U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
CAPTEX CAPITAL, INC
--------------------
(Name of Small Business Issuer)
Texas 98-0116179
- -------------------------------- ------------------------------
(State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization) Number
c/o John Mackay
2160-650 West Georgia Street, Vancouver, B.C. Canada V6B 4N7
- ----------------------------------------------------------------------------
(Address of Principal Executive Offices including Zip Code)
(604) 687-1919
--------------------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act: Common Stock, $.001
Par Value
(Title of Class)
<PAGE>
Page 2
TABLE OF CONTENTS
PART 1
------
ITEM 1. BUSINESS 4
History and Organization 4
Proposed Business 4
Risk Factors 5
ITEM 2. PLAN OF OPERATION 11
General Business Plan 11
Structure of Acquisition 13
No Dividend 14
Employees 14
Competition 14
Liquidity and Capital Resources 14
ITEM 3. DESCRIPTION OF PROPERTY 14
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 15
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTER
AND CONTROL PERSONS 15
ITEM 6. EXECUTIVE COMPENSATION 17
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 17
ITEM 8. DESCRIPTION OF SECURITIES 17
PART II
-------
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 18
ITEM 2. LEGAL PROCEEDINGS 19
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS AND FINANCIAL DISCLOSURE 19
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 19
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 19
PART F/S
--------
FINANCIAL STATEMENTS 21
<PAGE>
Page 3
PART 111
--------
ITEMS 1& 2 INDEX TO AND DESCRIPTION OF EXHIBITS 28
<PAGE>
Page 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
HISTORY AND ORGANIZATION
Captex Capital, Inc. (the "Company"), was organized under the laws of the
State of Texas on November 5, 1990 under the name Strand Capital, Inc. On
October 26, 1999 the Company changed its name to Captex Capital, Inc., forward
split its issued and outstanding share capital on a 1 to 5,000 basis (the
"Forward Split"), increased its authorized capital to 50,000,000 common shares
and changed the par value of it's shares from $1.00 per share to $.001 per
share.
The Company was organized for the purposes of creating a corporate vehicle
to locate and acquire an operating business entity which management believes is
a suitable acquisition candidate (a "target company"). The Company will not
restrict its search to any specific business, industry or geographical location.
The Company does not currently engage in any business activities that
provide any cash flow. The costs of identifying, investigating, and analyzing
business combinations will be paid with money in the Company's treasury or
loaned by management.
Although the Company was under no obligation to do so, it has voluntarily
filed this registration statement because it believes that it can better
facilitate its business goals if it were a "reporting issuer" under the
Securities Exchange Act of 1934 (the "Exchange Act").
PROPOSED BUSINESS
The Company will seek to locate an acquire a target company which is the
opinion of the Company's management (sometimes referred to as the "Management")
offers long term growth potential. The Company will not restrict its search to
any specific business, industry or geographical location. The Company may seek
to acquire a target company which has just commenced operations, or which works
to avail itself of the benefits of being a "reporting issuer" in order to
facilitate capital formation to expand into new products or market.
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. These are commonly thought to include the
following:
* the ability to use registered securities to make acquisitions of
assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
* a presence in the United States capital market.
A target company, if any, which may be interested in a business combination
with the Company may include the following:
<PAGE>
Page 5
* a company for which a primary purpose of becoming public is the use
of its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public
market to satisfy redemption requirements under a qualified Employee
Stock Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
There is no assurances that the Company will be able to effect an
acquisition of a target company. In addition, at this time, no specifics as to
an acquisition or as to the nature of the target company can be provided.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the
following:
<PAGE>
1. Anticipated Change in Control and Management. Upon the successful
completion of the acquisition of a target company, the Company anticipates that
it will have to issue to the target company or its shareholders some authorized
but unissued common stock which, when issued will comprise a majority of the
Company's then issued and outstanding shares of common stock. Therefore, the
Company anticipates that upon the closing of the acquisition of a target
company, the Company will no longer be controlled by the current shareholders.
In addition, existing management and directors may resign. The Company cannot
give any assurance that the experience or qualifications of new management, as
it relates to either in the operation of the Company's activities or in the
operation of the business, assets or property being acquired, will be adequate
for such purposes.
2. Conflict of Interest - Management's Fiduciary Duties. A conflict of
interest may arise between management's personal financial benefit and
management's fiduciary duty to you.
The Company's director and two officers are or may become officers, directors,
controlling shareholders and/or partners of other entities engaged in a variety
of businesses. Messers John Mackay and Rod Saunders are engaged in other
business activities. Accordingly, the amount of time they will devote to the
Company's business will only be about five (5) to ten (10) hours per month.
There exists potential conflicts of interest including allocation of time
between the Company and its representatives' other business interests.
3. Experience of Management; Consultants. Although Management has
general business experience, it has limited experience in effecting business
combinations and may not have any significant experience in acquiring or
operating certain business interests that the company might choose to acquire.
Management does not have, nor does it presently intend to enter into, any
contracts or agreements with any consultants or advisors with respect to its
proposed business activities. Consequently, Management has not established the
criteria that will be used to hire independent consultants regarding their
<PAGE>
Page 6
experience, the services to be provided, the term of service, etc., and no
assurance can be made that the Company will be able to obtain such assistance on
acceptable terms.
4. Potential Future Rule 144 Sales. Of the 50,000,000 shares of the
Company's Common Stock authorized, there are presently issued and outstanding
5,000,000 shares; of which 2,750,000 shares are "restricted securities" as that
term is defined under the Securities Act of 1933 (the "Securities Act"), and in
the future may be sold in compliance with Rule 144 of the Act, or pursuant to a
Registration Statement filed under the Act. Rule 144 provides, in essence, that
a person holding restricted securities for a period of 1 year may sell those
securities in unsolicited brokerage transactions of in transactions with a
market maker, in an amount equal to 1% of our outstanding common stock every 3
months. Additionally, Rule 144 requires that an issuer of securities make
available if the issuer satisfies the reporting requirements of Sections 13 or
15(d) of the Exchange Act and of Rule 15c2-11 thereunder. Rule 144 also
permits, under certain circumstances, that sale of shares by a person who is not
an affiliate of ours and who has satisfied a 2 two year holding period without
any quantity limitation and whether or not there is adequate current public
information available. Investors should be aware that sales under Rule 144, or
pursuant to a registration statement filed under the Securities Act, may have a
depressive effect on the market price of our common stock in any market that may
develop for such shares.
5. Possible Issuance of Additional Shares. The Company's Certificate of
Amendment of Certificate of Incorporation, authorizes the issuance of 50,000,000
shares of common stock. The Company's Board of Directors has the power to issue
any or all of such additional shares without stockholder approval for such
consideration as it deems. Management presently anticipates that it may choose
to issue a substantial amount of the Company's shares in connection with the
acquisition of a target business.
6. Risks of Leverage. There are currently no limitations relating to the
Company's ability to borrow funds to increase the amount of capital available to
it to effect a business combination or otherwise finance the operations of any
acquired business. The amount and nature of any borrowings by the Company will
depend on numerous factors, including the Company's capital requirements, the
Company's perceived ability to meet debt services on any such borrowings, and
then-prevailing conditions in the financial, if required or otherwise sought,
will be available on terms deemed to be commercially acceptable and in the best
interest of the Company's inability to borrow funds required to effect or
facilitate a business combination, or to provide funds for an additional
infusion of capital into an acquired business, may have a material adverse
affect on the Company's financial condition and future prospects.
Additionally, to the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks traditionally
associated with incurring of indebtedness, including:
- - if the Company's operating revenues after the acquisition were to be
insufficient to pay debt service, there would be a risk of default and
foreclosure on our assets.
- - if a loan agreement containing covenants is breached without a waiver or
renegotiation of the terms of that covenant, then the lender could have the
right to accelerate the payment of the indebtedness even if the Company has made
all principal and interest payments when due.
<PAGE>
Page 7
- - if the interest rate on a loan fluctuated or the loan was payable on
demand, the Company would bear the risk of variations in the interest rate or
demand for payment.
