UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14 (c)
Of the Securities Exchange Act of 1934 (Amendment No. 2)
Check the appropriate Box:
[X ] Preliminary Information Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
[ ] 14c-5(d)(2))
[ ] Definitive Information Statement
SEACREST INDUSTRIES CORPORATION
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ X ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-1:
(1) Title of each class of securities to which transaction applies: Common
Stock
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $773,180
(4) Proposed maximum aggregate value of transaction Total Fee Paid:
$773,180
(5) Total fee paid; $155
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previously filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1). Amount Previously Paid
(2). Form, Schedule or Registration Statement No.
(3). Filing Party:
(4). Date Filed:
First Mailed to Stockholders on or about October __ , 2002.
SEACREST INDUSTRIES CORPORATION
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
PRELIMINARY INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
NOTICE OF WRITTEN CONSENT OF STOCKHOLDERS IN LIEU OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE EFFECTIVE OCTOBER __, 2002.
OCTOBER __, 2002
TO OUR STOCKHOLDERS:
The enclosed information statement and notice of action taken without a
meeting is being furnished to stockholders of record on October __, 2002 (the
"Record Date"), of SeaCrest Industries Corporation, a Delaware corporation, (the
"Company" or "SeaCrest") in connection with the following actions taken by
written consent of holders of a majority of the outstanding shares of SeaCrest's
Common Stock entitled to vote on the following proposals:
1. Approve and adopt a merger agreement whereby the stockholders of
Availent Financial, Inc., a Texas corporation, Inc. ("Availent"), will exchange
all of their issued and outstanding shares of $0.01 par value for shares of
$0.01 par value Common Stock in the Company. A copy of the merger agreement is
attached as Appendix A. Shareholders are entitled to assert dissenter's rights
under Section 262 of the Delaware General Corporation Law (the "DGCL"), a copy
of which is attached as Appendix B;
2. Amend Certificate of Incorporation to change SeaCrest's name to
Availent Financial, Inc. A copy of the Certificate of Amendment to the Company's
Certificate of Incorporation are attached to this information statement as
Appendix C; and
3. Amend SeaCrest's Certificate of Incorporation to effect a one-for-two
reverse stock split and to increase the number of authorized shares of Common
Stock to 100,000,000 from 12,500,000 and to authorize the issuance of up to
10,000,000 shares of Preferred Stock at the discretion of the Company's Board of
Directors. A copy of SeaCrest's Certificate of Amendment to the Company's
Certificate of Incorporation are attached to this information statement as
Appendix C.
4. Ratify the appointment of Patrick McGeeney and Michael Banes as
directors of SeaCrest.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY
The Company's Board of Directors has fully reviewed and unanimously
approved the actions in connection with the above-referenced merger agreement
and has determined that the consideration to SeaCrest's stockholders is fair for
the acquisition of Availent. In addition, SeaCrest's Board of Directors
unanimously approved the amendments to our Certificate of Incorporation.
The holders of 51.7% of our Common Stock has executed a written consent in
favor of the above proposals. However, under federal law these proposals may not
be effected until at least 20 days after this Information Statement has first
been sent to our stockholders.
This Information Statement will serve as written Notice to stockholders
pursuant to Section 228 of the Delaware General Corporation Law (the "DGCL").
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDER'S
MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
By order of the Board of Directors,
/s/Patrick McGeeney
Patrick McGeeney
Chairman of the Board
SEACREST INDUSTRIES CORPORATION
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
PRELIMINARY INFORMATION STATEMENT
AND
NOTICE OF ACTION TAKEN WITHOUT A MEETING
Dated: October __, 2002
SUMMARY TERM SHEET
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. FOR A MORE COMPLETE UNDERSTANDING, YOU SHOULD
READ THE ENTIRE INFORMATIN STATEMENT CAREFULLY AS WELL AS THE
ADDITIONAL DOCUMENTS TO WHICH IT REFERS.
The Companies SeaCrest Industries Corporation, a Delaware
corporation ("SeaCrest"), and Availent
Financial, Inc. ("Availent"), a Texas
corporation.
SeaCrest A publicly held entity that has not
conducted operations since 1984. See
"Description of Business - SeaCrest".
Availent A Texas based originator of single-family
residential mortgage loans that was incorporated
on December 11, 2000. See "Description of
Business - Availent".
Transaction Merge Availent into SeaCrest by effecting a
one-for-two reverse split of SeaCrest, reducing
the number of issued and outstanding shares
SeaCrest from 12,484,689 to approximately
6,242,344, and issuing to present stockholders
of Availent 54,000,000 shares, leaving present
SeaCrest stockholders approximately 10.4% of the
issued and outstanding shres of Common Stock
following the merger. See "The Merger".
Purpose of Transaction
SeaCrest SeaCrest has not conducted operations since 1984
and desires to infuse operating assets into the
entity. See "Description of Business -
SeaCrest".
Availent Have access to larger amounts of capital that
was not available in private markets and give
greater creditability with lenders and
purchasers of mortgage loans originated by
Availent. See "Description of Business -
Availent".
Implementation
of Merger Agreement In addition to ratification of the merger
agreement, the holders of a majority of the
issued and outstanding Common Stock of SeaCrest
have adopted the following resolutions to
implement the merger agreement: See "Matters
Voted Upon".
Reverse stock split Effect a one-for-two reverse stock split
reducing the number of shares of SeaCrest Common
Stock from 12,484,689 to approximately 6,242,344
prior to the merger. See "Matters Voted Upon".
Authorized shares Increase the number of authorized shares of
Common Stock from 12,500,000 to 100,000,000 and
authorize 10,000,000 shares of preferred stock.
See "Matters Voted Upon".
Name Change Change the name of the SeaCrest to Availent
Financial, Inc. Miscellaneous Ratify the
appointment of Patrick McGeeney and Michael
Banes as directors of SeaCrest. See "Matters
Voted Upon".
1
Stock structure
Presently outstanding 12,484,689
After reverse stock split 6,242,344
Issued to Availent stockholders 54,000,000
Outstanding after merger 60,242,344
Negotiations In the first quarter of 2002, SeaCrest's then
president and sole director, C. M. Ball,
negotiated the merger agreement with Availent.
Purchase of stock As part of the acquisition, Availent agreed
to pay Mr. Ball $200,000 plus $50,000 for legal
fees for which Availent acquired 1,005,000
shares (500,250 shares after the one-for-two
reverse stock split) of SeaCrest Common Stock
and agreed to issue Mr. Ball approximately 13.0%
of the issued and outstanding shares of
Availent. In addition to payment for Mr. Ball's
stock, Mr. Ball was paid for his long experience
with SeaCrest and its stockholders as well as
for advising Availent. See "Description of
Business- SeaCrest".
Loan to acquire stock Bergstrom Investment Management L.L.C. loaned
Availent $500,000, a portion of which was used
to pay Mr. Ball. As part of this transaction,
Availent transferred to Bergstrom Investment
Management L.L.C. 500,000 shares (250,000 shares
after the one-for-two reverse stock split) and
secured the loan with another 500,000 shares
(250,000 shares after the one-for-two reverse
stock split) acquired from Mr. Ball. Of the
shares securing the Bergstrom obligation,
200,000 shares (100,000 shares after the
one-for-two reverse stock split) will, upon
release of the security interest by Bergstrom,
be transferred to to Michele McGeeney, the
spouse of Availent's president, Patrick
McGeeney, because she guaranteed of the loan
from Bergstrom Investment Management, L.L.C. See
"Management's Discussion and Analysis of
Financial Condition and Results of Operations";
"Certain Relationships and Related Party
Transactions".
Other SeaCrest
stock transfers Upon the release of the security interest by
Bergstrom Investment Management, L.L.C. in
500,000 shares (250,000 shares after the
one-for-two reverse stock split) Michele
McGeeney and Michael Banes will receive 119,600
shares (59,800 shares after the one-for-two
reverse stock split) and 120,400 shares (60,200
shares after the one-for-two reverse stock
split), respectively, in connection with the
recapitalization of Availent. Patrick McGeeney
and Michael Banes will receive 5,400 (2,700
shares after the one-for-two reverse stock
split) and 4,600 (2,300 shares after the
one-for-two reverse stock split) of these
shares, respectively. See "Management's
Discussion and Analysis of Financial Condition
and Results of Operations"; "Certain
Relationships and Related Party Transactions".
Restrictions on Transfer Recipients of shares purchased from Mr. Ball,
that is, Bergstrom Investment Management L.L.C.,
Patrick McGeeney, Michele McGeeney, Michael
Banes and one other, may not sell or otherwise
transfer the securities unless such securities
are registered under the Securities Act of 1933,
as amended, or an exemption from registration is
otherwise available. Those owning Common Stock
of SeaCrest that has been, prior to the merger,
acquired from those that are affiliated with
2
SeaCrest as well as their transferees are under
similar restrictions.
Stockholder Action Holders of a majority of SeaCrest's common
stock have provided a written consent to the
actions to ratify the merger and adopt the
resolutions necessary to implement the merger
agreement. "See Matters Voted Upon".
Purpose of Information
Statement To inform holders of SeaCrest Common Stock of
the action taken by the majority of its holders
of Common Stock and to notify other stockholders
of SeaCrest of action taken without a meeting as
required by Section 228 of the Delaware General
Corporation Law and to provide such information
in the manner required by Rule 14c-2(b) of the
Securities Exchange Act of 1934.
Effective Dates All required corporate approvals of the
transaction have been obtained. The approvals
will be effective 20 days from the date this
notice is first mailed to SeaCrest's
Stockholders. The merger will be effective upon
filing the appropriate merger documents with the
Secretary of State of Delaware as will the
amendments to SeaCrest's articles of
incorporation effecting the reverse stock split
and increasing the number of authorized shares
of Common Stock.
Consents to action by those
holding a majority of the
issued and outstanding
shares of SeaCrest. Holders of 6,455,000 shares (3,227,500
after the one-for-two reverse stock split)
constituting 51.7% of the issued and outstanding
shares of SeaCrest have adopted the plan of
merger and have approved the following actions:
See "Matters Voted Upon".
Merger agreement Adopted a merger agreement whereby the
stockholders of Availent Financial, Inc., a
Texas corporation, Inc. ("Availent"), will
exchange all of their issued and outstanding
shares of $0.01 par value for shares of $0.01
par value Common Stock in the Company, and
Availent will be merged into SeaCrest. A copy of
the merger agreement is attached as Appendix A.
Shareholders are entitled to assert dissenter's
rights under Section 262 of the DGCL, a copy of
which is attached as Appendix B See "The
Merger";
Change name to Availent
Financial, Inc. Amended SeaCrest's Certificate of
Incorporation to change SeaCrest's name to
Availent Financial, Inc. A copy of the Company's
Certificate of Amendment to its Certificate of
Incorporation are attached to this information
statement as Appendix C. See "Name Change";
One-for-two reverse stock
split Approved a one-for-two reverse stock split the
total 12,484,689 shares presently issued and
outstanding will become approximately 6,242,344
See "Approval Of Amendment To Our Certificate Of
Incorporation To Effect A One-For Two Reverse
Stock Split, Increase Authorized Shares Of
Common Stock And Authorize Preferred Stock -
Reverse Stock Split;
Increased the number of
authorized shares Amended SeaCrest's Certificate of
Incorporation to increase the number of
authorized shares of Common Stock to 100,000,000
from 12,500,000 and to authorize the issuance of
up to 10,000,000 shares of Preferred Stock at
the discretion of the Company's Board of
3
Directors. A copy of the Company's Amended and
Restated Certificate of Incorporation are
attached to this information statement as
Appendix C. See "Approval Of Amendment To Our
Certificate Of Incorporation To Effect A One-For
Two Reverse Stock Split, Increase Authorized
Shares Of Common Stock And Authorize Preferred
Stock - Reverse Stock Split; and
Ratify the appointment
of directors Ratified the appointment of Patrick McGeeney
and Michael Banes as directors of SeaCrest. See
"Management".
Stockholders holding a majority of the outstanding shares of SeaCrest's
Common Stock have signed the written consent. Therefore, all required corporate
approvals of the transaction have been obtained, subject to furnishing this
notice and effective 20 days from the date of this notice. This Information
Statement is furnished solely for the purpose of informing stockholders of this
corporate action in the manner required by Rule 14c-2(b) under the securities
Exchange Act of 1934. This Information Statement also constitutes notice of
action taken without a meeting as required by Section 228 of the Delaware
General Corporation Law.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO
STOCKHOLDER'S MEETING WILL BE HELD TO CONSIDER ANY
MATTER DESCRIBED HEREIN.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth certain information regarding the
beneficial ownership as of September 1, 2002, of the Common stock, presently
(before the one for two reverse stock split) and assuming that the merger had
been completed on that date (and after the one for two reverse stock split), by
(a) each person known by the Company to be a beneficial owner of more than 5% of
the outstanding shares of Common Stock, (b) each director of the Company,
Messrs. McGeeney and Banes, including those that are to be appointed following
completion of the merger, Messrs, Schrader and Cram (c) each Executive Officer,
Mr. Conradt, including those that are to be appointed following completion of
the merger, Messrs. Armstrong and Nichols and (d) as directors and executive
officers of the Company as a group, including those that are to be appointed
following completion of the merger. Unless otherwise noted, each beneficial
owner named below has sole investment and voting power with respect to the
Common Stock as beneficially owned by him as shown below:
Number of Number of
Name and Address of Shares Owned Shares Owned
Beneficial Owner (Before Merger) Percent (After Merger) Percent
Patrick McGeeney 5,400(1) - 16,852,215(1) 27.8%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Michael Banes 124,200(1)(2) 0.9% 16,911,615(1)(2) 27.9%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Michele McGeeney 520,400(2)(7) 2.6% 4,004,537 6.6%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
C. M. Ball 505,000(3) 4.0% 7,012,250 11.6%
17846 Tacoma Circle
Villa Park, CA 92681
4
Woody Conradt - - - -
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
George R. Schrader (4)(7) 44,932 0.3% 37,443 0.1%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Donald H. Cram(4)(7) 44,932 0.3% 22,466 -
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Jerry Armstrong (5)(7) 74,886 0.6% 7,037,443 11.6%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Jason Thomas Nichols (5)(7) 299,546 2.3% 149,773 0.3%
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
Gary V. Sutley 2,000,000 16.0% 1,000,000 1.7%
P.O. Box 3054
Newport Beach, CA 92659
Cindy Giesseman(6) 2,500,000 19.9% 1,250,000 2.1%
Christy Vogt(6) 1,450,000 11.5% 725,000 1.2%
ALII of Honolulu Inc. 750,000 6.0% 375,000 0.6%
Tower Suite 2550
Dallas, TX 75201
All Executive Officers and Directors 723,496(1)(2)(3)(7) 5.5% 41,010,955 67.7%
As a group (6 persons)
- ----------
(1) Includes 5,400 and 4,600 shares (before the one-for-two reverse stock
split) of Common Stock owned by Messrs. McGeeney and Banes,
respectively, held in the name of C. M. Ball and pledged to Bergstrom
Investment, L.L.C.
(2) Includes 120,400 and 119,600 shares (before the one-for-two reverse
stock split) of Common Stock owned by Ms. McGeeney and Mr. Banes,
respectively, held in the name of C. M. Ball and pledged to Bergstrom
Investment L.L.C.
(3) Of these shares, 500,000 shares are pledged to Bergstrom Investment
L.L.C. and all but 24,500 will be issued to four individuals upon
payment of a loan to Bergstrom Investment, L.L.C.
(4) Messrs. Schrader and Cram have each been granted warrants to acquire
22,466 shares of the SeaCrest's Common Stock upon the consummation of
the merger. The exercise price of the option is $0.10 per share.
(5) Messrs. Armstrong and Nichols have received warrants to acquire 37,443
and 149,773 shares, respectively, of SeaCrest's Common Stock upon
completion of the merger. The exercise price of the option is $0.05 per
share.
(6) Ms. Giesseman and Ms. Vogt are the adult daughters of Mr. Ball and Mr.
Ball disclaims any beneficial interest in these shares.
(7) Includes 200,000 shares Ms. McGeeney as well as 299,546; 74,886;
44,932; and 44,932 shares (before the one-for-two reverse stock split)
Messrs. Nichols, Armstrong, Schrader and Cram have, respectively, the
5
right to acquire pursuant to warrants. Ms. McGeeney's total is excluded
in the aggregate amount for officers and directors.
Status of Stock
Securities issued in connection with the merger may not be sold or
otherwise transferred unless the securities are registered under the Securities
Act of 1933 or an exemption from registration is otherwise available. Those
owning Common Stock of SeaCrest that has been, prior to the merger, acquired
from those that are affiliated with SeaCrest as well as their transferees are
under similar restrictions. To the knowledge of the Company, that includes C. M.
Ball (505,000 shares before the one-for-two reverse stock split) and five
transferees, Patrick McGeeney, Michael Banes, Michele McGeeney, Bergstrom
Investment Management, L.L.C. and another individual affiliated with Availent
(5,400; 124,200; 320,400; 500,000 and 30,500 shares, respectively, before the
one-for two reverse stock split).
GENERAL
The record date for determining stockholders entitled to receive this
Information Statement has been established as of the close of business on
October __, 2002. As of the record date, SeaCrest had 12,484,689 shares of
Common Stock issued and outstanding. Each share of Common Stock held of record
on the record date represents one vote for purposes of determining whether a
majority of the issued and outstanding shares have approved and adopted the
foregoing actions.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
As part of the acquisition of Availent, the Board of Directors of SeaCrest
determined to establish the power to issue Preferred Stock.
VOTING SECURITIES
As of the Record Date, the SeaCrest's authorized capitalization consisted
of 12,500,000 shares of Common Stock, par value $0.01 per share and no shares of
Preferred Stock, par value $0.01 per share. As of the Record Date, there were
12,484,689 shares of Common Stock outstanding, all of which were fully paid,
non-assessable and entitled to vote. Each share of Common Stock entitles its
holder to one vote on each matter submitted to the Stockholder.
MATTERS VOTED UPON
Effective May 10, 2002, the Board of Directors of SeaCrest approved the
following actions
1. Approved and adopted a merger agreement whereby the stockholders of
Availent Financial, Inc., a Texas corporation, Inc. ("Availent"), will exchange
all of their issued and outstanding shares of $0.01 par value for shares of
$0.01 par value Common Stock in the Company. A copy of the merger agreement is
attached as Appendix A. Shareholders are entitled to assert dissenter's rights
under Section 262 of the DGCL, a copy of which is attached as Appendix B;
2. Voted to amend the Company's Certificate of Incorporation to change our
name to Availent Financial, Inc. A copy of the Amended and Restated Certificate
of Incorporation are attached to this information statement as Appendix C; and
3. Voted to amend the Company's Certificate of Incorporation to to effect
a one-for-two reverse stock split and increase the number of authorized shares
of Common Stock to 100,000,000 from 12,500,000 and to authorize the issuance of
up to 10,000,000 shares of Preferred Stock at the discretion of the Company's
Board of Directors. A copy of the Amended and Restated Certificate of
Incorporation are attached to this information statement as Appendix C.
4. Appointed Patrick McGeeney and Michael Banes as directors of SeaCrest.
The holders of 6,455,000 shares of Common Stock (before the one-for-two
reverse stock split), a majority (51.7%) of the outstanding shares of Common
Stock, also approved these actions by written consent as of May 10, 2002. A copy
of the amendment to the Certificate of Incorporation being filed with the
Delaware Secretary of State is attached hereto as Appendix C.
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IT WILL NOT BE NECESSARY FOR STOCKHOLDERS TO EXCHANGE THEIR COMPANY STOCK
CERTIFICATES.
The amendment to the Certificate of Incorporation and Articles of Merger
will be filed on or about October __, 2002 after the expiration of the time
period required in 14c-5 of the Securities Exchange Act of 1934.
APPROVAL OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
TO EFFECT A ONE-FOR TWO REVERSE STOCK SPLIT, INCREASE AUTHORIZED
SHARES OF COMMON STOCK AND AUTHORIZE PREFERRED STOCK
SeaCrest's Certificate of Incorporation currently authorizes the issuance
of 12,500,000 shares of Common Stock, par value $0.01 per share, and no shares
of Preferred Stock. SeaCrest's board has unanimously adopted, subject to
stockholder approval, an amendment to SeaCrest's restated Certificate of
Incorporation to increase the number of authorized shares of SeaCrest's Common
Stock from 12,500,000 shares to 100,000,000 shares and to authorize the issuance
of 10,000,000 shares of Preferred Stock at the discretion of the board of
directors.
Approval of the amendment to SeaCrest's Certificate of Incorporation
required the affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote on this proposal.
On October __, 2002, the Record Date, SeaCrest had 12,484,689 shares of
Common Stock issued and outstanding. As of March 1, 2002, SeaCrest entered into
a Merger Agreement with Availent Financial, Inc. ("Availent") pursuant to which
SeaCrest will issue, subject to the terms of the Agreement, 54,000,000 shares of
SeaCrest's Common Stock to Availent's stockholders and SeaCrest would have
6,242,344 shares issued and outstanding.
One-for-two reverse stock split
The merger agreement was negotiated on the assumption that existing
stockholders of SeaCrest would own approximately 10% of the post merger company
and Availent stockholders would own approximately 90% of the post merger
company. Giving consideration to the pricing of SeaCrest Common Stock following
the merger, it was determined that the existing 12,484,689 shares should be
contracted by half. Accordingly, the one-for-two reverse stock split would
reduce the number of shares of Common Stock outstanding to approximately
6,242,344 and would constitute 10.4% of the shares of the Company following the
merger.
