4,
1995, in preparation for the proposed merger with Three-L Enterprises,
Inc., as discussed below. The accompanying financial statements present
the accounts and transactions of Intelicom and the transactions of the
predecessor corporation, Intelicom Corporation, from inception to December
31, 1995. The merger has been accounted for in a manner similar to that
used in accounting for a pooling-of-interests business combination.
DESCRIPTION OF BUSINESS
Intelicom's primary business purpose prior to September, 1995 was to market
telecommunication services for other companies. In September, 1995, the
company began buying wholesale long distance services which it resells to
customers under it's own name in addition to continuing to market other
companies services. The Company receives revenue from carriers of long
distance whose services it markets, and also assists some carriers in
collection efforts. In September, 1995, the Company began receiving
revenue from private individuals and companies for the sale of its own
services.
INCOME TAXES
The stockholders of the Company have consented to the Company's election to
be treated as a "small business corporation" under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, the Company did
not have any tax liability and its stockholders were subject to federal
income tax liabilities based on their respective interests in the Company's
taxable income. As a result of the merger discussed above, the S
corporation status of the Company terminated on December 4, 1995, and
thereafter the Company will pay income taxes based on its taxable income in
future years.
F-6
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
MAJOR CARRIER RELATIONSHIPS
The Company receives a substantial portion of its commission revenues from
two major telecommunication carriers. During 1995, 1994 and 1993,
commissions from these two carriers aggregated $1,298,596, $562,842 and
$32,829, respectively. At December 31, 1995, 1994 and 1993, commissions
due from those carriers included in trade accounts receivable were
$228,002, $155,666 and $21,368, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are provided using the straight-line method over the following estimated
useful lives: furniture, fixtures, and equipment - 7 years; computer
equipment - 5 years.
COMMON STOCK
The Company is authorized to issue 1,000 shares of $1.00 par value common
stock. The Company has issued 900 shares of its common stock in
conjunction with the merger with Intelicom Corporation, as discussed
previously.
ADVERTISING
Advertising costs are expensed as incurred.
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 at 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.
F-7
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
REVENUE RECOGNITION
The Company receives commissions for the sale of telephone services. These
commissions are earned as the services are provided.
2. ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31:
1995 1994
---- ----
Commissions payable $ 163,623 $ 123,376
Wages payable 11,562 12,785
Payroll taxes payable 977 1,426
--------- ---------
$ 176,162 $ 137,587
--------- ---------
--------- ---------
3. NOTES PAYABLE
Notes payable consists of a note payable to American General Finance for
the purchase of a computer due in 1996. The minimum payment on the note is
$268, including interest at 18%. The note is collateralized by the
computer.
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its office space and some of its office equipment under
noncancellable operating leases expiring in various years ranging through
2000. These leases generally require the Company to pay insurance, taxes
and other expenses related to the leased property.
Several of the equipment leases contain options to purchase the leased
equipment at fair market value upon expiration of the lease.
F-8
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
4. COMMITMENTS AND CONTINGENCIES (Continued)
OPERATING LEASES (CONTINUED)
Future minimum lease payments under these operating leases are as follows
as of December 31:
1996 $ 40,052
1997 40,952
1998 40,226
1999 40,406
2000 20,881
---------
$ 182,517
---------
---------
Rent expense for all operating leases was $46,590, $16,059 and $5,614,
during 1995, 1994 and 1993, respectively.
LEGAL PROCEEDINGS
The Company is involved in litigation with a computer software company
related to a contract dispute. The case is set for trial in March 1996.
The Company has filed a pending motion for Summary Judgement. The Company
will continue to vigorously defend their position and has filed a Counter
Complaint for the costs and expenses that it has had to incur due to the
software company's breach of the agreement. If the software company is
successful with their complaint, a judgement in the amount of approximately
$44,000 may be awarded. The case is in the discovery stage and the outcome
cannot be determined at this time.
5. INCOME TAXES
As described in Note 1, the stockholders have consented to the Company's
election to be treated as a "small business corporation" under the
provision of Subchapter S of the Internal Revenue Code and income taxes are
imposed on the stockholders rather than the Company. The Company did not
have any tax liability and its Stockholders were subject to federal income
tax liabilities based on their respective interests in the Company's
taxable income. As a result of the proposed merger, the S corporation
status of the Company has terminated and the Company will bear income taxes
based on its taxable income in the future.
