UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10SB-12G
General Form For Registration of Securities
of Small Business Issuers
Pursuant to Sections 12(b) and (g) of
the Securities Exchange Act of 1934
PROQUEST CAPITAL CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
Nevada 84-1055272
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
90 Madison Street, Suite 707, Denver, Colorado 80206
(Address of Principal Executive Offices and Zip Code)
303-355-3000
(Small Business Issuer's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 Par Value
(Title of Class)
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TABLE OF CONTENTS
PART I
Item 1. DESCRIPTION of BUSINESS ....................................... 4
Background .................................................. 4
Reincorporation .......................................... 4
Predecessor Corporation .................................. 4
Original Public Offering ................................. 4
Attempted Acquisitions ................................... 5
Sale of Control .......................................... 5
Forward-Looking Statement.................................... 5
Exchange Act Registration ................................... 6
Proposed Business ........................................... 6
Pre-Combination Activities ............................... 6
Combination Suitability Standards ........................ 7
Form of Acquisition ...................................... 9
Post-Combination Activities .............................. 10
Potential Benefits to Insiders .............................. 11
Use of Consultants and Finders .............................. 11
State Securities Law Considerations ......................... 12
No Investment Company Regulation ............................ 12
Competition ................................................. 12
Employees ................................................... 13
Item 2. MANAGEMENT's DISCUSSION and ANALYSIS or PLAN of OPERATION ..... 13
Results of Operations ....................................... 13
Liquidity and Capital Resources ............................. 13
Year 2000 Issues ............................................ 14
Item 3. DESCRIPTION of PROPERTY ....................................... 14
Item 4. SECURITY OWNERSHIP of CERTAIN
BENEFICIAL OWNERS and MANAGEMENT ............................. 14
Beneficial Ownership ........................................ 14
Changes in Control .......................................... 15
Item 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS and CONTROL PERSONS ................................ 15
Biographical Information .................................... 16
Prior Experience with Blank Check Companies ................. 17
Potential Conflicts of Interest ............................. 17
Indemnification of Directors and Officers ................... 18
Exclusion of Director Liability ............................. 18
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Item 6. EXECUTIVE COMPENSATION ........................................ 18
Cash and Other Compensation ................................. 18
Compensation Pursuant to Plans .............................. 19
Employee Stock Compensation Plan ............................ 19
Compensatory Stock Option Plan .............................. 19
Employment Contracts ........................................ 19
Item 7. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS ................ 19
Item 8. DESCRIPTION of SECURITIES ..................................... 20
Common Stock ................................................ 20
Preferred Stock ............................................. 20
Annual Reports .............................................. 21
Transfer Agent .............................................. 21
PART II
Item 1. MARKET PRICE of and DIVIDENDS on the REGISTRANT's COMMON
EQUITY and OTHER SHAREHOLDER MATTERS ......................... 21
Price Range of the Common Stock ............................. 21
Dividends ................................................... 21
Public Market for the Common Shares ......................... 21
Rule 144 Resales ............................................ 22
Prior Stock Purchase Transaction ............................ 22
Item 2. LEGAL PROCEEDINGS ............................................. 23
Item 3. CHANGES in and DISAGREEMENTS with ACCOUNTANTS
on ACCOUNTING and FINANCIAL DISCLOSURE ....................... 23
Item 4. RECENT SALES of UNREGISTERED SECURITIES ....................... 23
Item 5. INDEMNIFICATION of DIRECTORS and OFFICERS ..................... 23
PART F/S
FINANCIAL STATEMENTS .......................................... 23
PART III
Item 1. LIST of EXHIBITS .............................................. 24
SIGNATURE ..................................................... 25
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BACKGROUND
REINCORPORATION. Proquest Capital Corporation ("Proquest" or "Company") was
incorporated on September 9, 1997, for the purpose of entering into a merger
with and redomiciling its predecessor, Pro Quest, Inc., a Colorado corporation
("Pro Quest Colorado"). Effective September 19, 1997, Pro Quest Colorado was
merged with and into Proquest in a statutory merger (the "Merger"). At the
effective time of the Merger, each share of Pro Quest Colorado common stock
issued and outstanding immediately prior to the Merger was as a result of the
Merger changed into one-hundredth (1/100th) of a share of Proquest common stock.