The reverse stock split will become effective upon filing the certificate
of amendment with the Delaware Secretary of State. Upon the filing of the
certificate of amendment to our Certificate of Incorporation with the Delaware
Secretary of State, all the old common stock will be converted into new common
stock as set forth in the amendment. Beginning on the effective date of the
reverse stock split, each old certificate, until exchanged as described above,
will be deemed for all purposes to evidence ownership of the number of whole
shares of new common stock into which the shares evidenced by the old
certificates have been converted.
No fractional shares of common stock shall be issued as a result of such
reclassification and combination. In lieu of any fractional share to which the
stockholder would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the average of the high and low trading prices of
the Common Stock on the market for which the Common Stock is traded during
regular trading hours for the five trading days immediately preceding the day
the certificate of amendment is filed with the Secretary of State of Delaware,
including the day of filing.
The shares of new common stock will be fully paid and non-assessable. The
amendment will not change the terms of our common stock. The shares of new
common stock will have the same voting rights and rights to dividends and
distributions and will be identical in all other respects to the common stock
now authorized. No stockholder's percentage ownership of common stock will be
altered except to the extent that any holder of common stock who would otherwise
be entitled to a fractional share of new common stock as a result of the reverse
stock split receives cash in lieu of such fractional share of new common stock.
Increase in the number of authorized shares and authorization of preferred stock
7
The purpose of increasing the number of authorized shares of Common Stock
and authorizing a Preferred Stock is to provide additional authorized shares
which will be issued to fulfill current obligations, possible future financings,
possible acquisitions, and such other corporate purposes as the Board of
Directors determines in its discretion. These corporate purposes may include
future stock splits, stock dividends or other distributions, future financings,
acquisitions, stock options and other equity benefits under employee benefit
plans. The increase in the number of authorized shares of Common Stock and
authorizing a Preferred Stock would enable the Company to promptly take
advantage of market conditions and the availability of favorable opportunities
without the delay and expense associated with holding a special meeting of
stockholders.
Specifically, SeaCrest has 12,500,000 common shares authorized and
12,484,689 shares issued and outstanding, leaving 15,311 shares of Common Stock.
To effect the merger, SeaCrest will have to increase its number of authorized
shares of Common Stock. SeaCrest is actively seeking to raise funds and
additional shares will likely be issued if SeaCrest is successful in obtaining
financing. Consequently, the Board of Directors sought stockholder approval to
increase the number of authorized common shares and permit the issuance of
preferred shares as described herein. Other than described herein, the granting
of warrants or options and the possible raising of additional equity capital
through the issuance of Common Stock, SeaCrest has no specific plans at this
time to issue additional shares of Common Stock or Preferred Stock.
After filing the amendment, the Board of Directors is authorized to issue
any of the additional shares of Common Stock and Preferred Stock at such times,
to such persons and for such consideration as it may determine in its
discretion, except as may otherwise be required by applicable law or the rules
of any exchange on which the Common Stock and Preferred Stock may be listed. At
the present time, the Common Stock and the Preferred Stock are not listed with
any exchange.
One result of an increase in the number of shares of authorized Common
Stock and the establishment of Preferred Stock may be to help the Board of
Directors discourage or render more difficult a change in control. For example,
the additional shares could be issued to dilute the voting power of, create
voting impediments for, or otherwise frustrate the efforts of, persons seeking
to effect a takeover or gain control of SeaCrest, whether or not the change of
control is favored by a majority of unaffiliated stockholders. SeaCrest could
also privately place shares with purchasers who might side with the Board of
Directors in opposing a hostile takeover bid. The Board of Directors and those
holding a majority of SeaCrest's Common Stock have not adopted this amendment
with the intention of using the additional shares for anti-takeover purposes,
although the Board of Directors could theoretically use the additional shares to
make it more difficult or to discourage an attempt to acquire control of
SeaCrest. The Board of Directors is not aware of any proposed or contemplated
transaction of this type.
The issuance of any additional shares of Common Stock would also have the
effect of diluting the equity interests of existing stockholders and the
earnings per share of existing shares of Common Stock. Such dilution may be
substantial, depending upon the amount of shares issued.
The newly authorized shares of Common Stock will have voting and other
rights identical to those of the currently authorized shares of Common Stock.
Under SeaCrest's Certificate of Incorporation, holders of Common Stock do not
have preemptive rights. The amendment to increase the number of authorized
shares will have no effect on the legal rights of the holders of the existing
shares of Common Stock.
Authorization of Preferred Stock
Presently, SeaCrest does not have the authority to issue Preferred Stock.
The amendment to the Certificate of Incorporation of Incorporation would
establish the power of the Company's board of directors to issue Preferred Stock
as well as establish the relative rights, powers and privileges of any such
issue.
The purpose of establishing the power to issue preferred stock is to
establish the ability of the Company to have a flexible capital structure
without having to return to the Company's stockholders to create a needed
structure. By giving the Company's Board of Directors the power to issue
preferred shares and determine the relative rights, powers and privileges of
those shares, the directors can move expeditiously to take advantage of
financing opportunities as they occur. Management of Availent particularly
8
believes that these opportunities are critical in a financial services company
where, in management's opinion, the Company's capitalization must be flexible
and available upon short notice.
This power may have the effect of deterring a non-negotiated attempt to
acquire control of us. For example, a series of Preferred Stock could be issued
in the future that could thwart a possible take-over and operate to the
significant disadvantage of holders of Common Stock by including convertibility
features which are lower than the market price for the Common Stock, thus
diluting the value of existing shares of Common Stock.
THE MERGER
The Board of Directors of the Company has approved through merger the
acquisition of all of the issued and outstanding shares of Availent Financial,
Inc., and the Consenting Stockholders have approved these transactions which are
planned to become effective on the Effective Date. The surviving corporation
will be SeaCrest.
SeaCrest has not had operations for many years. By merging Availent into
SeaCrest, the Company can once again become operational. By merging with an
entity whose shares are publicly held, Availent, which needs access to large
amounts of capital, can gain access to broader capital markets, provide the
potential for liquidity to existing investors and, in the opinion of Availent's
management, gain greater creditability in those capital markets.
Following the completion of the merger of Availent into SeaCrest, existing
stockholders of the Company will own 6,242,344 of the 60,242,344 shares
outstanding, or approximately 10.4% of the outstanding shares of SeaCrest. While
there has been no appraisal, report or opinion as to the value of SeaCrest or
Availent, discussions between the SeaCrest and Availent resulted in the
structure set forth in the Merger Agreement.
Without the merger, the Company is, in the opinion of management,
practically valueless.
APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law, or DGCL, if
SeaCrest's present stockholders comply with the conditions established by
Section 262, you will be entitled to dissent and elect to have the "fair value"
of the stockholder's shares of SeaCrest Common Stock, exclusive of any element
of value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, judicially determined by the Delaware
Court of Chancery and paid in cash. Those holding a majority of SeaCrest's
issued and outstanding shares that executed the stockholder consent approving
the merger agreement have, in effect, waived its appraisal rights with respect
to its shares of SeaCrest Common Stock.
Section 262 is reprinted in its entirety as Appendix B to this information
statement. The following discussion is not a complete statement of the law
relating to appraisal rights and is qualified in its entirety by reference to
Appendix B. This discussion and Appendix B should be reviewed carefully by any
holder who wishes to exercise statutory appraisal rights or who wishes to
preserve the right to do so, as failure to comply with the applicable procedures
will result in the loss of appraisal rights. A person having a beneficial
interest in shares of SeaCrest Common Stock held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
A holder of record of shares of SeaCrest Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Date and who otherwise complies with
the statutory requirements of Section 262 will be entitled to an appraisal by
the Delaware Court of Chancery of the fair value of his or her shares of stock.
All references in this summary of appraisal rights to a "stockholder" is to the
record holder of shares of SeaCrest Common Stock.
Under Section 262, where (as in the case of adoption and approval of the
merger agreement by SeaCrest) a merger has been approved by written consent
pursuant to Section 228 of the DGCL, each constituent corporation must notify
each of the holders of its stock for which appraisal rights are available,
either before the Effective Date or within ten days thereafter, that such
appraisal rights are available and include in each such notice a copy of Section
262. October __, 2002 has been set as the record date for purposes of
9
determining stockholders entitled to receive this notice. This information
statement shall constitute such notice to the record holders of SeaCrest Common
Stock.
Holders of record of shares of SeaCrest Common Stock who desire to
exercise their appraisal rights must deliver a separate written demand for
appraisal to SeaCrest within 20 days after the date this information statement
is first mailed to Common Stockholders of SeaCrest. A demand for appraisal must
be executed by or on behalf of the stockholder of record fully and correctly, as
that stockholder's name appears on the stock certificates and must state that
the stockholder intends to demand appraisal of that stockholder's shares of
SeaCrest Common Stock.
A person having beneficial interests in shares of SeaCrest Common Stock
that are held of record in the name of another person, such as a broker,
fiduciary or other nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
whatever appraisal rights are available. If the shares of SeaCrest Common Stock
are owned of record by a person other than the beneficial owner, including a
broker, fiduciary (such as a trustee, guardian or custodian) or other nominee,
such demand must be executed by or for the record owner. If the shares of
SeaCrest Common Stock are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or for all joint
owners. An authorized agent, including one or more joint owners, may execute the
demand for appraisal for a stockholder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, such person is acting as agent for the record owner or
owners.
A record owner such as a broker who holds shares of SeaCrest Common Stock
as a nominee for others may exercise appraisal rights with respect to the shares
held for all or less than all beneficial owners of shares as to which such
person is the record owner. In that case, the written demand must set forth the
number of shares of SeaCrest Common Stock covered by such demand. Where the
number of shares is not expressly stated, the demand will be presumed to cover
all shares of SeaCrest Common Stock outstanding in the name of such record
owner. Stockholders who held their shares of SeaCrest Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights, if available,
should mail or deliver his or her written demand to: SeaCrest, Industries, 2720
Stemmons Freeway, South Tower, Suite 600, Dallas, TX 75207, Attention: Corporate
Secretary.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of SeaCrest Common Stock owned, and that
the stockholder is thereby demanding appraisal of his or her shares. Within 10
days after the consummation of the merger, SeaCrest must provide notice of the
consummation of the merger to all stockholders who are entitled to appraisal
rights and who have complied with Section 262.
Within 120 days after the consummation of the merger, but not thereafter,
either SeaCrest or any holder of SeaCrest Common Stock who has complied with the
requirements of Section 262 and who is otherwise entitled to appraisal rights
may file a petition in Delaware court, with a copy served on SeaCrest in the
case of a petition filed by a stockholder, demanding a determination of the fair
value of the shares of all dissenting stockholders. SeaCrest is under no
obligation to and has no present intention to file such a petition. Accordingly,
SeaCrest stockholders who are entitled to appraisal rights, who have complied
with Section 262 and who desire to have their shares appraised should initiate
any petitions necessary for the perfection of their appraisal rights within the
time periods and in the manner prescribed in Section 262.
Within 120 days after the consummation of the merger, any former SeaCrest
stockholder who has complied with Section 262 will be entitled, upon written
request, to receive from SeaCrest a statement setting forth the aggregate number
of shares of SeaCrest Common Stock not voted in favor of the merger and with
respect to which demands for appraisal were received by SeaCrest and the
aggregate number of holders of such shares. SeaCrest must mail this statement
within 10 days of a receipt of written request or within 10 days after the
expiration of the period for delivery of demands for appraisal, whichever is
later.
If a petition for an appraisal is timely filed with the Delaware court and
assuming appraisal rights are available to a former SeaCrest stockholder and a
copy thereof is served on SeaCrest, SeaCrest will then be obligated within 20
10
days to file with the Delaware Register in Chancery a duly verified list
containing the names and addresses of all former stockholders who have demanded
appraisals of their shares and with whom agreements as to the value of their
shares have not been reached. After notice to such stockholders, the Delaware
court is empowered to conduct a hearing on such petition to determine which
stockholders, if any, are entitled to appraisal rights. The Delaware court may
require the stockholders who have demanded an appraisal for their shares and who
hold stock represented by certificates to submit their certificates to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceedings. If any stockholder fails to comply with such direction, the
Delaware court may dismiss the proceedings as to such stockholder.
Where proceedings are not dismissed, the Delaware court will appraise the
"fair value" of shares of SeaCrest Common Stock owned by such stockholders,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. If a stockholder considers seeking
appraisal, the stockholder should be aware that the fair value of the
stockholder's shares as determined by Section 262 could be more than, the same
as or less than the consideration the stockholder would receive pursuant to the
merger if you did not seek appraisal of your shares. In determining fair value,
a Delaware court is to take into account all relevant factors.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the consummation of the merger, be entitled to vote for any
purpose any shares subject to such demand or to receive payment of dividends or
other distributions on such shares, except for dividends or distributions
payable to stockholders of record at a date prior to the consummation of the
merger.
If any stockholder who demands appraisal under Section 262 fails to
perfect, or effectively withdraws or loses, the right to appraisal, the
stockholder's shares of SeaCrest Common Stock will be converted into the right
to receive the merger consideration in cash in accordance with the merger
agreement, without interest. A stockholder will fail to perfect, or effectively
lose or withdraw, the right to appraisal if no petition for appraisal is filed
within 120 calendar days after the consummation of the merger. A stockholder may
withdraw a demand for appraisal by delivering to SeaCrest a written withdrawal
of the demand for appraisal and acceptance of the merger consideration, except
that any such attempt to withdraw made more than 60 calendar days after the
consummation of the merger will require the written approval of SeaCrest. Once a
petition for appraisal has been filed, the appraisal proceeding may not be
dismissed as to any stockholder, absent approval of the Delaware court.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
AND REVERSE STOCK SPLIT
The Corporation has not requested a ruling from the Internal Revenue
Service with respect to the Federal income tax consequences of the merger under
the Internal Revenue Code of 1986, as amended (the "Code"). Nor will the Company
receive an opinion of counsel. Although the Company will not receive an opinion
of counsel, management of the Company believes that: (i) the merger will
constitute a tax-free reorganization under Section 368(a)(1)(A) of the Code; and
(ii) no gain or loss will be recognized by holders of capital stock of SeaCrest
or Availent pursuant to the Merger Agreement.
Except for any cash received in lieu of fractional shares, a stockholder
will not recognize any gain or loss as a result of the receipt of shares of new
common stock in exchange for his shares of old common stock pursuant to the
reverse stock split. A stockholder's aggregate tax basis for the shares of new
common stock received, including any fractional share interest for which cash is
received, will equal such stockholder's aggregate tax basis of the shares of old
common stock exchanged. A stockholder's holding period for the shares of new
common stock received, including any fractional share interest for which cash is
received, will include the holding period of the shares of old common stock
exchanged.
A stockholder who receives cash in lieu of a fractional share of new
common stock will generally be treated as having received the cash as a
distribution in redemption of his fractional share interest, as provided under
Section 302 of the Code. In general, a stockholder will recognize capital gain
or loss on the deemed redemption in an amount equal to the difference between
the amount of cash received and such stockholder's adjusted tax basis allocable
to such fractional share, as described in the preceding paragraph. However,
depending on a stockholder's particular facts and circumstances, the cash
payment may be taxable as a dividend.
11
ALTHOUGH IT IS NOT ANTICIPATED THAT STATE OR LOCAL INCOME TAX CONSEQUENCES
TO STOCKHOLDERS WILL VARY FROM THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED
ABOVE, STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE EFFECT
OF THE REINCORPORATION UNDER STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
DESCRIPTION OF BUSINESS - SEACREST
The registrant, SeaCrest Industries Corporation, a Delaware corporation,
("SeaCrest") was formed in 1959. From 1974 through 1979 the Company engaged in
land sales in Texas and Idaho as well as insurance operations in Hawaii. In
1977, the insurance operations ceased and by 1979 the Company's last land
operations had either been sold or foreclosed upon. At that time the Company
ceased operations with winding up being completed in February 1984.
The Company has not transacted business since February 1984 and since that
time, the registrant has sought to acquire operating assets through the issuance
of common stock.
In 1983, C. M. Ball was elected president of SeaCrest. The Company then
had 12,484,689 shares issued and outstanding and began to look for acquisitions
such that the Company would have operations. Since that time, the only agreement
that the registrant entered for the acquisition of assets occurred in mid-1997.
This acquisition contemplated the reorganization of the registrant as a Nevada
corporation and the acquisition of an enterprise, affiliated with C. M. Ball's
brother, Gary E. Ball, that owned certain infrared sensing technology. To
implement that acquisition, in mid-1997 C. M. Ball resigned all positions with
the registrant, appointing Gary E. Ball and Wendy S. Ball, Gary E. Ball's
spouse, as directors. In mid-1998, the transaction was abandoned and C. M. Ball
was reappointed as the registrant's sole director, Gary E. Ball and Wendy S.
Ball resigning upon C. M. Ball's reappointment.
SeaCrest thereupon resumed looking for acquisitions of operating
companies.
In the first quarter of 2002, Availent Financial, Inc. ("Availent")
entered into a discussion with C. M. Ball regarding the merger of Availent into
SeaCrest. Availent desired to become a publicly traded company because it needed
access to large amounts of capital that, in management's opinion, was not
available in private markets. Further, being publicly held, in the opinion of
Availent's management, gave greater credibility to Availent in discussions with
lenders and purchasers of its mortgage loans that it originated. The management
of SeaCrest desired to infuse operating assets in a company that had long been
inactive.
The transaction contemplates SeaCrest effecting a one-for-two reverse
split and then merging Availent into SeaCrest in exchange for 54,000,000 shares
of SeaCrest common stock. Consequently, immediately prior to the merger,
SeaCrest would have 6,242,344 shares issued and outstanding and shareholders of
SeaCrest prior to the merger would own approximately 10.4% of the Company
following the merger. SeaCrest's name would be changed to Availent Financial,
Inc. as part of the transaction.
In connection with those discussions, Availent agreed to purchase from C.
M. Ball 1,005,000 shares (before the reverse stock split) of SeaCrest Common
Stock for $200,000 plus pay another $50,000 for legal services. Because of C. M.
Ball's familiarity with the registrant and its stockholders, Availent issued to
Mr. C. M. Ball approximately 11.6% of Availent's common stock (7,000,000 shares
following the merger). In the first quarter of 2002, Availent borrowed from
Bergstrom Investment Management, L.L.C. $500,000 to raise operating capital and
pay C. M. Ball. Patrick McGeeney, President of Availent, and his spouse, Michele
McGeeney, personally guaranteed this loan and Ms. McGeeney further secured the
obligation to Bergstrom Investment Management, L.L.C. by pledging an annuity to
secure its repayment. Bergstrom Investment Management, L.L.C. received 500,000
(before the reverse stock split) shares and was pledged an additional 500,000
shares (before the reverse stock split) against repayment of the loan. For
guaranteeing this loan, once the loan is repaid and the pledge to Bergstrom
Investment Management, L.L.C. is released, Michele McGeeney will receive 200,000
(before the reverse stock split) shares of the 1,005,000 SeaCrest Common Stock
purchased from Mr. C. M. Ball for assisting this transaction.
Effective in May 2002, Mr. C. M. Ball appointed Patrick McGeeney as a
director and President of SeaCrest, Michael Banes as a director of SeaCrest and
12
Woody Conradt as Chief Financial Officer, Treasurer and Secretary of SeaCrest.
Mr. Ball thereupon resigned as as a director and officer of the registrant.
The Company anticipates completing the merger in October 2002.
Availent, formed in December 2001, is engaged in the mortgage banking
industry. It distinguishes itself from other mortgage banking enterprises by
forming limited liability partnerships with real estate brokers. These
partnerships then place loan originators on the premises of the real estate
broker with the purpose of capturing mortgage business related to the real
estate office.
DESCRIPTION OF BUSINESS - AVAILENT
Patrick McGeeney and Michael Banes caused Availent Financial, Inc. to be
incorporated in Texas on December 11, 2000. Originally incorporated under the
name Founders National, the corporation changed its name to Availent Financial,
Inc. in May 2001. Availent Financial commenced operations in February 2001 and
conducts its operations through Availent Mortgage, Inc. and Availent Leasing,
Inc. Availent Financial's principal operations are conducted through Availent
Mortgage which originates single-family residential mortgage loans. Availent
Mortgage presently operates as a mortgage broker and plans to begin mortgage
banking operations in October of 2002. Mortgage banking operations will consist
of obtaining a warehouse line of credit that will enable Availent to fund
mortgage loans pending resale of mortgage loans to investors. Availent presently
does not intend to service mortgage loans.
Availent Mortgage mortgage loan originations are originated through 16
limited liability partnerships and branches in addition to its headquarters
office. Availent Mortgage owns a majority interest in these limited liability
partnerships with the minority interest in the limited liability partnerships
being owned by local real estate broker/owners. Availent Mortgage's strategy is
to form limited liability partnerships with local realtors to enable the local
real estate broker/owners to offer retail mortgage loans on site. None of these
real estate broker/owners are affiliated with Availent.
The following table sets identifies the existing limited liability
partnerships which Availent had entered into as of August 1, 2002 and the
percent of the limited liability partnerships owned by Availent Mortgage.