F-9
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
5. INCOME TAXES (CONTINUED)
Although the Company's S corporation status was terminated on December 4,
1995, the income tax effects of C corporation status for the period of
December 4, 1995, to December 31, 1995, are insignificant and no temporary
differences have been recognized in the current period.
The Company plans to adopt, prospectively, the provisions of FASB Statement
No. 109 "Accounting for Income Taxes" (SFAS No. 109), effective January 1,
1996. Under the liability method prescribed by SFAS No. 109, deferred
income taxes will reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts due for income tax purposes.
6. SUBSEQUENT EVENTS
On January 16, 1996, the Company established a letter of credit with
Republic Bank in the amount of $10,000 which is collateralized by the
general assets of the Corporation.
7. PROPOSED BUSINESS COMBINATION
The Company has entered into a "Letter of Intent" with Three-L Enterprises,
Inc. (a public company) to exchange all of the outstanding shares of
Intelicom for a majority interest in Three-L Enterprises, Inc. Three-L
Enterprises, Inc. proposes to acquire Intelicom in a transaction intended
to be a tax free exchange under the Internal Revenue Code, in exchange for
"restricted shares" of Three-L Enterprises, Inc. common stock. The Company
must have a minimum fair market value of $134,639 at the time of the
merger and meet certain other conditions, including the filing of a
Registration Statement with the Securities and Exchange Commission and the
approval of the majority of the shareholders of Three-L Enterprises, Inc.
8. RELATED PARTY TRANSACTIONS
The Company received working capital advances and loans from the
Corporation's shareholders. The Company has advanced funds to its
shareholders for the formation of two other related entities, Intelisoft
and Intelicom International (before the December 4, 1995 merger) for
formation costs and the development of computer software. There are no
other transactions with these entities.
F-10
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS (Concluded)
December 31, 1995 and 1994
8. RELATED PARTY TRANSACTIONS (Continued)
As part of its Independent Agent Agreement with its sales representatives,
the Company has a 2% revenue sharing pool that its representatives can
qualify to share in if they meet certain production requirements. Three
shares of the 2% revenue sharing pool shall be irrevocably reserved for the
original founding members of Intelicom Corporation, with such shares being
allocated among the founding members in accordance with the policies as
established by the board of directors. The rights to such shares shall be
irrevocably vested in and to the founding members after two years of full
time employment. The founders have waived any right to any revenue sharing
through December 31, 1995.
9. TREASURY STOCK
Treasury stock is shown at cost.
On June 15, 1994, the Company signed an agreement to purchase 20,000 of the
25,000 shares of Intelicom common stock issued and owned by one of the
original founders of the Company. Consideration for this treasury stock
consisted of the repayment of a shareholder loan of $15,000 by June 30,
1994, the remaining $1,000 of the shareholder loan by May 30, 1996, and
$4,000 for the 20,000 shares to be paid by May 30, 1996. The remaining
5,000 shares were delivered to and held by Bill Olive, one of the other
founding shareholders of Intelicom.
On February 5, 1996, Intelicom entered into a Mutual Release and Settlement
Agreement whereby the Company agreed to prepay the remaining $5,000 owed on
the note payable and treasury stock transaction discussed above and the
founding shareholder holding the remaining 5,000 shares tendered them to
the Company for no additional consideration and the former Intelicom
Corporation shareholder completely waived and renounced any rights or
claims to any ownership in the 5,000 shares or any other ownership in
Intelicom International or Intelicom Corporation. Based on the substance
and intent of this treasury stock transaction, the entire 25,000 shares of
stock originally owned by the one founding shareholder of Intelicom
Corporation has been treated as a treasury stock purchase at June 15, 1994.
