U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
FORM 10-SB
____________________
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
____________________
SILVER QUEST, INC.
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(Name of Small Business Issuer in its charter)
Idaho 82-0391094
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15304 E. Monmouth Place
Aurora, Colorado 80015
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (303) 693-0603
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Securities to be registered pursuant to Section 12(b) of the Act:
none
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Page One of Sixty Six Pages
Exhibit Index is Located at Page 35.
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TABLE OF CONTENTS
Page
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Part I
Item 1. Description of Business . . . . . . . . . . . . . 3
Item 2. Plan of Operation. . . . . . . . . . . . . . . . . 7
Item 3. Description of Property. . . . . . . . . . . . . . 14
Item 4. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . 14
Item 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . . . . 15
Item 6. Executive Compensation . . . . . . . . . . . . . . 17
Item 7. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . . 19
Item 8. Description of Securities. . . . . . . . . . . . . 19
Part II
Item 1. Market for Common Equities and Related Stockholder
Matters . . . . . . . . . . . . . .. . . . . . . . 20
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . 22
Item 3. Changes in and Disagreements with Accountants. . . 22
Item 4. Recent Sales of Unregistered Securities. . . . . . 22
Item 5. Indemnification of Directors and Officers. . . . . 23
Part F/S
Financial Statements . . . . . . . . . . . . . . . 24
Part III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . 35
Item 2. Description of Exhibits. . . . . . . . . . . . . . 36
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PART I
Item 1. Description of Business
Silver Quest, Inc. (the "Company"), was incorporated on April
11, 1983 under the laws of the State of Idaho, to engage in any
lawful corporate purpose. From inception of the Company through
January 1993, the Company was engaged in the mining business,
wherein it acquired mineral rights on land which management
believed had mining potential and thereafter leased these
properties. Since January 1993, the Company has been dormant, as
it undertook no other operations. Other than issuing shares to its
original shareholders, the Company never commenced any other
operational activities. As such, the Company can be defined as a
"shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The
Board of Directors of the Company has elected to commence
implementation of the Company's principal business purpose,
described below under "Item 2, Plan of Operation."
The Company is filing this registration statement on a
voluntary basis because the primary attraction of the Company as a
merger partner or acquisition vehicle will be its status as a
public company. Any business combination or transaction will
likely result in a significant issuance of shares and substantial
dilution to present stockholders of the Company.
The proposed business activities described herein classify the
Company as a "blank check" company. Many states have enacted
statutes, rules and regulations limiting the sale of securities of
"blank check" companies in their respective jurisdictions.
Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities or undertake any
offering of the Company's securities, either debt or equity, until
such time as the Company has successfully implemented its business
plan described herein. Relevant thereto, each shareholder of the
Company has executed and delivered a "lock-up" letter agreement,
affirming that they shall not sell their respective shares of the
Company's common stock until such time as the Company has
successfully consummated a merger or acquisition and the Company is
no longer classified as a "blank check" company. In order to
provide further assurances that no trading will occur in the
Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective
stock certificate with the Company's legal counsel, Andrew I.
Telsey, P.C., who will not release these respective certificates
until such time as legal counsel has confirmed that a merger or
acquisition has been successfully consummated. However, while
management believes that the procedures established to preclude any
sale of the Company's securities prior to closing of a merger or
acquisition will be sufficient, there can be no assurances that the
procedures established relevant herein will unequivocally limit any
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shareholder's ability to sell their respective securities before
such closing.
The Company's business is subject to numerous risk factors,
including the following:
No Operating History or Revenue and Minimal Assets. The
Company has had no recent operating history nor any revenues or
earnings from operations since January 1993. The Company has no
significant assets or financial resources. The Company will, in
all likelihood, sustain operating expenses without corresponding
revenues, at least until the consummation of a business
combination. This may result in the Company incurring a net
operating loss which will increase continuously until the Company
can consummate a business combination with a profitable business
opportunity. There is no assurance that the Company can identify
such a business opportunity and consummate such a business
combination.
Speculative Nature of Company's Proposed Operations. The
success of the Company's proposed plan of operation will depend to
a great extent on the operations, financial condition and
management of the identified business opportunity. While
management intends to seek business combination(s) with entities
having established operating histories, there can be no assurance
that the Company will be successful in locating candidates meeting
such criteria. In the event the Company completes a business
combination, of which there can be no assurance, the success of the
Company's operations may be dependent upon management of the
successor firm or venture partner firm and numerous other factors
beyond the Company's control.
Scarcity of and Competition for Business Opportunities and
Combinations. The Company is and will continue to be an
insignificant participant in the business of seeking mergers with,
joint ventures with and acquisitions of small private and public
entities. A large number of established and well-financed
entities, including venture capital firms, are active in mergers
and acquisitions of companies which may be desirable target
candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the
Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a
business combination. Moreover, the Company will also compete in
seeking merger or acquisition candidates with numerous other small
public companies.
No Agreement for Business Combination or Other Transaction-No
Standards for Business Combination. The Company has no arrangement,
agreement or understanding with respect to engaging in a merger
with, joint venture with or acquisition of, a private or public
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entity. There can be no assurance the Company will be successful
in identifying and evaluating suitable business opportunities or in
concluding a business combination. Management has not identified
any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance the Company will
be able to negotiate a business combination on terms favorable to
the Company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net
worth or other criteria which it will require a target business
opportunity to have achieved, and without which the Company would
not consider a business combination in any form with such business
opportunity. Accordingly, the Company may enter into a business
combination with a business opportunity having no significant
operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other negative
characteristics.
Continued Management Control, Limited Time Availability.
While seeking a business combination, management anticipates
devoting up to twenty hours per month to the business of the
Company. None of the Company's officers has entered into a written
employment agreement with the Company and none is expected to do so
in the foreseeable future. The Company has not obtained key man
life insurance on any of its officers or directors. Notwithstanding
the combined limited experience and time commitment of management,
loss of the services of any of these individuals would adversely
affect development of the Company's business and its likelihood of
continuing operations. See "Item 5 - Directors, Executive
Officers, Promoters and Control Persons."
Conflicts of Interest - General. Officers and directors of
the Company may in the future participate in business ventures
which could be deemed to compete directly with the Company.
Additional conflicts of interest and non-arms length transactions
may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the
Company transacts business. Management has adopted a policy that
the Company will not seek a merger with, or acquisition of, any
entity in which management serve as officers, directors or
partners, or in which they or their family members own or hold any
ownership interest.
Reporting Requirements May Delay or Preclude Acquisition.
Sections 13 and 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), require companies subject thereto to provide
certain information about significant acquisitions, including
certified financial statements for the company acquired, covering
one, two, or three years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by
some target entities to prepare such statements may significantly
delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do
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not have or are unable to obtain the required audited statements
may not be appropriate for acquisition so long as the reporting
requirements of the 1934 Act are applicable.
Lack of Market Research or Marketing Organization. The
Company has neither conducted, nor have others made available to
it, results of market research indicating that market demand exists
for the transactions contemplated by the Company. Moreover, the
Company does not have, and does not plan to establish, a marketing
organization. Even in the event demand is identified for a merger
or acquisition contemplated by the Company, there is no assurance
the Company will be successful in completing any such business
combination.
Lack of Diversification. The Company's proposed operations,
even if successful, will in all likelihood result in the Company
engaging in a business combination with a business opportunity.
Consequently, the Company's activities may be limited to those
engaged in by business opportunities which the Company merges with
or acquires. The Company's inability to diversify its activities
into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and therefore
increase the risks associated with the Company's operations.
Regulation. Although the Company will be subject to
regulation under the Securities Exchange Act of 1934, management
believes the Company will not be subject to regulation under the
Investment Company Act of 1940, insofar as the Company will not be
engaged in the business of investing or trading in securities. In
the event the Company engages in business combinations which result
in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would
be required to register as an investment company and could be
expected to incur significant registration and compliance costs.
The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company
under the Investment Company Act of 1940 and, consequently, any
violation of such Act would subject the Company to material adverse
consequences.
Probable Change in Control and Management. A business
combination involving the issuance of the Company's Common Shares
will, in all likelihood, result in shareholders of a private
company obtaining a controlling interest in the Company. Any such
business combination may require management of the Company to sell
or transfer all or a portion of the Company's Common Shares held by
them, or resign as members of the Board of Directors of the
Company. The resulting change in control of the Company could
result in removal of one or more present officers and directors of
the Company and a corresponding reduction in or elimination of
their participation in the future affairs of the Company.