- - if the terms of a loan did not provide for amortization prior to
maturity of the full amount borrowed and the "balloon" payment could not be
refinanced at maturity on acceptable terms, we might be required to seek
additional financing and, to the extent that additional financing is not
available on acceptable terms, to liquidate the Company's assets.
7. Possible Need for Additional Financing. The Company cannot ascertain
with any degree of certainty the capital requirements for an particular acquired
business inasmuch as the Company has not yet identified any acquisition
candidates. If the target company requires additional financing, such
additional financing (which, among other forms, could be derived from the public
or private offering of securities or from the acquisition of debt through
conventional bank financing), may not be available, due to, among other things,
the target company not having sufficient:
- credit or operating history;
- income stream;
- profit level;
- asset base eligible to be collateralized; or
- market for its securities.
Since no specific business has been targeted for acquisition, it is not possible
to predict the specific reasons why conventional private or public financing or
conventional bank financing might not become available. Although there are no
agreements between the Company and any of its officers and/or directors pursuant
to which we may borrow and such officers and/or directors are obligated to lend
the Company monies, there are no restrictions on our right to borrow money from
officers and directors. No stockholder approval is required in connection with
any such loan.
8. Penny Stock Rules. Under Rule 15g-9, a broker or dealer may not sell
a "penny stock" (as defined in Rule 3a51-1) to or effect the purchase of a penny
stock by any person unless:
(1) such sale or purchase is exempt from Rule 15g-9; or
(2) prior to the transaction the broker or dealer has (a) approved the
person's account for transaction in penny stocks in accordance with
Rule 15g-9 and (b) received from the person a written agreement to
the transaction setting forth the identity and quantity of the
penny stock to be purchased.
The United States Securities and Exchange Commission (the "Commission") adopted
regulations that generally define a penny stock to be any equity security other
than a security excluded from such definition by Rule 3a51-1. Such exemptions
include, but are not limited to (a) an equity security issued by an issuer that
has (i) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operations for at least three years; (ii) net tangible assets of at
least $5,000,000, if such issuer has been in continuous operation for less than
three years; or (iii) average revenue of at least $6,000,000 for the preceding
three years; (b) except for purposes of Section 7(b) of the Exchange Act and
Rule 419, any security that has a price of $5.00 or more; (c) and a security
that is authorized or approved for authorization upon notice of issuance for
<PAGE>
Page 8
quotation on the National Association of Securities ("NASD") Dealers Automated
Quotation System ("NASDAQ").
It is likely that the Company's common stock will be subject to the regulations
on penny stocks; consequently, the market liquidity for our common stock may be
adversely affected by such regulations. This, in turn, will affect shareholders
ability to sell his shares following the completion of an acquisition.
There is no current trading market for shares (the "Shares") the Company's
common stock and there can be no assurance that a trading market will develop,
or, if such a trading market does develop, that it will be sustained. The
Shares, to the extent that a market develops for the Shares at all, will likely
appear in what is customarily known as the "pink sheets" or on the NASD
over-the-counter Bulletin Board (the "OTCBB"), which may limit the marketability
and liquidity of the Shares.
To date, neither the Company nor anyone acting on behalf of the Company has
taken any affirmative steps to request or encourage any broker/dealer to act as
a market maker for our common stock. The Company has had no discussions or
understandings, with any "market makers" regarding the participation of any such
market maker in the future trading market, if any, in the Company's common
stock. Management expects that discussions in this area will ultimately be
initiated by the management in office after completion of the acquisition of a
target company.
9. Risks Associated with Operations in Foreign Countries. The Company's
business plan is to seek to acquire a target company. Management's discretion
is unrestricted, and the Company may participate in any business whatsoever that
may in the opinion of Management meet the Company's business objectives. The
Company may acquire a business outside the United States. The Company has not
limited the scope of its search to a particular region or country. Accordingly,
if the Company acquires a business located, or operating in a foreign
jurisdiction, the Company's operations may be adversely affected to the extent
of the existence of unstable economic, social and/or political conditions in
such foreign regions and countries.
10. No Operating History or Revenue and Minimal Assets. The Company has
had no operating history nor any revenues or earnings from operations. 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 target company. There
is no assurance that the Company can identify such a target company and
consummate such a business combination.
11. Speculative Nature of the 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 target company.
While management will prefer business combinations 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 will be dependent upon management of the
target company and numerous other factors beyond the Company's control.
<PAGE>
Page 9
12. 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 and acquisitions of business
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 merger or acquisition 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 with numerous other small public companies in seeking merger or
acquisition candidates.
13. No Agreement for Acquisition of a Target Company Combination. The
Company has no current arrangement, agreement or understanding with respect to
engaging in a merger with or acquisition of a specific business entity. There
can be no assurance that 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 that 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 company to have achieved, or
without which the Company would not consider a business combination with such
business entity. Accordingly, the Company may enter into a business combination
with a business entity having no significant operating history, losses, limited
or no potential for immediate earnings, limited assets, negative net worth or
other negative characteristics.
14. Reporting Requirements May Delay or Preclude Acquisition. Section 13
of the Securities Exchange Act of 1934 (the "Exchange Act") requires companies
subject thereto to provide certain information about significant acquisitions
including certified financial statements for the company acquired covering one
or two years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target companies to prepare such
financial statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the Company. Acquisition
prospects that do 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 Exchange Act are applicable.
15. Lack of Market Research or Marketing Organization. The Company has
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by the Company.
Even in the event demand exists for a merger or acquisition of the type
contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
16. 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 only one business entity. Consequently, the Company's
activities will be limited to those engaged in by the business entity 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.
<PAGE>
Page 10
17. Regulation under Investment Company Act. Although the Company will
be subject to regulation under the Exchange Act, 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 could subject the Company to material adverse
consequences.
18. Probable Change In Control and Management. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of a target company obtaining a controlling interest in
the Company. Any such business combination may require shareholders of the
Company to sell or transfer all or a portion of the Company's common stock held
by them. The resulting change in control of the Company will likely result in
removal of the present officer and director of the Company and a corresponding
reduction in or elimination of his participation in the future affairs of the
Company.
19. 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 company; 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.
20. Year 2000 Risks. Many existing computer programs use only two digits
to identify a year in such program's date field. These programs were designed
and developed without consideration of the impact of the change in the century
for which four digits will be required to accurately report the date. If not
corrected, many computer applications could fail or create erroneous results by
or following the year 2000 ("Year 2000 Problem"). Many of the computer programs
containing such date language problems have not been corrected by the companies
or governments operating such programs. It is impossible to predict what
computer programs will be effected, the impact any such computer disruption will
have on other industries or commerce or the severity or duration of a computer
disruption.
The Company does not have operations and does not maintain computer systems.
Before the Company enters into any business combination, it may inquire as to
the status of any target company's Year 2000 Problem, the steps such target
company has taken or intends to take to correct any such problem and the
probable impact on such target company of any computer disruption. However,
there can be no assurance that the Company will not acquire a target company
that has an uncorrected Year 2000 Problem or that any planned Year 2000 Problem
corrections will be sufficient. The extent of the Year 2000 Problem of a target
company may be impossible to ascertain and any impact on the Company will likely
be impossible to predict.
<PAGE>
Page 11
ITEM 2. MANAGEMENT'S DISCUSSION, ANALYSIS OR PLAN OF OPERATION
GENERAL BUSINESS PLAN
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire a target company which desires to seek the perceived
advantages of a corporation which has a class of securities registered under the
Exchange Act.
Management anticipates seeking out a target company through solicitation.
Such solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Management may engage in such solicitation
directly or may employ one or more other entities to conduct or assist in such
solicitation. Management and its affiliates pay referral fees to consultants
and others who refer target businesses for mergers into public companies in
which management and its affiliates have an interest. Payments are made if a
business combination occurs, and may consist of cash or a portion of the stock
in the Company retained by management and its affiliates, or both.
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. Management anticipates that it will be
able to participate in only one potential business venture because the Company
has nominal assets and limited financial resources. Please refer to "ITEM F/S.