F-11
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
BALANCE SHEETS
(Unaudited)
May 31, 1996 and 1995
ASSETS
5/31/96 5/31/95
------- -------
Current assets:
Cash $ 61,334 $ 49,606
Accounts receivable - trade 294,425 273,167
Notes receivable - related parties - 4,114
------- -------
Total current assets 355,759 326,887
------- -------
Property and equipment:
Furniture & equipment 64,529 41,414
Accumulated depreciation (20,669) (10,191)
------- -------
Net property and equipment 43,860 31,223
------- -------
Other assets:
Deposits 10,000 -
------- -------
Total Assets $409,619 $358,110
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,266 $ 2,250
Accrued expenses 206,621 182,280
Current portion of long-term debt 2,999 8,513
------- -------
Total current liabilities 227,886 193,043
------- -------
Stockholders' equity:
Common stock (1,000 shares
authorized, 900 shares issued
and outstanding at $1.00 par
value on December 31, 1995) 900 1,150
Additional paid-in capital - 1,150
Retained earnings 180,833 166,767
Treasury stock, at cost - (4,000)
------- -------
Total stockholders' equity 181,733 165,067
------- -------
Total Liabilities &
Stockholders' Equity $409,619 $358,110
------- -------
------- -------
F-12
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENTS OF EARNINGS
(Unaudited)
For the Five Months Ended May 31, 1996 and 1995
5/31/96 5/31/95
------- -------
Revenues:
Commissions $ 748,891 $ 589,366
Fees 106,494 83,469
Interest 3,023 601
--------- ---------
Total revenues 858,408 673,436
--------- ---------
Operating expenses:
Charitable contributions - 200
Commissions 473,385 345,078
Computer expense 41,728 44,233
Prepaid calling cards 473 -
Depreciation 4,725 3,553
Insurance 10,657 6,830
Marketing costs 37,559 16,220
Miscellaneous 1,357 3,260
Office supplies 6,858 12,070
Postage 7,197 8,306
Printing - 5,234
Professional fees 62,276 5,219
Rent 17,808 20,120
Salaries 79,197 60,959
Taxes/filing fees 14,305 18,504
Telephone 7,787 14,188
Trade shows - 4,620
Travel 34,770 42,331
Utilities/Maintenance 4,770 -
Long distance billing
services 17,287 -
--------- ---------
Total operating expenses 822,139 610,925
--------- ---------
Net earnings before taxes 36,269 62,511
Income taxes 10,989 -
--------- ---------
Net earnings $ 25,280 $ 62,511
--------- ---------
--------- ---------
Proforma information:
Historical net earnings $ 62,511
Charge in lieu of income
taxes for subchapter S
corporation 17,469
---------
Proforma net earnings $ 25,280 $ 45,042
--------- ---------
--------- ---------
F-13
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 -- $ -- $ -- $ -- -- $ --
Issued 100,000 shares on
July 6, 1993 100,000 1,000
Net earnings 1,431
------- -------- ------- ------- ------- -------
Balances, December 31, 1993 100,000 1,000 -- 1,431 -- --
Purchased 25,000 shares of
founding stockholder's stock,
June 15, 1994 (25,000) (4,000)
Issued 15,000 shares to remaining
stockholders on June 15, 1994 15,000 150 1,150
Net earnings 102,825
------- -------- ------- ------- ------- -------
Balances, December 31, 1994 115,000 1,150 1,150 104,256 (25,000) (4,000)
Recapitalization on merger
with International on 12/4/95 (114,100) (250) (1,150) 25,000 4,000
Net earnings 82,966
Distributions to stockholders (31,669)
------- -------- ------- ------- ------- -------
Balances, December 31, 1995 900 900 -- 155,553 -- --
Net earnings 25,280
------- -------- ------- ------- ------- -------
Balances, May 31, 1996 900 $ 900 -- $180,833 -- --
------- -------- ------- ------- ------- -------
------- -------- ------- ------- ------- -------
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE>
INTELICOM INTERNATIONAL CORPORATION
(FORMERLY INTELICOM CORPORATION)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Five Months Ended May 31, 1996 and 1995
5/31/96 5/31/95
------- -------
Cash flows from operating
activities:
Net income $ 25,280 $ 62,511
Adjustment to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation 4,725 3,552
(Increase) in accounts receivable (32,628) (93,711)
Increase in:
Accounts payable - trade - (3,244)
Accrued expenses 30,459 44,693
--------- --------
Net cash provided by
operating activities 32,836 13,801
--------- --------
Cash flows from investing
activities:
Acquisition of property and
equipment (9,069) -
(Increase) decrease in notes
receivable - (400)
--------- --------
Net cash (used) by
investing activities (9,069) (400)
--------- --------
Cash flows from financing
activities:
Payments on notes payable -
shareholders (6,072) (2,310)
--------- --------
Net cash (used) by
financing activities (6,072) (2,310)
--------- --------
Net increase in cash 17,695 11,091
Cash, beginning of year 43,639 38,515
--------- --------
Cash, end of year $ 61,334 $ 49,606
--------- --------
--------- --------
F-15
<PAGE>
ANNEX I
PROXY PROXY
THREE-L ENTERPRISES, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF THE SHAREHOLDERS TO BE HELD SEPTEMBER 13, 1996
The undersigned hereby constitutes and appoints Herman K. Watsky and Gordon
Dumont, and each of them, the true and lawful attorneys and proxies of the
undersigned, with full power of substitution and appointment, for and in the
name, place and stead of the undersigned, to act for and vote all of the
undersigned's shares of the $.0001 par value common stock of Three-L
Enterprises, Inc., a Delaware corporation at the Special Meeting of
Shareholders to be held at 1109 Andrews, Metairie, Louisiana, at 11:00 a.m.