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Reduction of Percentage Share Ownership Following Business
Combination. The Company's primary plan of operation is based
upon a business combination with a private concern which, in all
likelihood, would result in the Company issuing securities to
shareholders of any such private company. The issuance of
previously authorized and unissued Common Shares of the Company
would result in reduction in percentage of shares owned by present
and prospective shareholders of the Company and may result in a
change in control or management of the Company.
Disadvantages of Blank Check Offering. The Company may enter
into a business combination with an entity that desires to
establish a public trading market for its shares. A business
opportunity may attempt to avoid what it deems to be adverse
consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may
include, but are not limited to, time delays of the registration
process, significant expenses to be incurred in such an offering,
loss of voting control to public shareholders and the inability or
unwillingness to comply with various federal and state laws enacted
for the protection of investors.
Taxation. Federal and state tax consequences will, in all
likelihood, be major considerations in any business combination the
Company may undertake. Currently, such transactions may be
structured so as to result in tax-free treatment to both companies,
pursuant to various federal and state tax provisions. The Company
intends to structure any business combination so as to minimize the
federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such
business combination will meet the statutory requirements of a tax-
free reorganization or that the parties will obtain the intended
tax-free treatment upon a transfer of stock or assets. A non-
qualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both
parties to the transaction.
Requirement of Audited Financial Statements May Disqualify
Business Opportunities. Management of the Company believes that
any potential business opportunity must provide audited financial
statements for review, for the protection of all parties to the
business combination. One or more attractive business
opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses
associated with preparing audited financial statements.
Item 2. Plan of Operation
The Company intends to seek to acquire assets or shares of an
entity actively engaged in business which generates revenues, in
exchange for its securities. The Company has no particular
acquisitions in mind and has not entered into any negotiations
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regarding such an acquisition. None of the Company's officers,
directors, promoters or affiliates have engaged in any preliminary
contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the
Company and such other company as of the date of this registration
statement.
Depending upon the nature of the relevant business opportunity
and the applicable state statutes relating to the structure which
such transaction is undertaken, the Company's Board of Directors
expects that it will provide the Company's shareholders with
complete disclosure documentation concerning a potential business
opportunity and the structure of the proposed business combination
prior to consummation of the same, which disclosure, if so
undertaken, is expected to be in the form of a proxy or information
statement. While such disclosure may include audited financial
statements of such a target entity, there is no assurance that such
audited financial statements will be available. The Board of
Directors does intend to obtain certain assurances of value of the
target entity assets prior to consummating such a transaction, with
further assurances that an audited statement would be provided
within sixty days after closing of such a transaction. Closing
documents relative thereto will include representations that the
value of the assets conveyed to or otherwise so transferred will
not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
The Company has no full time employees. The Company's
President and Secretary have agreed to allocate a portion of their
time to the activities of the Company, without compensation. These
officers anticipate that the business plan of the Company can be
implemented by their devoting approximately 20 hours per month to
the business affairs of the Company and, consequently, conflicts of
interest may arise with respect to the limited time commitment by
such officers. See "Item 5. Directors, Executive Officers,
Promoters and Control Persons - Resumes."
The Company's officers and directors may, in the future,
become involved with other companies who have a business purpose
similar to that of the Company. As a result, potential conflicts
of interest may arise in the future. If such a conflict does arise
and an officer or director of the Company is presented with
business opportunities under circumstances where there may be a
doubt as to whether the opportunity should belong to the Company or
another "blank check" company they are affiliated with, they will
disclose the opportunity to all such companies. If a situation
arises in which more than one company desires to merge with or
acquire that target company and the principals of the proposed
target company has no preference as to which company will merger or
acquire such target company, the company which first filed a
registration statement with the Securities and Exchange Commission
will be entitled to proceed with the proposed transaction.
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General Business Plan
The Company's purpose is to seek, investigate and, if such
investigation warrants, acquire an interest in business
opportunities presented to it by persons or firms who or which
desire to seek the perceived advantages of an Exchange Act
registered corporation. The Company will not restrict its search
to any specific business, industry, or geographical location and
the Company may participate in a business venture of virtually any
kind or nature. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of the
Company's virtually unlimited discretion to search for and enter
into potential business opportunities. Management anticipates that
it may be able to participate in only one potential business
venture because the Company has nominal assets and limited
financial resources. See "Part F/S, Financial Statements." This
lack of diversification should be considered a substantial risk to
shareholders of the Company because it will not permit the Company
to offset potential losses from one venture against gains from
another.
The Company may seek a business opportunity with entities
which have recently commenced operations, or which wish to utilize
the public marketplace in order to raise additional capital in
order to expand into new products or markets, to develop a new
product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business
opportunity in which to participate will be complex and extremely
risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking
the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms
on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of
applicable statutes) for all shareholders and other factors.
Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of
which will make the task of comparative investigation and analysis
of such business opportunities extremely difficult and complex.
The Company has, and will continue to have, no capital with
which to provide the owners of business opportunities with any
significant cash or other assets. However, management believes the
Company will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in a
publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the
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business opportunities will, however, incur significant legal and
accounting costs in connection with acquisition of a business
opportunity, including the costs of preparing Form 8-K's, 10-K's or
10-KSB's, agreements and related reports and documents. The
Securities Exchange Act of 1934 (the "34 Act") specifically
requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited
financial statements to be included within the numerous filings
relevant to complying with the 34 Act. Nevertheless, the officers
and directors of the Company have not conducted market research and
are not aware of statistical data which would support the perceived
benefits of a merger or acquisition transaction for the owners of
a business opportunity.
The analysis of new business opportunities will be undertaken
by, or under the supervision of, the officers and directors of the
Company, none of whom is a professional business analyst.
Management intends to concentrate on identifying preliminary
prospective business opportunities which may be brought to its
attention through present associations of the Company's officers
and directors, or by the Company's shareholders. In analyzing
prospective business opportunities, management will consider such
matters as the available technical, financial and managerial
resources; working capital and other financial requirements;
history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of
management services which may be available and the depth of that
management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact the proposed activities of the
Company; the potential for growth or expansion; the potential for
profit; the perceived public recognition of acceptance of products,
services, or trades; name identification; and other relevant
factors. Officers and directors of the Company expect to meet
personally with management and key personnel of the business
opportunity as part of their investigation. To the extent
possible, the Company intends to utilize written reports and
personal investigation to evaluate the above factors. The Company
will not acquire or merge with any company for which audited
financial statements cannot be obtained within a reasonable period
of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in
matters relating to the new business of the Company, shall rely
upon their own efforts and, to a much lesser extent, the efforts of
the Company's shareholders, in accomplishing the business purposes
of the Company. It is not anticipated that any outside consultants
or advisors, except for the Company's legal counsel and
accountants, will be utilized by the Company to effectuate its
business purposes described herein. However, if the Company does
retain such an outside consultant or advisor, any cash fee earned
by such party will need to be paid by the prospective merger/
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acquisition candidate, as the Company has no cash assets with which
to pay such obligation. There have been no contracts or agreements
with any outside consultants and none are anticipated in the
future.
The Company will not restrict its search for any specific kind
of firms, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially
any stage of its corporate life. It is impossible to predict at
this time the status of any business in which the Company may
become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However,
the Company does not intend to obtain funds in one or more private
placements to finance the operation of any acquired business
opportunity until such time as the Company has successfully
consummated such a merger or acquisition.
It is anticipated that the Company will incur nominal expenses
in the implementation of its business plan described herein.
Because the Company has no capital with which to pay these
anticipated expenses, present management of the Company will pay
these charges with their personal funds, as interest free loans to
the Company. However, the only opportunity which management has to
have these loans repaid will be from a prospective merger or
acquisition candidate. Management has agreed among themselves that
the repayment of any loans made on behalf of the Company will not
impede, or be made conditional in any manner, to consummation of a
proposed transaction.
Acquisition of Opportunities
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and
shareholders of the Company will no longer be in control of the
Company. In addition, the Company's directors may, as part of the
terms of the acquisition transaction, resign and be replaced by new
directors without a vote of the Company's shareholders or may sell
their stock in the Company. Any terms of sale of the shares
presently held by officers and/or directors of the Company will be
also afforded to all other shareholders of the Company on similar
terms and conditions. Any and all such sales will only be made in
compliance with the securities laws of the United States and any
applicable state.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance upon exemption from
registration under applicable federal and state securities laws.
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In some circumstances, however, as a negotiated element of its
transaction, the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or
at specified times thereafter. If such registration occurs, of
which there can be no assurance, it will be undertaken by the
surviving entity after the Company has successfully consummated a
merger or acquisition and the Company is no longer considered a
"shell" company. Until such time as this occurs, the Company will
not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any
trading market which may develop in the Company's securities may
have a depressive effect on the value of the Company's securities
in the future, if such a market develops, of which there is no
assurance.