FINANCIAL STATEMENTS." This lack of diversification should be considered a
substantial risk to the 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. Management believes
(but has not conducted any research to confirm) that there are business entities
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, increasing the opportunity
to use securities for acquisitions, providing liquidity for shareholders and
other factors. Business opportunities may be available 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
difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any 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
public company without incurring the cost and time required to conduct an
initial public offering. Management has not conducted market research and is
not aware of statistical data to support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
<PAGE>
Page 12
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management may 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 or acceptance of products, services, or trades; name
identification; and other relevant factors.
This discussion of the proposed criteria is not meant to be restrictive of
the Company's virtually unlimited discretion to search for and enter into
potential business opportunities.
The Exchange Act requires that any merger or acquisition candidate comply
with certain reporting requirements, which include providing audited financial
statements to be included in the reporting filings made under the Exchange Act.
The Company will not acquire or merge with any company for which audited
financial statements cannot be obtained at or within a reasonable period of time
after closing of the proposed transaction.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company 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 or the inability to
obtain an underwriter or to obtain an underwriter on satisfactory terms.
The Company will not restrict its search for any specific kind of business
entities, 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
business 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.
Management of the Company, which in all likelihood will not be experienced
in matters relating to the business of a target company, will rely upon its own
efforts in accomplishing the business purposes of the Company. Outside
consultants or advisors may be utilized by the Company to assist in the search
for qualified target companies. If the Company does retain such an outside
consultant or advisor, any cash fee earned by such person will need to be
assumed by the target company, as the Company has limited cash assets with which
to pay such obligation. No such consultant or advisor has been retained.
Following a business combination the Company may benefit from the services
of others in regard to accounting, legal services, underwriting and corporate
public relations. If requested by a target company, management may recommend
one or more underwriters, financial advisors, accountants, public relations
firms or other consultants to provide such services.
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued after
any business combination. Additionally, a target company may be presented to
the Company only on the condition that the services of a consultant or advisor
be continued after a merger or acquisition. Such preexisting agreements of
target companies for the continuation of the services of attorneys, accountants,
<PAGE>
Page 13
advisors or consultants could be a factor in the selection of a target company.
STRUCTURE OF ACQUISITION
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 a target company. It may also acquire
stock or assets of a target company. Upon consummation of a an acquisition, it
is likely that the present management and shareholders of the Company will no
longer be in control of the Company. In addition, it is likely that the
Company's officers and director will, as part of the terms of the acquisition
transaction, resign and be replaced by one or more new officers and directors.
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. 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 entered into an agreement for a business combination or has consummated a
business combination and the Company is no longer considered a blank check
company. The issuance of additional securities and their potential sale into
any trading market which may develop in the Company's securities may depress the
market value of the Company's securities in the future if such a market
develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351 or
368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for 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 with or acquisition of a target company. The percentage of 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 significant dilutive effect on the percentage
of shares held by the Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing and will
include miscellaneous other terms
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at or 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 Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements as
part of or within 60 days following its Form 8-K to be filed with the Securities
and Exchange Commission upon consummation of a merger or acquisition, as well as
<PAGE>
Page 14
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 Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of the
Company.
NO DIVIDENDS
The Company has not paid any dividends on its common stock; nor does the
Company intend to declare and pay dividends prior to the consummation of an
acquisition. The payment of dividends after any acquisition will be within the
discretion of the Company's then Board of Directors.
EMPLOYEES
The Company presently has no employees. The Company has two officers and
one director. Mr. John Mackay is the president and sole Director of the Company
and Mr. Rod Saunders is the Secretary. Both Mr. Mackay and Saunders are engaged
in other business activities, and the amount of time they will both devote to
the Company's business will only be between five (5) and ten (10) hours per
month each. Upon completion of the public offering, it is anticipated that
management will devote such time to our affairs each month as may be necessary
to carry on our business plans.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company has limited working capital and a deficit. The ability of the
Company to continue as a going concern is dependent upon its ability to obtain
adequate financing to reach profitably levels of operation. It is not possible
to predict whether financing efforts will be successful or it the Company will
attain profitable levels of operations. Mr. Mackay has agree to loan the
Company, on an as needed basis, up to $10,000 through December 31, 2000. The
Company anticipates that such amount will be (a) sufficient for payment of the
Company's operating expenses through December 31, 2000 and (b) be repaid upon
completion of the acquisition of a target business.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to acquire
any properties. The Company is presently using as a mailing address, at no
cost, the office of it's President 2160-650 West Georgia Street. Vancouver B.C.
Canada V6B 4N7. Such arrangement is expected to continue until completion of
the acquisition of a target company. See "Item 4. Security Ownership of Certain
Beneficial Owners and Management."
<PAGE>
Page 15
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known by the Company to be the
beneficial owner of five percent or more of the Company's Common Stock, all
directors individually and all directors and officers of the Company as a group.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NAME AND ADDRESS OF SHARES OF COMMON STOCK ATTRIBUTED APPROXIMATE PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIAL OWNER OWNERSHIP
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unigro U.S.A. Inc. 2,750,000 Frits Jelgersma 55%
1221 Lexington Court
El Dorado hills, CA 95762
- -----------------------------------------------------------------------------------------------
Carrie Nelson 450,000 NA 9%
639 Thurston Crt.
Port Moody B.C.
Canada V3H 4J4
- -----------------------------------------------------------------------------------------------
Lynne Tam 450,000 NA 9%
2433 West 47th Ave.
Vancouver, B.C.
Canada V6M 2N3
- -----------------------------------------------------------------------------------------------
John Mackay 450,000 NA 9%
2280 S.W. Marine Drive
Vancouver B.C.
Canada V6P 6C2
- -----------------------------------------------------------------------------------------------
Officers and Directors as a Group 450,000 NA 9%
(1 person)
- -----------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Set forth below is the name of each of the directors and officers of the
Company, all positions and offices with the Company held, the period during
which such person has never served as such, and the business experience during
at least the last five years:
Name Age Positions and Offices Held
---- --- --------------------------
John Mackay 49 President and Director(since inception)
Rod Saunders 39 Secretary (since May 1st 1996)
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officers and
director are not acting on behalf of nor will act at the direction of any other
person.
Mr. John Mackay is and since 1990 has been the President of Strand
Properties Corporation. Mr Mackay holds a Bachelor of Commerce degree and a
Bachelor of laws degree, both from the University of British Columbia.
Mr. Rod Saunders is and since 1990 has been the Vice President , Finance of
Strand Properties Corporation. Mr Saunders holds a Bachelor of Commerce degree
from the University of British Columbia and is a Certified Public Accountant and
<PAGE>
Page 16
a member of the Delaware Society of Certified Public Accountants.
Conflicts of Interest.
The Company's officers and sole director expect to organize other companies
of a similar nature and with a similar purpose as the Company. Consequently,
there are potential inherent conflicts of interest in acting as an officer and
director of the Company. Insofar as the officers and the sole director are
engaged in other business activities, he will devote only a minor amount of time
to the Company's affairs. The Company does not 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.
A conflict may arise in the event that another blank check and/or blind
pool company (a "blind pool company") with which management is affiliated is
formed and actively seeks a target company. It is anticipated that target
companies will be located for the Company and other blind pool companies in
chronological order of the date of formation of such blind pool companies or by
lot. However, any blank check companies that may be formed may differ from the
Company in certain items such as place of incorporation, number of shares and
shareholders, working capital, types of authorized securities, or other items.
It may be that a target company may be more suitable for or may prefer a certain
blind pool company formed after the Company. In such case, a business
combination might be negotiated on behalf of the more suitable or preferred
blind pool company regardless of date of formation or choice by lot. Mr. John
Mackay will be responsible for seeking, evaluating, negotiating and consummating
a business combination with a target company which may result in terms providing
benefits to Mr. John Mackay.
The Company may agree to pay finder's fees, as appropriate and allowed, to
unaffiliated persons who may bring a target company to the Company where that
reference results in a business combination. No finder's fee of any kind will
be paid by the Company to management or promoters of the Company or to their
affiliates. No loans of any type have, or will be, made by the Company to
management or promoters of the Company or to any of their associates or
affiliates.
Management has not adopted policies involving possible conflicts of
interest.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by Management to resolve conflicts of interest
in favor of the Company could result in liability of Management to the Company.
However, any attempt by shareholders to enforce a liability of Management to the
Company would most likely be prohibitively expensive and time consuming.