Central Standard Time, on September 13, 1996, and any and all adjournments
thereof, for the following purposes:
1. To reconfirm their investment in Three-L Enterprises, Inc.
/ / FOR / / AGAINST / / ABSTAIN
2. To consider and approve the Stock Exchange Agreement with Intelicom
International Corporation ("Intelicom") and the issuance of 1,420,687 shares
of Three-L Common Stock for all of the issued and outstanding shares of
Intelicom.
/ / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as properly may come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ABOVE.
The undersigned hereby revokes any proxies as to said shares and heretofore
given by the undersigned, and ratifies and confirms all that said attorneys
and proxies may lawfully do by virtue hereof.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
A-1
<PAGE>
The undersigned hereby acknowledges receipt
of the Notice of Special Meeting of
Shareholders and Proxy Statement
furnished therewith.
Dated: , 1996
------------------------------
-------------------------------------------
-------------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s)
hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should
submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THREE-L
ENTERPRISES, INC. PLEASE SIGN AND RETURN THIS PROXY TO THREE-L ENTERPRISES,
INC., 1109 ANDREWS, METAIRIE, LOUISIANA 70005. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
A-2
<PAGE>
ANNEX II
STOCK PURCHASE AGREEMENT
____________________
BETWEEN
DAVID A. KANSTOROOM
DAVID SPEZZA
TELECOM VENTURES AND ACQUISITIONS CORP
as Sellers
AND
THREE - L ENTERPRISES, INC.
as Purchaser,
relating to the purchase of
all of the outstanding stock of
INTELICOM INTERNATIONAL CORPORATION
September __, 1996
A-3
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is executed as of the _____ day of
September, 1996 (hereinafter called the "Agreement"), between and among David
A. Kanstoroom, David Spezza and Telecom Ventures and Acquisitions Corp
(hereinafter referred to as the "Selling Stockholders"), Three-L Enterprises,
Inc. (hereinafter referred to as "Purchaser"), a corporation organized and
existing in accordance with the laws of the State of Delaware, and Intelicom
International Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Florida.
RECITALS
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Florida, having its principal place of business at 28050
U.S. 19 North, Suite 202, Clearwater, Florida 34621. The Selling
Stockholders own 100% of the outstanding capital stock of the Company.
WHEREAS, Purchaser is a corporation organized and existing under the laws
of the State of Delaware, having its principal place of business located at
1109 Andrews, Metairie, Louisiana 70005.
WHEREAS, Purchaser has offered to purchase 100% of the outstanding
capital shares of the Company (the "Shares") in consideration of the issuance
of 1,420,687 shares of the Purchaser's common stock to the Selling
Stockholders, and other good and valuable consideration, the adequacy whereof
is hereby acknowledged. The Selling Stockholders are willing to sell the
Shares pursuant to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the above premises and of the
respective representations, warranties and agreements herein contained, the
parties hereto agree as follows:
1. THE PURCHASE
1.1 AGREEMENT TO PURCHASE. Purchaser hereby agrees to purchase, and
Selling Stockholders hereby agree to sell to Purchaser the Shares in
consideration of the issuance of 1,420,687 shares of the Purchaser's common
stock to the Selling Stockholders, such shares to be delivered to the Selling
Stockholders at the Closing.
1.2 CLOSING. The completion of the purchase shall take place as may be
agreed between the parties, but no later than June 30, 1996 (the "Closing
Date"). The date of completion of the purchase shall be hereinafter referred
to as the "Effective Date."
2. ACTIONS ON THE EFFECTIVE DATE
2.1 DIRECTORS. On the Effective Date, (i) Purchaser's Board of
Directors shall be reduced from five to three, (ii) Purchaser's directors
shall appoint the Selling Stockholders as Directors of Purchaser, and (iii)
the remaining Directors of Purchaser shall resign.
2.2 OFFICERS. On the Effective Date, all of Purchaser's Officers shall
resign, and David A. Kanstoroom shall be appointed as Chief Executive Officer
and Secretary and David Spezza as President and Treasurer.