While the actual terms of a transaction to which the Company
may be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to avoid
the creation of a taxable event and thereby structure the
acquisition in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In
order to obtain tax-free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80% or
more of the voting stock of the surviving entity. In such event,
the shareholders of the Company would retain less than 20% of the
issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors
of the Company will meet personally with management and key
personnel, may visit and inspect material facilities, obtain
independent analysis of verification of certain information
provided, check references of management and key personnel, and
take other reasonable investigative measures to the extent of the
Company's limited financial resources and management expertise.
The manner in which the Company participates in an opportunity will
depend on the nature of the opportunity, the respective needs and
desires of the Company and other parties, the management of the
opportunity and the relative negotiation strength of the Company
and such other management.
With respect to any merger or acquisition, negotiations with
target company management is expected to focus on the percentage of
the Company which the target company shareholders would acquire in
exchange for all of their shareholdings in the target company.
Depending upon, among other things, the target company's assets and
liabilities, the Company's shareholders will in all likelihood hold
a substantially lesser percentage ownership interest in the Company
following any merger or acquisition. The percentage ownership may
be subject to significant reduction in the event the Company
acquires a target company with substantial assets. Any merger or
acquisition effected by the Company can be expected to have a
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significant dilutive effect on the percentage of shares held by the
Company's then shareholders.
The Company will participate in a business opportunity only
after the negotiation and execution of appropriate written
agreements. Although the terms of such agreements cannot be
predicted, generally such agreements will require some specific
representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing
and the conditions which must be satisfied by each of the parties
prior to and after such closing, will outline the manner of bearing
costs, including costs associated with the Company's attorneys and
accountants, will set forth remedies on default and will include
miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge
with any entity which cannot provide independent audited financial
statements within a reasonable period of time after closing of the
proposed transaction. The Company is subject to all of the
reporting requirements included in the 34 Act. Included in these
requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to
be filed with the Securities and Exchange Commission upon
consummation of a merger or acquisition, as well as the Company's
audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial
statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements
of the 34 Act, or if the audited financial statements provided do
not conform to the representations made by the candidate to be
acquired in the closing documents, the closing documents will
provide that the proposed transaction will be voidable at the
discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision
providing for the acquisition entity to reimburse the Company for
all costs associated with the proposed transaction.
Competition
The Company will remain an insignificant participant among the
firms which engage in the acquisition of business opportunities.
There are many established venture capital and financial concerns
which have significantly greater financial and personnel resources
and technical expertise than the Company. In view of the Company's
combined extremely limited financial resources and limited
management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's
competitors.
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Item 3. Description of Property
The Company has no properties and at this time has no
agreements to acquire any properties. The Company intends to
attempt to acquire assets or a business in exchange for its
securities, which assets or business is determined to be desirable
for its objectives.
The Company operates from its offices at 15304 East Monmouth
Place, Aurora, Colorado 80015. This space is provided to the
Company on a rent free basis by Cheryl Miller, an officer and
director of the Company, and it is anticipated that this
arrangement will remain until such time as the Company successfully
consummates a merger or acquisition. Management believes that this
space will meet the Company's needs for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners and
Management
The table below lists the beneficial ownership of the
Company's voting securities by each person known by the Company to
be the beneficial owner of more than 5% of such securities, as well
as the securities of the Company beneficially owned by all
directors and officers of the Company. Unless otherwise indicated,
the shareholders listed possess sole voting and investment power
with respect to the shares shown.
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent of
Title of Class Owner Owner Class
Common Cheryl Miller1 150,000 43.5%
15304 E. Monmouth Place
Aurora, CO 80015
Common Lowell Miller1 30,000 8.7%
2500 Niles Avenue
St. Joseph, MI 49085
Common Carolyn H. Sagara1 30,000 8.7%
8221 W. Walker Dr.
Littleton, CO 80123
Common Phyliss C. Miller 26,000 7.5%
2609 Lake View Avenue
St. Joseph, MI 49085
Common Vance B. Miller 20,000 5.8%
Box 100
Wickenburg, AZ 85358-0100
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Name and Amount and
Address of Nature of
Beneficial Beneficial Percent of
Title of Class Owner Owner Class
Common Wallace Westwood 20,000 5.8%
5900 W. Rowland Avenue
Littleton, CO 80123
Common William Miller 25,000 7.3%
6979 W. Quarto Place
Littleton, CO 80123
Common All Officers and 210,000 60.9%
Directors as a
Group (3 persons)
____________________
1 Officer and director.
The balance of the Company's outstanding Common Shares are
held by 3 persons.
Item 5. Directors, Executive Officers, Promoters and Control
Persons.
The directors and officers of the Company are as follows:
Name Age Position
Lowell S. Miller 53 President, Director
Cheryl J. Miller 46 Secretary, Treasurer,
Director
Carolyn Sagara 34 Vice President,
Director
The above listed officers and directors will serve until the
next annual meeting of the shareholders or until their death,
resignation, retirement, removal, or disqualification, or until
their successors have been duly elected and qualified. Vacancies
in the existing Board of Directors are filled by majority vote of
the remaining Directors. Officers of the Company serve at the will
of the Board of Directors. Lowell S. Miller and Cheryl J. Miller
are brother and sister.
Resumes
Lowell S. Miller, President and a director of the Company, has
held his positions with the Company since its inception. In
15
<PAGE>
addition to his positions with the Company, since 1992 Mr. Miller
has been President of Win, Inc., St. Joseph, Michigan, which is
involved in structuring mining and real estate ventures. Mr.
Miller received a Master's Degree in 1967 from the University of
Chicago and a Bachelor of Science degree in 1965 from the
University of Arizona. He devotes only such time as necessary to
the business of the Company, which time is expected to be nominal.
Cheryl J. Miller, Secretary, Treasurer and a director of the
Company, has held her position as a director of the Company since
February 1984, as Secretary since November 1994, and as Treasurer
since April 1996. In addition to her positions with the Company,
since August 1991, Ms. Miller has been a registered representative
with Rocky Mountain Securities & Investments, an Englewood,
Colorado, stock brokerage firm. Ms. Miller received a Masters
Degree in Arts in 1973 from Creighton University and a Bachelor of
Science degree in 1970 from Colorado Woman's College. She devotes
only such time as necessary to the business of the Company, which
time is expected to be nominal.
Carolyn Sagara, Vice President and a director of the Company,
has held her position with the Company since April 1996. In
addition to her positions with Company, since May 1996, Ms. Sagara
has been a social worker with the Denver Department of Social
Services, Denver, Colorado. From May 1995 to May 1996, Ms. Sagara
was a therapist with Denver Mental Health Corp., Denver, Colorado,
and from September 1987 to May 1995, a therapist with Arapahoe
County Mental Health Center, Inc., Englewood, Colorado. Ms. Sagara
received her Masters Degree in Counseling in 1987 from University
of Colorado at Denver, Colorado, and her Bachelor of Science Degree
in education in 1979 from Metro State College, Denver, Colorado.
She devotes only such time as necessary to the business of the
Company, which time is expected to be nominal.
Prior "Blank Check" Experience
None of the Company's officers and/or directors have had any
direct experience in identifying emerging companies for investment
and/or business combinations.
Conflicts of Interest
Members of the Company's management are associated with other
firms involved in a range of business activities. Consequently,
there are potential inherent conflicts of interest in their acting
as officers and directors of the Company. Insofar as the officers
and directors are engaged in other business activities, management
anticipates it will devote only a minor amount of time to the
Company's affairs.
The officers and directors of the Company are now and may in
the future become shareholders, officers or directors of other
16
<PAGE>
companies which may be formed for the purpose of engaging in
business activities similar to those conducted by the Company.
Accordingly, additional direct conflicts of interest may arise in
the future with respect to such individuals acting on behalf of the
Company or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or
otherwise. The Company does not currently have a right of first
refusal pertaining to opportunities that come to management's
attention insofar as such opportunities may relate to the Company's
proposed business operations.
The officers and directors are, so long as they are officers
or directors of the Company, subject to the restriction that all
opportunities contemplated by the Company's plan of operation which
come to their attention, either in the performance of their duties
or in any other manner, will be considered opportunities of, and be
made available to the Company and the companies that they are
affiliated with on an equal basis. A breach of this requirement
will be a breach of the fiduciary duties of the officer or
director. If the Company or the companies in which the officers
and directors are affiliated with both desire to take advantage of
an opportunity, then said officers and directors would abstain from
negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if
the Company should decline to do so. Except as set forth above,
the Company has not adopted any other conflict of interest policy
with respect to such transactions.