Investment Company Act of 1940.
Although the Company will be subject to regulation under the Securities Act
of 1933 (the "Securities Act") and the Exchange Act, 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 not obtained a formal
determination from the Commission as to the status of the Company under the
Investment Company Act of 1940. Any violation of such Investment Company Act
would subject the Company to material adverse consequences.
<PAGE>
Page 17
ITEM 6. EXECUTIVE COMPENSATION.
The Company's officers and director do not receive any compensation for
their services rendered to the Company, have not received such compensation in
the past, and are not accruing any compensation pursuant to any agreement with
the Company.
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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has no properties and at this time no agreements to acquire any
properties. The Company is presently using the office of it's President, John
Mackay, located at Suite 2160- 650 West Georgia St., Vancouver, B.C. Canada, at
no cost as the Company's office and mailing address. Such arrangement is
expected to continue until completion of the acquisition of a target company.
ITEM 8. DESCRIPTION OF SECURITIES.
On October 26, 1999, the Company effected a 5,000 to 1 stock split,
increased it's authorized capital to fifty million (50,000,000) shares of common
stock and reduced the par value of it's shares of common stock to $.001 per
share.
The Company is currently authorized to issue fifty million (50,000,000)
shares of common stock, no par value of $.001 per share of which 5,000,000
shares were issued and outstanding as of the date of this Registration
Statement. Each outstanding share of common stock entitles the holder to one
vote, either in person or by proxy, on all matters that may be voted upon by the
owners thereof at meetings of the stockholders.
The holders of common stock (i) have equal rights to dividends from funds
legally available therefor, when, as and if declared by the Board of Directors
of the Company; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights, and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote at
all meetings of stockholders.
Reports to Stockholders.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable after the end of
each fiscal year. Our fiscal year ends on August 31. In addition, we intend to
issue unaudited interim reports and financial statements on a quarterly basis.
Dividends.
The Company has not declared any dividends since inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future. The payment by the Company of dividends, if any, in the
future, rests within the discretion of our Board of Directors and will depend,
among other things, upon our earnings, capital requirements and financial
condition, as well as other relevant factors.
<PAGE>
Page 18
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. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue.
The National Securities Market Improvement Act of 1996 limited the
authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act of 1933, as amended
(the "Securities Act") of companies which file reports under Sections 13 or
15(d) of the Securities Exchange Act. The Company files such reports. As a
result, sales of the Company's common stock in the secondary trading market by
the holders thereof may be made pursuant to Section 4(1)of the Securities Act
(sales other than by an issuer, underwriter or broker).
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes 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 investing in penny stocks in both public offerings 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.
If, after a merger or acquisition, the Company does not meet the
qualifications for listing on the Nasdaq Stock Market Inc.'s SmallCap Market
("NASDAQ_SCM"), the Company's securities may be traded on the OTCBB. The OTCBB
market differs from national and regional stock exchanges in that it (1) is not
sited in a single location but operates through communication of bids, offers
and confirmations between broker-dealers and (2) securities admitted to
quotation are offered by one or more broker-dealers rather than the "specialist"
common to stock exchanges. The Company may seek to have its securities quoted
on the OTCBB or may offer its securities in what are commonly referred to as the
"pink sheets" of the National Quotation Bureau, Inc.
In order to qualify for listing on the NASDAQ-SCM, a company must have at
least (i) net tangible assets of $4,000,000 or market capitalization of
$50,000,000 or net income for two of the last three years of $750,000; (ii)
public float of 1,000,000 shares with a market value of $5,000,000; (iii) a bid
price of $4.00; (iv) three market makers; (v) 300 shareholders and (vi) an
operating history of one year or, if less than one year, $50,000,000 in market
<PAGE>
Page 19
capitalization. For continued listing on the Nasdaq SmallCap Market, a company
must have at least (i) net tangible assets of $2,000,000 or market
capitalization of $35,000,000 or net income for two of the last three years of
$500,000; (ii) a public float of 500,000 shares with a market value of
$1,000,000; (iii) a bid price of $1.00; (iv) two market makers; and (v) 300
shareholders.
If the Company is unable initially to satisfy the requirements for
quotation on the NASDAQ-SCM or becomes unable to satisfy the requirements for
continued quotation thereon, and trading, if any, is conducted in the OTCBB, 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.
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 its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has not sold any securities.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the General Corporation Law of the State of Texas
provides that a Texas corporation has the power, under specified circumstances,
to indemnify its directors, officers, employees and agents, against judgements,
penalties, fines, settlements, and reasonable expenses incurred in any action,
suit or proceeding: but if the person is found liable to the company or is found
liable on the basis that personal benefit was improperly received by the person,
the indemnification is limited to reasonable expenses actually incurred by the
person and shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct in the
performance of his duty to the company. The Articles of the Company may
restrict the circumstances under which a company is required or permitted to
indemnify a person.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
<PAGE>
Page 20
PART F/S
FINANCIAL STATEMENTS
Index
Page
- ----
Auditors Report dated September 24, 1999 21
Audited Balance Sheets as of August 31, 1999 and 1998 22
Audited Statement of Loss for the year ended August 31, 1999, 1998 and 1997 23
Audited Statement of Cash Flow for the year ended August 31, 1999, 1998 and
1997 24
Statement of Shareholder Equity (Deficit) for the year ended August 31,
1999, 1998, and 1997 25
Notes to Financial Statements 26
<PAGE>
Russell & Co.
AUDITORS' REPORT TO THE DIRECTORS OF:
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
We have audited the balance sheet of Strand Capital, Inc. as at August 31, 1999,
and August 31, 1998 and the statements of loss and shareholders' equity
(deficit) and cash flows for the years ended August 31, 1999, August 31, 1998
and August 31, 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 an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at August 31, 1999 and August
31, 1998 and the results of its operations and its cash flows for the years
ended August 31, 1999, August 31, 1998 and August 31, 1997 in accordance with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's negative working capital and deficit raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not contain any adjustments that might result from the
outcome of this uncertainty.
/s/ Russell & Co.
Chartered Accountant
West Vancouver, B.C.
Canada.
September 24, 1999
415 Gordon Ave., West Vancouver, B.C., V7T 1P4
Telephone: (604) 913-0405 - Fax: (604) 913-0406
<PAGE>
Page 22
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
Balance Sheet
as at August 31, 1999 and August 31, 1998
(U.S. DOLLARS)
1999 1998
Assets
Incorporation costs $ 1,000 $ 1,000
- ------------------- ------------- -------------
Total Assets $ 1,000 $ 1,000
============ ============= =============
Liabilities
Current liabilities
Accounts payable $ 2,000 $ -
---------------- ------------ -------------
Total Liabilities 2,000 -
------------ -------------
Shareholders' equity (deficit)
Share Capital
Authorized:
1,000 common shares with a par value
of $1.00 each
Issued and outstanding
1,000 common shares with a par value
of $1.00 at August 31, 1999 and
August 31, 1998 1,000 1,000
- ---------------- ------------ -------------
1,000 1,000
Accumulated Deficit (2,000) -
- -------------------- ------------ -------------
(1,000) 1,000
------------ -------------
$ 1,000 $ 1,000
============ =============
CONTINUING OPERATIONS (NOTE 1)
Approved: /s/John Mackay
--------------
Director
<PAGE>
Page 23
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
Statement of Loss
For the year ended August 31, 1999,
year ended August 31, 1998 and the year ended August 31, 1997
(U.S. DOLLARS)
1999 1998 1997
Expenses
Legal $ 2,000 $ - $ -
----- ------- ------- -------
Net earnings (loss) for the period $ (2,000) $ - $ -
================================== ======= ======= =======
Basic and diluted loss per share $(2.0000) $(0.0000) $(0.0000)
- -------------------------------- ------- ------- -------
Weighted average shares Outstanding 1,000 1,000 1,000
- ----------------------------------- ------- ------- -------
<PAGE>
Page 24
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
Statement of Cash Flow
For the year ended August 31, 1999,
year ended August 31, 1998 and the year ended August 31, 1997
(U.S. DOLLARS)
1999 1998 1997
Cash provided by (used in
Operations
Net Loss for period $ (2,000) $ - $ -
------------------- ------- ------- -------
(2,000) $ - $ -
Net change in non-cash
working capital balances
Accounts payable 2,000 - -
---------------- ------- ------- -------
Net cash used in operating
activities - - -
Change in cash for period - - -
Cash, beginning of period - - -
- ------------------------- -------- ------- -------
Cash, end of period $ - $ - $ -
=================== ======== ======= =======
<PAGE>
Page 25
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
Statement of Shareholders' Equity (Deficit)
Year ended August 31, 1999,
and year ended August 31, 1998 and August 31, 1997
(U.S. DOLLARS)
Common shares Total
Accumulated Shareholders'
Shares Amount (Deficit) Equity
------ ------ --------- ------
(Deficit)
--------
Balance August 31, 1996 1,000 $ 1,000 - $ 1,000
Net loss - - - -
- -------- ----- ------ ------- -------
Balance at August 31, 1997 1,000 1,000 - 1,000
Net loss - - - -
- -------- ----- ------ ------- -------
Balance at August 31, 1998 1,000 1,000 - 1,000
Net loss - - (2,000) (2,000)
- -------- ----- ------ ------- -------
Balance at August 31, 1999 1,000 $ 1,000 $(2,000) $(2,000)
========================== ===== ====== ======= =======
<PAGE>
Page 26
STRAND CAPITAL, INC.