2.3 PURCHASER ACTIONS AT CLOSING. On the Effective Date, Purchaser
shall deliver to Selling Stockholders certificates for a total of 1,420,687
shares of Purchaser's common stock, as follows:
David A. Kanstoroom 473,562.4 shares
David Spezza 473,562.3 shares
Telecom Ventures and Acquisitions Corp 473,562.3 shares
A-4
<PAGE>
2.4 THE SELLING STOCKHOLDERS' ACTIONS AT CLOSING. On the Effective
Date, the Selling Stockholders shall deliver to Purchaser
2.4.1 Certificates representing the Shares, all of which are
owned by the Selling Stockholders, properly endorsed and assigned to
Purchaser; and
2.4.2 All of the books and records of the Company.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Selling Stockholders as follows:
3.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Purchaser has full power and authority, corporate and
otherwise, to carry on its business in the State of Delaware.
3.2 CORPORATE POWERS, GOVERNMENTAL CONSENTS AND LAW. Purchaser has the
unconditional right, power and authority to execute, pursue and complete this
Agreement. Except as set forth in Section 7 hereof, no consent, approval,
authorization or order of any court or governmental agency or body or union
or other body is required by Purchaser to complete the transactions
contemplated herein.
3.3 AUTHORIZATION BY DIRECTORS AND SHAREHOLDERS. The execution and
delivery of this Agreement and the completion of the transactions
contemplated hereby have been duly authorized by the Board of Directors and
the shareholders of Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Purchaser as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Florida. The Company has full power and authority, corporate and
otherwise, to carry on its business as and where now conducted.
4.2 AUTHORIZED CAPITALIZATION. The authorized capital stock of the
Company is 1,000 shares of common stock, $1.00 par value. As of the date of
this Agreement, there are 900 shares of common stock issued and outstanding,
all of which are owned by the Selling Stockholders. The Company has no
outstanding warrants, options, convertible securities, contracts,
commitments, or other rights or demands of any character to acquire any
additional shares of its common stock or any other security.
4.3 SUBSIDIARIES. The Company has no subsidiaries as of the date hereof.
4.4 CORPORATE POWERS, GOVERNMENTAL CONSENTS AND LAWS. The Company has
the unconditional right, power and authority to execute, pursue and complete
this Agreement. No consent, approval, authorization or order of any court
or governmental agency or body or union or other body is required by the
Company to complete the transactions contemplated herein.
4.5 DELIVERY OF DOCUMENTS. Copies of the articles of incorporation,
bylaws and minutes of the Company have been made available for inspection by
representatives of Purchaser and are true, complete, unmodified and correct
copies of the articles of incorporation, as amended, and the bylaws of the
Company in effect at the date hereof and the minutes of meetings of its
shareholders, directors and committees thereof.
4.6 MATERIAL TRANSACTIONS AND ADVERSE CHANGES. As of the date of this
Agreement, there has not been, occurred or arisen:
4.6.1 Any material adverse change in the business or financial
condition of the Company since December 31, 1995, except as set forth on
Schedule 4.6.1 attached hereto; or
A-5
<PAGE>
4.6.2 Any damage or destruction in the nature of a casualty
loss, whether covered by insurance or not, materially and adversely affecting
any one or more properties or the business of the Company; or
4.6.3 Any borrowing of money or any commitment to borrow money
by the Company or any cancellation, termination or modification of any
existing loan and/or commitment to lend money to the Company, except as set
forth on Schedule 4.6.3 attached hereto; or
4.6.4 The creation of or entrance into any new or existing
business entity by the Company, except as set forth on Schedule 4.6.4
attached hereto; or
4.6.5 Any other event, condition or state of facts of any
character which materially and adversely affects, or, to the best of the
knowledge of the Company, threatens to materially and adversely affect, the
business or assets of the Company, or results of operations or financial
condition of the Company.
4.7 TAXES.
4.7.1 All income, excise, unemployment, social security,
occupation, franchise and other taxes, duties or charges levied, assessed or
imposed upon the Company by the United States or by any government, state,
municipality or governmental subdivision have been duly paid or adequately
provided for and all income, excise, unemployment, social security,
occupation, franchise and other tax reports or other reports required by law
or regulation have been duly filed.
4.7.2 All federal and state tax returns of the Company required
to have been filed previously have been filed by the Company with the
appropriate governmental agency and all assessments with respect to such
periods have been paid. Adequate reserves have been established for all
income and other tax liabilities on the Company's financial statements for
the period then ended and for all preceding periods for the Company.
4.7.3 The Company has not waived any statute of limitations with
respect to any of its liabilities, including, without limitation, liability
for federal income or any other taxes for any period prior to the date hereof.