Investment Company Act of 1940
Although the Company will be subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934,
management believes the Company will not be subject to regulation
under the Investment Company Act of 1940 insofar as the Company
will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business
combinations which result in the Company holding passive investment
interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act of 1940. In such
event, the Company would be required to register as an investment
company and could be expected to incur significant registration and
compliance costs. The Company has obtained no formal determination
from the Securities and Exchange Commission as to the status of the
Company under the Investment Company Act of 1940 and, consequently,
any violation of such Act would subject the Company to material
adverse consequences.
Item 6. Executive Compensation.
None of the Company's officers and/or directors receive any
compensation for their respective services rendered unto the
17
<PAGE>
Company, nor have they received such compensation in the past.
They all have agreed to act without compensation until authorized
by the Board of Directors, which is not expected to occur until the
Company has generated revenues from operations after consummation
of a merger or acquisition. As of the date of this registration
statement, the Company has no funds available to pay directors.
Further, none of the directors are accruing any compensation
pursuant to any agreement with the Company.
It is possible that, after the Company successfully
consummates a merger or acquisition with an unaffiliated entity,
that entity may desire to employ or retain one or a number of
members of the Company's management for the purposes of providing
services to the surviving entity or otherwise provide other
compensation to such persons. However, the Company has adopted a
policy whereby the offer of any post-transaction remuneration to
members of management will not be a consideration in the Company's
decision to undertake any proposed transaction. Each member of
management has agreed to disclose to the Company's Board of
Directors any discussions concerning possible compensation to be
paid to them by any entity which proposes to undertake a
transaction with the Company and further, to abstain from voting on
such transaction. Therefore, as a practical matter, if each member
of the Company's Board of Directors is offered compensation in any
form from any prospective merger or acquisition candidate, the
proposed transaction will not be approved by the Company's Board of
Directors as a result of the inability of the Board to
affirmatively approve such a transaction.
It is possible that persons associated with management may
refer a prospective merger or acquisition candidate to the Company.
In the event the Company consummates a transaction with any entity
referred by associates of management, it is possible that such an
associate will be compensated for their referral in the form of a
finder's fee. It is anticipated that this fee will be either in
the form of restricted common stock issued by the Company as part
of the terms of the proposed transaction, or will be in the form of
cash consideration. However, if such compensation is in the form
of cash, such payment will be tendered by the acquisition or merger
candidate because the Company has insufficient cash available. The
amount of such finder's fee cannot be determined as of the date of
this registration statement, but is expected to be comparable to
consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either
directly or indirectly, as a result of their respective efforts to
implement the Company's business plan outlined herein.
No retirement, pension, profit sharing, stock option or
insurance programs or other similar programs have been adopted by
the Company for the benefit of its employees.
18
<PAGE>
Item 7. Certain Relationships and Related Transactions.
There have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to
Item 404 of Regulation S-B.
Item 8. Description of Securities.
The Company's authorized capital stock consists of 50,000,000
shares of Common Stock, par value $0.01 per share. There are
345,000 Common Shares issued and outstanding as of the date of this
filing.
Common Stock. All shares of Common Stock have equal voting
rights and, when validly issued and outstanding, are entitled to
one vote per share in all matters to be voted upon by shareholders.
The shares of Common Stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting in the election
of directors is not permitted, which means that the holders of a
majority of the issued and outstanding shares of Common Stock
represented at any meeting at which a quorum is present will be
able to elect the entire Board of Directors if they so choose and,
in such event, the holders of the remaining shares of Common Stock
will not be able to elect any directors. In the event of
liquidation of the Company, each shareholder is entitled to receive
a proportionate share of the Company's assets available for
distribution to shareholders after the payment of liabilities and
after distribution in full of preferential amounts, if any. All
shares of the Company's Common Stock issued and outstanding are
fully paid and nonassessable. Holders of the Common Stock are
entitled to share pro rata in dividends and distributions with
respect to the Common Stock, as may be declared by the Board of
Directors out of funds legally available therefor.
The proposed business activities described herein classify the
Company as a "blank check" company. Many states have enacted
statutes, rules and regulations limiting the sale of securities of
"blank check" companies in their respective jurisdictions.
Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as
the Company has successfully implemented its business plan
described herein. Relevant thereto, each shareholder of the
Company has executed and delivered a "lock-up" letter agreement,
affirming that they shall not sell their respective shares of the
Company's common stock until such time as the Company has
successfully consummated a merger or acquisition and the Company is
no longer classified as a "blank check" company. In order to
provide further assurances that no trading will occur in the
Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective
stock certificate with the Company's legal counsel, Andrew I.
19
<PAGE>
Telsey, P.C., who will not release these respective certificates
until such time as legal counsel has confirmed that a merger or
acquisition has been successfully consummated. However, while
management believes that the procedures established to preclude any
sale of the Company's securities prior to closing of a merger or
acquisition will be sufficient, there can be no assurances that the
procedures established relevant herein will unequivocally limit any
shareholder's ability to sell their respective securities before
such closing.
PART II
Item 1. Market Price for Common Equity and Related Stockholder
Matters.
There is no trading market for the Company's Common Stock at
present and there has been no trading market to date. Management
has not undertaken any discussions, preliminary or otherwise, with
any prospective market maker concerning the participation of such
market maker in the aftermarket for the Company's securities and
management does not intend to initiate any such discussions until
such time as the Company has consummated a merger or acquisition.
There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
a. Market Price. The Company's Common Stock is not quoted at
the present time.
The Securities and Exchange Commission has adopted a Rule
which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market
price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules
require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information
and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth
the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a
signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of
20
<PAGE>
investing in penny stock in both public offering and in secondary
trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for
the penny stock held in the account and information on the limited
market in penny stocks.
The National Association of Securities Dealers, Inc. (the
"NASD") which administers NASDAQ, has recently made changes in the
criteria for continued NASDAQ eligibility. In order to continue to
be included on NASDAQ, a company must maintain $2,000,000 in total
assets, a $200,000 market value of its publicly traded securities
and $1,000,000 in total capital and surplus. In addition,
continued inclusion requires two market-makers and a minimum bid
price of $1.00 per share; provided, however, that if a company
falls below such minimum bid price it will remain eligible for
continued inclusion on NASDAQ if the market value of its publicly
traded securities is at least $1,000,000 and the Company has
$2,000,000 in capital and surplus.
Management intends to strongly consider undertaking a
transaction with any merger or acquisition candidate which will
allow the Company's securities to be traded without the aforesaid
limitations. However, there can be no assurances that, upon a
successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange,
or be able to maintain the maintenance criteria necessary to insure
continued listing. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such
qualification in the future may result in the discontinuance of the
inclusion of the Company's securities on a national exchange. In
such events, trading, if any, in the Company's securities may then
continue in the non-NASDAQ over-the-counter market. As a result,
a shareholder may find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, the Company's
securities.
b. Holders. There are ten (10) holders of the Company's
Common Stock. In February 1985, the Company issued 34,500 of its
Common Shares for cash, services and expenses valued at
approximately $.35 per share ($12,075). All of the issued and
outstanding shares of the Company's Common Stock were issued in
accordance with the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. Thereafter, in July 1997, the
Company undertook a forward split of its common stock wherein 10
shares were issued for every 1 share of common stock then issued
and outstanding.
As of the date of this report, all of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the
21
<PAGE>
Securities Act of 1933, as amended, subject to certain limitations
included in said Rule. In general, under Rule 144, a person (or
persons whose shares are aggregated), who has satisfied a one year
holding period, under certain circumstances, may sell within any
three-month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the
average weekly trading volume during the four calendar weeks prior
to such sale. Rule 144 also permits, under certain circumstances,
the sale of shares without any quantity limitation by a person who
has satisfied a two-year holding period and who is not, and has not
been for the preceding three months, an affiliate of the Company.
c. Dividends. The Company has not paid any dividends to
date, and has no plans to do so in the immediate future.
Item 2. Legal Proceedings.
There is no litigation pending or threatened by or against the
Company.
Item 3. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
The Company has not changed accountants since its formation
and there are no disagreements with the findings of said
accountants.
Item 4. Recent Sales of Unregistered Securities.
The Company has not issued any of its securities during the
three year period preceding the date of this Registration
Statement. All of the shares of Common Stock of the Company
previously issued have been issued for investment purposes in a
"private transaction" and are "restricted" shares as defined in
Rule 144 under the Securities Act of 1933, as amended (the "Act").
These shares may not be offered for public sale except under Rule
144, or otherwise, pursuant to the Act.
As of the date of this report, all of the issued and
outstanding shares of the Company's Common Stock are eligible for
sale under Rule 144 promulgated under the Securities Act of 1933,
as amended, subject to certain limitations included in said Rule.