(A Texas Corporation)
(A development stage company)
Notes to Financial Statements
Year ended August 31, 1999
(U.S. DOLLARS)
1. Continuing operations
Strand Capital, Inc. was incorporated on November 5, 1990 in the state of
Texas, U.S.A.
The Company has negative working capital and a deficit. The ability for
the Company to continue as a going concern is dependent upon its ability to
obtain adequate financing to reach profitable levels of operations. It is not
possible to predict whether financing efforts will be successful or if the
Company will attain profitable levels of operations.
2. Summary of significant accounting policies
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States and reflect the following
significant accounting principles:
a. Estimates and assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
b. Earnings (loss) per common share
In February, 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share (SFAS 128), which established new standards for
computing and presenting earnings per share effective for fiscal years ending
after December 15, 1997. With SFAS 128, primary earnings per share is replaced
by basic earnings per share, which is computed by dividing income available to
common shareholders by the weighted average number of shares outstanding for the
period. In addition, SFAS 128 requires the presentation of diluted earnings per
share, which includes the potential dilution that could occur if dilutive
securities were exercised or converted into common stock. The computation of
diluted EPS does not assume the conversion or exercise of securities if their
effect is anti-dilutive. Common equivalent shares consist of the common shares
issuable upon the conversion of the convertible loan notes and special warrants
(using the if-converted method) and incremental shares issuable upon the
exercise of stock options and share purchase warrants ( using the treasury stock
method).
c. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly
liquid investments with an original maturity of three months or less.
<PAGE>
Page 27
2. Income taxes
The Company has net operating losses which may give rise to future tax benefits
of approximately $2,000 as of August 31, 1999. To the extent not used, net
operating loss carry forwards expire in varying amounts beginning in the year
2014. Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No.109 (SFAS 109). Under this method, deferred income
taxes are determined based on differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end, and are
measured based on enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
No provision for income taxes is included in the statement due to its immaterial
amount.
<PAGE>
Page 28
PART 111
--------
ITEMS 1&2 INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit
- -------
2(1) Certificate of Incorporation
2(2) Certificate of Amendment to the Certificate of Incorporation
2(3) Articles
<PAGE>
Exhibit 2(1)
The State of Texas
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
STRAND CAPTAL, INC.
- --------------------------------------------------------------------------------
CHARTER NO. 01171564-0
The undersigned, as Secretary of State of Texas, hereby certifies that
Articles of Incorporation for the above corporation duly signed pursuant to the
provisions of the Texas Business Corporation Act, have been received in this
Office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of
the authority vested in the Secretary by law, hereby issues this Certificate of
Incorporation and attaches hereto a copy of the Articles of Incorporation.
Issuance of this Certificate of Incorporation does not authorize the use of
a corporate name in this State in violation of the rights of another under the
federal Trademark Act of 1946, the Texas trademark law, the Assumed Business or
Professional Name Act, or the common law.
Dated, NOVEMBER 5 ,19 90
--------------- --
/s/George S. Bayoud Jr.
--------------------------------
Secretary of State
<PAGE>
Exhibit 2(2)
"SEAL"
The State of Texas
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
CAPTEX CAPITAL, INC.
FORMERLY
STRAND CAPTAL, INC.
The undersigned, as Secretary of State of Texas, hereby certifies that the
attached Articles of Amendment for the above named entity have been received
in this office and are found to conform to law.
ACCORDINGLY the undersigned, as Secretary of State, and by virtue of the
authority vested in the Secretary by law, hereby issues this Certificate of
Amendment.
Dated: October 26, 1999
Dated: October 26, 1999
"Seal of the STATE OF TEXAS" /s/Elton Bomer LCS
------------------
Elton Bomer
Secretary of State
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
ARTICLES OF AMENDMENT
Oct 26 1999
Corporations Section
Pursuant to the provisions of the Texas Business Corporation Act, the
undersigned corporation hereby amends its Articles of Incorporation, and for
that purpose, submits the following statement:
1. The name of the corporation is Strand Capital, Inc.
2. Article I of the Articles of Incorporation is hereby amended so as to read
as follows:
The name of the corporation is Captex Capital, Inc.
3. Article IV of the Articles of Incorporation is hereby amended so as to read
as follows:
The aggregate number of shares which the corporation has authority to issue
is Fifty Million(50,000,000) shares o $0.001 par value per share. Such
shares are designated as common stock and shall have identical rights and
privileges in every respect.
4. The date of adoption of each amendment is: October 15, 1999.
5. The amendments were unanimously approved in writing by all the shareholders
of the corporation, holding an aggregate of 1,000 share being all the
authorized and issued shares of the corporation. The amendments were also
approved by the sole director of the corporation.
6. All the issued and authorized capital of the corporation, both being 1,000
shares, will be subdivided on the basis of 5,000 shares for each share in
the corporation resulting in 5,000,000 issued and outstanding shares.
7. The authorized capital will be increased by creating 45,000,000 shares
resulting in a total authorized capital of 50,000,000 shares. The par
value of the shares will be decreased to $0.001 per share.
Date: October 15, 1999 By: /s/John D. L. Mackay
--------------------
John D. L. Mackay, President
<PAGE>
Exhibit 2(3)
ARTICLES OF INCORPORATION
OF
STRAND CAPITAL, INC.
The undersigned natural person of the age of eighteen 18) years or more,
acting as an incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation:
ARTICLE I
NAME
----
The name of the corporation is Strand Capital, Inc.
ARTICLE II
DURATION
--------
The period of its duration is perpetual.
ARTICLE III
PURPOSE
-------
The purpose or purposes for which the corporation is organized are to
transact any and all lawful business for which corporations may be incorporated
under the Texas Business Corporation Act.
ARTICLE IV
SHARES
------
The aggregate number of shares which the corporation has authority to issue
is One Thousand (1,000) shares of One Dollar($1.00) par value per share. Such
<PAGE>
Page 2
shares are designated as com-mon stock and shall have identical rights and
privileges in every respect.
ARTICLE V
DENIAL OF PREEMPTIVE RIGHTS
---------------------------
The right of a shareholder referred to in Article 2.22-1 of the Texas
Business Corporation Act, to exercise a preemptive right to acquire additional,
unissued or treasury shares of the corporation or securities of the corporation
convertible into or carrying a right to subscribe to or acquire shares of the
corporation is hereby denied.
ARTICLE VI
NONCUMULATIVE VOTING
--------------------
Directors shall be elected by majority vote. No shareholder of the
corporation shall have the right to cumulate his votes in the election of
directors.
ARTICLE VII
POWER TO AMEND BYLAWS
---------------------
Without limiting the power of the shareholders of the corporation to amend
or repeal the corporation's bylaws or to adopt new bylaws, the Board of
Directors shall have the power to amend or repeal the corporation's bylaws and
to adopt new bylaws.