This exchange ratio had the effect of reducing the total number of outstanding
shares from 144,601,580 to approximately 1,445,879. At the time of the Merger,
Proquest was a wholly owned subsidiary of Pro Quest Colorado.
Because the Merger was consummated for the sole purpose of changing Pro
Quest Colorado's domicile from Colorado to Nevada, management believes that the
Merger did not constitute a "sale" within the meaning of Section 5 of the
Securities Act of 1933, as amended. Accordingly, each share of Proquest common
stock now issued and outstanding continues to have the same status and to be
subject to the same restrictions and limitations, if any, as they were subject
prior to the Merger. The Merger was effected due to management's belief that
Nevada law is more advantageous to a corporation than Colorado law. Neither the
Merger nor any name change related to a change of control or other transaction.
Proquest is in the development stage with no significant assets or
liabilities and has been essentially inactive since its inception, except for
organizational activities. Proquest owns no real estate and has no full time
employees, and it will have no operations of its own unless and until it engages
in one or more of the activities described below under this ITEM 1. Proquest is
a "blank check" company which intends to enter into a business combination with
one or more as yet unidentified privately held businesses.
PREDECESSOR CORPORATION. Proquest's predecessor - that is, Pro Quest
Colorado - is Pro Quest, Inc., which was incorporated under the laws of the
State of Colorado on March 10, 1987, under the name "Pro Image, Inc." and
subsequently changed its name to Pro Quest, Inc. Pro Quest Colorado was formed
primarily to engage in sports promotion or other sports-related activities. Pro
Quest Colorado proposed to establish any business other than sports promotion
through the acquisition of one or more companies already engaged in
sports-related activities.
ORIGINAL PUBLIC OFFERING. On July 21, 1987, Pro Quest Colorado closed a
public offering of securities pursuant to a registration statement on Form S-18,
with the sale of 30,000,000 units offered. Each unit consisted of one (1) Common
Share, par value $.0001 per share, one (1) Class A Warrant, one (1) Class B
Warrant and one (1) Class C Warrant. Each Class A Warrant was exercisable to
purchase one Common Share at $.02 per share commencing October 4, 1987, until
October 4, 1988. Each Class B Warrant was exercisable to purchase one Common
Share at an exercise price of $.05 per share commencing October 4, 1987 until
April 4, 1989, and each Class C Warrant was exercisable to purchase one Common
Share at an exercise price of $.10 per share commencing October 4, 1987, until
October 4, 1989.
Pro Quest Colorado reserved the right to extend the exercise periods of the
Warrants and to reduce the exercise price by up to 50% of the initial exercise
price. Total proceeds from the sale of the units were $300,000, resulting in net
proceeds of approximately $238,086 after deduction of commissions and offering
expenses of $61,914. Pro Quest Colorado called the Class A Warrants for
redemption in November, 1987. Of the 30,000,000 Class A Warrants outstanding,
10,587,450 Class A Warrants were exercised (resulting in $208,308 in proceeds,
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net of $3,441 in redemption expenses), and the remaining 19,412,4550 Class A
Warrants were redeemed and cancelled. The Class B and Class C Warrants were
allowed to expire without being exercised.
ATTEMPTED ACQUISITIONS. In August 1987, Pro Quest Colorado acquired
28,000,000 shares of restricted common stock of International Medical Systems,
Inc. ("IMS"). The Company also loaned $25,000 to IMS in the form of an unsecured
debenture, with interest at 9% per annum. IMS proposed to engage in
sports-medicine activities following successful completion of a public offering.
The Company abandoned its investment in IMS in 1988. Pro Quest Colorado's loss
with respect to that transaction was reflected in its operating statements for
the fiscal year ended December 31, 1988.