Name and Percent
Location Owned
Availent - Radcliff, LP 60
Bossier City, LA
Availent - MINA, Ltd. 60
Shreveport, LA
Availent - Realty Executives of Ft. Bend, Ltd. 60
Sugarland, TX
Availent - Ruidoso, Ltd. 55
Ruidoso, NM
Availent - Ameristar, Ltd. 60
Houston, TX
Availent - Burns & Co., Ltd 60
Baton Rouge, LA
Availent - Westmark, Ltd. 51
Lubbock, TX
Availent - Bennet, Ltd. 60
New Orleans, LA
Availent - H.I. Holdings, Ltd. 51
Hattiesburg, MS
Availent - THCR, Ltd. 60
Denton, TX
13
Availent - G&M Holdings, Ltd. 60
Houston, TX
Availent - Orange Beach, Ltd. 60
Orange Beach, FL
Availent - Mobile, Ltd 51
Mobile, Alabama
Availent - Platinum, Ltd. 51
Irvine, California
As of August 1, 2002, Availent also maintained two branch offices, one in
Tyler, Texas and the other in Madison, Mississippi. Availent also originates
mortgage loans from its headquarters in Dallas, Texas.
The partnerships are accounted for utilizing the consolidated method of
accounting.
Availent Leasing purchases and, subsequently, leases computers and related
equipment to the affiliated partnerships.
As a mortgage broker, Availent Mortgage processes loans that are
originated by the limited liability partnerships and funded by mortgage bankers.
Availent Mortgage is a HUD/FHA approved lender and is approved with the Veterans
Administration.
Mortgage Underwriting
Loan originators in the field gather information about the mortgagee in a
loan application. This information is forwarded to Availent's headquarters. All
mortgage loan applications must be underwritten and approved in accordance with
Availent's and other investor's underwriting standards and criteria.
Underwriting standards used for conforming loans are those promulgated by FNMA
and FHLMC. Non-conforming (Jumbo) loans are underwritten subject to credit and
appraisal standards established by specific investors. Availent analyzes the
borrower's credit standing, financial resources and repayment ability as well as
the risk of the underlying collateral.
All mortgage loans must have a property appraisal provided by an
independent third party, fee-based appraiser. A nationally recognized credit
reporting agency provides complete reports of the borrower's credit history
including bankruptcies and delinquencies.
A given borrower may qualify for a mortgage loan through a variety of
mortgage loan documentation programs. Each program places a heavy emphasis on
credit scores, assets, income and loan to value ratios.
Upon becoming a mortgage banker, the Company's underwriting department
will consist of underwriters who maintain the consistent quality of mortgage
loans expected by secondary market investors. The Company will generally take
from two to four days to underwrite a mortgage loan. Upon completion of the
underwriting process, the mortgage loan is closed by a title agency or attorney.
Availent will perform a pre-funding audit on all mortgage loans that
includes a verification of certain mortgage loan documentation to determine the
integrity of the data and a review for compliance with underwriting guidelines.
Post-funding audits will be performed to monitor and evaluate our origination
policies and procedures. We will sample ten percent of all mortgage loans closed
and subject them to a full quality control review including re-underwriting the
mortgage loan. Our management will receive a monthly report on any deficiencies
found in the randomly sampled mortgage loans and believes that its use of the
IRS Verification of Income program increases significantly the quality of its
originators.
Mortgage Production Volumes for 2001 and first seven months of 2002
During 2001, from inception through the end of the year, Availent entered
into seven limited liability partnerships through which Availent originated and
closed $9,727,834 in mortgage loans. In the first seven months of 2002, Availent
established an additional seven limited liability partnerships or branches
through which Availent originated and closed $10,682,490 in mortgage loans. All
of Availent's mortgage loan production, in addition to the originations from its
headquarters in Dallas, Texas, is presently originated through its limited
14
liability partnerships or branch offices. As of August 1, 2002, Availent had
opened a total of 16 limited liability partnerships or branches.
In August 2002 Availent received notice that it had been approved by a
lender for a warehouse line of credit of $5,000,000. Upon formally entering into
this agreement, Availent will become a wholesale mortgage banker. Availent may,
in limited circumstances, provide mortgage banking services to third party
mortgage brokers but has no plans to provide such wholesale mortgage banking
services to those other than its affiliated entities.
Entering into mortgage banking operations will result in some interest
rate risks that arise because of interest rate changes between the time a
mortgage loan is originally funded and the time the mortgage loan is
subsequently sold. As of August 1, 2002, Availent had not established a hedging
operation, program or relationship to control this interest rate risk.
Competition
Availent faces strong competition in originating mortgage loans.
Availent's competition is principally from savings and loan associations, other
mortgage companies, commercial banks and, to a lesser degree, credit unions and
insurance companies, depending upon the type of mortgage loan product offered.
Many of these institutions have greater financial and other resources than
Availent and maintain a significant number of branch offices in the area in
which the Availent conducts operations. Increased competition for mortgage loans
from other lenders may result in a decrease in the volume of mortgage loans
originated by Availent. If Availent is unable to compete effectively, its
business, results of operations and financial condition could be materially and
adversely affected.
Availent believes that mortgage industry is undergoing consolidation with
various financial institutions acquiring specialized financial entities such as
mortgage companies and those involved in the real estate industry, whether title
companies, real estate brokers, or financial institutions, are consolidating or
integrating vertically with entities engaged in aspects of the real estate
industry that the entity is not presently operating in. Several lenders and
title companies have purchased real estate franchise organizations to penetrate
the same market. Similarly, real estate companies or franchises have formed
their own mortgage companies.
Availent's strategy of partnering with a real estate broker by placing a
mortgage office in a real estate broker's location is to provide a ready source
of funding for potential customers of the real estate broker and agents. This
service will permit the real estate broker to both ascertain the credit
worthiness of the client and have a ready source of mortgage loans available
that fit the borrower.
Regulation
Federal, state and local authorities regulate and examine the origination,
processing, underwriting, selling and servicing of mortgage loans. Availent is
approved to submit mortgage loans through Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") automated
underwriting systems. In addition, the Company is an approved mortgage lender by
Department of Housing and Urban Development ("HUD") and is qualified to
originate mortgage loans insured by the Federal Housing Administration ("FHA")
or guaranteed by the Veterans Administration ("VA"). Among other consequences,
the failure to comply with HUD, FHA or FNMA regulations could prevent the
Company from reselling its mortgage loans or prevent Availent's ability to enter
into the servicing of mortgage loans should it choose to do so. Such failure
could also result in demands for indemnification or mortgage loan repurchase,
certain rights of rescission for mortgage loans, class action law suits and
administrative enforcement actions, any of which could have a material adverse
effect on the Availent's results of operations and financial condition.
Federal, state and local governmental authorities also regulate Availent's
activities as a lender. The Truth In Lending Act and Regulation Z promulgated
thereunder contain certain requirements designed to provide consumers with
uniform, understandable information with respect to the terms and conditions of
mortgage loans and credit transactions. The Equal Credit Opportunity Act
prohibits creditors from discriminating against applicants on the basis of race,
color, sex, age or marital status, among other restrictions and requirements. In
instances where the applicant is denied credit, or the rate or charge for a
mortgage loan increases as a result of information obtained from a consumer
15
credit agency, the Fair Credit Reporting Act of 1970 requires the lender to
supply the applicant with a name and address of the reporting agency. The Real
Estate Settlement Procedures Act and the Debt Collection Practices Act subject
Availent to filing an annual report with HUD.
The Real Estate Settlement Procedures Act of 1974 or RESPA prohibits the
payment or receipt of fees for the referral of settlement service business. This
law and related regulations prohibit arrangements that could be deemed to be
kick-backs. Although Availent is scrupulous in complying with those regulations,
the failure to succeed in its RESPA compliance program would have a severe
adverse effect on Availent.
There can be no assurance that Availent will maintain compliance with
these requirements in the future without additional expenses, or that more
restrictive local, state or federal laws, rules and regulations will not be
adopted or that existing laws and regulations will not be interpreted in a more
restrictive manner, which would make compliance more difficult and more
expensive for the Company.
Employees
At August 1, 2002, the Availent employed 28 people.
Property
Availent leases approximately 4100 square feet in Dallas, Texas for which
it presently pays $3747 per month. The monthly rent will increase to $4429 in
December 2002. The lease expires in February 2004.
RISK FACTORS
This information statement contains certain forward looking statements
with respect to our financial condition, results of operations and business and,
assuming the consummation of the merger, the proposed merger with Availent.
These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities.
Availent will need to raise additional capital to continue operations, failure
to obtain additional capital would substantially hurt its business plan
Availent's future capital requirements will depend on many factors,
including cash flow from operations, competing market and technological
developments, and the its ability to market its services successfully. Availent
will need to raise additional capital to continue operations. At present levels
of expenditure, Availent has funding to remain operational through October 2002
and is negotiating for bridge funding to remain operational through November
2002. Availent does not have any commitment for any additional capital, and its
failure to raise additional capital will jeopardize Availent's ability to
continue operations.
Availent has limited operating history and cannot be assured that its business
plan will be successful
Availent was incorporated in December 2000 and has relatively limited
operating history. Availent's ability to fulfill its business plan is dependent
on further successful development and marketing of its services. Availent's
success is particularly dependent upon the success of its limited liability
partnerships in marketing its mortgage services, a marketing strategy and model
that Availent developed and is implementing. Availent may encounter
unanticipated problems, expenses, and delays in developing and marketing its
products and services. The failure of Availent to develop its services or
successfully market itself would have a material adverse effect on it and would
force Availent to reduce operations. No assurance can be given that Availent can
or will operate profitably.
Availent has incurred substantial losses its first full year of operation
Availent sustained a loss of $513,523 in fiscal 2001. The previous losses
have substantially reduced Availent's equity causing Availent to seek additional
capital. Availent can make no assurances that it will operate profitably in the
future.
Availent will depend on interim financing to fund mortgages
Upon becoming a mortgage banker, Availent will fund mortgage loans it
purchases or originates through borrowings that are collateralized by loan
purchase agreements and repaid when Availent sells the mortgage loan to a third
party. Any failure by Availent to have such funding agreements in place would
16
have a materially adverse effect on Availent's business, and the failure to
obtain funding agreements upon favorable terms and conditions and interest rates
could have a material adverse effect upon Availent's operations and
profitability.
Availent depends on programs that purchase or guarantee loans.
Institutional investors, which purchase most of the mortgage loans
Availent originates, usually generate funds by selling mortgage-backed
securities and depend on the continuation of programs administered by FHLMC or
the FNMA. Although Availent does not know of any proposed action, the
discontinuation or reduction of these programs could alter the context in which
Availent operates, and Availent may not be able to function effectively in an
altered environment. In addition, the mortgage loan products eligible for FHLMC
or FNMA may be changed by the sponsor and affect the costs of administering or
originating mortgage loans sponsored by these entities.
A large number of companies compete with Availent in originating mortgage loans.
Availent faces strong competition in originating and purchasing mortgage
loans. Savings and loan associations, other mortgage companies, commercial banks
and, to a lesser degree, credit union and insurance companies provide services
similar to those that are provided by Availent and have greater financial and
other resources as well as maintain several branch offices in the areas Availent
operates and thereby increase their marketing presence. This increased
competition may decrease the volume of mortgage loans originated and purchased
by Availent and the rates Availent is able to quote.
Availent may have to repurchase mortgage loans previously sold in certain
circumstances.
Availent makes a variety of representations and warranties to purchasers
and insurers of mortgage loans and related mortgage servicing rights about the
mortgage loan or the borrower complying with the law, regulations and program
standards. In the event of a breach of these representations and warranties,
Availent may be required to repurchase these mortgage loans and may be liable
for certain damages or both. These repurchases diminish Availent's liquidity and
increase the costs to administer Availent's business, increasing Availent's
expenses.
Changing and volatile interest rates affect many aspects of Availent's business.
The volume of mortgage loans Availent originates increases as interest
rates decline and volumes decrease as interest rates rise. In addition to
reflecting overall borrowing levels, when interest rates decline homeowners
refinance mortgage loans causing the volume of mortgage loans to accelerate
further. This volatility often introduces inefficiencies because of the need to
hire additional personnel or, when mortgage loan volumes decline, the need to
reduce in a timely manner staffing levels.
Accordingly, interest rates affect many aspects of Availent's business and
profitability. The failure to manage or prepare for the consequences of interest
rate changes, particularly when interest rates are volatile, could have a
material adverse effect on Availent's business, its operations and
profitability.
Federal, state and local authorities regulate the mortgage industry.
Federal, state and local authorities regulate and examine the origination,
processing, underwriting and servicing of mortgage loans. Availent is an
approved seller/servicer of mortgage loans for Fannie Mae, an approved mortgage
lender by HUD, and are qualified to originate mortgage loans insured by FHA and
VA. If Availent fails to comply with HUD of Fannie Mae regulations, Availent
could be prevented from reselling Availent's mortgage loans or be prevented from
entering into the servicing of mortgage loans should Availent choose to do so.
Such failure could also result in those to which Availent sells mortgage loans
to seek indemnification or to require that Availent repurchase the mortgage
loans and trigger certain rights for rescission of mortgage loans previously
sold. These failures could also cause the filing class action lawsuits or
administrative enforcement actions. Any one of these actions by investors,
clients or governmental agencies could have a material adverse effect on
Availent's results of operations and financial condition.
Federal, state and local governmental authorities also regulate Availent's
activities as a lender. The Truth in Lending Act and its related Regulation Z
contain certain requirements designed to provide consumers with uniform,
understandable information with respect to the terms and conditions of mortgage
loans and credit transactions. The Equal Credit Opportunity Act prohibits
17
creditors from discriminating against applicants on the basis of race, color,
sex, age or martial status, among other restrictions and requirements. In
instances where the applicant is denied credit, or the rate or charge for a
mortgage loan increases as a result of information obtained from a consumer
credit agency, the Fair Credit Reporting Act of 1970 requires the lender to
supply the applicant with name and address of the reporting agency. The Real
Estate Settlement Procedure Act and the Debt Collection Practice Act subject
Availent to filing an annual report with HUD.
There can be no assurance that Availent will maintain compliance with
these requirements in the future without additional expense, or that more
restrictive local, state or federal laws, rules and regulations will not be
adopted or that existing laws and regulations will not be interpreted in a more
restrictive manner which would make compliance more difficult and expensive for
Availent.
Availent originates mortgage loans in a few markets and the economic health of
these markets affects Availent's business prospects.
Almost all of Availent's mortgage loans are currently originated in Texas
and the surrounding states. Although Availent has plans to expand out of those
areas, Availent's results of operations and financial condition will be
significantly affected by the general trends in the economy in Texas and the
surrounding areas.
Availent's success depends on its founders, Patrick McGeeney and Michael Banes.
Availent's business is substantially dependent on the efforts of Patrick
McGeeney, Availent's President, and Michael Banes, President of Availent
Mortgage. Patrick McGeeney and Michael Banes are bound by employment agreements
whose terms end in 2006. Although the loss of either of them could have a
material adverse effect on Availent's business, the Company has obtained key-man
insurance policies in the face amount of $1,000,000 on the life of each of
Messrs. McGeeney and Banes, there can be no assurance that amount would be
sufficient to compensate for the loss of Messrs. McGeeney's or Banes's services.
Patrick McGeeney and Michael Banes control Availent.
Patrick McGeeney and Michael Banes have the power to vote, after the
merger, 56.1% of the Company's Common Stock. Together they will become in a
position to elect or influence the election of the Company's directors and
officers, to control its policies and operations and to determine the outcome of
corporate transactions or other matters submitted for stockholder approval,
including mergers, consolidations or other matters submitted for stockholder
approval.
Availent will have provisions in its corporate charter that may inhibit a
potential buyer from acquiring us.
Availent's amended Certificate of Incorporation will authorize the
issuance of Preferred Stock without stockholder approval and subject to terms
and conditions determined by the Board of Directors. This power may have the
effect of deterring a non-negotiated attempt to acquire control of us. For
example, a series of Preferred Stock could be issued in the future that could
thwart a possible take-over and operate to the significant disadvantage of
holders of Common Stock by including convertibility features which are lower
than the market price for the Common Stock, thus diluting the value of existing
shares of Common Stock.
SeaCrest does not pay dividends on its Common Stock.
SeaCrest presently intends to retain all of its earnings for the stability
and expansion of Availent's business and does not anticipate the distribution of
cash dividends in the foreseeable future. Any future decision of the Company's
directors to pay cash dividends will depend, among other factors, upon
Availent's earnings, financial position and cash requirement.
Any of these factors could have a significant and adverse impact on the
market price of Availent's Common Stock. In addition, the stock market in
general has experienced extreme volatility and rapid decline that has often been
unrelated or disproportionate to the operating performance of particular
companies. These broad market fluctuations may adversely affect the trading
price of Availent's Common Stock, regardless of Availent's actual operating
performance.
Risks Relating to the Merger
18
The consideration to be paid for the acquisition of Availent was determined by
SeaCrest and the management of Availent after negotiation and may not reflect
any recognized criteria of value
The consideration offered to Availent in the merger may not reflect the
actual value of Availent's stock and bears no relationship to the assets, book
value, earnings, net worth, or any other recognized criteria of value.
Consequently, the consideration offered to Availent, which can be deemed an
offering price for Availent's assets, was determined arbitrarily and solely by
SeaCrest and Availent. In establishing the terms of the transaction, principals
considered such matters as Availent's financial resources and the general
condition of the securities markets. The exchange ratio of the merger should
not, however, be considered an indication of SeaCrest's or Availent's actual
value. Neither SeaCrest nor Availent obtained a fairness opinion in connection
with the merger.
Certain anti-takeover features of the Company's Certificate of Incorporation and
bylaws and Delaware law may have the effect of discouraging potential
acquisition proposals
Upon consummation of the merger, certain provisions of our Certificate of
Incorporation and Bylaws, along with certain provisions of Delaware statutory
law, could discourage potential acquisition proposals and could delay or prevent
a change in control. Such provisions could diminish the opportunities for a
stockholder to participate in tender offers, including tender offers at a price
above the then current market value of the Company's Common Stock. Such
provisions also may inhibit fluctuations in the market price of the Company's
Common Stock that could result from takeover attempts.
There is no market for your shares and you may not be able to sell them
There has been no trading market for SeaCrest's Common Stock and there is
no assurance that one will develop following the merger with Availent nor is
there any assurance that a trading market will ever exist. Because Availent does
not meet the qualifications for NASDAQ or the other national exchanges, Availent
intends to apply for listing of the Common Stock on the OTC Bulletin Board.
Although Availent will be applying to list our Common Stock on the OTC Bulletin
Board, there can be no assurance that our application will be granted and there
can be no assurance that an active market will develop for our Common Stock.
Although our director C. M. Ball has agreed to assist the Company in obtaining a
market maker (a requirement for listing), there can be no assurance any broker
will be interested in trading our stock. Therefore, it may be difficult to sell
your shares if you should desire or need to sell. You may have no more liquidity
in your stock even if the Company is successful in completing the merger and
getting listed on the OTC Bulletin Board. Once the Company has issued shares of
its Common Stock in the merger, Availent does not know if or how our Common
Stock will trade. Even if Availent is successful in being listed on the OTC
Bulleting Board, the market price of the Company's Common Stock may fluctuate
significantly due to a number of factors, some of which may be beyond our
control, including:
o the potential absence of securities analysts covering the Company
and distributing research and recommendations about the Company;
o the liquidity of our Common Stock will be low because only 7.6%
of our shares will be in the hands of non-affiliates of the
Company or otherwise non-restricted and such shares are not
eligible for sale under exemptions from registration under the
Securities Act of 1933;
o changes in earnings estimates by securities analysts or our
ability to meet those estimates;
o the operating results and stock price performance of other
comparable companies;
o low trading volume because so much of our stock is closely held;
o overall stock market fluctuations; and other economic conditions
generally.
19
NAME CHANGE
SeaCrest's Board of Directors and stockholders owning a majority of
SeaCrest's outstanding shares of Common Stock determined that the corporation's
name should be changed to capture the goodwill associated with that name and
reflect the corporation's new business activity. With the filing of the
Certificate of Amendment, the corporation's Certificate of Incorporation will be
amended to change the corporation's name to Availent Financial, Inc.
MANAGEMENT
Effective May 10, 2002, two principals of Availent, Patrick McGeeney and
Michael Banes, were appointed to the Board of Directors of SeaCrest and Woody
Conradt was appointed Chief Financial Officer, Treasurer and Secretary of
SeaCrest. Stockholders of SeaCrest owning a majority of SeaCrest's outstanding
shares of Common Stock ratified the appointment of Patrick McGeeney and Michael
Banes as directors of SeaCrest. The following table sets forth certain
information regarding the Company's directors and executive officers after that
date as well as those that are directors and principals of Availent.
Name Age Position
Patrick A. McGeeney 52 Director, President and Chairman of the Board
Michael L. Banes 35 Director, President of Availent Mortgage
Donald H. Cram(1) 63 Director of Availent
George R. Schrader(1) 71 Director of Availent
Jerry L. Armstrong(1) 55 Western Regional Manager, Availent Financial
Woody Conradt 41 Chief Financial Officer, Secretary and Treasurer
Jason Thomas Nichols(1) 30 Central Regional Manager, Availent Financial
(1) Not presently a director or officer of SeaCrest.
Mr. C. M. Ball, age 71, who resigned as a director and all offices in May
2002, has been a private investor since his retirement in 1996.