<PAGE>
Page 3
ARTICLE VIII
COMMENCEMENT OF BUSINESS
------------------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE IX
REGISTERED OFFICE AND AGENT
---------------------------
The street address of the initial registered office of the corporation is
5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270 and the name of its
initial registered agent at such address is Kelley J. Fitzpatrick.
ARTICLE X
INITIAL DIRECTORS
-----------------
The number of directors constituting the initial Board of Directors is two
(2) and the names and addresses of the persons who are to serve as directors
until the first annual meeting of the shareholders, or until their successor or
successors are elected and qualified are:
John McKay
c/o Pan West Group
1090 W. Georgia Street, Suite 230
Vancouver, BC V6E 3V7
Frederick James Walker
c/o Pan West Group
1090 W. Georgia Street, Suite 230
Vancouver, BC V6E 3V7
<PAGE>
Page 4
ARTICLE XI
LIABILITY OF DIRECTORS
----------------------
No director of the corporation shall be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except that this article does not eliminate or limit the
liability of a director to the extent the director is found liable for: (1) a
breach of the director's duty of loyalty to the corporation or its shareholders;
(2) an act or omission not in good faith that constitutes a breach of duty of
the director to the corporation or an act or omission that involves intentional
misconduct or a knowing violation of the law; (3) a transaction from which the
director received an improper benefit, whether or not the benefit resulted from
an action taken within the scope of the director's office; or (4) an act or
omission for which the liability of a director is expressly provided for by an
applicable statute.
ARTICLE XII
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
-----------------------------------------
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
<PAGE>
Page 5
entitled to vote on the action were present and voted.
ARTICLE XIII
INCORPORATOR
------------
The name and address of the incorporator is:
Marla Corter
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
IN WITNESS WHEREOF, I have hereunto set my hand this the 2nd day of
November, 1990.
/s/Marla Corter
--------------------
Marla Corter
<PAGE>
BYLAWS
OF
STRAND CAPITAL, INC.
* * * * * * * * * * * * * * * * * * * *
TABLE OF CONTENTS
ARTICLE I. Offices.
1. Principal Office.
2. Other Offices.
ARTICLE II. Meetings of Shareholders.
1. Place of Meetings.
2. Annual Meeting.
3. List of Shareholders.
4. Special Meetings.
5. Notice.
6. Quorum.
7. Voting by Shareholders.
8. voting Procedure.
9. Record Date.
10. Action Without Meeting; Telephone Meetings.
ARTICLE III. Directors.
1. Management.
2. Number; Election.
3. Change in Number.
4. Removal and Vacancies.
5. Election of Directors.
6. Place of Meetings.
7. First Meetings.
8. Regular Meetings.
9. Special meetings.
10. Quorum.
11. Action Without Meeting; Telephone Meetings.
12. Chairman of the Board.
13. Compensation.
14. Executive Committee.
15. Other Committees.
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE IV. Notices.
1. Method.
2. Waiver.
ARTICLE V. Officers.
1. Officers.
2. Election.
3. Compensation.
4. Removal and Vacancies.
5. President.
6. Vice Presidents.
7. Secretary.
8. Assistant Secretaries.
9. Treasurer.
10. Assistant Treasurers.
ARTICLE VI. Certificates Representing Shares.
1. Certificates.
2. Lost Certificates.
3. Transfer of Shares.
4. Registered Shareholders.
ARTICLE VII. General Provisions.
1. Distributions and Share Dividends.
2. Reserves.
3. Checks.
4. Fiscal Year.
5. Seal.
6. Indemnification.
7. Amendments.
8. Table of Contents; Headings.
<PAGE>
BYLAWS
OF
STRAND CAPITAL, INC.
(the "Corporation")
ARTICLE I.
OFFICES
-------
Section 1. Principal Office. The principal business office of the
-----------------
Corporation shall be at c/o Pan West Group, 1090 W. Georgia Street, Suite 230
Vancouver, B.C. V6E 3V7.
Section 2. Other Offices. The Corporation may also have offices at such
--------------
other places, both within and without the State of Texas, as the Board of
Directors may from time to time deter-mine or the business of the Corporation
may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of shareholders for all purposes may
------------------
be held at such time and place, within or without the State of Texas, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meeting. An annual meeting of the shareholders, commencing
---------------
with the year 1991, shall be held on the first Monday in November of each year;
but if such date shall fall on a legal holiday, then on the next regular
business day following, at 10:00 a.m., at which they shall elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 3. List of Shareholders. At least ten (10) days before each meeting
---------------------
of the shareholders, a complete list of the shareholders entitled to vote at
said meeting, arranged in alphabetical order with the address of and the number
of voting shares held by each, shall be prepared by the officer or agent having
charge of the stock transfer books. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall be produced and kept open at the
<PAGE>
Page 2
time and place of the meeting during the whole time thereof, and shall be
subject to the inspection of any shareholder who may be present.
Section 4. Special meetings. Special meetings of the shareholders, for any
-----------------
purpose or purposes, unless otherwise pre-scribed by statute, the Articles of
Incorporation, or these Bylaws, may be called by (a) the President or the Board
of Directors, or (b) the holders of at least ten percent (10%) of all shares
entitled to vote at such meetings, unless the Articles of Incorporation provide
for a number of shares greater than or Less than ten percent (10%), in which
event special meetings may be called by the holders of at least the percentage
of shares specified in the Articles of Incorporation, provided, however, that
in no event may the Articles of incorporation require a percentage greater than
fifty percent (50%). Business transacted at a special meeting shall be confined
to the purposes stated in the notice of the meeting.
Section 5. Notice. Written or printed notice stating the place, day and
hour of a meeting of shareholders, and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) or, in the event of a merger or consolidation, not less than
twenty (20), nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or person calling the meeting, to each shareholder of
record entitled to vote at the meeting. Notice need not be given to a
shareholder if (1) notice of two consecutive annual meetings and all notices of
any meetings held during the period between those annual meetings or (2) all
(but in no event less than two) payments (if sent by firstclass mail) of
distributions or interest on securities during a 12 month period have been
mailed to the shareholder, addressed at, his address as shown on the records of
the Corporation, and have been returned undeliverable. If such a shareholder
delivers to the Corporation a written notice setting forth his current address,
the notice requirement of this Section shall be reinstated.
Section 6. Quorum. At each meeting the holders of a majority of the
shares issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum of the
shareholders for the transaction of business except as otherwise or provided
by statute, the Articles of Incorporation or these Bylaws, but in no event shall
a quorum consist of the holders of less than one third of the shares entitled to
vote at such a meeting. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
<PAGE>
Page 3
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 7. Voting by Shareholders.(a) With respect to any matter other than
-----------------------
the election of directors or a matter for which the affirmative vote of the
holders of a specified portion of the shares entitled to vote is required by the
Texas Business Corporation Act, the affirmative vote of the holders of a
majority of the shares entitled to vote on that matter and represented in person
or by proxy at a meeting of shareholders at which a quorum is present shall be
the act of the shareholders, unless otherwise provided in the Articles of
Incorporation or the Bylaws.
(b) Unless otherwise provided in the Articles of Incorporation or the
Bylaws, directors shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
Section 8. Voting Procedure. Each outstanding share, regardless of class,
-----------------
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied or special voting rights are provided by
the Articles of Incorporation. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in person, by
proxy appointed by an instrument in writing subscribed by such shareholder, or
his duly authorized attorney-in-fact. No form of proxy or power of attorney
bearing a date more than eleven (11) months prior to said meeting shall be
valid, unless said instrument provides for a longer period. Each proxy shall be
revocable unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest. Such proxy shall be filed
with the Secretary of the Corporation prior to or at the time of the meeting.
Section 9. Record Date. 1a) For the purpose of determining shareholders
------------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by the Corporation
(other than a distribution involving a purchase or redemption by the Corporation
of any of its own shares) or a share dividend, or in order .to make a
determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting or shareholders), the Board of Directors of the
Corporation may provide that the share transfer records shall be closed for a
stated period but not to exceed, in any case, sixty (60) days. If the share
transfer records shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such records
<PAGE>
Page 4
shall be closed for at least ten (10) days immediately preceding such meeting.