In January 1988, Pro Quest Colorado formed Pro Quest Marketing Associates,
Inc., a wholly-owned subsidiary which was expected to engage in certain sales,
marketing and franchising activities relating to products and services which Pro
Quest Colorado hoped to offer. Pro Quest Marketing Associates, Inc. engaged
primarily in organizational activities and discontinued operation in July 1988.
In May, 1988, Pro Quest Colorado entered into a contract with a New
Jersey-based investment banking firm, Financial Resources Corporation ("FRC"),
which provided that FRC would locate, screen and present viable acquisition
candidates to Pro Quest Colorado. In connection with the contract, Pro Quest
Colorado paid FRC an initial fee of $15,000. Subsequently, additional fees in
the amount of $30,000 which were due to FRC under the terms of that contract
were satisfied by the issuance of 34,000,000 shares of restricted common stock
of Pro Quest Colorado to FRC in exchange for the outstanding fees plus a payment
of $4,000. In October 1988, Pro Quest Colorado terminated the consulting
contract with FRC for lack of performance. Effective September 30, 1994, Pro
Quest Colorado repurchased 33,150,000 of the shares issued to FRC, in exchange
for cancellation of FRC's obligations to Pro Quest Colorado and a waiver of
claims between the parties. These 33,150,000 shares (331,500 shares post-split)
were cancelled in 1999 and resumed the status of authorized and unissued shares.
On November 18, 1988, Pro Quest Colorado entered into an agreement of
merger which provided for a tax-free exchange of 166,000,000 restricted shares
of Pro Quest Colorado for all of the outstanding shares of Kettenbauer
Technology Corporation ("Kettenbauer"). Kettenbauer held rights to a proprietary
process to purify toxic waste. That agreement was mutually rescinded in December
of 1988.
SALE OF CONTROL. On November 23, 1994, Stephen G. Petrucci as Seller sold
control of the Company to a purchaser group led by Randy J. Sasaki, the current
President and CEO of the Company. Mr. Petrucci sold to the Sasaki group a total
of 68,384,125 shares (683,941 post split), both personally and as trustee of a
voting trust. The shares were not transferred into the names of the buyers until
May of 1999. Incident to the same transaction, the former officers and directors
resigned, and Mr. Sasaki and Mr. Rahe became directors of the Company. This sale
of control is described in more detail under the caption "Rule 144 Resales" in
PART II, Item 1 below.
FORWARD-LOOKING STATEMENTS
This Registration Statement contains certain forward-looking statements and
information relating to Proquest that are based on the beliefs of its management
as well as assumptions made by and information currently available to its
management. When used in this report, the words "anticipate", "believe",
"estimate", "expect", "intend", "plan" and similar expressions, as they relate
to Proquest or its management, are intended to identify forward-looking
statements. These statements reflect management's current view of Proquest
concerning future events and are subject to certain risks, uncertainties and
assumptions, including among many others: a general economic downturn; a
downturn in the securities markets; a general lack of interest for any reason in
going public by means of transactions involving public blank check companies;
federal or state laws or regulations having an adverse effect on blank check
companies, Securities and Exchange Commission regulations which affect trading
in the securities of "penny stocks," and other risks and uncertainties.
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Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. Readers
should realize that Proquest is in the development stage, with only very limited
assets, and that for Proquest to succeed requires that it either originate a
successful business (for which it lacks the funds) or acquire a successful
business. Proquest's realization of its business aims as stated herein will
depend in the near future principally on the successful completion of its
acquisition of a business, as discussed below.
EXCHANGE ACT REGISTRATION
Proquest has voluntarily filed this registration statement on Form 10-SB
with the Securities and Exchange Commission ("SEC" or "Commission") in order to
register Proquest's common stock under Section 12(g) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"). Upon effectiveness of this
registration statement, Proquest will be required to file quarterly, annual and
other reports and other information with the SEC as required by the Exchange
Act. Management believes it is in the shareholders' best interests for Proquest
to register under the Exchange Act, in order that Proquest's common stock can be
quoted on the OTC Bulletin Board. Additionally, management believes that
potential combination candidates will find Proquest more attractive as a public
blank check company if it is subject to Exchange Act reporting requirements and
files annual and quarterly financial statements with the SEC. If Proquest's duty
to file reports under the Exchange Act is suspended, Proquest intends to
nonetheless continue filing reports on a voluntary basis.