Patrick A. McGeeney co-founded Availent in 2000 and serves as its
President and Chairman of the Board of Directors. He also serves as President of
Availent Leasing. Prior to founding Availent, he was Chief Operating Officer of
REALTEC Real Estate, a Dallas, Texas based franchise company that franchises
real estate mortgage agencies within mortgage operations. At REALTEC, Mr.
McGeeney was responsible for its operations and sales, developing REALTEC's
brand identity and mortgage marketing. Prior to joining REALTEC in 1996, Mr.
McGeeney owned a consulting firm counseling clients on financial services and
marketing. He has spent 13 years as a marketing consultant and was with Young &
Rubicam engaged in national brand marketing. He has been engaged in developing
national brands for Clorox, Clorox 2, Maxwell House, Uncle Ben's Rice, National
Oats Company among several others. He has also developed franchise marketing for
several national companies. A graduate of Southern Methodist University, Mr.
McGeeney serves on the Associate Board of the Southern Methodist University Cox
School of Business.
Michael L. Banes co-founded Availent in 2000 and serves as a director. He
is also the President of Availent Mortgage. In February 2000, Mr. Banes founded
Founders Mortgage, the predecessor company to Availent Mortgage. In July 1996,
he joined REALTEC Real Estate, a Dallas, Texas based real estate/mortgage office
franchisor and served as the Vice President of Mortgage Operations. Prior to
joining REALTEC in 1996, Mr. Banes was the sole proprietor of two Chick-fil-A
restaurants. He also held a Series 7 Securities license.
Donald H. Cram became an advisory director of Availent in November, 2001.
He retired as a mortgage banker in 1994. Upon his retirement, he was chairman of
Cram Mortgage, a one billion dollar home loan servicing corporation. Since his
20
retirement he has acted as an independent consultant, principally in the
mortgage banking industry. Mr. Cram is the past director of the Texas Mortgage
Bankers Association and former Chairman of the Fort Worth, Texas, City Planning
Commission. He has also served as a director for J. P. Morgan Chase Bank of Fort
Worth and of Magnolia Media Group.
George R. Schrader became an advisory director of Availent in January
2001. For the last five years he has been a named member of Schrader & Cline,
LLC, a financial and governmental management consulting firm. From 1983 to 1993,
he was a principal of Schrader Investment Company whose activities paralleled
those of Schrader & Cline, LLC. From 1972 to 1981, Mr. Schrader was City Manager
for the city of Dallas, Texas. Since 1984, he has been a member of the Board of
Directors of Overhill Corp., an American Stock Exchange listed company. For more
than ten years, he served on the Board of Directors of Deutsch Bankers Trust
Company Southwest, an investment banking firm providing financial services to
state and local governments.
Jerry L. Armstrong joined Availent in March 2002 and is Availent
Financial's Western Regional Manager. In October 1996, Mr. Armstrong founded
Charter Financial, a Southern California Mortgage Bank and Mortgage Broker. Mr.
Armstrong has several years experience in commercial real estate development,
retail mortgage lending, the management and training of sale representatives
engaged in financial services and telephone franchising.
Woody Conradt joined the Company in May 2002 and serves as the Company's
Chief Financial Officer, Secretary and Treasurer. From August 1996 until joining
the Company, Mr. Conradt was Chief Financial Officer, Secretary and Treasurer of
Telsco Industries, Inc., a Dallas Texas based international manufacturer of
commercial and residential irrigation systems and high-compression gas and
pipeline fittings. Mr. Conradt is a Certified Public Accountant, working in
public accounting for five years with Price Waterhouse.
Jason Thomas Nichols joined Availent in October 2001 where he is Regional
Manager of Availent Financial's Central Region. Prior to joining Availent
Mortgage, Mr. Nichols was a financial advisor with Hibernia Investments, LLC, a
firm he joined in June 1999 and where he managed over 500 clients and advised
clients for six local branches. Prior to his engagement with Hibernia
Investments, LLC, Mr. Nichols was a financial advisor with Morgan Keegan, an
investment banker.
EXECUTIVE COMPENSATION
No director or officer of SeaCrest received compensation for service to
SeaCrest.
The following table sets forth the compensation paid to the Availent's
Chief Executive Officer and other executive officers who earned more than
$100,000 in 2001 (the "Named Executive Officers") for services rendered to the
Company in all capacities for the three fiscal years ended December 31, 2001.
Summary Compensation Table
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
C. M. Ball 2001 $ - - -
Chief Executive Officer 2000 - - -
1999 - - -
Patrick McGeeney (1) 2001 $150,404 - -
President, Availent Financial
Michael Banes (1) 2001 $150,404 - -
President, Availent Mortgage
- ------------
(1) Of Messrs. McGeeney's and Banes's compensation for 2001, $43,004 has been
deferred.
Availent has entered into employment agreements with Messrs. McGeeney,
Banes, Conradt, Armstrong and Nichols. Each employment agreement is for a period
of five years. Messrs. McGeeney's and Banes's agreements commenced on February
1, 2001 and the compensation is the same. For the first twelve months of the
term, each's salary is $165,000, increasing to $190,000, $275,000, $350,000, and
21
$425,000 in each successive year of service. In addition, each will be paid
quarterly a bonus equally to 5% of Availent's pre-tax gross profits, as defined.
The calculation of gross profits deducts general and administrative expenses.
The term of Mr. Conradt's employment agreement began on May 6, 2002, and
pays Mr. Conradt $129,200 on an annual basis for the first three months of
agreement's term. After three months, Mr. Conradt's compensation is increased to
$144,200 per year for the balance of his first year of employment. The
contract's compensation increases to $169,200 in the contract's second year with
an increase in base compensation of at least 10% for each year thereafter. Mr.
Conradt has been granted warrants to acquire 40,000 shares of SeaCrest (after
the one-for-two reverse stock split) annually during the term of his employment
beginning after the first year of employment. The exercise price for such shares
is $0.50 per share.
The term of Mr. Armstrong's employment began on March 13, 2002, and sets
the salary of Mr. Armstrong at $6,000 per month of which $3,000 per month is
deferred until the Company completes a public offering. In addition, he will
receive a bonus based upon production volume in his region. The agreement also
grants Mr. Armstrong the right to acquire 60,000 shares of SeaCrest (after the
one-for-two reverse stock split) annually during the term of his employment
beginning after the first year of employment. The exercise price for such shares
is $0.50 per share.
The term of Mr. Nichols's contract began on January 15, 2002, and set the
salary of Mr. Nichols at $6,000 per month. In addition, he will receive a bonus
based upon production volume in his region. The agreement also grants Mr.
Nichols the right to acquire 60,000 shares 000 shares of SeaCrest (after the
one-for-two reverse stock split) annually during the term of his employment
beginning after the first year of employment. The exercise price for such shares
is $0.50 per share.
Stock Option Plan
Availent does not have a stock option plan. It has granted warrants to
acquire a total of 3,019,330 shares of SeaCrest (after the one-for-two reverse
stock split) common stock of which warrants to purchase 1,587,217 have been
granted to employees. The following table summarizes the warrants granted to
certain named executives:
Number of Percent of Exercise or Expiration
Securities options base price date
Underlying granted to ($/Sh)
Options granted employees
In fiscal
Year
Jerry Armstrong 397,443 11.2% $0.50 2012
Jason Nichols 449,773 14.9% $0.50 2012
Woody Conradt 200,000 6.6% $0.50 2012
Messrs. Armstrong and Nichols have been granted warrants to purchase
37,444 and 149,773 shares, each post split warrants, upon completion of the
merger. Messrs. Armstrong , Nichols and Conradt may exercise 60,000, 60,000, and
40,000 shares, respectively, annually commencing in 2003.
Director Remuneration
Each of Availent's outside directors have received a warrant to purchase
22,466 shares of Common Stock. The directors do not currently receive any other
compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2002 Availent entered into a bridge loan agreement in the
amount of $500,000 with Bergstrom Investment Management, L.L.C. Patrick McGeeney
and his spouse, Michele McGeeney, have personally guaranteed this loan. Michele
McGeeney has also pledged an annuity securing the same bridge loan agreement. As
compensation for securing this loan she was paid $25,000 on the date of the
loan's closing and will be paid an additional 5% of the principal amount of the
loan outstanding if it is not repaid within 180 days of the date of the loan.
She is also paid monthly an amount equal to .25% of the principal amount
outstanding on the loan at the time the lender is paid interest. She has
22
received warrants to purchase 50,000 shares of Common Stock within thirty days
after the closing of the merger of SeaCrest with Availent as well as the right
to receive 200,000 shares of SeaCrest (before the one-for-two reverse stock
split) upon the payment of Availent's obligation to Bergstrom Investment
Management, L.L.C.
On February 1, 2001, Michele McGeeney loaned Availent $290,000. The loan
matured on January 31, 2002, and paid 13.8% interest per year, payable in
advance. The note was renewed on February 1, 2002, and the renewed note matures
on January 31, 2003. The renewed note has the same interest rate and interest on
the renewed note was also paid in advance.
In November 2001 Patrick McGeeney and Michael Banes loaned Availent
$35,000 and $30,000, respectively. The loans have an interest rate of 15%,
mature no later than December 31, 2002, but are payable upon demand. Further,
Messrs McGeeney and Banes will receive 5,400 and 4,600 shares (before the
reverse stock split) of the Company's stock following the merger.
In addition, as of August 1, 2002, Michele McGeeney had loaned Availent
another $250,000 with interest at 15% and 12 points paid in advance. The loans
mature in January 2003. In July 2002 Patrick McGeeney and Michael Banes loaned
the Company $40,000 and $13,300, respectively, with interest at 15% and 5
points, the points being payable at maturity, in December, 2002. The points were
not paid in advance. In August 2002 Michael Banes loaned Availent $95,000 with
interest at 15% with twelve additional points payable at maturity on October 25,
2002.
In early 2002, Michele McGeeney and Michael Banes converted Preferred
Stock of Availent owned by each into Availent Common Stock. In connection with
that conversion, Ms. McGeeney and Mr. Banes were paid 120,400 shares (before the
reverse stock split) and 119,600 shares (before the reverse stock split),
respectively, of SeaCrest Common Stock.
In connection with the merger, Mr. Ball acquired shares of Availent Common
Stock which will result in the issuance to him of 7,000,000 shares (post merger)
of Common Stock. Mr. Ball arranged for the pledge of securities securing the
$500,000 bridge loan referred to above as well as the loan of 733,000 shares of
Common Stock of a publicly held entity traded on the bulletin board, Advance
Technologies, Inc., to assist in the capitalization of Availent pending the
completion of an equity placement by the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SeaCrest has not transacted business since February 1984, and since that
time, the registrant has sought to acquire operating assets through the issuance
of common stock. SeaCrest lacks assets, has no liabilities and as of October 1,
2002 had 12,484,689 shares of common stock, par value $0.01 per share issued and
outstanding, a capital structure that has existed since at least 1996.
SeaCrest's last operations ended in 1984. In 1997 SeaCrest attempted to
reorganize as a Nevada corporation and acquire assets through a merger. In
mid-1998 that reorganization and attempted merger were abandoned. SeaCrest did
not incur expenses in connection with the 1997 and 1998 activities. Any expenses
incurred since 1997, essentially the cost of keeping SeaCrest as an active
Delaware corporation, have been assumed by C. M. Ball without reimbursement or
expense from SeaCrest, reimbursement that C. M. Ball will not seek from
SeaCrest.
The accounting treatment for the acquisition of Availent by SeaCrest will
be treated as a reverse merger, that is, as though Availent acquired SeaCrest.
Management anticipates that the merger of SeaCrest and Availent will be
completed October 2002. Following completion of the merger, the management plans
to complete an equity placement of its common stock to raise up to $8,000,000.
The purpose of this equity offering is four fold: to pay debt, to fund opening
of offices of Availent on a national level, to develop corporate operational
infrastructure for mortgage loan originator support and to provide capital
reserves to establish lines of credit to fund the closing of mortgage loans.
23
Availent Operations
Availent began originating mortgage loans in the second quarter of
calendar 2001. The following table sets forth the quarterly production volumes
since that date:
Q2 Q3 Q4 Q1 Q2
2001 2001 2001 2002 2002
Number of Loans 16 31 37 23 39
Total Value of Loans $1,657,367 $3,289,188 $4,781,279 $1,957,357 $6,420,710
The total number of loans generated for each of the above periods reflects
the start-up nature of Availent's business with the number of loans increasing
from quarter to quarter with the exception of the period from the fourth quarter
of 2001 to the first quarter of 2002, a decline that Availent's management
attributes to seasonality in the industry with mortgage loan applications
generally declining in the winter.
Year Ended December 31, 2001
Availent's operations began in February 2001, during which time Availent
lost, prior to an unrealized gain on securities of $285,983, $645,303. This loss
reflects the startup costs in establishing Availent's business, particularly in
establishing its limited liability partnerships. Although Availent was able to
generate $239,294 in revenues during this period, funds totaling $214,800 paid
to Messrs. McGeeney and Banes were treated as loans rather than compensation
expense.
Six Months Ended June 30, 2002
In the first six months, 2002, Availent began a growth and capital raising
phase of its development. The Company lost $1,004,167 prior to an unrealized
loss of $593,956 in securities. The comparable period in 2001 resulted in a loss
of $227,082. Availent generated $158,141 in revenues during this period and
$42,512 for the comparable period in 2001. The company expensed all salaries due
and payable to Messrs. McGeeney and Banes during this period.
Liquidity and Capital Resources
To gain assets for Availent Mortgage, Availent arranged for the loan to it
of 733,000 shares of a publicly held entity, Advance Technology, Inc. These
shares can be returned to the lender or purchased for $373,000. For the year
ended December 31, 2001, Availent recognized an unrealized gain on these
securities of $285,983. This gain became an unrealized loss of $593,956 at the
end of the second quarter of 2002.
Availent's liquidity has principally been provided through borrowings
which amounted to $1,049,676 at December 31, 2001. At June 30, 2002, the amount
of the debt had increased to $1,881,253. During the period ended December 31,
2001, Availent issued $200,000 in preferred stock which, subsequent to December
31, 2001, has been converted to common stock.
The majority of the increase in indebtedness in the first quarter of 2002
occurred through a loan to Availent by Bergstrom Investment Management, L.L.C.
in the amount of $500,000. Of this amount Availent paid $250,000 for the
acquisition of SeaCrest. The note bears an interest rate of 12% and matures
December 1, 2002. For $7,500, Availent may extend this loan for one year. The
loan may be prepaid and no principal is due until maturity. Interest is payable
monthly. This loan is secured by the personal guarantees of Michele and Pat
McGeeney, an annuity owned by Michele McGeeney, and by a pledge of 500,000
shares of SeaCrest Common Stock.
Availent continues to fund losses through borrowings. A bank has loaned
Availent a total of $50,000. Several individuals have loaned Availent money,
including principals of Availent. See "Certain Relationships and Related
Transactions." Availent may seek up to $500,000 in similarly structured debt
pending the closing of an offering of up to $8,000,000.
Availent's plan of operation contemplates a $8,000,000 equity placement
immediately upon the completion of this merger which Availent's management
believes will be sufficient to fund its growth for a period of at least one year
following that offering's close. Availent will continue to expand its affiliated
limited partnerships in anticipation of this funding.
24
In June 2002 Availent received a letter from a lender informing Availent
that Availent had been approved for a $5,000,000 warehouse line of credit.
Although the final contracts had not been executed as of October 1, 2002, the
approval letter contemplated an interest rate of LIBOR plus 4.0% or Fed Funds
rate plus 4.0%, whichever is greater, and a transaction fee of $100 per per
mortgage loan depending on the type of mortgage loan funded. Its effectiveness
is subject to several conditions including a net worth of Availent's subsidiary,
Availent Mortgage, of at least $600,000 and combined tangible net worth of
Availent Mortgage and all guarantors of at least $3,500,000. In October 2002
this lender informally funded mortgages under this arrangement. This warehouse
line of credit is to be guaranteed by Patrick McGeeney, Michele McGeeney,
Michael Banes and Mr. Banes's spouse and will permit Availent to fund mortgage
loans prior to the mortgage loan being sold to investors.
Availent's plan is to have sufficient liquid resources following its
equity placement. It anticipates operating losses to extend into the first half
of 2003 while it expands its operations through partnerships. The balance of the
proceeds from its equity offering will be used to support warehouse lending
which often require liquid cash reserves held in support of mortgage lending
pending a mortgage loan's resale. Availent's management anticipates that all of
its liquid resources will be used in that manner and any investments will be in
short term, highly secure investements.
The failure to complete the equity placement will have a material adverse
effect on Availent, and such failure could result in Availent ceasing
operations.
ADDITIONAL AND AVAILABLE INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the SEC relating to its business,
financial condition and other matters. Such reports, proxy statements and other
information can be inspected and copied at the public reference facility
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. Information regarding the public reference facilities may be obtained
from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also
available to the public on the SEC's website (http://www.sec.gov). Copies of
such materials may also be obtained by mail from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
COMPANY CONTACT INFORMATION
All inquiries regarding the Company should be addressed to the Company's
principal executive offices: SeaCrest Industries Corporation
2720 Stemmons Freeway
South Tower, Suite 600
Dallas, TX 75207
By order of the Board of Directors:
/s/ Patrick McGeeney
President and Chief Executive Officer
25
AVAILENT FINANCIAL, INC. AND
SUBSIDIARIES
FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 15, 2001) TO
DECEMBER 31, 2001
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT.................................................1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet............................................2
Consolidated Statement of Income and Comprehensive Income.............4
Consolidated Statement of Stockholders' Equity........................5
Consolidated Statement of Cash Flows..................................6
Notes to Consolidated Financial Statements............................7
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Availent Financial, Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Availent
Financial, Inc. and Subsidiaries as of December 31, 2001 and the related
consolidated statements of income and comprehensive income, stockholders'
equity, and cash flows for the period from inception (February 15, 2001) to
December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Availent Financial,
Inc. and Subsidiaries as of December 31, 2001, and the results of their
operations and their cash flows for the period from inception (February 15,
2001) to December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 4 to the financial statements, the accompanying financial
statements have been restated to correct an error resulting primarily in an
overstatement of intangible assets.
/s/ Gainer, Donnelly & Desroches, L.C.
Gainer, Donnelly & Desroches, L.C.
Houston, Texas
March 6, 2002
(except for Note 4, as to
which the date is August 22, 2002)
1
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 4,588
Marketable Securities 659,961
Advances to Stockholders (Non-Interest Bearing) 214,800
-------------
Total Current Assets 879,349
---------------
PROPERTY AND EQUIPMENT:
Furniture and Fixtures 20,300
Office Equipment 43,334
Lease Improvements 10,480
Less: Accumulated Depreciation (11,858)
--------------
Net Property and Equipment 62,256
-------------
OTHER ASSETS:
Deposits 2,400
Customer Lists, Net 63,333
Licensing Agreements, Net 20,000
-------------
Total Other Assets 85,733
-------------
TOTAL ASSETS $ 1,027,338
==============
2
See accompanying notes.
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 30,348
Accrued Liabilities 61,775
Line of Credit 50,000
Current Portion of Capital Lease Obligation 4,409
Notes Payable 1,049,676
-------------
Total Current Liabilities 1,196,208
-------------
LONG-TERM LIABILITIES:
Capital Lease Obligation, Net of Current Portion 5,622
-------------
MINORITY INTEREST (30,461)
--------------
STOCKHOLDER'S EQUITY:
Preferred Stock, $1.00 Par Value;
200,000 Shares Authorized, Issued and Outstanding 200,000
Common Stock, $0.01 Par Value;
1,000,000 Shares Authorized; 529,910 Shares
Issued and Outstanding 5,299
Additional Paid-in Capital 9,990
Net Unrealized Gains On Securities 285,983
Retained Earnings (645,303)
--------------
Total Stockholders' Equity (144,031)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,027,338
==============
3
See accompanying notes.
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE PERIOD FROM INCEPTION (FEBRUARY 15, 2001) TO DECEMBER 31, 2001
REVENUES $ 239,294
COST OF REVENUES:
Advertising and Publications 18,180
Delivery 10,873
Financial Fees 41,918
Licenses and Other Fees 7,093
Wages and Salaries 31,804
-------------
Total Cost of Revenues 109,868
-------------
GROSS PROFIT 129,426
OPERATING EXPENSES:
Amortization 16,667
Depreciation 11,858
Insurance 29,254
Lease Expense 28,737
Office Supplies 58,476
Miscellaneous Expense 8,863
Professional Fees 221,654
Repairs and Maintenance 17,449
Taxes 5,395
Telecommunications 19,851
Travel, Meals and Entertainment 50,852
Wages and Salaries 272,191
-------------
Total Operating Expenses 741,247
-------------
LOSS BEFORE INTEREST EXPENSE (611,821)
INTEREST EXPENSE (67,943)
--------------
LOSS BEFORE MINORITY INTEREST (679,764)
MINORITY INTEREST 34,461
-------------
NET LOSS (645,303)
NET UNREALIZED GAINS ON SECURITIES 285,983
-------------
COMPREHENSIVE INCOME (LOSS) $ (359,320)
==============
LOSS PER COMMON SHARE
Basic $ (1.29)
===============
Diluted $ (1.29)
===============
4
See accompanying notes.