4.8 CONTRACTS. Except as set forth on Schedule 4.8 attached hereto, the
Company is not a party to any contract not made in the ordinary course of
business, nor is the Company a party to any (1) contract for the employment
of any officer or individual employee, (2) contract with any union, (3) bank
loan or other credit agreement, (4) bonus, deferred compensation, profit
sharing, pension or retirement arrangement, (5) leases for real or personal
property, (6) partnership or joint venture agreement, or (7) other material
contract, agreement or commitment, whether or not made in the ordinary course
of business.
4.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 4.9 are true and
complete copies of the financial statements of the Company as of December 31,
1994 and 1995. Such financial statements present fairly, to the extent
reported thereon, the financial position of the Company as of the end of the
periods reflected thereon. The financial information described herein is
collectively referred to as the "Financial Statements."
4.10 CONTINGENT LIABILITIES. There are no claims, actions, suits,
proceedings or investigations pending or threatened, against or affecting the
Company or its properties, in any court or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or arbitration tribunal, or other
forum which, if adversely determined against the Company would materially
affect the business, prospects, properties or assets of the Company or the
right of the Company to conduct its business as currently conducted. There
are no judgments, decrees, orders, writs, injunctions, demands or any other
mandates outstanding to which, to the knowledge of the Company, the Company
is a party or by which it is bound or affected which adversely affects the
business, prospects, properties or assets of the Company.
A-6
<PAGE>
4.11 GUARANTEES. There are no contracts or commitments by the Company
directly or indirectly guaranteeing the payment, performance or both payment
and performance of the obligations of third parties.
4.12 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all applicable laws, orders and regulations of the federal,
state, municipal and/or other governments and/or any instrumentality thereof,
domestic or foreign, applicable to its assets and/or to the business
conducted by it including, without limitation, all applicable securities
laws, and is not in violation of any laws, orders and regulations which
singly or in the aggregate are material.
4.13 INDEBTEDNESS OWED TO STOCKHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES.
The Company is not indebted to any stockholder, officer, director or
employee as of the date hereof.
4.14 INDEBTEDNESS OWED BY STOCKHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES.
No money is owed to the Company by any of the stockholders, officers,
directors or employees of the Company.
4.15 NO SUBSEQUENT MATERIAL EVENTS. Other than in the ordinary course of
business, there have been (1) no commitments made or outstanding for the
payment of salaries, bonuses, fees or other forms of compensation of any
employee, (2) no loans made or agreed to be made to any person, firm or
corporation, (3) no dividends or other distributions declared or paid, (4) no
purchase or commitments for the purchase or redemption of any shares of
outstanding capital stock, (5) no capital expenditures and no commitments for
capital expenditures, and (6) no other material transactions other than in
the ordinary course of business.
4.16 AUTHORIZATION BY DIRECTORS AND THREE STOCKHOLDERS. The execution
and delivery of this Agreement has been duly and properly authorized by the
Board of Directors and the three stockholders of the Company.
4.17 STATUS OF THE SHARES. The Shares have been legally and validly
issued to the Selling Stockholders and are duly authorized, fully paid and
nonassessable.
4.18 ESTOPPEL. All statements herein with respect to the Company are
true and correct and the Company has not made any untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements made herein, in the light of the circumstances under which
they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. The Selling
Stockholders, and each of them, represent and warrant to Purchaser as follows:
5.1 The Selling Stockholders are the owner of all of the outstanding
shares of the Company and have the capacity to enter into, and to perform the
obligations required by this Agreement.
5.2 No other person has any direct or indirect interest in the Shares,
and the Selling Stockholders are the sole party in interest with respect to
the Shares.
5.3 The Selling Stockholders have completed due investigation and, after
such investigation, has no reason to believe that any of the representations
or warranties of the Company contained in Section 4, above, are not true,
correct, and complete, and none of the representations or warranties of the
Company omits any statement or information necessary, in light of the
circumstances, to make such representation or warranty not misleading.