However, all of the shareholders of the Company have executed and
delivered a "lock-up" letter agreement which provides that each
such shareholder shall not sell their respective securities until
such time as the Company has successfully consummated a merger or
acquisition. Further, each shareholder has placed their respective
stock certificate with the Company's legal counsel, Andrew I.
Telsey, P.C., who has agreed not to release any of the certificates
until the Company has closed a merger or acquisition. Any
liquidation by the current shareholders after the release from the
"lock-up" selling limitation period may have a depressive effect
22
<PAGE>
upon the trading prices of the Company's securities in any future
market which may develop.
In general, under Rule 144, a person (or persons whose shares
are aggregated) who has satisfied a one year holding period, under
certain circumstances, may sell within any three-month period a
number of shares which does not exceed the greater of one percent
of the then outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the
preceding three months, an affiliate of the Company.
Item 5. Indemnification of Directors and Officers.
The Company's Articles of Incorporation and Bylaws do not
provide for the indemnification of officers and directors or any
other persons. The laws of the State of Idaho provide that a
corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or as serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement
in connection with such threatened, pending or completed suits or
proceedings, except in relation to matters with respect to which
such persons shall be determined not to have acted in good faith
and in the best interests of the corporation. With respect to
matters as to which a corporation's officers and directors and
others are determined to be liable for misconduct or negligence,
including gross negligence in the performance of their duties to a
corporation, Idaho also law provides for indemnification only to
the extent that the court in which the action or suit is brought
determines that such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to officers, directors or persons
controlling the Company pursuant to the foregoing, the Company has
been informed that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act, and is therefore unenforceable.
23
<PAGE>
PART F/S
Financial Statements.
The following financial statements are attached to this report
and filed as a part thereof. See page 25.
1) Table of Contents - Financial Statements
2) Report of Independent Auditor
3) Balance Sheet
4) Statement of Operations
5) Statement of Cash Flow
6) Statement of Shareholders' Equity
7) Notes to Financial Statements
24
<PAGE>
SILVER QUEST, INC.
(A Development Stage Company)
Audited Financial Statements
For the Years Ended December 31, 1996 and 1995
and the Interim Period Ended September 30, 1997
and the Period January 1, 1995 (Inception) Through September 30, 1997
25
<PAGE>
SILVER QUEST, INC.
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flow 4
Statement of Shareholders' Equity 5
Notes to the Financial Statements 6-7
26
<PAGE>
Kish Leake & Associates, P.C.
Certified Public Accountants
J.D. Kish, C.P.A., M.B.A. 7901 E. Belleview Ave., Suite 220
James D. Leake, C.P.A., M.T. Englewood, Colorado 80111
------------------- Telephone (303) 779-5006
Facsimile (303) 779-5724
Independent Auditor's Report
----------------------------
We have audited the accompanying balance sheet of Silver Quest, Inc. (a
development stage company), as of December 31, 1996 and the interim period ended
September 30, 1997 and the related statements of income, shareholders' equity,
and cash flows for the fiscal years ended December 31, 1996 and 1995, the
interim period ended September 30, 1997 and the period January 1, 1995
(inception) through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Silver Quest, Inc. at December
31, 1996 and the interim period ended September 30, 1997 and the results of its
operations and its cash flows for the fiscal years ended December 31, 1996 and
1995, the interim period ended September 30, 1997, and the period January 1,
1995 (inception) through September 30, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The deficiency in working capital as
of September 30, 1997 raise substantial doubt about its ability to continue as
a going concern. Management's plans concerning these matters are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
s/Kish, Leake & Associates, P.C.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
November 20, 1997
-1-
27
<PAGE>
<TABLE>
Silver Quest, Inc.
(A Development Stage Company)
Balance Sheet
______________________________________________________________________________
<CAPTION>
September December
30, 1997 31, 1996
--------- ---------
<S> <C> <C>
ASSETS $ 0 $ 0
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts Payable 6,500 1,250
--------- ---------
SHAREHOLDERS' EQUITY
Common Stock, .01 Par Value
Authorized 50,000,000 Shares; Issued
And Outstanding 345,000 Shares 3,450 3,450
Additional Paid In Capital 12,861 8,111
Retained Deficit (22,811) (12,811)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (6,500) (1,250)
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 0 $ 0
========= =========
<FN>
The Accompanying Notes Are An Integral Part Of These Financial
Statements.
</TABLE>
-2-
28
<PAGE>
<TABLE>
Silver Quest, Inc.
(A Development Stage Company)
Statement Of Operations
______________________________________________________________________________
<CAPTION>
January
Nine Month 1, 1995
Interim Period (Inception)
Ended through
September December December September
30, 1997 31, 1996 31, 1995 30, 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
EXPENSES
Professional Fees 10,000 1,250 0 11,250
-------- -------- -------- --------
Total 10,000 1,250 0 11,250
======== ======== ======== ========
Net (Loss) ($ 10,000) ($ 1,250) $ 0 ($ 11,250)
======== ======== ======== ========
Net (Loss) Per
Common Share ($0.03) ($0.00) $0.00 ($0.03)
======== ======== ======== ========
Common Shares
Outstanding 345,000 345,000 345,000 345,000
======== ======== ======== ========
<FN>
The Accompanying Notes Are An Integral Part Of These Financial
Statements.
</TABLE>
-3-
29
<PAGE>
<TABLE>
Silver Quest, Inc.
(A Development Stage Company)
Statement Of Cash Flows
______________________________________________________________________________
<CAPTION>
January
Nine Month 1, 1995
Interim Period (Inception)
Ended through
September December December September
30, 1997 1996 1995 30, 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net (Loss) Accumulated
During The Development
Stage ($ 10,000) ($ 1,250) $ 0 ($ 11,250)
Items Not Affecting Cash Flow:
Expenses Paid By Shareholders'
On Behalf Of The Company 4,750 0 0 4,750
Increase In Accounts Payable $ 5,250 $ 1,250 0 6,500
-------- -------- -------- --------
Cash Flows From Operations 0 0 0 0
-------- -------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES 0 0 0 0
-------- -------- -------- --------
Cash Flows From Financing 0 0 0 0
-------- -------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES 0 0 0 0
-------- -------- -------- --------
Cash Flows From Investing 0 0 0 0
-------- -------- -------- --------
Net Increase In Cash 0 0 0 0
Cash At Beginning Of Period 0 0 0 0
-------- -------- -------- --------
Cash At End Of Period $ 0 $ 0 $ 0 $ 0
======== ======== ======== ========
Non-Cash Activities:
Expenses Paid By Shareholders'
On Behalf Of The Company $ 4,750 $ 4,750 $ 0 $ 4,750
======== ======== ======== ========
<FN>
The Accompanying Notes Are An Integral Part Of These Financial
Statements.
</TABLE>
-4-
30
<PAGE>
<TABLE>
Silver Quest, Inc.
(A Development Stage Company)
Statement Of Shareholders' Equity
__________________________________________________________________________________
<CAPTION>
Number Of Additional
Common Common Paid-In Retained
Shares** Stock Capital Deficit Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance At December 31,
1994, 1995 345,000 $ 3,450 $ 8,111 ($ 11,561) $ 0
-------- -------- -------- -------- --------
Net Loss December 31, 1996 (1,250) (1,250)
Balance At December 31, 1996 345,000 3,450 8,111 (12,811) (1,250)
-------- -------- -------- -------- --------
Net Loss September 30, 1997 (10,000) (10,000)
Additional Paid In Capital 4,750 4,750
Balance At September 30, 1997 345,000 $ 3,450 $ 12,861 ($22,811) ($ 6,500)
======== ======== ======== ======== ========
** Reflects 10 for 1 Stock Split.
<FN>
The Accompanying Notes Are An Integral Part Of These Financial
Statements.
</TABLE>
-5-
31
<PAGE>
Silver Quest, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended December 31, 1996 and 1995
and the Interim Period Ended September 30, 1997
- -----------------------------------------------------
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
Organization:
On April 11, 1983, Silver Quest, Inc. (the Company) was incorporated under the
laws of Idaho for the purpose of engaging in the mining business. In December
1986 the Company ceased operations in the mining business.
On January 1, 1995 the Company's management decided to search for a merger or
acquisition candidate and therefore has entered into the development stage.
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The ability of the Company to continue as a going concern is
dependent upon an acquisition.
Developmental Stage:
The Company is currently in the developmental stage and has no significant
operations to date.