In lieu of closing the share transfer records, the Bylaws or, in the absence of
an applicable Bylaw, 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 sixty (60) days and, in the case of a meeting of shareholders,
not less than ten (10) days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. if the share
transfer records 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 a distribution (other than a
distribution involving a purchase or redemption by the Corporation of any of its
own shares) or a share 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 distribution or share 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 subsection, such determination shall apply to any adjournment
thereof, except where the determination has been made through the closing of the
share transfer records and the stated period of closing has expired.
(b) For the purpose of determining shareholders entitled to call a special
meeting of shareholders pursuant to Section 4 of this Article II, the record
date shall be the date the first shareholder signs the notice of the meeting.
(c) Unless a record date shall have previously been fixed or determined
pursuant to this section, whenever action by shareholders is proposed to be
taken by consent in writing without a meeting of shareholders, the Board of
Directors may fix a record date for the purpose of determining shareholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors and the prior action of the Board of
Directors is not required by the Texas Business Corporation Act, the record date
for determining shareholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation in the
manner provided by Section 10(b) of this Article II. If no record date shall
have been fixed by the Board of Directors and prior action of the Board of
Directors is required by the Texas Business Corporation Act, the record date for
determining shareholders entitled to consent to action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts a resolution taking such prior action.
<PAGE>
Page 5
Section 10. Action Without Meeting; Telephone Meetings.(a) Any action
-------------------------------------------
required or permitted to be taken at a meeting of the shareholders of the
Corporation may be taken without a meeting without prior notice, and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holder or holders of shares having not less than the
minimum number of votes that would be necessary to take such action at a meeting
at which the holders of all shares entitled to vote on the action were present
and voted.
(b) Every written consent shall bear the date of signature of each
shareholder who signs the consent. No written consent shall be effective to take
the action that is the subject of the consent unless, within sixty (60) days
after the date of the earliest dated consent delivered to the Corporation in the
manner required by this subsection, a consent or consents signed by the holder
or holders of shares having not less than the minimum number of votes that would
be necessary to take the action that is the subject of the consent are delivered
to the Corporation by delivery to its registered office, its principal place or
business, or an officer or agent of the Corporation having custody of the books
in which proceedings of meetings of shareholders are recorded. Delivery shall be
by hand or certified or registered mail, return receipt requested. Delivery to
the Corporation's principal place of business shall be addressed to the
president or principal executive officer of the Corporation.
(c) A telegram, telex, cablegram, or similar transmission by a shareholder,
or a photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a shareholder, shall be regarded as signed by the shareholder for
purposes of this section.
(d) Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
(e) Subject to applicable notice provisions and unless otherwise restricted
by the Articles of Incorporation, shareholders may participate in and hold a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute presence in person at such
meeting, except where a person's participation is for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
riot lawfully called or convened.
<PAGE>
Page 6
ARTICLE III.
DIRECTORS
---------
Section 1. Management. The business and affairs of the Corporation shall be
-----------
managed by its Board of Directors who may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The Board of Directors shall keep
regular minutes of its proceedings.
Section 2. Number; Election. The Board of Directors shall consist of two(2)
-----------------
directors, who need not be shareholders or residents of the State of Texas.
Directors shall be elected at the annual meeting of the shareholders, except as
hereinafter provided, and each Director elected shall hold office until his
successor shall be elected and shall qualify.
Section 3. Change in Number. The number of Directors may be increased or
-----------------
decreased from time to time by amendment to these Bylaws, but no decrease shall
have the effect of shortening the term of any incumbent Director.
Section 4. Removal and vacancies. Any Director may be removed either for or
----------------------
without cause at any annual. or special meeting of shareholders by the
affirmative vote of a majority in number of shares of the shareholders present
;in person or by proxy at such meeting and entitled to vote for the election of
such Director, if notice of the intention to act upon such matters shall have
been given in the notice calling such meeting. Any vacancy occurring in the
Board of Directors may be filled by the vote of a majority of the remaining
Directors, even if such remaining Directors comprise 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 position on the Board of
Directors to be filled by reason of an increase in a number of Directors shall
be filled by the vote of a majority of Directors, election at an annual meeting
of the shareholders or at a special meeting of shareholders duly called for such
purpose, provided that the Board of Directors may fill no more than two such
vacancies during the period between any two successive annual meetings of
shareholders.
Section 5. Election of Directors. At every election of Directors, each
----------------------
shareholder entitled to vote with respect to such matter shall have the right to
vote in person or by proxy the number of voting 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. Cumulative voting shall be prohibited.
<PAGE>
Page 7
Section 6. Place of meetings. The Directors of the Corporation may hold
------------------
their meetings, both regular and special, either within or without the State of
Texas.
Section 7. First Meetings. The first meeting of each newly elected Board of
---------------
Directors shall be held without further notice immediately following the annual
meeting of shareholders, and at the same place, unless by unanimous consent of
the Directors then elected and serving, such time or place shall be changed.
Section 8. Regular Meetings. Regular meetings of the Board of Directors may
-----------------
be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 9. Special Meetings. Special meetings of the Board of Directors
-----------------
may be called by the President on three (3)days' notice to each Director,
either personally or by mail or telegram. Special meetings may be called
in like manner and on like notice on the written request of any two Directors.
'Except as may be otherwise expressly provided by statute, the Articles of
Incorporation or these Bylaws, neither the business to be transacted at, nor the
purpose of, any special meeting need be in a notice or waiver of notice.
Section 10. Quorum At all meetings of the Board of Directors, the presence
------
of a majority of the Directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, the Articles of Incorporation or these Bylaws. If a quorum shall not be
present at any meeting of Directors, the Directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Action Without Meeting Telephone Meetings. Any action required
------------------------------------------
or permitted to be taken at a meeting of the Board of Directors or members of
any committee designated by the Board of Directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all the members of the Board of Directors or committee, as the case may be.
Such consent shall have the same force and effect as a unanimous vote at a
meeting. Subject to applicable notice provisions and unless otherwise
restricted by the Articles of Incorporation, members of the Board of Directors,
or members of any committee designated by the Board of Directors, may
participate in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
<PAGE>
Page 8
meeting can hear each other, and participation in such meeting shall constitute
presence in person at such meeting, except where a person's participation is for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Section 12. Chairman of the Board. The Board of Directors may elect a
----------------------
Chairman of the Board to preside at their meetings and to perform such other
duties as the Board of Directors may from time to time assign to him.
Section 13. Compensation. Directors, as such, shall not receive any stated
-------------
salary for their services, but by resolution of the Board of Directors a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board of Directors; provided that nothing
herein contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of any committee designated by the Board of Directors may, by resolution of the
Board of Directors, be allowed compensation for attending committee meetings.
Section 14. Executive Committee. The Board of Directors may, by resolution
--------------------
adopted by a majority of the whole Board of Directors, designate an Executive
Committee, to consist of one or more of the Directors of the Corporation. The
Executive Committee, to the extent provided in said resolution, shall have and
may exercise all of the authority of the Board of Directors in the management of
the business and affairs of the Corporation, except where action of the full
Board of Directors is required by statute or by the Articles of Incorporation,
and shall have power to authorize the seal of the Corporation to be affixed to
all papers which may require it. Any member of the Executive Commit-tee may be
removed by the Board of Directors by the affirmative vote of a majority of the
Board of Directors, whenever in its judgment the best interests of the
Corporation will be served thereby. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required.
Section 15. Other Committees. The Board of Directors may, by resolution
-----------------
adopted by a majority of the whole Board of Directors, designate from among its
members one or more committees, other than an Executive Committee, to the extent
provided in such resolution.
ARTICLE IV.
NOTICES
-------
Section 1. Method Whenever by statute, the Articles of incorporation, or
------
these Bylaws, notice is required to be given to any Director or shareholder, and
<PAGE>
Page 9
no provision is made as to how such notice shall be given, it shall not be
construed to mean personal notice, but any such notice may be given in writing,
by mail, postage prepaid, addressed to such Director or shareholder at such
address as appears on the books of the Corporation or in any other method
permitted by law. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same shall be thus deposited in the
United States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
-------
shareholder or Director of the Corporation by statute, the Articles of
Incorporation, or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated in
such notice, shall be deemed equivalent to the giving of such notice. Attendance
of a shareholder or Director at a meeting shall constitute a waiver of notice
of such meeting, except where a share-holder or Director attends for the express
Purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened. Consent in writing by a shareholder
or Director to any action taken or resolution adopted by the shareholders or
Directors of the Corporation shall constitute a waiver of any and all notices
required to be given in connection with such action or resolution.