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 15, 2001) TO DECEMBER 31, 2001
Net
Additional Unrealized
Preferred Common Paid-in Gains on Retained
Stock Stock Capital Securities Earnings Total
------------- -------------- -------------- ----------- ------------ -----------
Balance, Beginning
of Period $ - $ - $ - $ - $ - $ -
Issuance of
Preferred Stock 200,000 - - - - 200,000
Sale of Common Stock - 5,299 9,990 - - 15,289
Net Unrealized Gains
on Securities - - - 285,983 - 285,983
Net Loss - - - - (645,303) (645,303)
----------- ------------ ----------- ----------- ---------- -----------
Balance, End of Period $ 200,000 $ 5,299 $ 9,990 $ 285,983 $ (645,303) $ (144,031)
============ ============= =========== ============ ========== ==========
5
See accompanying notes.
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 15, 2001) TO DECEMBER 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (645,303)
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities
Amortization 16,667
Depreciation 11,858
Noncash Professional Fees 60,234
Minority Interest in Loss of Limited Partnerships (34,461)
(Increase) Decrease In:
Deposits (2,400)
Increase (Decrease) In:
Accounts Payable 30,348
Accrued Liabilities 61,775
-------------
Net Cash Used in Operating Activities (501,282)
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (16,369)
--------------
Net Cash Used in Investing Activities (16,369)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Line of Credit 50,000
Proceeds from Notes Payable 675,698
Payments on Capital Lease Obligation (2,659)
Advances to Stockholders (214,800)
Contributed Capital from Limited Partnerships - Minority Interest 4,000
Issuance of Common Stock 10,000
-------------
Net Cash Provided by Financing Activities 522,239
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,588
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
-------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,588
==============
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 8,905
==============
6
See accompanying notes.
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Availent Financial, Inc. (collectively with its subsidiaries, the "Company") was
incorporated in the state of Texas in December, 2000. The Company wholly owns
the following subsidiaries: Availent Mortgage, Inc. and Subsidiaries (Mortgage)
and Availent Leasing, Inc. (Leasing).
Availent Mortgage, Inc. was incorporated in the state of Texas in December, 2000
and originates single-family residential mortgage loans in Texas and the
Southwestern United States. As of December 31, 2001, Mortgage has a majority
interest in seven limited liability partnerships that secure mortgages which are
processed by Mortgage. Mortgage accounts for its investments in these
partnerships utilizing the consolidated method of accounting.
Availent Leasing, Inc. purchases and, subsequently, leases computer and related
equipment to affiliated partnerships.
Basis of Accounting
The Company maintains its records and the accompanying consolidated financial
statements have been prepared on the accrual basis of accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of Availent
Financial, Inc. and its wholly owned subsidiaries. All intercompany balances and
transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and all highly
liquid investments with a maturity of three months or less at the time of
purchase.
Financial Instruments
The Company's financial instruments (primarily cash and cash equivalents, loans
held for sale, receivables, and payables) are carried in the accompanying
consolidated financial statements at amounts that reasonably approximate fair
value.
Account Receivables
Account receivables represent amounts owned to the Company as of December 31,
2001. An allowance is established for accounts whose collection is uncertain. At
December 31, 2001, there were no accounts receivable.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on the
straight-line method over three to seven years while accelerated methods are
used for income tax purposes. Depreciation expense for the period ended December
31, 2001 totaled $11,858.
7
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property and Equipment - Continued
Expenditures for additions, major renewals, and betterments are capitalized and
expenditures for maintenance and repairs are charged against income as incurred.
When property and equipment are sold or otherwise disposed of, the asset account
and related accumulated depreciation account are relieved, and any gain or loss
is included in operations.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Revenue Recognition
Commitment fees, points and premium fees are earned and recognized as revenue
when the loans are closed and sold to permanent investors. Any fees collected
prior to closing would be included in deferred income.
Application fees, partially representing reimbursement for the costs of specific
services performed by third parties with respect to loans originated, collected
during loan processing are recognized as revenue when the loans have been
originated and all related services have been performed.
As of December 31, 2001, the Company has no correspondent relationship with any
financial institution. Gains on sales of loans are recognized at the loan
closing which corresponds to the sale date.
Advertising Costs
All costs related to advertising are expensed in the period incurred. Total
advertising expense for the period ended December 31, 2001 was $14,932.
NOTE 2 - CASH CONCENTRATION
At various times throughout the year, the Company may maintain bank deposits in
excess of FDIC insurance limits of $100,000.
NOTE 3 - MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" with the
Company's securities classified as available-for-sale. Available-for-sale
securities are recorded at fair value with the change in fair value during the
year excluded from earning and recorded net of tax as a component of other
comprehensive income. Realized gains and losses are determined by specific
identification and are charged or credited to earnings.
8
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MARKETABLE SECURITIES - CONTINUED
Marketable securities are summarized as follows at December 31, 2001:
Gross Fair
Unrealized Market
Gains Value
------------- -------------
Equity Securities $ 285,983 $ 659,961
============= =============
The Company's portfolio as of December 31, 2001 consists of one security,
Advance Technologies, Inc. SFAS 115 requires that available-for-sale securities
be reported at their fair market value based on the over the counter price at
the end of the year. This security was acquired through a note payable valued at
an amount equal to the fair market value of the security at the date of
acquisition (i.e., $373,978). Effective October 2002, the Company may either
return the security, pay the outstanding note of $373,978, or extend the
transaction date for an additional period of time.
NOTE 4 - CUSTOMER LISTS AND LICENSING AGREEMENTS
Intangible assets consist of certain customer lists and licensing agreements and
are being amortized over a five-year period. Such assets were capitalized at
amounts which approximate the predecessor's cost. Amortization expense for the
period ended December 31, 2001 totaled $16,667.
The accompanying financial statements have been restated from previously issued
financial statements (dated March 6, 2002) to correct an error resulting
primarily in an overstatement of intangible assets. The effect of the
restatement was to decrease net income by $131,780.
NOTE 5 - LINE OF CREDIT
Under the terms of a line of credit agreement with Inwood National Bank, the
Company may borrow up to $50,000. Interest on outstanding principal amounts is
calculated based at a 9% interest rate and is payable monthly. The line matures
in March of 2002. The outstanding principal balance at December 31, 2001 was
$50,000. The credit facility is secured by the Company's equipment and furniture
and fixtures.
NOTE 6 - NOTES PAYABLE
Notes payable consist of the following at December 31, 2001:
Individuals $ 483,978
Stockholders 390,000
Officers 175,698
-------------
Total $ 1,049,676
=============
9
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - NOTES PAYABLE - CONTINUED
Notes payable are unsecured, bear interest at varying rates and are due on
demand. Interest expense on these notes totaled $67,943 for the period ended
December 31, 2001 and accrued interest expense of $59,038 is included in accrued
liabilities in the accompanying financial statements.
NOTE 7 - CAPITAL LEASE
The Company is the lessee of computers under a capital lease that expires in
2004. The assets and liabilities under capital leases are recorded at the lower
of the present value of the minimum lease payments. The asset is depreciated
over the related lease term, which approximates the estimated productive life.
Depreciation expense on these assets totaled $3,525 for the year ended December
31, 2001 and is included in depreciation expense in the accompanying financial
statements.
The following is a summary of future minimum lease payments during the next
three years:
Year Ending
December 31,
2002 $ 5,727
2003 5,286
2004 881
-------------
11,894
Less: Interest Included in Lease Payments (1,863)
-------------
Net Present Value of Future Minimum Lease Payments 10,031
Less: Current Maturities (4,409)
-------------
Long-Term Portion $ 5,622
=============
NOTE 8 - INCOME TAXES
The Company accounts for income tax in accordance with SFAS No. 109. In
accordance with SFAS No. 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. When management determines that it is likely that a
deferred tax asset will not be realized, a valuation allowance is established.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The Company files a consolidated federal tax return with Mortgage and Leasing
and records its share of the consolidated federal tax provision on a separate
return basis. The Company's income tax provision for the period ended December
31, 2001, consists of the following:
10
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES - CONTINUED
Current Tax Expense $ ---
Deferred Tax Benefit ---
-------------
Total $ ---
=============
As of December 31, 2001, the Company has available approximately $30,000 of
unused net operating loss carry forwards that may be applied against future
taxable income and that expire in various years to 2021. The Company's net
operating loss generated a deferred tax benefit of approximately $9,600;
however, due to the uncertainty of its ultimate recognition, a valuation
allowance has been established equal to the benefit.
The difference between the loss from operations and the tax loss carry forward
results primarily from recognition of equity losses of subsidiaries and certain
professional fees for financial reporting purposes but not for tax purposes.
NOTE 9 - SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Contribution of Marketable Securities for a Note Payable to Sonny Ball $ 373,978
=============
Contribution of Furniture and Fixtures from Mike Banes and Pat McGeeney $ 45,055
=============
Preferred Stock Issued for Intangible Assets $ 100,000
=============
Equipment Acquired under Capital Lease Obligations $ 12,690
=============
NOTE 10 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2001, the Company engaged in various
transactions with certain affiliates. Under informal arrangements, transactions
between these entities generated charges primarily general and administrative,
including certain leasing charges, expenses. During 2001, net charges between
these companies totaled approximately $124,500. These balances are eliminated in
consolidation.
Mortgage has a majority interest in seven Limited Liability Partnerships (the
Partnerships). These Partnerships secure mortgages that are processed by
Mortgage. For this service, Mortgage is paid a processing fee which totaled
$10,750 for the period ended December 31, 2001.
Mortgage also receives the required RESPA management fee from these
Partnerships. This is calculated as 1% of the Partnerships' revenue. The RESPA
management fee was $1,853 for the year ended December 31, 2001.
During the year, stockholders received advances totaling $214,800. Such advances
bear no rate of interest and are due on demand. Advances were to Patrick
McGeeney, President, for $107,400 and Michael Banes, Corporate Secretary, for
$107,400.
11
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - CONTINGENCY
For the period from inception to date, the Company has incurred significant
operating losses and, at times, has experienced cash flow constraints. Operating
losses are projected through 2002. The cash flow restrictions have been
mitigated by additional contributions of capital by new and existing
shareholders of the Company and by financing provided through certain credit
arrangements. However, the effect of such operating losses and constraints and
the long-term impact on the Company's operations and financial condition is
unknown.
NOTE 12 - EMPLOYEE SAVINGS PLAN
The Company provides a qualified employee savings plan (the Plan) for its
employees. Participation in the Plan is open to all employees who have reached
the age of 21 and completed one year of service, as defined in the Plan.
Employee contributions to the Plan qualify for tax deferred status under the
provision of Section 401(k) of the Code.
The Company may, at the discretion of the board of directors, provide
discretionary contributions based on a percentage of an employee's compensation,
as defined in the Plan. Total contributions based on a percentage of an
employee's compensation, as defined in the Plan. No contributions were made by
the Company for the period ended December 31, 2001.
NOTE 13 - EARNINGS PER SHARE
The following is the calculation for the earnings per share and diluted earnings
per share.
Weighted
Average
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS $(645,303) 500,094 $(1.29)
======= ======= =====
Diluted EPS $(645,303) 500,094 $(1.29)
======= ======= =====
NOTE 14 - OPERATING LEASES
The Company leases office space under an operating lease that expires in
February 2004. Rent expense for the period ended December 31, 2001 was $20,008.
At December 31, 2001, future minimum rental payments required under this lease
were as follows:
Year Ending
December 31,
2002 $ 29,447
2003 34,801
2004 4,350
-------------
Total $ 68,598
=============
12
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SUBSEQUENT EVENT
In March of 2002, the Company negotiated and obtained a $500,000 loan. Proceeds
totaling $250,000 were subsequently used to pay certain professional fees in
connection with the proposed acquisition of a "public shell" company with which
Availent Financial, Inc. and Subsidiaries may ultimately merge. This activity
would facilitate an anticipated public offering in 2002. The remaining proceeds
will be used for operating purposes.
NOTE 16 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), "Goodwill
and Other Intangible Assets," was recently issued and addresses goodwill and
other intangible assets. The adoption of this pronouncement will not have a
material effect on the financial position and results of operations of the
Company.
Statement of Financial Accounting Standards No. 144 (SFAS No. 144), "Accounting
for the Impairment or Disposal of Long-Lived Assets;" is effective for fiscal
years beginning after December 15, 2001. This statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. At the date of adoption of this standard, the impact on
the financial position and results of operations of the Company was not
material.
13
AVAILENT FINANCIAL, INC. AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 2002 AND 2001
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
INDEPENDENT ACCOUNTANT'S REPORT..............................................1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets...........................................2
Consolidated Statements of Income and Comprehensive Income............4
Consolidated Statements of Cash Flows.................................6
Notes to Consolidated Financial Statements............................7
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
Availent Financial, Inc.
Dallas, Texas
We have reviewed the accompanying consolidated balance sheet of Availent
Financial, Inc. and Subsidiaries as of June 30, 2002 and the related
consolidated statements of income and comprehensive income, stockholders' equity
and cash flows for the six months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Availent Financial, Inc.
and Subsidiaries.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with auditing standards generally accepted in the United
States of America, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying June 30, 2002 consolidated financial statements in
order for them to be in conformity with accounting principles generally accepted
in the United States of America.
The accompanying 2001 consolidated financial statements of Availent Financial,
Inc. and Subsidiaries were compiled by us in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. A compilation is limited to presenting in the form
of financial statements information that is the representation of management. We
have not audited or reviewed the 2001 consolidated financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
/s/ Gainer, Donnelly & Desroches, L.C.
Gainer, Donnelly & Desroches, L.C.
Houston, Texas
August 7, 2002
1
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND 2001
ASSETS
2002 2001
(Reviewed) (Compiled)
----------------- ------------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 200 $ 16,968
Other Receivables - 55,799
Marketable Securities 66,005 -
Prepaid Expenses 48,209 -
Advances to Stockholders (Non-Interest Bearing) 214,800 114,800
---------------- ---------------
Total Current Assets 329,214 187,567
---------------- ---------------
PROPERTY AND EQUIPMENT:
Furniture and Fixtures 22,800 20,300
Office Equipment 53,647 34,969
Leasehold Improvements 21,530 10,480
Less: Accumulated Depreciation (19,992) (2,174)
---------------- ---------------
Net Property and Equipment 77,985 63,575
---------------- ---------------
OTHER ASSETS:
Deposits 2,872 2,400
Customer Lists, Net 55,733 70,933
Licensing Agreements, Net 17,600 22,400
---------------- ---------------
Total Other Assets 76,205 95,733
---------------- ---------------
TOTAL ASSETS $ 483,404 $ 346,875
================ =================
See Independent Accountant's Report and Accompanying Notes.
2
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 AND 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2001
(Reviewed) (Compiled)
----------------- ------------------
CURRENT LIABILITIES:
Accounts Payable $ 204,748 $ 26,500
Accrued Liabilities 110,358 30,464
Line of Credit 50,000 25,000
Current Portion of Capital Lease Obligations 4,359 3,799
Notes Payable 1,881,253 290,000
---------------- ---------------
Total Current Liabilities 2,250,718 375,763
---------------- ---------------
LONG-TERM LIABILITIES:
Capital Lease Obligations, Net of Current Portion 3,726 7,747
---------------- ---------------
MINORITY INTEREST (5,142) (14,553)
----------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 Par Value;
200,000 Shares Authorized, Issued and Outstanding - 200,000
Common Stock, $0.01 Par Value;
1,000,000 Shares Authorized; 727,803 Shares
Issued and Outstanding 7,278 5,000
Additional Paid-in Capital 184,267 -
Net Unrealized Losses on Securities (307,973) -
Retained Earnings (1,649,470) (227,082)
----------------- ---------------
Total Stockholders' Equity (1,765,898) (22,082)
----------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 483,404 $ 346,875
================ ===============
See Independent Accountant's Report and Accompanying Notes.
3
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
2002 2001
(Reviewed) (Compiled)
----------------- ------------------
REVENUES $ 158,141 $ 42,512
COST OF REVENUES:
Delivery 7,239 1,934
Financial Fees 7,986 10,853
Appraisals 20,572 -
Credit Application Services 6,224 -
Automated Underwriting 1,891 -
HUD Fees 1,413 -
Licenses and Other Fees 4,576 3,351
Wages and Salaries 100,967 44,464
---------------- ---------------
Total Cost of Revenues 150,868 60,602
---------------- ---------------
GROSS PROFIT 7,273 (18,090)
OPERATING EXPENSES:
Advertising and Publications 15,380 2,686
Amortization 10,000 6,667
Depreciation 8,134 2,174
Insurance 13,003 7,143
Lease Expense 35,231 12,453
Office Supplies 45,428 19,860
Miscellaneous Expense 21,572 952
Professional Fees 373,762 103,892
Repairs and Maintenance 5,569 15,674
Taxes 11,676 1,075
Telecommunications 30,716 8,075
Travel, Meals and Entertainment 46,076 10,613
Wages and Salaries 336,621 17,416
---------------- ---------------
Total Operating Expenses 953,168 208,680
---------------- ---------------
LOSS BEFORE OTHER EXPENSE (945,895) (226,770)
OTHER EXPENSE:
Other Expense 3,395 -
Interest Expense 83,328 17,365
---------------- ---------------
Total Other Expense $ 86,723 $ 17,365
---------------- ---------------
See Independent Accountant's Report and Accompanying Notes.
4
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
2002 2001
(Reviewed) (Compiled)
----------------- ------------------
LOSS BEFORE MINORITY INTEREST $ (1,032,618) $ (224,135)
MINORITY INTEREST 28,451 17,053
---------------- ---------------
NET LOSS (1,004,167) (227,082)
OTHER ITEMS OF COMPREHENSIVE INCOME:
Net Unrealized Losses on Securities (593,956) -
---------------- ---------------
COMPREHENSIVE INCOME (LOSS) $ (1,598,123) $ (227,082)
================ ===============
LOSS PER COMMON SHARE
Basic $ (1.60) $ (0.45)
=============== ==============
Diluted $ (1.50) $ (0.45)
=============== ==============
See Independent Accountant's Report and Accompanying Notes.
5
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
2002 2001
(Reviewed) (Compiled)
----------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,004,167) $ (227,082)
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities
Amortization 10,000 6,667
Depreciation 8,134 2,174
Noncash Professional Fees 19,256 54,945
Minority Interest in Loss of Limited Partnerships (28,451) (17,053)
(Increase) Decrease In:
Other Receivables - (55,799)
Prepaid Expenses (48,209) -
Deposits (472) (2,400)
Advances to Stockholders - (114,800)
Increase (Decrease) In:
Accounts Payable 174,400 26,500
Accrued Liabilities 48,583 30,464
---------------- ---------------
Net Cash Used in Operating Activities (820,926) (296,384)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (23,863) (8,004)
---------------- ---------------
Net Cash Used in Investing Activities (23,863) (8,004)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Line of Credit - 25,000
Proceeds from Notes Payable 751,577 290,000
Payments on Capital Lease Obligations (1,946) (1,144)
Issuance of Common Stock 37,000 5,000
Contributed Capital from Limited Partnerships - Minority Interest 53,770 2,500
---------------- ---------------
Net Cash Provided by Financing Activities 840,401 321,356
---------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,388) 16,968
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,588 -
---------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 200 $ 16,968
================ ===============
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 106,594 $ 2,563
================ ===============
See Independent Accountant's Report and Accompanying Notes.
6
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Availent Financial, Inc. (collectively with its subsidiaries, the "Company") was
incorporated in the state of Texas in December, 2000. The Company wholly owns
the following subsidiaries: Availent Mortgage, Inc. and Subsidiaries (Mortgage)
and Availent Leasing, Inc. (Leasing).
Availent Mortgage, Inc. was incorporated in the state of Texas in December, 2000
and originates single-family residential mortgage loans in Texas and the
Southwestern United States. As of June 30, 2002 and 2001, Mortgage has a
majority interest in twelve and three, respectively, limited liability
partnerships that secure mortgages, which are processed by Mortgage. Mortgage
accounts for its investments in these partnerships utilizing the consolidated
method of accounting.
Availent Leasing, Inc. purchases and, subsequently, leases computer and related
equipment to affiliated partnerships.
The accompanying consolidated financial statements of the Company as of and for
the six months ended June 30, 2002 and 2001, are unaudited. These statements
include all adjustments consisting only of normal recurring accruals, which are,
in the opinion of management considered necessary for a fair presentation of
financial position and results of operations. The results of operations of the
Company for the six months ended June 30, 2002 and 2001 are not necessarily
indicative of the results to be expected for the full year.
Basis of Accounting
The Company maintains its records and the accompanying consolidated financial
statements have been prepared on the accrual basis of accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of Availent
Financial, Inc. and its wholly owned subsidiaries. All intercompany balances and
transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and all highly
liquid investments with a maturity of three months or less at the time of
purchase.
Financial Instruments
The Company's financial instruments (primarily cash and cash equivalents, loans
held for sale, receivables, payables and borrowings) are carried in the
accompanying consolidated financial statements at amounts, which reasonably
approximate fair value.
8
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Account Receivables
Account receivables represent amounts owed to the Company as of June 30, 2002
and 2001. An allowance is established for accounts whose collection is
uncertain. At June 30, 2002 and 2001, there were no accounts receivable.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on the
straight-line method over three to seven years while accelerated methods are
used for income tax purposes. Depreciation expense for the period ended June 30,
2002 and 2001 totaled $8,134 and $2,174, respectively.
Expenditures for additions, major renewals, and betterments are capitalized and
expenditures for maintenance and repairs are charged against income as incurred.
When property and equipment are sold or otherwise disposed of, the asset account
and related accumulated depreciation account are relieved, and any gain or loss
is included in operations.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Revenue Recognition
Commitment fees, points and premium fees are earned and recognized as revenue
when the loans are closed and sold to permanent investors. Any fees collected
prior to closing would be included in deferred income.