PROPOSED BUSINESS
Proquest intends to enter into a business combination with one or more as
yet unidentified privately held businesses. Management believes that Proquest
will be attractive to privately held companies interested in becoming publicly
traded by means of a business combination with Proquest, without offering their
own securities to the public. Proquest intends to pursue negotiations with
qualified candidates after effectiveness of this Registration Statement.
Proquest will not be restricted in its search for business combination
candidates to any particular geographical area, industry or industry segment,
and may enter into a combination with a private business engaged in any line of
business. Management's discretion is, as a practical matter, unlimited in the
selection of a combination candidate. Proquest has not entered into any
agreement, arrangement or understanding of any kind with any person regarding a
business combination. Proquest does not intend to enter into any business
combination involving any business or venture with which its sole officer or
director is affiliated.
Depending upon the nature of the transaction, the current sole officer and
director of Proquest probably will resign his directorship and officer positions
with Proquest in connection with Proquest's consummation of a business
combination. See "Form of Acquisition" below. Proquest's current management will
not have any control over the conduct of Proquest's business following
Proquest's completion of a business combination.
It is anticipated that business opportunities will come to Proquest's
attention from various sources, including its management, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. Proquest has no
plans, understandings, agreements, or commitments with any individual or entity
to act as a finder of or as a business consultant in regard to any business
opportunities for Proquest. There are no plans to use advertisements, notices or
any general solicitation in the search for combination candidates.
PRE-COMBINATION ACTIVITIES. Proquest is a "blank check" company, defined as
an inactive, publicly quoted company with nominal assets and liabilities. With
these characteristics, management believes that Proquest will be attractive to
privately held companies interested in becoming publicly traded by means of a
business combination with Proquest, without offering their own securities to the
public. Proquest intends to pursue negotiations with qualified candidates after
effectiveness of this Registration Statement.
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The term "business combination" (or "combination") means the result of (i)
a statutory merger of a combination candidate into or its consolidation with
Proquest or a wholly owned subsidiary of Proquest formed for the purpose of the
merger or consolidation, (ii) the exchange of securities of Proquest for the
assets or outstanding equity securities of a privately held business, or (iii)
the sale of securities by Proquest for cash or other value to a business entity
or individual, and similar transactions. A combination may be structured in one
of the foregoing ways or in any other form which will result in the combined
entity being a publicly held corporation. It is unlikely that any proposed
combination will be submitted for the approval of Proquest's shareholders prior
to consummation. Pending negotiation and consummation of a combination, Proquest
anticipates that it will have no business activities or sources of revenues and
will incur no significant expenses or liabilities other than expenses related to
this Registration Statement, related to ongoing filings required by the Exchange
Act, or related to the negotiation and consummation of a combination.
The Company anticipates that the business opportunities presented to it
will (1) be recently organized with no operating history, or a history of losses
attributable to under-capitalization or other factors; (2) be experiencing
financial or operating difficulties; (3) be in need of funds to develop a new
product or service or to expand into a new market; (4) be relying upon an
untested product or marketing concept; or (5) have a combination of the
foregoing characteristics. Given the above factors, it should be expected that
any acquisition candidate may have a history of losses or low profitability.
Proquest will not be restricted in its search for business combination
candidates to any particular geographical area, industry or industry segment,
and may enter into a combination with a private business engaged in any line of
business, including service, finance, mining, manufacturing, real estate, oil
and gas, distribution, transportation, medical, communications, high technology,
biotechnology or any other. Management's discretion is, as a practical matter,
unlimited in the selection of a combination candidate. Management of Proquest
will seek combination candidates in the United States and other countries, as
available time permits, through existing associations and by word of mouth.