ARTICLE V.
OFFICERS
--------
Section 1. Officers. The officers of the Corporation shall be elected by the
---------
Directors and shall be a President and a Secretary. The Board of Directors may
also choose a Chairman of the Board, one or more Vice Presidents, a Treasurer
and one or more Assistant Secretaries and Assistant Treasurers. Any two or more
offices may be held by the same person.
Section 2. Election. The Board of Directors at its first meeting after each
---------
annual meeting of shareholders shall choose a President and a Secretary, neither
of whom need be a member of the Board of Directors, a shareholder or a resident
of the State of Texas. The Board of Directors may appoint such other officers
and agents as it shall deem necessary, who shall be appointed for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to rime by the Board of Directors.
Section 3. Compensation. The compensation of all officers and agents of the
-------------
Corporation shall be fixed by the Board of Directors.
<PAGE>
Page 10
Section 4. Removal and Vacancies. Each officer of the Corporation shall hold
----------------------
office until his successor is chosen and qualified in his stead or until his
death or until his resignation or removal from office. Any officer or agent or
member of a committee elected or appointed by the Board of Directors may be
removed either for or without cause by a majority of the Board of Directors
present at a meeting of the Board of Directors at which a quorum is represented,
whenever in the judgment of the Board of Directors 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. If the office of any
officer becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
Section 5. President. The President shall be the chief executive officer of
----------
the Corporation. The President shall preside at all meetings of the shareholders
and the Board of Directors unless 'the Board of Directors shall choose to elect
a Chairman of the Board, in which event the President shall preside at meetings
of the Board of Directors in the absence of the Chairman of the Board. The
President shall have general and active management of the business and affairs
of the Corporation, shall see that all orders and resolutions of the Board of
Directors are carried into effect, and shall perform such other duties as the
Board of Directors shall prescribe.
Section 6. Vice President. Each Vice President shall have only such powers
---------------
and perform only such duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to such Vice
President.
Section 7. Secretary. The Secretary shall attend all sessions of the Board
----------
of Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee when required. The secretary
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision the Secretary shall be. The Secretary shall keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it, and, when so affixed, it shall be
attested by the Secretary's signature or by the signature of the Treasurer or an
Assistant Secretary.
Section 8. Assistant Secretaries. Each Assistant Secretary shall have only
----------------------
such powers and perform only such duties as the Board of Directors may from time
to time prescribe or as the President may from time to time delegate.
<PAGE>
Page 11
Section 9. Treasurer. The Treasurer, if any, shall have the custody of the
----------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and Directors, at the regular meetings of the Board of Directors,
or whenever they may require it, an account of all transactions as Treasurer and
of the financial condition of the Corporation, and shall perform such other
duties as the Board of Directors may prescribe. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in ' such form in
such sum, and with surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of such office and for the
restoration to the Corporation, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money, and
other property of whatever kind in the Treasurer's possession or under the
Treasurer's control belonging to the Corporation.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall have only
---------------------
such powers and perform only such duties as the Board of Directors may from time
to time prescribe.
ARTICLE VI.
CERTIFICATES REPRESENTING SHARES
--------------------------------
Section 1. Certificates. Certificate in such form as may be determined by
-------------
the Board of Directors shall be delivered representing all shares to which
shareholders are entitled. Such certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. Each
certificate shall state on the face thereof the holder's name, the number and
class of shares, and the par value of such shares or a statement that such
shares are without par value. They shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and may be sealed with the
seal of the Corporation or a facsimile thereof . The signature of any such
officer may be facsimile.
Section 2. Lost Certificates. The Board of Directors may direct a new
------------------
certificate representing shares to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making or an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
<PAGE>
Page 12
precedent to the issuance thereof, may require the owner of such lost or
destroyed certificate, or the owner's legal representative, to advertise the
same in such manner as it shall require and/or give the Corporation a bond in
such form, in such sum, and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only on
-------------------
the books of the Corporation by the holder thereof in person or by the holder's
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of, succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 4. Registered Shareholders. Unless otherwise provided in the Texas
------------------------
Business Corporation Act, and subject to the provisions of Chapter 8 of the
Texas Business & Commerce Code: (a) the Corporation may regard the person in
whose name any shares issued by the Corporation are registered in the share
transfer records of the Corporation at any particular time (including, without
limitation, as of a record date fixed pursuant to these Bylaws) as the owner of
those shares at that time for purposes of voting those shares, receiving
distributions thereon or notices in respect thereof, transferring those shares,
exercising rights of dissent with respect to those shares, exercising or waiving
any preemptive right with respect to those shares, entering into agreements with
respect to those shares in accordance with Article 2.22 or 2.30 of the Texas
Business Corporation Act, or giving proxies with respect to those shares; and
(b) neither the Corporation nor any of its officers, directors, employees, or
agents shall be liable for regarding that person as the owner of those shares at
that time for those purposes, regardless of whether that person does not possess
a certificate for those shares.
ARTICLE VII.
GENERAL PROVISIONS
------------------
Section 1. Distributions and Share Dividends. Distributions and share
dividends, subject to the provisions of the Articles of Incorporation, if any,
may be authorized by the Board of Directors at any regular or special meeting.
Distributions may be paid in cash, in property, or in the issuance of
indebtedness, and may be in the form of a dividend on the outstanding shares of
<PAGE>
Page 13
the Corporation, a purchase or redemption by the Corporation of any of its own
shares, or a payment in liquidation of all or a portion of the assets of the
Corporation. Share dividends shall be paid in authorized but unissued shares of
the Corporation or in treasury shares subject to the provisions of the Texas
Business Corporation Act and the Articles of Incorporation. The Board of
Directors may fix a record date in the manner provided in Article II of these
Bylaws for the purpose of determining shareholders entitled to receive a
distribution (other than a distribution involving a purchase or redemption by
the Corporation of any of its own shares) or share dividend.
Section 2. Reserves. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation such reserve or reserves as the
Directors from (time to time, in their discretion, think proper to provide for
contingencies, or to equalize distributions, or to repair or maintain any
property of the Corporation, or for such other purposes as the Directors shall
think beneficial to the Corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
Section 3. Checks. All checks or demands for money and notes of the
-------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
------------
fixed by resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the name
-----
of the Corporation. Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
Section 6. Indemnification. The Corporation shall indemnify every Director
----------------
and officer of the Corporation against, and reimburse and advance to every
Director and officer for, all liabilities, costs and expenses incurred in
connection with such directorship or office and any actions taken or omitted in
such capacity to the greatest extent permitted under the Texas Business
Corporation Act and other applicable laws at the time of such indemnification,
reimbursement or advance payment.
Section 7. Amendments. These Bylaws may be amended or repealed or new Bylaws
-----------
may be adopted by the shareholders of the Corporation or by the Board of
Directors.
Section 8. Table of Contents; Headings. The Table of Contents and headings
----------------------------
used in these Bylaws have been inserted for convenience only and do not
constitute matters to be construed in interpretation.
<PAGE>
Page 14
CERTIFICATE BY SECRETARY
------------------------
The undersigned, being the secretary of the Corporation, hereby certifies
that the foregoing code of Bylaws was duly adopted by the initial Directors of
the Corporation effective on November 5, 1990.
IN WITNESS WHEREOF, I have signed this certification as of the 5th day of
November, 1990.
/s/James Walker
-----------------------------------
Frederick James Walker, Secretary
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form 10SB and has duly caused this
Registration Statement to be signed on its behalf by the undersigned hereunto
duly authorized in the City of Vancouver, on the 29th day of October, 1999.
CAPTEX CAPITAL, INC.
(Registrant)
By: /s/ John Mackay
--------------------
John Mackay, President and Director
<PAGE>