Statement of Cash Flows:
For the purpose of the statement of cash flows, the Company considers demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid for interest in the nine month interim period ended September 30, 1997
and the years ended December 31, 1996 and 1995 was $-0-. Cash paid for income
taxes in the nine month interim period ended September 30, 1997 and the years
ended December 31, 1996 and 1995 was $-0-.
Net (Loss) per Common Share:
Net (Loss) per common share is computed by dividing the net loss for the period
by the number of shares outstanding at the nine month interim period ended
September 30, 1997 and at December 31, 1996 and 1995.
-6-
32
<PAGE>
Silver Quest, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal years Ended December 31, 1996 and 1995
and the Interim Period Ended September 30, 1997
- -----------------------------------------------------
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Actual results could differ from those estimates.
Note 2 - Equity
- ----------------
The Company initially authorized 50,000 shares of $.01 par value common stock.
In July 1997 the board of directors of the Company approved a 10 to 1 forward
split making the outstanding common stock equal to 345,000 shares.
Note 3 - Related Party Events
- -----------------------------
The Company maintains a mailing address provided by an officer and director on
a cost free basis at their residence. No expense has been recorded as the value
of the address is considered immaterial.
Note 4 - Income Taxes
- ---------------------
At December 31, 1996 the Company had net operating loss carryforwards available
for financial statement and Federal income tax purposes of approximately $1,250
which, if not used, will expire in the year 2011.
The Company follows Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" (SFAS #109), which requires, among other things,
an asset and liability approach to calculating deferred income taxes. As of
December 31, 1996 and 1995 there is no material difference between recorded book
basis and tax basis. The Company has made no provision for income taxes because
there have been no operations generating taxable income for financial statement
or tax purposes.
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Silver Quest, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal years Ended December 31, 1996 and 1995
and the Interim period Ended September 30, 1997
- -----------------------------------------------------
The Company had a deferred tax asset of $250 as of December 31, 1996, and $2,250
as of the interim period ended September 30, 1997 primarily for its net
operating loss carryforward which has been fully reserved through a valuation
allowance. The change in valuation allowance for 1996 is $250 and for the
interim period ended September 30, 1997 $2,000.
Note 5 - Basis of Presentation
- ------------------------------
In the course of its development activities the Company has sustained continuing
losses and expects such losses to continue for the foreseeable future. The
Company's management plans on advancing funds on an as needed basis and in the
longer term, revenues from the operations of a merger candidate, if found. The
Company's ability to continue as a going concern is dependent on these
additional management advances, and, ultimately, upon achieving profitable
operations through a merger candidate.
Note 6 - Subsequent Events
- --------------------------
The Company will be filing a Form 10SB with the Securities and Exchange
Commission.
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<PAGE>
PART IV
Item 1. Exhibit Index
No. Sequential
___ Page No.
________
(3) Articles of Incorporation and Bylaws
3.1 Articles of Incorporation 36
3.2 Bylaws 43
(4) Instruments Defining the Rights of Holders
4.1 Copies of Form of Lock-up Agreements Executed
by the Company's Shareholders 63
(27) Financial Data Schedule
27.1 Financial Data Schedule 66
_____________________
35
<PAGE>
SILVER QUEST, INC.
_____________________________
EXHIBIT 3.1
_____________________________
ARTICLES OF INCORPORATION
_____________________________
36
<PAGE>
STATE OF IDAHO
CERTIFICATE OF INCORPORATION
OF
SILVER QUEST, INC.
I, PETE T. CENARRUSA, Secretary of State of the State of Idaho, hereby
certify that duplicate originals of Articles of Incorporation for the
incorporation of
SILVER QUEST, INC.
- ----------------------------------------------------------------------
duly signed pursuant to the provisions of the Idaho Business Corporation Act,
have been received in this office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I issue
this Certificate of Incorporation and attach hereto a duplicate original of
the Articles of Incorporation.
Dated: April 11, 1983
s/Pete T. Cenarrusa
SECRETARY OF STATE
[ S E A L ]
by:_________________________________________
37
<PAGE>
ARTICLES OF INCORPORATION
OF
SILVER QUEST, INC.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned
citizen of the United States of America, over the age of twenty-one
years, do hereby voluntarily form a domestic corporation under
and by virtue of the laws of the State of Idaho, and I do hereby
make, sign, acknowledge and file these Articles of Incorporation
as follows:
ARTICLE I.
The name of this corporation is, and shall be SILVER QUEST,
INC.
ARTICLE II.
The purpose or purposes for which the corporation is organized
are:
2.1 The transaction of any or all lawful business for which
corporations may be incorporated under the Idaho Business
Corporation Act.
ARTICLE III.
The corporate existence of this corporation shall be
perpetual.
ARTICLE IV.
The registered agent in the State of Idaho shall be Alden
Hull. The location of the corporation's registered office in the
State of Idaho shall be 415 Seventh Street, Wallace, Idaho 83873.
The post office address of the corporation's registered office in
the State of Idaho shall be P.O. Box 709, Wallace, Idaho 83873.
ARTICLE V.
This company shall be capitalized for $500,000.00. The
total authorized stock of this corporation shall be divided into
38
<PAGE>
50,000,000 shares, all of which shall be common stock with a par
value of one cent ($.01) per share. Said shares shall be
non-assessable and shall be of the same class and every share of
said stock shall be equal in all respects to every other of said
shares, and there shall be no preemptive rights.
The said shares may be issued and sold from time to time by
the corporation for such consideration and upon such terms as
may, from time to time, be fixed by the Board of Directors
without action by the stockholders.
Notwithstanding the provisions of Section 30-1-26, Idaho
Code, the Board of Directors of this corporation shall have power
and authority from time to time to authorize the sale of, and to
sell for cash or otherwise, all or any portion of the unissued
and/or of the treasury stock of this corporation without said
stock, or any thereof, being first offered to the shareholders of
this corporation.
ARTICLE VI.
The corporate powers of this corporation shall be vested in
a Board of Directors of not less than three (3) and no more than
seven (7) members, who shall be elected annually by the shareholders,
and who shall serve until the election and qualification of
their successors. A Director of this corporation need not be a
shareholder therein. Directors who are to serve for the first
corporation year shall be selected by the incorporator. Unless
otherwise determined by the shareholders, the Board of Directors
by resolution, shall from time to time fix the number of directors
within the limit herein Provided. Three (3) shall constitute the
initial board.
ARTICLE VII.
The name and post office address of the incorporator are as
-2-
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<PAGE>
follows:
Name Address
Alden Hull P.O. Box 709
Wallace, Idaho 83873
ARTICLE VIII.
The names and addresses of the initial Directors are as
follows:
Name Address
Piatt Hull P.O. Box 709
Wallace, Idaho 83873
Lowell Miller 514 Botham Avenue
St. Joseph, Michigan 49085
John Lovejoy 15304 East Monmouth Place
Auroa, Colorado 80015
ARTICLE IX.
In addition to the power conferred upon the shareholders by
law, to make, amend or repeal By-Laws for this corporation, the
Directors shall have the power to repeal and amend the By-Laws
and adopt new By-Laws, but such powers may be executed only by a
majority of the whole Board of Directors.
ARTICLE X.
A director or officer of the corporation shall not, in the
absence of actual fraud, be disqualified by his office from dealing
or contracting with the corporation, either as vendor, purchaser,
or otherwise; and in the absence of actual fraud no transaction
or contract of the corporation shall be void or voidable by reason
of the fact that any director or officer, or firm of which any
director or officer is a member, or any other corporation of
which any director or officer is a shareholder, officer or director,
is in anyway interested in such transaction or contract; provided,
that such transaction or contract is, or shall be authorized,
-3-
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<PAGE>
ratified or approved (1) by a vote of a majority of a quorum of
the Board of Directors, or of the Executive Committee, if any,
counting for the purpose of determining the existence of such
majority or quorum, any Director, when present, who is so interested,
or who is a member of a firm so interested; or (2) at a stockholders
meeting by a vote of a majority of the outstanding shares of
stock of the corporation represented at such meeting and then
entitled to vote, or by writing or writings signed by a majority
of such holders of stock which shall have the same force and
effect as though such corporation, ratification or approval were
made by the stockholders; and no director or officer shall be
liable to account to the corporation for any profits realized by
him through any such transaction or contract of the corporation
authorized, ratified or approved, as aforesaid, by reason of the
fact that he may be, or any firm of which he is a member, or any
corporation of which he is a shareholder, officer or director,
was interested in such transaction. Nothing in this paragraph
contained shall create any liability in the events above mentioned,
or prevent the authorization, ratification or approval of such
contracts or transactions in any other manner permitted by
law, or invalidate or made voidable any contract or transaction
which would be valid without reference to the provisions of this
paragraph.