Application fees, partially representing reimbursement for the costs of specific
services performed by third parties with respect to loans originated, collected
during loan processing are recognized as revenue when the loans have been
originated and all related services have been performed.
As of June 30, 2002 and 2001, the Company has no correspondent relationship with
any financial institution. Gains on sales of loans are recognized at the loan
closing which corresponds to the sale date.
Advertising Costs
All costs related to advertising are expensed in the period incurred. Total
advertising expense for the period ended June 30, 2002 and 2001 were $15,380 and
$2,686, respectively.
NOTE 2 - CASH CONCENTRATION
At various times throughout the year, the Company may maintain bank deposits in
excess of FDIC insurance limits of $100,000.
9
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" with the
Company's securities classified as available-for-sale. Available-for-sale
securities are recorded at fair value with the change in fair value during the
year excluded from earning and recorded net of tax as a component of other
comprehensive income. Realized gains and losses are determined by specific
identification and are charged or credited to earnings.
Marketable securities are summarized as follows at June 30, 2002:
Gross Fair
Unrealized Market
Losses Value
------------- -------------
Equity Securities $ (307,973) $ 66,005
============= =============
The Company's portfolio as of June 30, 2002 consists of one security, Advance
Technologies, Inc. SFAS 115 requires that available-for-sale securities be
reported at their fair market value as based on the over the counter price at
the end of the period. This security was acquired through a note payable valued
at an amount equal to the fair market value of the security at the date of
acquisition (i.e., $373,978). Effective October 2002, the Company may either
return the security, pay the outstanding note of $373,978, or extend the
transaction date for an additional period of time.
NOTE 4 - CUSTOMER LISTS AND LICENSING AGREEMENTS
Intangible assets consist of certain customer lists and licensing agreements and
are being amortized over a five-year period. Amortization expense for the
periods ended June 30, 2002 and 2001 totaled $10,000 and $6,667, respectively.
NOTE 5 - LINE OF CREDIT
Under the terms of a line of credit agreement with Inwood National Bank, the
Company may borrow up to $50,000 Interest on outstanding principal amounts is
calculated based at a 7.5% interest rate and is payable monthly. The line
matures in March 2003. The outstanding principal balance at June 30, 2002 was
$50,000. The credit facility is secured by the Company's equipment, leasehold
improvements, and furniture and fixtures.
NOTE 6 - NOTES PAYABLE
Notes payable consist of the following at June 30, 2002 and 2001:
2002 2001
------------- -------------
Individuals $ 1,104,828 $ -
Stockholders 402,800 290,000
Officers 373,625 -
------------- -------------
Total $ 1,881,253 $ 290,000
============= ============
10
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - NOTES PAYABLE - CONTINUED
A note payable to an individual totaling $500,000 is secured by the personal
guarantee of an officer of the Company. Interest is at 12% and is payable
monthly. The note is due on December 31, 2002. Other notes payable are
unsecured, bear interest at varying rates and are due on varying dates to March
2003.
Interest expense totaled $83,328 and $17,365, respectively, for the periods
ended June 30, 2002 and 2001 and accrued interest expense of $35,772 and
$14,802, respectively, is included in accrued liabilities in the accompanying
financial statements.
NOTE 7 - CAPITAL LEASES
The Company is the lessee of computer and related equipment under capital leases
that expire in 2004. The assets and liabilities under capital leases are
recorded at the lower of the present value of the minimum lease payments and are
depreciated over the related lease terms, which approximates the estimated
productive lives. Depreciation expense on these assets totaled $3,234 and $1,630
for the periods ended June 30, 2002 and 2001 and is included in depreciation
expense in the accompanying financial statements.
The following is a summary of future minimum lease payments during the next two
years:
Period Ending
June 30,
2003 $ 5,286
2004 3,965
-------------
9,251
Less: Interest Included in Lease Payments (1,166)
--------------
Net Present Value of Future Minimum Lease Payments 8,085
Less: Current Maturities (4,359)
--------------
Long-Term Portion $ 3,726
=============
NOTE 8 - INCOME TAXES
The Company accounts for income tax in accordance with SFAS No. 109. In
accordance with SFAS No. 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. When management determines that it is likely that a
deferred tax asset will not be realized, a valuation allowance is established.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The Company files a consolidated federal tax return with Mortgage and Leasing
and records its share of the consolidated federal tax provision on a separate
return basis. The Company's income tax provision for the period ended June 30,
2002 and 2001, consists of the following:
11
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES - CONTINUED
2002 2001
------------- -------------
Current Tax Expense $ --- $ ---
Deferred Tax Benefit --- ---
------------- -------------
Total $ --- $ ---
============= =============
As of June 30, 2002 and 2001, the Company has available approximately $220,000
and $0, respectively, of unused net operating loss carry forwards that may be
applied against future taxable income and that expire in various years to 2022.
The difference between the loss from operations and the tax loss carry forward
results primarily from recognition of equity losses of subsidiaries and certain
professional fees for financial reporting purposes but not for tax purposes.
Deferred income taxes result from significant temporary differences between
income for financial reporting purposes and taxable income. These differences
arose primarily from the Company's net operation loss carry forward and
recognition of certain items of income and expense for financial reporting
purposes but not for tax purposes. As of June 30, 2002 and 2001, the Company has
net deferred tax benefit of approximately $165,000 and $7,500, respectively. Due
to the uncertainty of its ultimate recognition, a valuation allowance has been
established equal to the benefit.
NOTE 9 - SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
2002 2001
------------- -------------
Contribution of Furniture and Fixtures $ --- $ 45,055
============= =============
Preferred Stock Issued for Intangible Assets $ --- $ 200,000
============= =============
Preferred Stock Redeemed for Common Stock and Notes Payable $ 200,000 $ ---
============= =============
Equipment Acquired under Capital Lease Obligations $ --- $ 12,690
============= =============
NOTE 10 - RELATED PARTY TRANSACTIONS
During the period ended June 30, 2002 and 2001, the Company engaged in various
transactions with certain affiliates. Under informal arrangements, transactions
between these entities generated charges primarily involving general and
administrative expenses, including certain leasing charges. During the period,
net charges between these companies totaled approximately $254,192 and $67,905,
respectively. These balances are eliminated in consolidation.
As of June 30, 2002, and 2001, mortgage has a majority interest in twelve and
three, respectively, limited liability partnerships (the Partnerships). These
Partnerships secure mortgages that are processed by Mortgage.
Mortgage also receives the required RESPA management fee from these
Partnerships. This is calculated as 1% of the Partnerships' revenue. The RESPA
management fee was $2,160 and $214, respectively, for the periods ended June 30,
2002 and 2001.
12
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS - CONTINUED
During the fourth quarter of 2001, certain stockholders received advances
totaling $214,800. Such advances bear no rate of interest and are due on demand.
Advances were to Patrick McGeeney, President, for $107,400 and Michael Banes,
Corporate Secretary, for $107,400.
NOTE 11 - OPERATING LEASES
The Company leases office space and various office equipment and furniture under
operating leases that expire in 2005. Rent expense for the period ended June 30,
2002 and 2001 was $35,231 and $19,800, respectively.
At June 30, 2002, future minimum rental payments required under these leases are
as follows (approximate amounts):
Period Ending
June 30,
2003 $ 68,500
2004 52,000
2005 14,000
-------------
Total $ 134,500
=============
NOTE 12 - EMPLOYEE SAVINGS PLAN
The Company provides a qualified employee savings plan (the Plan) for its
employees. Participation in the Plan is open to all employees who have reached
the age of 21 and completed one year of service, as defined in the Plan.
Employee contributions to the Plan qualify for tax-deferred status under the
provision of Section 401(k) of the Code. The Company may, at the discretion of
the board of directors, provide discretionary contributions based on a
percentage of an employee's compensation, as defined in the Plan. Total
contributions based on a percentage of an employee's compensation, as defined in
the Plan. For the period ended June 30, 2002 and 2001, the Company has not paid
any matching contributions.
NOTE 13 - STOCK OPTIONS AND WARRANTS
During 2002, the Company granted stock options and warrants to certain key
employees and individuals to purchase shares of common stock. At the date of
grant, the fair market value of the Company's common stock was not determinable
and, therefore, no compensation expense was recognized for the period.
Additionally, the Company has issued various stock warrants associated with
certain debt instruments.
13
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - EARNINGS PER SHARE
The following is the calculation for the earnings per share and diluted earnings
per share.
Weighted
Average
Income Shares Per Share
For June 30, 2002 (Numerator) (Denominator) Amount
- ----------------- ----------- ------------- ------
Basic EPS $(1,004,167) 628,310 $(1.60)
========= ======= ====
Diluted EPS $(1,004,167) 669,004 $(1.50)
========= ======= =====
For June 30, 2001
Basic EPS $ (227,082) 500,227 $(0.45)
======= ======= =====
Diluted EPS $ (227,082) 501,829 $(0.45)
======= ======= =====
NOTE 15 - CONTINGENCY
For the period from inception to date, the Company has incurred significant
operating losses and, at times, has experienced cash flow constraints. Operating
losses are projected through 2002. The cash flow restrictions have been
mitigated by additional contributions of capital by new and existing
shareholders of the Company and by financing provided through certain credit
arrangements. However, the effect of such operating losses and constraints and
the long-term impact on the Company's operations and financial condition is
unknown.
NOTE 16 - RECENTLY ISSUED ACCOUNTING STATEMENTS
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), "Goodwill
and Other Intangible Assets," was recently issued and addresses goodwill and
other intangible assets. The adoption of this pronouncement does not have a
material effect on the financial position and results of operations of the
Company.
Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for
the Impairment or Disposal of Long-Lived Assets" requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The effect of this pronouncement has no current impact on
the financial position and results of operations of the Company.
NOTE 17 - PROFESSIONAL FEES
Certain professional fees totaling $250,000 were incurred in connection with the
proposed acquisition of a "public shell' company with which Availent Financial,
Inc. and Subsidiaries may ultimately merge. This activity would facilitate an
anticipated public offering in 2002.
14
Seacrest Industries Corporation
(A Delaware Corporation)
Compiled Financial Statements
and
Accountant's Report
September 30, 2001
Seacrest Industries Corporation
CONTENTS Page
Report of Independent Certified
Public Accountant 3
Balance Sheet as of September 30, 2001
and September 30, 2000 4
Statement of Operations
Year ended September 30, 2001 and
and September 30, 2000 5
Statement of Changes in Stockholder's
Equity for period September 30, 1998
to September, 30 2001 6
Statement of Cash Flows
Year ended September 30, 2001 and
September 30, 2000 7
Notes to Financial Statements 8
John P. Semmens CPA, A Professional Corporation
30448 Rancho Viejo Rd, Suite 130, San Juan Capistrano, Ca. 92675
(TEL) 949-496-8800 (FAX) 949-443-0642
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors and Shareholders
Seacrest Industries Corporation (A Delaware Corporation)
I have compiled the accompanying balance sheet of Seacrest Industries
Corporation (A Delaware Corporation) as of September 30, 2001 and the
related statements of operations, changes in stockholders' equity and
cash flows for the year then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of assurance
on them.
/s/ John P. Semmens CPA
John P. Semmens CPA
A Professional Corporation
San Juan Capistrano, California
September 17, 2002
3
Seacrest Industries Corporation
(A Delaware Corporation)
BALANCE SHEET
September 30, 2001 and September 30, 2000
September 30, September 30,
ASSETS 2001 2000
- ------ ------------------ -----------------
Current Assets
Cash in bank $ 0 $ 0
---------------- ---------------
Total current assets 0 0
Other Assets
Organization costs 0 0
---------------- ---------------
Total Assets $ 0 $ 0
================ ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accrued legal $ 0 $ 0
---------------- ---------------
Total current liabilities 0 0
Stockholders' Equity
Common Stock - $.01 par value,
12,500,000 shares authorized,
12,484,689 issued and outstanding 124,847 124,847
Retained earnings (124,847) (124,847)
---------------- ---------------
Total stockholders' equity 0 0
---------------- ---------------
Total Liabilities & Stockholders' Equity $ 0 $ 0
================ ===============
4
Seacrest Industries Corporation
(A Delaware Corporation)
STATEMENT OF OPERATIONS
Year ended September 30, 2001 and September 30, 2000
September 30, September 30,
2001 2000
------------------ -----------------
Revenues $ 0 $ 0
Expenses 0 0
---------------- ---------------
Net Income $ 0 $ 0
================ ===============
Net income per weighted-average share of
common stock outstanding $ 0 $ 0
================ ===============
Weighted- average number of shares of
common stock outstanding 12,484,689 12,484,689
================ ===============
5
Seacrest Industries Corporation
(A Delaware Corporation)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year ended September 30, 2001 and September 30, 2000
Common Stock
-------------------------------
Retained Stockholders'
Shares $ Earnings Equity
--------------- -------------- ------------- ------------------
Balance September 30, 1999 12,484,689 124,847 (124,847) 0
Net income (loss) September
30, 2000 0 0 0 0
--------------- -------------- ------------- ------------------
Balance September 30, 2000 12,484,689 124,847 (124,847) 0
Net income (loss) September
30, 2001 0 0 0 0
--------------- -------------- ------------- ------------------
Balance September 30, 2001 12,484,689 124,847 (124,847) 0
=============== ============== ============== ==================
6
Seacrest Industries Corporation
(A Delaware Corporation)
STATEMENT OF CASH FLOWS
Year ended September 30, 2001 and September 30, 2000
September 30, September 30,
2001 2000
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 0 $ 0
Adjustments to reconcile net earnings to
cash provided from operating activities 0 0
--------------- ---------------
Net Cash provided by operating activities 0 0
--------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Net Cash used by investing activities 0 0
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash used by Financing activities 0 0
--------------- ---------------
Cash at beginning of period 0 0
--------------- ---------------
Cash at end of period $ 0 $ 0
=============== ===============
7
Seacrest Industries Corporation
(A Delaware Corporation)
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND DESCRIPTION OF BUSINESS
SeaCrest Industries Corporation, (A Delaware Corporation) was Incorporated under
the laws of the state of Delaware. The Company was originally created on
November 16, 1959 to manufacture, produce, own, use, repair, service, maintain,
mortgage, pledge or otherwise dispose of, and generally to trade and deal in and
with, as principal, agent or otherwise, swimming pools and any and all
machinery, tools, equipment, appliances, devices, supplies and materials used or
useful in connection with or incidental thereto. The Company was also originally
formed to deal in frozen foods, real estate, meat and grocery stores, super
markets, and goods, wares and merchandise and personal property of every class
and description. The Company has not transacted business since February 1984.
The preparation of financial statements, in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
The company considers all cash on hand and in banks, including accounts in book
overdraft positions, certificates of deposit and other highly-liquid investments
with maturities of three months or less, when purchased, to be cash and cash
equivalents.
2. Income per share
Income per share is computed by dividing the net income by the weighted-average
number of shares of common stock and common stock equivalents, if any,
outstanding during the year/period.
8
Seacrest Industries Corporation
(A Delaware Corporation)
Compiled Financial Statements
and
Accountant's Report
June 30, 2002
Seacrest Industries Corporation
CONTENTS Page
Report of Independent Certified
Public Accountant 3
Balance Sheet as of June 30, 2002
and September 30, 2001 4
Statement of Operations
Quarter ended June 30, 2002 and
and June 30, 2001 5
Statement of Cash Flows
Quarter ended June 30, 2002 and
June 30, 2001 6
Notes to Financial Statements 7
John P. Semmens CPA, A Professional Corporation
30448 Rancho Viejo Rd, Suite 130, San Juan Capistrano, Ca. 92675
(TEL) 949-496-8800 (FAX) 949-443-0642
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors and Shareholders
Seacrest Industries Corporation (A Delaware Corporation)
I have compiled the accompanying balance sheet of Seacrest Industries
Corporation (A Delaware Corporation) as of June 30, 2002 and the
related statements of operations, and cash flows for the quarter then
ended, in accordance with Statements on Standardsfor Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of assurance
on them.
/s/ John P. Semmens CPA
John P. Semmens CPA
A Professional Corporation
San Juan Capistrano, California
September 17, 2002
3
Seacrest Industries Corporation
(A Delaware Corporation)
BALANCE SHEET
June 30, 2002 and September 30, 2001
June 30, September 30,
ASSETS 2002 2001
- ------ ------------------ -----------------
Current Assets
Cash in bank $ 0 $ 0
---------------- ---------------
Total current assets 0 0
Other Assets
Organization costs 0 0
---------------- ---------------
Total Assets $ 0 $ 0
================ ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accrued legal $ 0 $ 0
---------------- ---------------
Total current liabilities 0 0
Stockholders' Equity
Common Stock - $.01 par value,
12,500,000 shares authorized,
12,484,689 issued and outstanding 124,847 124,847
Retained earnings (124,847) (124,847)
---------------- ---------------
Total stockholders' equity 0 0
================ ===============
4
Seacrest Industries Corporation
(A Delaware Corporation)
STATEMENT OF OPERATIONS
Quarter ended June 30, 2002 and June 30, 2001
June 30, June 30,
2002 2001
------------------ -----------------
Revenues $ 0 $ 0
Expenses 0 0
---------------- ---------------
Net Income $ 0 $ 0
================ ===============
Net income per weighted-average share of
common stock outstanding $ 0 $ 0
================ ===============
Weighted- average number of shares of
common stock outstanding 12,484,689 12,484,689
================ ===============
5
Seacrest Industries Corporation
(A Delaware Corporation)
STATEMENT OF CASH FLOWS
Quarter ended June 30, 2002 and June 30, 2001
June 30, June 30,
2002 2001
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 0 $ 0
Adjustments to reconcile net earnings to
cash provided from operating activities 0 0
--------------- ---------------
Net Cash provided by operating activities 0 0
--------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES
0 0
--------------- ---------------
Net Cash used by investing activities 0 0
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash used by Financing activities 0 0
Cash at beginning of period 0 0
--------------- ---------------
Cash at end of period $ 0 $ 0
=============== ===============
6
Seacrest Industries Corporation
(A Delaware Corporation)
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND DESCRIPTION OF BUSINESS
SeaCrest Industries Corporation, (A Delaware Corporation) was Incorporated under
the laws of the state of Delaware. The Company was originally created on
November 16, 1959 to manufacture, produce, own, use, repair, service, maintain,
mortgage, pledge or otherwise dispose of, and generally to trade and deal in and
with, as principal, agent or otherwise, swimming pools and any and all
machinery, tools, equipment, appliances, devices, supplies and materials used or
useful in connection with or incidental thereto. The Company was also originally
formed to deal in frozen foods, real estate, meat and grocery stores, super
markets, and goods, wares and merchandise and personal property of every class
and description. The Company has not transacted business since February 1984.
The preparation of financial statements, in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
The company considers all cash on hand and in banks, including accounts in book
overdraft positions, certificates of deposit and other highly-liquid investments
with maturities of three months or less, when purchased, to be cash and cash
equivalents.
2. Income per share
Income per share is computed by dividing the net income by the weighted-average
number of shares of common stock and common stock equivalents, if any,
outstanding during the year/period.
7
The pro forma information presented below represents a merger transaction
between Availent Financial, Inc. (a Texas corporation) and SeaCrest Industries
Corporation (a Delaware corporation) for the year ended December 31, 2001 and
the six months ended June 30, 2002.