5.4 RESTRICTED SECURITIES. The Selling Stockholders understand that the
shares of Purchaser acquired by them are and will continue to be restricted
securities within the meaning of Rule 144 of the General Rules and
Regulations under the Securities Act of 1933, as amended (the "Act") and
applicable state statutes, and each consents to the placement of an
appropriate restrictive legend or legends on any certificates evidencing the
shares and any certificates issued in replacement or exchange therefor and
acknowledges that Purchaser will cause its stock transfer records to note
such restrictions. The Selling Stockholders further understand that the
shares cannot be sold unless they are registered under the Act and any
applicable state securities laws or unless an exemption from such
registration requirements is available; that they must bear the economic
risks of the investment in the shares for an
A-7
<PAGE>
indefinite period of time because they have not been registered under the Act
or any state securities laws; and that the Purchaser is the only person which
may register the shares under the Act and state securities statutes and the
Purchaser has not made any representations to it regarding the registration
of the shares or compliance with Regulation A or some other exemption under
the Act.
6. SURVIVAL
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Purchaser, the Company, and the Selling
Stockholders contained in this Agreement shall survive the Closing for a
period of three years.
7. ADDITIONAL AGREEMENTS
7.1 STOCKHOLDER APPROVAL. Purchaser shall promptly call a meeting of
its stockholders (the "Purchaser Stockholder Meeting") for the purpose of
complying with the requirements of Rule 419 adopted under the Securities Act
of 1933, as amended, and approval of the Stock Purchase which is the subject
of this Agreement, and shall use its reasonable best efforts to obtain
stockholder approval of both. The Purchaser Stockholder Meeting shall be
held as soon as practicable following the date upon which the Registration
Statement becomes effective, and Purchaser will, through its Board of
Directors, recommend to its stockholders the approval of the Stock Exchange.
7.2 REGISTRATION STATEMENT AND PROXY STATEMENT. Purchaser shall
prepare and file with the Securities and Exchange Commission ("SEC") as soon
as practicable a proxy statement for use at the Purchaser Stockholder Meeting
(the"Proxy Statement"), and Purchaser shall prepare and file with the SEC as
soon as practicable a registration statement (the"Registration Statement")
(including the Proxy Statement as a prospectus therein) and shall use all
reasonable efforts to have the Registration Statement declared effective by
the SEC as soon as practicable. Purchaser shall also take any action
required to be taken under state securities or "Blue Sky" laws in connection
with the issuance of the Purchaser's common stock pursuant to this Agreement.
The Company and the Selling Stockholders shall furnish Purchaser with all
information concerning the Company, its officers, directors and stockholders,
as the case may be, required for use in the Registration Statement and the
Proxy Statement, and the Company and Purchaser shall each take such other
actions as the other may reasonable request in connection with the
preparation of the Registration Statement and the Proxy Statement.
8. MISCELLANEOUS
8.1 NOTICE. Any notice, request, instruction or other document to be
given hereunder shall be in writing and, except as otherwise provided for
herein, shall be delivered personally or sent by registered or certified mail
as follows:
If to Selling Stockholders:
DAVID A. KANSTOROOM
28050 U.S. 19 North, Suite 202
Clearwater, Florida 34621
DAVID SPEZZA
28050 U.S. 19 North, Suite 202
Clearwater, Florida 34621
TELECOM VENTURES AND ACQUISITIONS CORP
28050 U.S. 19 North, Suite 202
Clearwater, Florida 34621
A-8
<PAGE>
If to Purchaser:
THREE - L ENTERPRISES, INC.
1109 Andrews
Metairie, Louisiana 70005
Attention: Herman K. Watsky
and to JOHN B. WILLS, ESQ.
410 Seventeenth St.
Suite 1940
Denver, Co. 80202
If to the Company:
INTELICOM INTERNATIONAL CORPORATION
28050 U.S. 19 North, Suite 202
Clearwater, Florida 34621
or to any subsequent address as to which the other party is advised in
accordance with the foregoing.
8.2 BENEFIT. This Agreement shall be binding upon and shall inure to
the benefit of Selling Stockholders, Purchaser and the Company and their
respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than Selling
Stockholders, Purchaser and the Company and their successors and assigns, any
rights or remedies under or by reason thereof.
8.3 FEES. Except as otherwise provided herein, Selling Stockholders and
Purchasers shall pay their own costs and expenses incident to the
negotiation, preparation and performance of this Agreement, and compliance
with all agreements and conditions contained herein, including all fees,
expenses and disbursements of their respective counsel, whether or not the
transactions contemplated hereby are completed.
8.4 MODIFICATION. This Agreement cannot be modified, changed,
discharged or terminated except by an instrument in writing, signed by the
party against whom the enforcement of any waiver, change, discharge or
termination is sought. This Agreement contains the entire understanding
between the parties with respect to the transactions covered hereby.