Proquest has not entered into any agreement or understanding of any kind
with any person regarding a business combination. There is no assurance that
Proquest will be successful in locating a suitable combination candidate or in
concluding a business combination on terms acceptable to Proquest. Proquest's
Board of Directors has not established a time limitation by which it must
consummate a suitable combination; however, if Proquest is unable to consummate
a suitable combination within a reasonable period, such period to be determined
at the discretion of Proquest's Board of Directors, the Board of Directors will
probably recommend its liquidation and dissolution. It is anticipated that
Proquest will not be able to diversify, but will essentially be limited to one
such venture because of Proquest's lack of capital. This lack of diversification
will not permit Proquest to offset potential losses from one acquisition against
profits from another, and should be considered an adverse factor affecting any
decision to purchase Proquest's securities.
Proquest's management has the authority and discretion to effect
transactions having a potentially adverse impact upon Proquest's shareholders
and to complete a combination without submitting any proposal to the
stockholders for their prior approval. Proquest's shareholders should not
anticipate that they will have any meaningful opportunity to consider or vote
upon any candidate selected by Proquest management for acquisition. However, it
is anticipated that Proquest's shareholders will, prior to completion of any
combination, be given information about the candidate company's business,
financial condition, management and other information required by ITEMs 6(a),
(d), (e), 7 and 8 of Schedule 14A of Regulation 14A under the Exchange Act.
COMBINATION SUITABILITY STANDARDS. The analysis of candidate companies will
be undertaken by or under the supervision of Proquest's President, who is not a
professional business analyst. See "MANAGEMENT" below.
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To a large extent, a decision to participate in a specific combination may
be made upon management's analysis of the quality of the candidate company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the candidate will derive from becoming a publicly held entity, and numerous
other factors which are difficult, if not impossible, to objectively quantify or
analyze. In many instances, it is anticipated that the historical operations of
a specific candidate may not necessarily be indicative of the potential for the
future because of the possible need to shift marketing approaches substantially,
expand significantly, change product emphasis, change or substantially augment
management, or make other changes. Proquest will be dependent upon the owners
and management of a candidate to identify any such problems which may exist and
to implement, or be primarily responsible for the implementation of, required
changes. Because Proquest may participate in a business combination with a newly
organized candidate or with a candidate which is entering a new phase of growth,
it should be emphasized that Proquest will incur further risks, because
management in many instances will not have proved its abilities or
effectiveness, the eventual market for the candidate's products or services will
likely not be established, and the candidate may not be profitable when
acquired.
Otherwise, Proquest anticipates that it may consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. Proquest's perception of how any particular candidate will be received
by the investment community and by Proquest's stockholders;
3. Whether, following the business combination, the financial condition
of the candidate would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of
Proquest to qualify for listing on an exchange or on NASDAQ, so as to
permit the trading of such securities to be exempt from the
requirements of the federal "penny stock" rules adopted by the SEC.
4. Capital requirements and anticipated availability of required funds,
to be provided by Proquest or from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
5. The extent to which the candidate can be advanced;
6. Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
7. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment;
8. The cost of participation by Proquest as compared to the perceived
tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required
items.
No one of the factors described above will be controlling in the selection
of a candidate. Potentially available candidates may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. It should be recognized that, because of
Proquest's limited capital available for investigation and management's limited
experience in business analysis, Proquest may not discover or adequately
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evaluate adverse facts about the opportunity to be acquired. Proquest cannot
predict when it may participate in a business combination. It expects, however,
that the analysis of specific proposals and the selection of a candidate may
take several months or more.
Management believes that various types of potential merger or acquisition
candidates might find a business combination with Proquest to be attractive.
These include acquisition candidates desiring to create a public market for
their shares in order to enhance liquidity for current shareholders, acquisition
candidates which have long-term plans for raising capital through the public
sale of securities and believe that the possible prior existence of a public
market for their securities would be beneficial, and acquisition candidates
which plan to acquire additional assets through issuance of securities rather
than for cash, and believe that the possibility of development of a public
market for their securities will be of assistance in that process. Acquisition
candidates which have a need for an immediate cash infusion are not likely to
find a potential business combination with Proquest to be an attractive
alternative.
