you need to put your source files inside src folder.
you can omit the src folder by filling blank in MAIN SOURCE FOLDER in step 3 of project creation in flex builder.
1) the source files are already in the src folder. The src folder is not at the project root folder. It was moved to a WebContents/src folder.
2) I am importing an existing project and not creating a new project...so there is no step three.
you can change the source folder:
. right click on project ( it must be open ) and go to properties.
. go to Flex Build Path section.
. change Main Source Folder.
Very cool. Thanks for the info!