8.5 APPLICABLE LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Delaware.
8.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
8.7 FINDER'S FEE. Each of the parties hereto represent and warrant to
each other that no broker or other person is entitled to a brokerage or
finder's fee or commission or other compensation in respect to the execution
of this Agreement and the completion of the transactions contemplated hereby.
Each of the parties hereto agree to indemnify and hold the other harmless
against and in respect to any and all claims, losses, liabilities or expenses
which may be asserted against such other party by any broker or other person
who claims to be entitled to a brokerage or finder's fee or commission in
respect of the execution of this Agreement and the completion of the
transactions contemplated hereby by reason of his or its acting at the
request of such party.
8.8 LEGAL REPRESENTATION. Each party acknowledges that he or it has
obtained such legal, accounting, and investment representation as such party
has deemed necessary or appropriate, and no party is relying on
representation obtained by any other party with respect to this Agreement or
the actions contemplated hereby.
A-9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
DAVID A. KANSTOROOM
- -----------------------------------
David A. Kanstoroom
DAVID SPEZZA
- -----------------------------------
David Spezza
TELECOM VENTURES AND ACQUISITIONS CORP
- -----------------------------------
- -----------------------------------
THREE - L ENTERPRISES, INC.
By:
-------------------------------
Herman K. Watsky, President
INTELICOM INTERNATIONAL CORPORATION
By:
-------------------------------
David Spezza, President
A-10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. The Delaware General Corporation Law ("DGCL") allows indemnification of
directors, officers, employees and agents of Three-L against liabilities
Section 145 of the General Corporation Law of Delaware provides:
"(a) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonable incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE, shall not, of
itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
II-1
<PAGE>
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Section. Such
expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
grated pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses my be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this section.
(h) For purposes of this Section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises":
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation": as referred to in this Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
II-2
<PAGE>
B. Article X of the Registrant's Certificate of Incorporation provides as
follows:
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same may
be amended and/or supplemented, indemnify any and all persons whom it shall
have the power to indemnify under said section from and against any and all
of the expenses, liabilities or other matters referred to in or covered by
said section, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors, and administrators
of such person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as exhibits to this Form S-4:
Number Description
------ -----------
3.1 Certificate of Incorporation, dated March 18, 1994.(1)*
3.2 Bylaws(1)*
3.3 Intelicom Certificate of Incorporation*
3.4 Intelicom Bylaws*
5 Opinion of John B. Wills, Esq. re: legality of shares to be
issued(1)*
10.1 Agreement between Business Telecom Incorporated and Intelicom
International Corporation dated July 28, 1994*
10.2 Agreement between (WCT)(now Frontier) and Intelicom International
Corporation dated April 1, 1993*
10.3 Agreement dated February 20, 1996, between Business Telecom
Incorporated and Intelicom International Corporation*
23 Consent of Schmidt & Associates, P.C.*
23.1 Consent of Schmidt & Associates, P.C.
28.1 Escrow Agreement(1)*
28.2 Deposited Fund Escrow Agreement(1)*
28.3 Deposited Securities Escrow Agreement(1)*
28.4 Amended Deposited Securities Escrow Agreement(1)*
- --------------------
* previously filed
(1) Incorporated by reference from the like numbered exhibits filed with the
Registrant's Registration Statement on Form S-1, No. 33-85396.
(b) Financial statement schedules have been omitted because they are not
required or the information is included in the financial statements
and notes thereto.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of New Orleans, State of Louisiana on July 17, 1996.
THREE-L ENTERPRISES, INC.
By: /s/ Herman K. Watsky
--------------------------------
Herman K. Watsky, President
In accordance with to the requirements of the Securities Act of 1993, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ------ ----
/s/ Herman K. Watsky President, Principal Executive July 17, 1996
- ------------------------ Officer and a Director
Herman K. Watsky
/s/ Vice President and a Director July 17, 1996
- ------------------------
Dr. Roy D. Greenberg
/s/ Secretary and a Director July 17, 1996
- ------------------------
Bernard A. Goldman
/s/ Gordon Dumont Treasurer, Chief Financial July 17, 1996
- ------------------------ Officer, Principal Accounting
Gordon Dumont Officer and a Director
/s/ Edward P. Gothard Director July 17, 1996
- ------------------------
Edward P. Gothard
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report dated March 12, 1996, on the financial statements of Three-L Enterprises,
Inc., and to the reference made to our firm under the caption "Experts" included
in or made part of this Registration Statement.
SCHMIDT + ASSOCIATES, P.C.
July 11, 1996
Greenwood Village, Colorado