1
SEACREST INDUSTRIES CORPORATION
PROFORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
Proforma
Historical Adjustments Combined
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ - $ 4,588 $ 4,588
Marketable Securities - 659,961 659,961
Advances to Stockholders (Non-Interest Bearing) - 214,800 214,800
----------- ----------- -----------
Total Current Assets - 879,349 879,349
----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Furniture and Fixtures - 20,300 20,300
Office Equipment - 43,334 43,334
Lease Improvements - 10,480 10,480
Less: Accumulated Depreciation - (11,858) (11,858)
----------- ----------- -----------
Net Property and Equipment - 62,256 62,256
----------- ----------- -----------
OTHER ASSETS:
Deposits - 2,400 2,400
Customer Lists, Net - 63,333 63,333
Licensing Agreements, Net - 20,000 20,000
----------- ----------- -----------
Total Other Assets - 85,733 85,733
----------- ----------- -----------
TOTAL ASSETS $ - $ 1,027,338 $ 1,027,338
=========== =========== ===========
2
SEACREST INDUSTRIES CORPORATION
PROFORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
Proforma
Historical Adjustments Combined
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ - $ 30,348 $ 30,348
Accrued Liabilities - 61,775 61,775
Line of Credit - 50,000 50,000
Current Portion of Capital Lease Obligation - 4,409 4,409
Notes Payable - 1,049,676 1,049,676
----------- ----------- -----------
Total Current Liabilities - 1,196,208 1,196,208
----------- ----------- -----------
LONG-TERM LIABILITIES:
Capital Lease Obligation, Net of Current Portion - 5,622 5,622
----------- ----------- -----------
MINORITY INTEREST - (30,461) (30,461)
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 Par Value;
200,000 Shares Authorized, Issued and Outstanding - 200,000 200,000
Common Stock, $0.01 Par Value;
1,000,000 Shares Authorized; 529,910 Shares
Issued and Outstanding 124,847 5,299 130,146
Additional Paid-in Capital - 9,990 9,990
Net Unrealized Gains on Securities - 285,983 285,983
Retained Earnings (124,847) (645,303) (770,150)
----------- ----------- -----------
Total Stockholders' Equity - (144,031) (144,031)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ 1,027,338 $ 1,027,338
=========== =========== ===========
3
SEACREST INDUSTRIES CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE PERIOD ENDED DECEMBER 31, 2001
Proforma
Historical Adjustments Combined
REVENUES $ - $ 239,294 $ 239,294
COST OF REVENUES:
Advertising and Publications - 18,180 18,180
Delivery - 10,873 10,873
Financial Fees - 41,918 41,918
Licenses and Other Fees - 7,093 7,093
Wages and Salaries - 31,804 31,804
----------- ----------- -----------
Total Cost of Revenues - 109,868 109,868
----------- ----------- -----------
GROSS PROFIT - 129,426 129,426
OPERATING EXPENSES:
Amortization - 16,667 16,667
Depreciation - 11,858 11,858
Insurance - 29,254 29,254
Lease Expense - 28,737 28,737
Office Supplies - 58,476 58,476
Miscellaneous Expense - 8,863 8,863
Professional Fees - 221,654 221,654
Repairs and Maintenance - 17,449 17,449
Taxes - 5,395 5,395
Telecommunications - 19,851 19,851
Travel, Meals and Entertainment - 50,852 50,852
Wages and Salaries - 272,191 272,191
----------- ----------- -----------
Total Operating Expenses - 741,247 741,247
----------- ----------- -----------
LOSS BEFORE INTEREST EXPENSE - (611,821) (611,821)
INTEREST EXPENSE - (67,943) (67,943)
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST - (679,764) (679,764)
MINORITY INTEREST - 34,461 34,461
----------- ----------- -----------
NET LOSS - (645,303) (645,303)
OTHER ITEMS OF COMPREHENSIVE INCOME:
Net Unrealized Gains on Securities - 285,983 285,983
----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ - $ (359,320) $ (359,320)
=========== =========== ===========
4
SEACREST INDUSTRIES CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 31, 2001
Proforma
Historical Adjustments Combined
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ - $ (645,303) $ (645,303)
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities
Amortization - 16,667 16,667
Depreciation - 11,858 11,858
Noncash Professional Fees - 60,234 60,234
Minority Interest in Loss of Limited Partnerships - (34,461) (34,461)
(Increase) Decrease In:
Deposits - (2,400) (2,400)
Increase (Decrease) In:
Accounts Payable - 30,348 30,348
Accrued Liabilities - 61,775 61,775
----------- ----------- -----------
Net Cash Used in Operating Activities - (501,282) (501,282)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment - (16,369) (16,369)
----------- ----------- -----------
Net Cash Used in Investing Activities - (16,369) (16,369)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Line of Credit - 50,000 50,000
Proceeds from Notes Payable - 675,698 675,698
Payments on Capital Lease Obligation - (2,659) (2,659)
Advances to Stockholders - (214,800) (214,800)
Contributed Capital from Limited
Partnerships - Minority Interest - 4,000 4,000
Issuance of Common Stock - 10,000 10,000
----------- ----------- -----------
Net Cash Provided by Financing Activities - 522,239 522,239
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS - 4,588 4,588
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD - - -
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 4,588 $ 4,588
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ - $ 8,905 $ 8,905
=========== =========== ===========
5
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
Proforma
Historical Adjustments Combined
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ - $ 200 $ 200
Marketable Securities - 66,005 66,005
Prepaid Expenses - 48,209 48,209
Advances to Stockholders (Non-Interest Bearing) - 214,800 214,800
--------- --------- ---------
Total Current Assets - 329,214 329,214
--------- --------- -------
PROPERTY AND EQUIPMENT:
Furniture and Fixtures - 22,800 22,800
Office Equipment - 53,647 53,647
Leasehold Improvements - 21,530 21,530
Less: Accumulated Depreciation - (19,992) (19,992)
--------- ---------- ---------
Net Property and Equipment - 77,985 77,985
--------- --------- ---------
OTHER ASSETS:
Deposits - 2,872 2,872
Customer Lists, Net - 55,733 55,733
Licensing Agreements, Net - 17,600 17,600
--------- --------- ---------
Total Other Assets - 76,205 76,205
--------- --------- ---------
TOTAL ASSETS $ - $ 483,404 $ 483,404
========= ========= =========
1
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
Proforma
Historical Adjustments Combined
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ - $ 204,748 $ 204,748
Accrued Liabilities - 110,358 110,358
Line of Credit - 50,000 50,000
Current Portion of Capital Lease Obligations - 4,359 4,359
Notes Payable - 1,881,253 1,881,253
----------- ----------- -----------
Total Current Liabilities - 2,250,718 2,250,718
----------- ----------- ---------
LONG-TERM LIABILITIES:
Capital Lease Obligations, Net of Current Portion - 3,726 3,726
----------- ----------- -----------
MINORITY INTEREST - (5,142) (5,142)
----------- ------------ -----------
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 Par Value;
1,000,000 Shares Authorized; 535,200 Shares
Issued and Outstanding 124,847 7,278 132,125
Additional Paid-in Capital - 184,267 184,267
Net Unrealized Losses on Securities - (307,973) (307,973)
Retained Earnings (124,847) (1,649,470) (1,774,317)
------------ ------------ ----------
Total Stockholders' Equity - (1,765,898) (1,765,898)
----------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ 483,404 $ 483,404
=========== =========== ===========
2
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Proforma
Historical Adjustments Combined
REVENUES $ - $ 158,141 $ 158,141
COST OF REVENUES:
Delivery - 7,239 7,239
Financial Fees - 7,986 7,986
Appraisals - 20,572 20,572
Credit Application Services - 6,224 6,224
Automated Underwriting - 1,891 1,891
HUD Fees - 1,413 1,413
Licenses and Other Fees - 4,576 4,576
Wages and Salaries - 100,967 100,967
----------- ----------- -----------
Total Cost of Revenues - 150,868 150,868
----------- ----------- -----------
GROSS PROFIT - 7,273 7,273
OPERATING EXPENSES:
Advertising and Publications - 15,380 15,380
Amortization - 10,000 10,000
Depreciation - 8,134 8,134
Insurance - 13,003 13,003
Lease Expense - 35,231 35,231
Office Supplies - 45,428 45,428
Miscellaneous Expense - 21,572 21,572
Professional Fees - 373,762 373,762
Repairs and Maintenance - 5,569 5,569
Taxes - 11,676 11,676
Telecommunications - 30,716 30,716
Travel, Meals and Entertainment - 40,076 46,076
Wages and Salaries - 336,621 336,621
----------- ----------- -----------
Total Operating Expenses - 953,168 953,168
----------- ----------- -----------
LOSS BEFORE OTHER EXPENSE - (945,895) (945,895)
OTHER EXPENSE:
Other Expense - 3,395 3,395
Interest Expense - 83,328 83,328
----------- ----------- -----------
Total Other Expense $ - $ 86,723 $ 86,723
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST - (1,032,618) (1,032,618)
MINORITY INTEREST - 28,451 28,451
----------- ----------- -----------
NET LOSS - (1,004,167 (1,004,167)
OTHER ITEMS OF COMPREHENSIVE INCOME:
Net Unrealized Losses on Securities - (593,956) (593,956)
----------- ------------ -----------
COMPREHENSIVE INCOME (LOSS) $ - $ (1,598,123) $ (1,598,123)
=========== ============ ===========
1
AVAILENT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Proforma
Historical Adjustments Combined
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ - $ (1,004,167) $ (1,004,167)
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities
Amortization - 10,000 10,000
Depreciation - 8,134 8,134
Noncash Professional Fees - 19,256 19,256
Minority Interest in Loss of Limited Partnerships - (28,451) (28,451)
(Increase) Decrease In:
Prepaid Expenses - (48,209) (48,209)
Deposits and Other Assets - (427) (472)
Increase (Decrease) In:
Accounts Payable - 174,400 174,400
Accrued Liabilities - 48,583 48,583
----------- ----------- -----------
Net Cash Used in Operating Activities - (820,926) (820,926)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment - (23,863) (23,863)
----------- ------------ -----------
Net Cash Used in Investing Activities - (23,863) (23,863)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable - 751,577 751,577
Payments on Capital Lease Obligations - (1,946) (1,946)
Issuance of Common Stock - 37,000 37,000
Contributed Capital from Limited Partnerships -
Minority Interest - 53,770 53,770
----------- ----------- -----------
Net Cash Provided by Financing Activities - 840,401 840,401
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS - (4,388) (4,388)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD - 4,588 4,588
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 200 $ 200
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ - $ 106,594 $ 106,594
=========== =========== ===========
1
Appendix A
THIRD AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (herein, together with all Exhibits,
"Agreement") is entered into as of March 1, 2002, by and between Seacrest
Industries Corporation (a Delaware Corporation) and Availent Financial, Inc. (a
Texas Corporation).
This Agreement sets forth the terms and conditions upon which Availent will
merge with and into Seacrest (the "Merger") pursuant to this Agreement and Plan
of Reorganization (the "Merger Agreement") which provides, among other things,
for the conversion and exchange of all outstanding shares of par value common
stock of Availent into Seacrest.
In consideration of the mutual promises and covenants contained herein. Seacrest
and Availent agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms (whether used in singular or
plural forms) shall have the following meanings:
"Contract" means any written contract, mortgage, deed of trust, bond, indenture,
lease, license; note, franchise, certificate, option, warrant, right, or other
instrument, document or agreement, and any oral obligation, right or agreement.
"GAAP" means generally accepted accounting principles, as that term is defined
by the American Institute of Certified Public Accountants under the first
standard of reporting under its generally-accepted accounting standards.
"Knowledge" of Seacrest of or with respect to any matter means that any of the
executive officers, directors or senior managers of Seacrest has, or after due
inquiry and investigation would have, actual awareness or knowledge of such
matter, and "Knowledge" of Availent of or with respect to any matter means that
any of the executive officers, directors or senior managers of Availent has, or
after due inquiry and investigation would have, actual awareness or knowledge of
such matter.
"Legal Requirement" means applicable common law and any statute, ordinance, code
or other law, rule, regulation, order, technical or other standard, requirement,
judgment, or procedure enacted, adopted, promulgated, applied or followed by any
governmental authority including judgments.
1
"Lien" means any security agreement, financing statement filed with any
governmental authority. conditional sales statement filed with any governmental
authority, conditional sale or other title retention agreement, any lease,
consignment or bailment given for purposes of security, any lien, mortgage,
indenture, pledge, option, encumbrance, adverse interests, constructive trust or
other trust, claim, attachment. exception to or defect in title or other
ownership interest (including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, easement, rights-of-way, restrictive
covenants teases and licenses) of any kind, which otherwise constitutes an
interest in or claim against property. whether arising pursuant to any Legal
Requirement, Contract or otherwise.
ARTICLE 2
Merger
Section 2.1 Merger. Subject to the terms and conditions contained in
this Agreement, Availent will be merged by statutory merger with and into
Seacrest pursuant to the Merger Agreement at a Closing at the Effective Time of
the Merger as defined in the Merger Agreement. In the Merger, the shares of
Availent Common Stock outstanding immediately prior to the effective time of the
Merger (excluding shares as to which statutory dissenters* rights have been
exercised) will be converted into and exchanged for Fifty-Four Million
(54,000,000) shares of Seacrest Common Stock, subject to adjustments.
Section 2.2 Amend Authorized Capital. Seacrest shall amend authorized
capital to 100,000,000 common shares, at $0.01 par value and effect a one for
two reverse split of its outstanding common stock.
Section 2.3 Change of Name. The name of the surviving corporation
(Seacrest) shall be changed to Availent Financial, Inc.
Section 2.4 Resignation of Directors. Prior to Closing, all current
directors of Seacrest shall tender their resignations and new directors
designated by Availent shall be appointed.
Section 2.6 Mechanics for Closing Merger. Upon the approval of the
respective shareholders, the executed Articles of Merger shall be filed with the
Delaware Secretary of State and the Texas Corporate Commissioner office and the
Texas Secretary of State.
Section 2.7 Further Assurances. At or after Closing, Seacrest, at the
request of Availent, shall promptly execute and deliver or cause to be executed
and delivered, to Availent all such documents and instruments, in form and
substance satisfactory to Availent, as Availent reasonably may request in order
to carry out or evidence the terms of this Agreement.
ARTICLE 3
Representation and Warranties of Availent
Availent represents and warrants to Seacrest, as of the date of this Agreement
and as of Closing, as follows:
Section 3.1 Organization and Qualification of Availent. Availent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, and has all requisite corporate power to conduct its
activities as such activities are currently conducted.
2
Section 3.2 Authority. Availent has all requisite corporate power and
authority to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by Availent have been duly arid
validly authorized by all necessary action on the part of Availent. This
Agreement has been duly and validly executed and delivered by Availent and is a
valid and binding obligation of Availent, enforceable against Availent in
accordance with its terms.
Section 3.3 Ownership and Number of Shares of Availent Common Stock.
The shareholders, set forth on Exhibit A, own the Availent Common Stock shown
thereon, beneficially and of record, free and clear of all liens. The Availent
Common Stock is not subject to, or bound or affected by, any proxies, voting
agreements, or other restrictions on the incidents of ownership hereof.
Section 3.4 Subsidiaries. Availent does not control or hold direct or
indirect equity interests in, or hold tights to control or acquire direct or
indirect equity interests in, any corporation other than Availent Mortgage, Inc.
and Availent Leasing, Inc. and affiliated entities set forth on Exhibit 3.4.
Section 3.5 Capitalization of Availent. Other than as set forth on
Exhibit 3.6, the authorized capital stock of Availent consists of duly
authorized shares of common stock which shares are validly issued and
outstanding, fully paid and nonassessable. In addition, there are no preferred
shares issued and outstanding. There are no authorized or outstanding
subscriptions, options, convertible securities, warrants, calls or other tights
of any kind issued or granted by or binding upon, Availent to purchase or
otherwise acquire any securities of or equity interest in Availent.
Section 3.6 No Conflicts: Required Consents. The execution, delivery
and performance by Availent of this Agreement will not: (i) conflict with or
violate any provision of the, articles or certificate of incorporation or bylaws
of Availent. (ii) violate any Legal Requirements; (iii) result in the creation
or imposition of any Lien against or upon the Availent Common Stock or any of
the assets or properties owned or leased by Availent or (iv) require any
consent, approval, or authorization of, or filing of any certificate; notice,
application, report or other document with, any governmental authority or other
person.
Section 3.7 Litigation. There is no litigation pending or, to
Availent's knowledge, threatened by or before any governmental authority or
private arbitration tribunal, against Availent or it operations, nor, to
Availent's knowledge, is there any basis for any such litigation.
Section 3.8 Compliance with Applicable Legal Requirements. Conduct by
Availent of its activities as currently conducted does not violate or infringe
any Legal Requirements currently in effect, or to the knowledge of Availent,
proposed to become effective, and Availent has received no notice of any
violation by Availent of any Legal Requirements applicable to Availent or its
activities as currently conducted; and Availent knows of no basis for the
allegation of any such violation.
Section 3.9 Financial Statements Availent has delivered to Seacrest the
audited financial statements of Availent as of December 31, 2001.
Section 3.10 Liabilities. Availent has no liabilities or obligations,
whether absolute, accrued, contingent or otherwise, that are not reflected in
the Balance Sheet, or non-delinquent obligations for ordinary and recurring
expenses. including in the ordinary course of business of Availent since the
date of the Balance Sheet.
Section 3.11 Tax Returns and Payments. Availent has filed all federal,
state, local and foreign tax returns required to be filed, and has timely paid
3
all taxes that have become due and payable, whether not so shown on any such tax
returns. Availent has not received any notice of, nor does Availent have any
knowledge of, any deficiency or assessment of, proposed deficiency or assessment
from any taxing governmental authority. There are no tax audits pending with
respect to Availent that extend the statutory period of limitations applicable
to any federal, state, local, or foreign tax returns for any period.
Section 3.12 Absence of Certain Changes or Events. Since the date of
the Balance Sheet there has not occurred:
(a) any material and adverse change in the financial condition or
operations of Availent;
(b) any damage, destruction or loss to or of any of the material assets
or properties owned or leased by Availent;
(c) the creation or attachment of any Lien against the Common Stock of
Availent;
(d) any waiver, release, discharge, transfer, or cancellation by
Availent of rights or claims of material value;
(e) any issuance by Availent of any securities, or any merger or
consolidation of Availent with any other Person, or any acquisition by Availent
of the business of any other Person except as reflected in Section 3.3 above.
(f) any incurrence, assumption or guarantee by Availent of any
indebtedness or liability;
(g) any declaration. setting aside or payment by Availent of any
dividends on, or any other distribution with respect to, any capital stock of
Availent or any repurchase, redemption; or other acquisition of any capital
stock of Availent except as reflected in Section 3.3 above;
(h) (A) any payment of any bonus, profit sharing, pension or similar
payment or arrangement or special compensation to any employee of Availent,
except in the ordinary course of the administration of Availent, or
(B) any increase in the compensation payable or to become
payable to any employee of Availent, or
(i) the entry by Availent into any Contract to do any of the foregoing.
Section 3.13 Material Availent Contract. As of the date of this Plan of
Reorganization, Availent does not have (i) contracts evidencing or relating to
any liabilities or obligations of Availent, whether absolute, accrued,
contingent or otherwise. or granting any Person a Lien against any properties or
assets owned or leased by Availent; (ii) joint venture or partnership Contracts
between Availent and any other person; (iii) Contracts limiting the freedom of
Availent to engage in or to compete in any activity, or to use or disclose any
information in its possession; and (iv) any other Contracts to which Availent is
a party or by which it or the assets or properties owned or leased by it are
bound or affected, that are not set forth, which in the aggregate contemplate
payments to or by Availent exceeding $50,000 in any twelve-month period
(collectively herein as the "Material Availent Contract"). Availent has
delivered to Seacrest true and complete copies of each of* the Material Availent
Contracts, including any amendments thereto or, in the case of oral Material
Availent Contracts is valid, in full force and effect and enforceable in
accordance with its terms against the parties thereto other than Availent. and
Availent has fulfilled when due, or has taken alt action necessary to enable it
to fulfill when due, all of its obligations thereunder. (iv) there has not
occurred any default (without regard to lapse of time, the giving of notice, or
the election of Availent, or any combination thereof) by any other person, under
any of the Material Availent Contracts; (v) neither Availent nor, to the
4
knowledge of Availent, any other person is in arrears in the performance or
satisfaction of it obligations under any of the Material Availent Contracts, and
no waiver has been granted by any of the parties thereto.
Section 3.14 Real Property. As of the date of this Plan of
Reorganization, Availent does not own any real property.
Section 3.15 Employees. As of the date of this Plan of Reorganization,
Availent has 14 employees.
Section 3.16 Books and Records. All of the books, records and accounts
of Availent are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements.
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the Financial Statements.
Availent has previously delivered to Seacrest the complete stock record book of
Availent, and true and complete copies of all of the minutes of meetings. and
all other corporate actions of the stockholders, Board of Directors and
committees of the Board of Directors of Availent since the date of its
incorporation.
Section 3.17 Certain Interests. None of Availent or its officers,
directors, or holders of 10% or more of Availent Common Stock, directly or
indirectly is, or owns any interest .in, or controls, or is an employee.
officer, director or partner of or participant in, or consultant to, any person
which is a competitor, supplier or customer of Availent.
Section 3.18 Bank Accounts. Availent December 31, 2001 financial
statement sets forth all bank accounts, brokerage accounts, and safe deposit
boxes of any kind maintained by Availent and, in each case, identifies the
persons that are authorized signatories for, or which are authorized to have
access to. each of them.
Section 3.19 Changes in Circumstances . Availent has no knowledge of(i)
any current or future condition or state of facts or circumstances which could
reasonably be expected to result in a material and adverse change in the
financial condition of operations of Availent. or (ii) any Legal Requirements
from which Availent would be exempt by reason of any "grandfather" clauses or
provisions contained therein, but which would be applicable to Seacrest
following Closing.
Section 3.20 Accuracy of Information. None of the written information
and documents which have been or will be furnished by Availent or any
representatives of Availent. to Seacrest or any of the representatives of
Seacrest in connection with the transactions contemplated by this Agreement
contains or will contain, as the case may be. any untrue statement of a material
fact or omits or will omit to state a material tact necessary in order to make
the statements therein not misleading in light of the circumstances in which
made. To the knowledge of Availent. Availent has disclosed to Seacrest as the
purchaser of Availent Common Stock all material information relating to Availent
and its activities as currently conducted.
Section 3 21 Investment. Availent is acquiring Seacrest Common Stock
for investment purposes, and not with a view to distribution or resale thereof
in violation of applicable securities Legal Requirements.
ARTICLE 4
Representations and Warranties of Seacrest
5
Seacrest represents and warrants to Availent, as of the date of this Agreement
and as of Closing, as follows:
Section 4.1 Organization and Qualification of Seacrest. Seacrest is a
corporation duly organized, validly existing. and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as currently conducted. Seacrest is duly
qualified to do business as a foreign corporation in which the ownership or
leasing of the properties and assets owned or leased by it or the nature of its
activities makes such qualification necessary.
Section 4.2 Authority . Seacrest has all requisite corporate power and
authority to execute, deliver and perform this Agreement. The execution,
delivery, and performance of this Agreement by Seacrest has been duly and
validly executed and delivered by Seacrest, and is the valid and binding
obligation of Seacrest. enforceable against Seacrest in accordance with its
terms.