Prior to consummation of any combination (other than a mere sale by
Proquest insiders of a controlling interest in Proquest's common stock) Proquest
intends to require that the combination candidate provide Proquest the financial
statements required by ITEM 310 of Regulation S-B, including at the least an
audited balance sheet as of the most recent fiscal year end and statements of
operations, cash flows and changes in stockholders' equity for the two most
recent fiscal years, audited by certified public accountants acceptable to
Proquest's management, and the necessary unaudited interim financial statements.
Such financial statements must be adequate to satisfy Proquest's reporting
obligations under Section 15(d) or 13 of the Exchange Act. If the required
audited financial statements are not available at the time of closing, Proquest
management must reasonably believe that the audit can be obtained in less than
60 days. This requirement to provide audited financial statements may
significantly narrow the pool of potential combination candidates available,
since most private companies are not already audited. Some private companies
will either not be able to obtain an audit or will find the audit process too
expensive. In addition, some private companies on closer examination may find
the entire process of being a reporting company after a combination with
Proquest too burdensome and expensive in light of the perceived potential
benefits from a combination.
FORM OF ACQUISITION. It is impossible to predict the manner in which
Proquest may participate in a business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and desires of
Proquest and the promoters of the opportunity and, upon the basis of that review
and the relative negotiating strength of Proquest and such promoters, the legal
structure or method deemed by management to be suitable will be selected. Such
structure may include, but is not limited to leases, purchase and sale
agreements, licenses, joint ventures and other contractual arrangements.
Proquest may act directly or indirectly through an interest in a partnership,
corporation or other form of organization. Implementing such structure may
require the merger, consolidation or reorganization of Proquest with other
corporations or forms of business organization, and although it is likely, there
is no assurance that Proquest would be the surviving entity. In addition, the
present management and stockholders of Proquest most likely will not have
control of a majority of the voting shares of Proquest following a
reorganization transaction. As part of such a transaction, Proquest's existing
directors may resign and new directors may be appointed without any vote or
opportunity for approval by Proquest's shareholders.
It is likely that Proquest will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of
Proquest. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, Proquest's
current stockholders would retain in the aggregate 20% or less of the total
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issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of Proquest prior to such
reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in Proquest by the current officers, directors and principal
shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, Proquest may
agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in Proquest's securities may have a depressive
effect upon such market.
Proquest will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, Proquest anticipates that it, and/or its officers and
principal shareholders will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity prior to signing a
binding agreement. Such a letter of intent will set forth the terms of the
proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither Proquest nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of Proquest to pay until an indeterminate future time may make it
impossible to procure goods and services.
POST-COMBINATION ACTIVITIES. Management anticipates that, following
consummation of a combination, control of Proquest will change as a result of
the issuance of additional Common Stock to the shareholders of the business
acquired in the combination. Once ownership control has changed, it is likely
that the new controlling shareholders will call a meeting for the purpose of
replacing the incumbent directors of Proquest with candidates of their own, and
that the new directors will then replace the incumbent officers with their own
nominees. Rule 14f-1 under the Exchange Act requires that, if in connection with
a business combination or sale of control of Proquest there should arise any
arrangement or understanding for a change in a majority of Proquest's directors
and the change in the board of directors is not approved in advance by
Proquest's shareholders at a shareholder meeting, then none of the new directors
may take office until at least ten (10) days after an information statement has
been filed with the Securities and Exchange Commission and sent to Proquest's
shareholders. The information statement furnished must as a practical matter
include the information required by ITEMS 6(a), (d) and (e), 7 and 8 of Schedule
14A of Regulation 14A in a proxy statement.
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Following consummation of a combination, management anticipates that
Proquest will file a current report on Form 8-K with the Commission which
discloses among other things the date and manner of the combination, material
terms of the definitive agreement, the assets and consideration involved, the
identity of the person or persons from whom the assets or other property was
acquired, changes in management and biographies of the new directors and
executive officers, identity of principal shareholders following the
combination, and contains the required financial statements. The Form 8-K report
also will be required to include all information as to the business acquired
called for by ITEM 101 of Regulation S-B.