IN WITNESS WHEREOF, I have hereunto set my hand in
quadruplicate this 21st day of March, 1983.
s/Alden Hull
_______________________________
-4-
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<PAGE>
STATE OF IDAHO )
) ss
County of Shoshone )
I, MELISSA SCHEFFELMAIER, a notary public, do hereby certify
that on this 21st day of March, 1983, personally appeared
before me, ALDEN HULL, who being by me first duly sworn, declared
that he is the person who signed the foregoing document as
incorporator, and that the statements therein contained are true.
s/Melissa Scheffelmaier
-----------------------------------
Notary Public in and for the State of
Idaho, Residing at: Wallace
Lifetime Commission
42
<PAGE>
SILVER QUEST, INC.
____________________________
EXHIBIT 3.2
____________________________
BYLAWS
____________________________
43
<PAGE>
BY-LAWS
OF
SILVER QUEST, INC.
______________________
ARTICLE I. OFFICES
The principal office of the corporation in the State of
Idaho shall be located in the City of Wallace, County of
Shoshone. The Corporation may have such other offices,
either within or without the State of Idaho, as the board of
directors may designate or as the business of the corporation may
require from time to time.
The registered office of the corporation required by the
Idaho Business Corporation Act to be maintained in the State of
Idaho may be, but need not be, identical with the principal
office of the State of Idaho, and the address of the registered
office may be changed from time to time by the board of directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders shall be held on the first Monday in the month of
April in each year, beginning with the year 1984, at the hour of
2:00 o'clock p.m., or at such other time on such other day within
such month as shall be fixed by the board of directors, for the
purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed
for the annual meeting shall be a legal holiday in the State of
Idaho, such meeting shall be held on the next succeeding business
day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or
at any adjournment thereof, the board of directors shall cause
44
<PAGE>
the election to be held at a special meeting of the shareholders
as soon thereafter as conveniently may be.
Section 2. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise
prescribed by statute, may be called by the president or by the
board of directors, and shall be called by the president at the
request of the holders of not less than one-fifth of all
outstanding shares of the corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The board of directors may
designate any place, either within or without the State of Idaho,
as the place of meeting for any annual meeting or for any special
meeting called by the board of directors. A waiver of notice
signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Idaho,
as the place for the holding of such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the corporation in
the State of Idaho.
Section 4. Notice of Meeting. Written notice stating the
place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called,
shall, unless otherwise prescribed by statute, be delivered not
less than ten nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of
the president, or the secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the stock
-2-
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<PAGE>
transfer books of the corporation, or at such other last known
address of which the corporation may have notice, with postage
thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record
Date. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any
adjournment thereof, or shareholders entitled to receive payment
of any dividend, or in order to make a determination of shareholders
for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be
closed for a stated period but not to exceed, in any case, fifty
days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for
at least ten days immediately preceding such meeting. In lieu of
closing the stock transfer books, the board of directors may fix
in advance a date as the record date for any such determination
of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. If the stock
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this
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46
<PAGE>
section, such determination shall apply to any adjournment
thereof.
Section 6. Voting Record. The officer or agent having
charge of the stock transfer books for shares of the corporation
shall make a complete record of the shareholders entitled to vote
at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the
number of shares held by each. Such record shall be produced and
kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
Section 7. Quorum. A majority of the outstanding
shares of the corporation entitled to vote, represented
in person or by proxy, shall constitute a quorum of a meeting of
shareholders, but in no event shall a quorum consist of less than
one-third of the shares entitled to vote at the meeting. If a
quorum is present at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a
quorum.
Section 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before
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<PAGE>
Section 7. Quorum. A majority of the outstanding
shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum of a meeting of shareholders,
but in no event shall a quorum consist of less than one-third of
the shares entitled to vote at the meeting. If a quorum is
present at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The shareholders
present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before
or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise
provided in the proxy.
Section 9. Voting of Shares. Subject to the provisions of
Section 12 of this Article II, each outstanding share entitled to
vote shall be entitled to one vote upon each matter submitted to
vote at a meeting of shareholders.
Section 10. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by such
officer, agent or proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provision, as the board of
directors of such other corporation may determine.
-5-
48
<PAGE>
Shares held by the administrator, personal representative,
guardian or conservator may be voted by him, either in person or
by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in
person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his
name.
Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name if authority so to do be contained in the
appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Neither treasury shares of its own stock held by the
corporation, nor shares held by another corporation if a majority
of the shares entitled to vote for the election of directors of
such other corporation are held by the corporation, shall be
voted at any meeting or counted in determining the total number
of outstanding shares at any given time for purposes of any
meeting.
Section 11. Informal Action by Shareholders. Any action
required or permitted to be taken at a meeting of the shareholders
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
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<PAGE>
Section 12. Cumulative Voting. At each election for
directors every shareholder entitled to vote at such election
shall have the right to vote, in person or by proxy, the number
of shares owned by him for as many persons as there are directors
to be elected and for whose election he has a right to vote, or
to cumulate his votes by giving one candidate as many votes as
the number of such directors multiplied by the number of his
shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed by its board of directors.
Section 2. Number, Tenure and Qualifications. The number
of directors of the corporation shall be not less than three (3)
and no more than seven (7) members. Each director shall hold
office until the next annual meeting of shareholders and until
his successor shall have been elected and qualified. Directors
need not be residents of the State of Idaho or shareholders of
the corporation.
Section 3. Regular Meetings. A regular meeting of the
board of directors shall be held without other notice than this
by-law immediately after, and at the same place as, the annual
meeting of shareholders. The board of directors may provide, by
resolution, the time and place, either within or without the
State of Idaho, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the board
of directors may be called by or at the request of the president
or any two directors. The person or persons authorized to call
special meetings of the board of directors may fix any place,
either within or without the State of Idaho, as the place for
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<PAGE>
holding any special meeting of the board of directors called by
them.
Section 5. Notice. Notice of any special meeting shall be
given at least three days previously thereto by written notice
delivered personally or mailed to each director at his business
address, or by telegram. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, so
addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may
waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
Section 6. Quorum. A majority of the number of directors
fixed by Section 2 of this Article III shall constitute a quorum
for the transaction of business at any meeting of the board of
directors, but if less than such majority is present at a
meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
Section 7. Manner of Acting. The act of the majority of
the directors present at a meeting at which a quorum is present
shall be the act of the board of directors.
Section 8. Action without a meeting. Any action required
or permitted to be taken by the board of directors at a meeting
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<PAGE>
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the
directors.
Section 9. Vacancies. Any vacancy occurring in the board
of directors may be filled by the affirmative vote of a majority
of the remaining directors though less than a quorum of the board
of directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number
of directors may be filled by election by the board of directors
for a term of office continuing only until the next election of
directors by the shareholders.
Section 10. Compensation. By resolution of the board
of directors, each director may be paid his expenses, if
any, of attendance at each meeting of the board of directors,
and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the board of directors or
both. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor.
Section 11. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of
directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director
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<PAGE>
who voted in favor of such action.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation shall
be a president, one or more vice-presidents (the number thereof
to be determined by the board of directors), a secretary, and a
treasurer, each of whom shall be elected by the board of directors.
Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the board of directors.
Any two or more offices may be held by the same person, except
the offices of president and secretary.
Section 2. Election and term of Office. The officers of
the corporation to be elected by the board of directors shall be
elected annually by the board of directors at the first meeting
of the board of directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified
or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by
the board of directors whenever in its judgment, the best
interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may
be filled by the board of directors for the unexpired portion of
the term.
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<PAGE>
Section 5. President. The president shall be the principal
executive officer of the corporation and, subject to the control
of the board of directors, shall in general supervise and control
all of the business and affairs of the corporation. He shall,
when present, preside at all meetings of the shareholders and of
the board of directors. He may sign, with the secretary or any
other proper officer of the corporation thereunto authorized by
the board of directors, certificates for shares of the corporation
any deeds, mortgages, bonds, contracts, or other instruments
which the board of directors has authorized to be executed,
except in cases where the signing and execution thereof shall be
expressly delegated by the board of directors or by these By-Laws
to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed; and in
general shall perform all duties incident to the office of
president and such other duties as may be prescribed by the board
of directors from time to time.
Section 6. The Vice-Presidents. In the absence of the
president or in the event of his death, inability or refusal to
act, the vice-president (or in the event there be more than one
vice-president, the vice-presidents in the order designated at
the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. Any
vice-president may sign, with the secretary or any assistant
secretary, certificates for shares of the corporation; and shall
perform such other duties as from time to time may be assigned to
him by the president or by the board of directors.