Section 4.3 No Conflicts: Required Consents. The execution, delivery
and performance by Seacrest of this Agreement does not and will not: (I)
conflict with or violate any provisions of the articles or certificate of
incorporation or bylaws of Seacrest; (ii) violate any provision of any Legal
Requirements; or (iii) conflict with, violate, result in a breach of, constitute
a default under (without regard to requirements of notice, lapse of time, or
elections of other persons. or any combination thereof) or accelerate or permit
the acceleration of the performance required by, any Contract or Lien to which
Seacrest is a party or by which Seacrest or the assets or properties owned or
leased by it are bound or affected, or (iv) require any consent, approval or
authorization, report or other document with, any Governments Authority or other
person.
Section 4.4 Validity and Ownership of Seacrest Common Stock. The
Seacrest Common Stock received by the shareholders of Availent at Closing will
be validly issued and outstanding, fully paid and non-assessable. The Seacrest
Common Stock will not be subject to, nor bound or affected by, any proxies,
voting agreements, or other restrictions on the ownership thereof.
ARTICLE 5
Covenants of Availent and Seacrest
Section 5.1 Affirmative Covenants of Availent. Except as Seacrest may
otherwise consent in writing between the date of the Agreement and Closing,
Availent shall:
(a) Conduct its business only in the usual, regular, and ordinary
course, and in accordance with past practices;
(b) [1] duly comply with all applicable Legal Requirements; [2] perform
all of its obligations under all Availent Contracts without default, and [3]
maintain its books, records, and accounts on a basis consistent with past
practices;
(c) [I] give Seacrest and its counsel, accountants and other
representatives reasonable access during normal business hours to the premises
of Availent, all of the assets and properties owned or leased by Availent.
Availent's books and records, and Availent's personnel; [2] furnish to Seacrest
and such representatives alt such additional documents (certified by an officer
of Availent, if requested), financial information and other information as
Seacrest may from time to time reasonably request and [3] cause Availent's
6
accountants to permit Seacrest and its accountants to examine the records and
working papers pertaining to Availent's financial statements* provided that no
investigation by Seacrest or it representatives will affect or limit the scope
of any of the representations and warrants of Availent herein or in any Exhibit
or other related document;
(d) use it best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by Availent in order to
consummate the transactions contemplated hereby and deliver to Seacrest copies,
satisfactory in form and substance to Seacrest, or such approvals and consents;
(e) promptly deliver to Seacrest true and complete copies of all
monthly and quarterly financial statements of Availent and any reports with
respect to the activities of Availent which are prepared by or for Availent at
any lime from the date hereof until Closing; and
(f) promptly notify Seacrest of any circumstance, event or action, by
Availent or otherwise, [1] which, if known at the date of this Agreement, would
have been required to be disclosed in or pursuant to this Agreement, or [2] the
existence, occurrence or taking of which would result in any of the
representations and warranties of Availent in this Agreement or in any
Transaction Document not being true and correct in all material respects.
Section 5.2 Negative Covenants of Availent. Except as Seacrest may
otherwise consent in writing, between the date of this Agreement and Closing,
Availent shall not:
(a) change the character of its business;
(b) incur any liability or obligation or enter into any Contract
except, in each case, in the ordinary Course of business consistent with prior
practices and not prohibited by any other provision hereof,
(c) incur, assume or guarantee any indebtedness or liability in respect
of borrowed.money;
(d) make any capital expenditure or commitment for capital expenditure;
(e) modify, terminate, or abrogate any Material Availent Contract other
than in the ordinary course of business, or waive, lease, discharge. transfer or
cancel any rights or claims of material value;
(f) create or permit the creation or attachment of any Lien against any
of the assets or properties owned or leased by it;
(g) except as otherwise required by this Agreement, prepay any material
liabilities or obligations;
(h) issue any securities, or merge or consolidate with any other
person, or acquire any of the securities, partnership or joint venture
interests, or business of any other person;
(i) declare, set aside or pay any dividends on, or make any other
distribution with respect to. any of it capital stock, or repurchase, redeem or
otherwise acquire any of is capital stock; and
(j) enter into any transaction or permit the taking of any action that
would result in any of the representations and warranties in this Agreement not
being true and correct in all material respects at Closing.
Section 5.3 Covenants of Seacrest. Except as Availent may otherwise
agree in writing, between the date of the Agreement and Closing, Seacrest shall:
(a) use its best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by Availent in order to
7
consummate the transactions contemplated hereby and deliver to Seacrest copies,
satisfactory in form and substance to Seacrest of such approvals and consents;
(b) promptly notify Availent of any circumstance, event or action, by
Seacrest or otherwise, (i) which, if known at the date of this Agreement, would
have been required to be disclosed in or pursuant to this Agreement. would have
been required to be disclosed in or pursuant to this Agreement, or (ii) the
existence, occurrence or taking of which would result in any of the
representations and warranties of Seacrest in this Agreement or in any
Transaction Document not being true and correct in all material respects.
Section 5.4 Joint Undertakings. Each of Seacrest and Availent shall
cooperate and exercise commercially reasonable efforts to facilitate the
consummation of the transactions contemplated by the Agreement so as to permit
Closing to take place on the date provided herein and to cause the satisfaction
of conditions to Closing set forth in Article 6.
Section 5.5 Confidentiality.
(a) Any non-public information that Seacrest may obtain from Availent
in connection with this agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential, and unless and
until Closing shall occur. Seacrest shall not disclose any such information to
any third party (other than its directors, officers and employees, and persons
whose knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
Availent; provided that; (i) Seacrest may use and disclose any such information
once it has been publicly disclosed (other than by Seacrest in breach of its
obligations under this Section) or which rightfully has conic into the
possession of Seacrest (other than from Availent), and (ii) to the extent that
Seacrest may become compelled by Legal Requirements to disclose any of such
information, Seacrest may disclose such information if it shall have used all
reasonable efforts, and. shall have afforded Availent the opportunity, to obtain
an appropriate protective order, or other satisfactory assurance of confidential
treatment, for the information compelled be disclosed. In the event of
termination of this Agreement. Seacrest shall use all reasonable efforts to
cause to be delivered to Availent, and retain no copies of, any documents, work
papers, and other materials obtained by Seacrest or on it behalf from Availent,
whether so obtained before or after the execution hereof.
(b) Any non-public information that Availent may obtain from Seacrest
in connection with this Agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential, and unless, and
until Closing shall occur. Availent shall not disclose any such information to
any third party (other than its directors, officers, and employees, and persons
whose knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
Seacrest: provided that (i) Availent may use and disclose any such information
once it has been publicly disclosed (other than by Availent in breach of its
obligations under this Section) or which rightfully has come into the possession
of Availent (other than from Seacrest); and (ii) to the extent that Availent may
become compelled by Legal Requirements to disclose any of such information,
Availent may disclose such information if it shall have used all reasonable
efforts, and shall have afforded Seacrest the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of confidential
treatment, for the formation compelled to be disclosed. In the event of
termination of this Agreement, Availent shall use all reasonable efforts to
8
cause to be delivered to Seacrest and retain no copies of, any documents, work
papers and other materials obtained by Availent or on its behalf from Seacrest.
whether so obtained before or after the execution hereof.
Section 5.6 Publicity. Seacrest and Availent shall each consult with
and obtain the consent of the other before issuing any press release or making
any other public disclosure concerning this Agreement or the transactions
contemplated hereby unless, in the reasonable judgment of the disclosing party,
a release or disclosure is required to discharge its disclosure obligations
under applicable legal requirements, in which case it shall in good faith
consult with the other party about the form, content and timing of such release
or disclosure prior to its release or disclosure.
ARTICLE 6
Conditions Precedent
Section 6.1 Conditions to Availent's Obligation. The obligations of
Availent to consummate the transactions contemplated by this Agreement are
subject to the following conditions:
(a) Accuracy of Representations. The representations of Seacrest in
this Agreement or in any Transaction Document shall be true and accurate in all
material respects at and as of Closing with the same effect as if made at and as
of Closing, except as affected by the transactions contemplated hereby.
(b) Performance of Agreements. Seacrest shall have performed all
obligations and agreements and complied with all covenants in this Agreement to
be performed and complied with by it at or before closing.
(c) Officer's Certificate. Availent shall have received a certificate
executed by an executive officer of Seacrest, dated as of Closing, reasonably
satisfactory in form and substance to Availent certifying that the conditions
stated in subparagraphs (a) and (b) of this Section have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction and no litigation shall be pending which restrains,
makes illegal or prohibits consummation of the transactions contemplated hereby.
(e) Consents. Availent shall have obtained evidence, in form and
substance satisfactory to it that there have been obtained all consents,
approvals and authorizations required by this Agreement.
(f) Legal Matters Satisfactory to Availent's Counsel. All actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all related legal
matters shall be reasonably satisfactory to and approved by Availent's counsel,
and such counsel shall have been furnished with such certified copies of actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.
Section 6.2. Conditions to Seacrest's Obligations. The obligations of
Seacrest to consummate the transactions contemplated by this Agreement are
subject to the following conditions:
(a) Accuracy of Representations. The representations of Availent in
this Agreement or in any Transaction Document shall be true and accurate (in all
9
material respects) at and as of Closing with the same effect as if they were
made at and as of Closing; except as affected by the transactions contemplated
hereby.
(b) Performance of Agreements. Availent shall have performed all
obligations and agreements and complied with all covenants in this Agreement or
in any Transaction Document to which it is a party to be performed and complied
with by it at or before Closing.
(c) Officer's Certificate. Seacrest shall have received a certificate
executed by an executive officer of Availent dated as of Closing, reasonably
satisfactory in form and substance to Seacrest, certifying that the conditions
stated in subparagraphs (a) and (b) of this Section have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
judgment shall have been entered and not created by any Governmental Authority
of competent jurisdiction and no litigation shall be pending which (i)
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby or (ii) could have a material adverse effect upon the
operations or financial condition of Availent.
(e) Consents. Seacrest shall have received evidence, in form and
substance satisfactory to it, that there have been obtained all consents,
approvals, and authorizations required by this Agreement.
(f) Resignation of Officers and Directors. Each of the Officers and
directors of Seacrest whose resignation Availent shall have requested, pursuant
to Section 4 & 5 shall have delivered to Availent written resignations effective
as of Closing.
(g) Legal Matters Satisfactory to Seacrest and its Counsel. All
actions, proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental thereto and all
related legal matters shall be reasonably satisfactory to and approved by
Seacrest's counsel, and such counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as it shall have reasonably requested.
ARTICLE 7
Indemnification
Section 7.1 Indemnification by Selling Shareholder. From and after
Closing, the selling shareholders set forth in Exhibit 7.1 who, together with
their subsidiaries, other corporate affiliates, and immediate families, are all
the holders of 10% or more of the Availent Common Stock ("Principal
Shareholder") all jointly and severally indemnify and hold harmless Seacrest,
its officers and directors, employees, agents and representatives and any person
claiming by or through any of them, from and against any and all losses and
related expenses arising out of or resulting from:
(a) any representations and warranties of Availent in this Agreement
not being true and accurate when made or when required by this Agreement to be
true and accurate; or
(b) any failure by Availent to perform any of its covenants, agreements
or obligations in this Agreement.
Section 7.2 Indemnification by Seacrest. From and after Closing,
Seacrest shall indemnify and hold harmless Availent. its officers and directors,
agents and representative, and any person claiming by or through any of them, as
the case may be, from and against any and all losses and related expenses
arising out of or resulting from:
10
(a) any representations and warranties of Seacrest in this Agreement
not being true and accurate when made or when required by this Agreement or any
Transaction Document to be true and accurate; or
(b) any failure by Seacrest to perform any of its covenants, agreements
or obligations in this Agreement.
(c) all undisclosed liabilities and obligations relating to, or arising
out of activities of Seacrest during periods prior to Closing.
Section 7.3 Indemnification Against Third Party Claims. Promptly after
receipt, by a person entitled to indemnification hereunder (the "Indemnitee") of
written notice of the assertion of any claim or the commencement of any
litigation with respect to any matter referred to in Sections 7.1 or 7,2, the
Indemnitee shall give written notice thereof to the party from whom
indemnification is sought pursuant hereto (the "Indemnitor") and thereafter
shall keep the Indemnitor reasonably informed with respect thereto, provided
that failure of the Indemnitee to give the Indemnitor notice as provided herein
shall not relieve the Indemnitor of its obligations hereunder. In case any
litigation is brought against any lndemnitee, the Indemnitor shall be entitled
to participate in (and at the request of the Indemnitee shall assume) the
defense thereof with counsel satisfactory to the Indemnitee at the Indemnitor's
expense. If the Indemnitor, at the Indemnitee's request, shall assume the
defense of any settlement shall include as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnitee,
satisfactory to the Indemnitee, from all liability with respect to such
litigation.
Section 7.4. Time and Manner of Certain Claims. The representations and
warranties of Seacrest and the Principal Shareholders in this Agreement shall
survive Closing; provided, however, that neither Seacrest nor the Principal
Shareholders shall have any liability under Sections 7.1 or 7.2, respectively
unless a claim is asserted by the party seeking indemnification thereunder by
written notice to the party from whom indemnification is sought within three
years after Closing and such party commences litigation seeking such
indemnification within 180 days following the date of such notice.
Section 7.5 Effect of de minimis Damage on Indemnity by Principal
Shareholders. The principal Shareholders shall have no indemnity obligations
under this Article 7, unless the aggregate amount payable by them under this
Article 7 is in excess of $100,000.
Section 7.6 Tax Effect. In calculating amounts payable to an Indemnitee
hereunder, (i) the amount of indemnified losses shall be reduced by the amount
of any reduction in the Indemnitee's liability for taxes resulting from the
facts or occurrence giving rise to the indemnified tosses; and (ii) the amount
of the Indemnified losses shall be grossed up by the amount of any increase in
liability for taxes resulting from indemnification with respect thereto.
ARTICLE 8
Termination
Section 8.1 Termination Events. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of Seacrest and Availent.
(b) by either Seacrest or Availent. If the other is in material breach
or default of its respective covenants, agreements or other obligations
hereunder or if any of its representations and warranties herein are not true
and accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate.
11
(c) by Availent, if any of the conditions to its obligations set forth
in Section 6.1 shall not have been satisfied as of Closing, unless satisfaction
shall have been frustrated or made impossible by an act or failure to act of
Availent; or
(d) by Seacrest, if any of the conditions to its obligations set forth
in Section 6.2 shall not have been satisfied as of Closing, unless satisfaction
shall have been frustrated or made impossible by an act of failure to act of
Seacrest; or
(e) by either Seacrest or Availent upon written notice to the other, if
the transactions contemplated by this Agreement are not consummated on or prior
to July 1, 2002, for any reason other than material breach or default by such
party of it respective representations, warranties, covenants. agreements or
other obligations hereunder.
Section 8.2 Effect of Termination. If this Agreement shall be
terminated, all obligations of the parties hereunder shall terminate, except for
the obligations set forth in Section 5.5, 5.6 and 9.3.
ARTICLE 9
Miscellaneous
Section 9.1 Expenses. Each party shall be responsible for the legal,
accounting and any other expenses consummated as a result of this transaction.
Section 9.2 Waiver and Modifications. Any of the provisions of the
Agreement may be waived at any time by the party entitled to the benefit
thereof, upon the authority of the Board of Directors of such party; provided,
however, that no waiver by Seacrest shall be authorized alter the last vote of
the stockholders of Seacrest if such waiver shall, in the judgment of the Board
of Directors of Seacrest, affect materially and adversely the benefits of the
Seacrest stockholders under this Agreement or the Agreement of Merger. Any of
the provision of this Agreement (including the exhibits and the Agreement of
Merger) may be modified at any time prior to and alter the vote of the
stockholders of Seacrest by agreement in writing approved by the Board of
Directors of each party and executed in the same manner (but necessarily by the
same persons) as this Agreement, provided that such modification, after the last
vote of the stockholders of Seacrest shall not, in the judgment of the Board of
Directors of Seacrest, affect materially and adversely the benefits of
Seacrest's stockholders under this Agreement or the Agreement of Merger. To the
extent permitted by law, the powers of the Board of Directors may be delegated
by the Board of the Executive Committee of such Board or by such Board (or by
the Executive Committee to the extent any matter has been delegated to such
Committee by the Board) to any officer or officers of such party, and any
notices, consents or other action referred to in this Agreement may be given or
taken by any officer so authorized.
Section 9.3 Finder Commissions. Seacrest and Availent each represents
and warrants that no broker or finder is entitled to any brokerage or finder's
fee or other commission based on agreements, arrangements or understandings made
by it with respect to the transactions contemplated by this Agreement or by the
Agreement of Merger, other than set forth in Exhibit 9.3.
Section 9.4 Notices. Any notices, request, instruction or other
document to be given hereunder or under the Agreement of Merger by any party to
another shall be in writing and delivered personally or sent by registered or
certified mail, postage prepaid.
If to Seacrest Industries Corporation, addressed to:
20101 Southwest Birch Street, Suite 200
Newport Beach CA 92660
12
If to Availent Financial, Inc., addressed to:
2720 Stemmons Frwy South Tower,
Suite 600
Dallas, TX 75207
Section 9.5 Abandonment. At anytime before the effective date, this
Merger Agreement maybe terminated and the Merger may be abandoned by the Board
of Directors of either Seacrest or Availent or both, notwithstanding approval of
this Agreement by the shareholders of Seacrest or the shareholders of Availent
or both.
Section 9.6 Entire Agreement. This Agreement and Plan of Merger
represents the entire agreement between the parties. Any and all other oral or
written agreements concerning this merger shall be deemed null and void.
Section 9.7 Governing Law. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of California.
Section 9.8 Counterparts. In order to facilitate the filing and
recording of this Merger Agreement the nine may be executed in any number of
counterparts, each of which shall be doomed to be an original.
IN WITNESS WHEREOF, Seacrest and Availent, by their duly authorized
officers, have executed and delivered this Agreement effective as of the date
first above written.
Seacrest Industries Corporation
/s/ C. M. Ball
Name:C.M. Ball
Title: President
Availent Financial, Inc.
/s/ Patrick McGeeney
Name: Patrick McGeeney
Title: President
13
Appendix B
Delaware General Corporation Law
ss. 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this
title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
1
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsection (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of such stockholder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss. 228 or ss.
253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or
resulting corporation within 10 days thereafter shall notify each of the
holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all
shares of such class or series of stock of such constituent corporation,
and shall include in such notice a copy of this section. Such notice may,
and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constitutent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
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class or series of stock of such constitutent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date,
the record date shall be the close of business on the day next preceding
the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g)At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
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pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h)After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock.
(j)The costs of the proceeding may be determined by the Court and taxed upon the
parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by
any stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l)The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
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Appendix C
CERIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
SEACREST INDUSTRIES CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY
FIRST: That at a meeting of the Board of Directors of SEACREST
INDUSTRIES CORPORATION resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this
Corporation be amended by changing the Article thereof number "First"
so that as amended said Article shall be and read as follows:
"FIRST: The name of the corporation is Availent Financial, Inc."
RESOLVED FURTHER, that the Certificate of Incorporation of this
Corporation be amended by changing the Article thereof numbered
"Fourth" so that as amended said Article shall be and read follows:
"FOURTH: Effective at 5:00 p.m., eastern time, on the filing
date of this Certificate of Amendment of Restated Certificate of
Incorporation (the "Effective Time"), a one-for-two reverse stock
split of the Corporation's common stock shall become effective,
pursuant to which each two shares of common stock outstanding and held
of record by each stockholder of the Corporation (including treasury
shares) immediately prior to the Effective Time (the "Old Common
Stock") shall be reclassified and combined (the "Reverse Split") into
one share of common stock automatically and without any action by the
holder thereof upon the Effective Time and shall represent one share
of common stock from and after the Effective Time (the "New Common
Stock"). No fractional shares of common stock shall be issued as a
result of such reclassification and combination. In lieu of any
fractional share to which the stockholder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by
the average of the high and low trading prices of the Common Stock on
the market for which the Common Stock is traded during regular trading
hours for the five trading days immediately preceding the Effective
Time or the first five trading days when trading does commence,
whichever is earlier. Whether or not fractional shares are issuable
upon such reclassification and combination shall be determined on the
basis of the total number of shares of Old Common Stock held by a
holder and the total number of shares of New Common Stock issuable to
such holder as a result of the Reverse Split.
"The corporation shall be authorized to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock"; the total number of shares of stock which the
corporation shall have authority to issue is One Hundred Ten Million
(110,000,000) and the par value of each of such shares is No and
01/100 ($0.01) Dollars, amounting in the aggregate to One Million One
Hundred Thousand and no/100 ($1,100,000.00) Dollars; the total number
of shares of Preferred Stock shall be Ten Million (10,000,000); the
total number of shares of Common Stock shall be One Hundred Million
(100,000,000).
"Shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors is hereby authorized to fix
the voting rights, designations, powers, preferences and the relative,
participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any wholly
unissued series of Preferred Stock; and to fix the number of shares
constituting such series, and to increase or decrease the number of
shares of any such series (but not below the number of shares thereof
then outstanding)."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation will not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said SEACREST INDUSTRIES CORPORATION has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Patrick McGeeney its President, and attested by Woody Conradt, its Secretary,
this ___ day of June 2002.
SEACREST INDUSTRIES CORPORATION
By_____________________________
President
By__________________
Secretary