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<PAGE>
Section 7. The Secretary. The secretary shall: (a) keep
the minutes of the proceedings of the shareholders and of the
board of directors in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-Laws or as required by law; (c)
be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed
to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which
shall be furnished to the secretary by such shareholder; (e) sign
with the president, or a vice-president, certificates for shares of
the corporation, the issuance of which shall have been
authorized by resolution of the board of directors; (f) have
general charge of the stock transfer books of the corporation;
and (g) in general perform all duties incident to the office of
secretary and such other duties as from time to time may be
assigned to him by the president or by the board of directors.
Section 8. The Treasurer. The treasurer shall: (a) have
charge and custody of and be responsible for all funds and
securities of the corporation; (b) receive and give receipts for
moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as
shall be selected in accordance with the provisions of Article
V of these By-Laws; and (c) in general perform all of the duties
incident to the office of treasurer and such other duties as from
time to time may be assigned to him by the president or by the
board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his
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<PAGE>
duties in such sum and with such surety or sureties as the board
of directors shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the board of
directors, may sign with the president or a vice-president
certificates for shares of the corporation the issuance of which
shall have been authorized by a resolution of the board of
directors. The assistant treasurers shall respectively, if
required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as
the board of directors shall determine. The assistant secretaries
and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.
Section 10. Salaries. The salaries of the officers shall
be fixed from time to time by the board of directors and no
officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize
any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general
or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf
of the corporation and no evidences of indebtedness shall be
issued in its name unless authorized by a resolution of the board
of directors. Such authority may be general or confined to
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<PAGE>
specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the
credit of the corporation in such banks, trust companies or other
depositories as the board of directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates
representing shares of the corporation shall be in such form as
shall be determined by the board of directors. Such certificates
shall be signed by the president or a vice-president and by the
secretary or an assistant secretary and sealed with the corporate
seal or a facsimile thereof. The signatures of such officers
upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or one of its employees. Each
certificate for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom
the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificates
shall be issued until the former certificate for a like number
of shares shall have been surrendered and cancelled, except that
in case of a lost, destroyed or mutilated certificate a new one
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<PAGE>
may be issued therefor upon such terms and indemnity to the
corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificates
for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the first
day of January and end on the thirty first day of December in
each year.
ARTICLE VIII. DIVIDENDS
The board of directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in
the manner, and upon the terms and conditions provided by law and
its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The corporate seal of the corporation shall consist of two
concentric circles, between which shall be the name of the
corporation, in the center of which shall be inscribed the year of
its incorporation and the words "Corporate Seal, State of Idaho",
said seal to be in the form as shown by the impression to
the right.
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<PAGE>
In lieu of the corporate seal, when so authorized by the
Board of Directors, a facsimile thereof may be impressed or
affixed or reproduced.
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder
or director of the corporation under the provisions of these ByLaws
or under the provisions of the Articles of Incorporation or
under the provisions of the Idaho Business Corporation Act, a
waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new
By-Laws may be adopted by the board of directors or by the
shareholders at any regular or special meeting.
ARTICLE XII. EXECUTIVE COMMITTEE
Section 1. Appointment. The board of directors by resolution
adopted by a majority of the full board, may designate two or
more of its members to constitute an executive committee. The
designation of such committee and the delegation thereto of
authority shall not operate to relieve the board of directors, or
any member thereof, of any responsibility imposed by law.
Section 2. Authority. The executive committee, when the
board of directors is not in session shall have and may exercise
all of the authority of the board of directors except to the
extent, if any, that such authority shall be limited by the
resolution appointing the executive committee and except also
that the executive committee shall not have the authority of the
board of directors in reference to amending the articles of
incorporation, adopting a plan of merger or consolidation,
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<PAGE>
recommending to the shareholders the sale, lease or other
disposition of all or substantially all of the property and
assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a
voluntary dissolution of the corporation of a revocation thereof,
or amending the By-Laws of the corporation.
Section 3. Tenure and Qualifications. Each member of the
executive committee shall hold office until the next regular annual
meeting of the board of directors following his designation
and until his successor is designated as a member of the
executive committee and is elected and qualified.
Section 4. Meetings. Regular meetings of the executive
committee may be held without notice at such times and places as
the executive committee may fix from time to time by resolution.
Special meetings of the executive committee may be called by any
member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written
or oral, and if mailed, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of
the executive committee at his business address. Any member of
the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive
committee need not state the business proposed to be transacted
at the meeting.
Section 5. Quorum. A majority of the members of the
executive committee shall constitute a quorum for the transaction
of business at any meeting thereof and action of the executive
committee must be authorized by the affirmative vote of a
majority of the members present at a meeting at which a quorum is
present.
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<PAGE>
Section 6. Action Without a Meeting. Any action required
or permitted to be taken by the executive committee at a meeting
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the members of
the executive committee.
Section 7. Vacancies. Any vacancy in the executive
committee may be filled by a resolution adopted by a majority of
the full board of directors.
Section 8. Resignations and Removal. Any member of the
executive committee may be removed at any time with or without
cause by resolution adopted by a majority of the full board of
directors. Any member of the executive committee may resign from
the executive committee at any time by giving written notice to
the president or secretary of the corporation, and unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect
a presiding officer from its members and may fix its own rules of
procedure which shall not be inconsistent with these By-Laws. It
shall keep regular minutes of its proceedings and report the same
to the board of directors for its information at the meeting
thereof held next after the proceedings shall have been taken.
The foregoing By-Laws were regularly adopted at the first
meeting of the Directors of the corporation held on the 29th day of
February, 1984 at Wallace, Idaho.
s/Lowell S. Miller
-----------------------------------
Chairman of Meeting of Directors
s/Piatt Hull
-----------------------------------
Secretary of Meeting of Directors
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<PAGE>
I, the undersigned, Incorporator of the above named
corporation do hereby adopt the foregoing code of By-Laws.
s/Alden Hull
-----------------------------------
We, the undersigned, constituting (a) a majority of the
Board of Directors, and (b) the Secretary of the above named
corporation, certify that the foregoing is a true and exact copy
of the By-Laws of the Corporation, duly adopted at a meeting of
the Directors of the Corporation held on the 29th day of
February, 1984.
s/Lowell S. Miller
-----------------------------------
-----------------------------------
-----------------------------------
s/Piatt Hull
-----------------------------------
Secretary of the Corporation
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<PAGE>
SILVER QUEST, INC.
___________________________
EXHIBIT 4.1
___________________________
FORM OF
SHAREHOLDER LOCK-UP LETTER
____________________________
63
<PAGE>
____________________________, 1997
Board of Directors
Silver Quest, Inc.
15304 E. Monmouth Place
Aurora, Colorado 80015
Gentlemen:
The undersigned, a beneficial owner of the common stock of Silver Quest,
Inc. (the "Company"), par value $0.01 per share (the "Common Stock"),
understands that the Company has filed with the U.S. Securities and Exchange
Commission a registration statement on Form 10-SB (File No. )
(the "Registration Statement"), for the registration of the Company's Common
Stock. As part of the disclosure included in the Registration Statement, the
Company has affirmatively stated that there will be no trading of the Company's
securities until such time as the Company successfully implements its business
plan as described in such Registration Statement, consummating a merger or
acquisition.
In order to insure that the aforesaid disclosure is adhered to, the
undersigned agrees, for the benefit of the Company, that he/she will not offer
to sell, assign, pledge, hypothecate, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of the Common Stock of
the Company owned by him/her, or subsequently acquired through the exercise of
any options, warrants or rights, or conversion of any other security, grant
options, rights or warrants with respect to any such shares of Common Stock,
until the Company successfully closes a merger or acquisition. Furthermore, the
undersigned will permit all certificates evidencing his/her shares to be
endorsed with the appropriate restrictive legends and will consent to the
placement of appropriate stop transfer orders with the transfer agent of the
Company.
Very truly yours,
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
[Signature of Holder]
_____________________________________
[Please Print Name(s)]
_____________________________________
[Number of Shares of Common Stock Owned]
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the Registrant has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SILVER QUEST, INC.
(Registrant)
Date: December 19, 1997
By: s/Lowell S. Miller
---------------------------
Lowell S. Miller,
President
65
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996, AND UNAUDITED
FINANCIAL STATEMENTS FOR THE NINE MONTH INTERIM PERIOD ENDED SEPTEMBER 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 0
<CURRENT-LIABILITIES> 1,250 6,500
<BONDS> 0 0
0 0
0 0
<COMMON> 3,450 3,450
<OTHER-SE> (4,700) (9,950)
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,250 10,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,250) (10,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,250) (10,000)
<EPS-PRIMARY> 0 .03
<EPS-DILUTED> 0 0
</TABLE>