POTENTIAL BENEFITS to INSIDERS
In connection with a business combination, it is possible that shares of
common stock constituting control of Proquest may be purchased from the current
principal shareholders ("insiders") of Proquest by the acquiring entity or its
affiliates. If stock is purchased from the insiders, the transaction is very
likely to result in substantial gains to them relative to the price they
originally paid for the stock. In Proquest's judgment, none of its officers and
directors would as a result of such a sale become an "underwriter" within the
meaning of the Section 2(11) of the Securities Act of 1933, as amended. No bylaw
or charter provision Proquest prevents insiders from negotiating or consummating
such a sale of their shares. The sale of a controlling interest by Proquest
insiders could occur at a time when the other shareholders of the Company remain
subject to restrictions on the transfer of their shares, and it is unlikely that
Proquest shareholders generally will be given the opportunity to participate in
any such sale of shares. Moreover, Proquest shareholders probably will not be
afforded any opportunity to review or approve any such buyout of shares held by
an officer, director or other affiliate, should such a buyout occur.
Proquest may require that a company being acquired repay all advances made
to Proquest by Proquest shareholders and management, at or prior to closing of a
combination. Otherwise, there are no conditions that any combination or
combination candidate must meet, such as buying stock from Proquest insiders or
paying compensation to any Proquest officer, director or shareholder or their
respective affiliates.
USE OF CONSULTANTS and FINDERS
Although there are no current plans to do so, Proquest management might
hire and pay an outside consultant to assist in the investigation and selection
of candidates, and might pay a finder's fee to a person who introduces a
candidate with which Proquest completes a combination. Since Proquest management
has no current plans to use any outside consultants or finders to assist in the
investigation and selection of candidates, no policies have been adopted
regarding use of consultants or finders, the criteria to be used in selecting
such consultants or finders, the services to be provided, the term of service,
or the structure or amount of fees that may be paid to them. However, because of
the limited resources of Proquest, it is likely that any such fee Proquest
agrees to pay would be paid in stock and not in cash. Proquest has had no
discussions, and has entered into no arrangements or understandings, with any
consultant or finder. Proquest's officers and directors have not in the past
used any particular consultant or finder on a regular basis and have no plan to
either use any consultant or recommend that any particular consultant be engaged
by Proquest on any basis.
It is possible that compensation in the form of common stock, options,
warrants or other securities of Proquest, cash or any combination thereof, may
be paid to outside consultants or finders. No securities of Proquest will be
paid to officers, directors or promoters of Proquest nor any of their respective
affiliates. Any payments of cash to a consultant or finder would be made by the
business acquired or persons affiliated or associated with it, and not by
Proquest. It is possible that the payment of such compensation may become a
factor in any negotiations for Proquest's acquisition of a business opportunity.
Any such negotiations and compensation may present conflicts of interest between
the interests of persons seeking compensation and those of Proquest's
shareholders, and there is no assurance that any such conflicts will be resolved
in favor of Proquest's shareholders.
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STATE SECURITIES LAWS CONSIDERATIONS
Section 18 of the Securities Act of 1933, as amended in 1996, provides that
no law, rule, regulation, order or administrative action of any state may
require registration or qualification of securities or securities transactions
that involve the sale of a "covered security." The term "covered security" is
defined in Section 18 to include among other things transactions by "any person
not an issuer, underwriter or dealer," (in other words, secondary transactions
in securities already outstanding) that are exempted from registration by
Section 4(1) of the Securities Act of 1933, provided the issuer of the security
is a "reporting company," meaning that it files reports with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
Section 18 as amended preserves the authority of the states to require
certain limited notice filings by issuers and to collect fees as to certain
categories of covered securities, specifically including Section 4(1) secondary
transactions in the securities of reporting companies. Section 18 expressly
provides, however, that a state may not "directly or indirectly prohibit, limit,
or impose conditions based on the merits of such offering or issuer, upon the
offer or sale of any (covered) security." This provision prohibits states from
requiring registration or qualification of securities of an Exchange Act
reporting company which is current in its filings with the SEC.
The states generally are free to enact legislation or adopt rules that
prohibit secondary trading in the securities of "blank check" companies like
Proquest. Section 18, however, of the Act preempts state law as to covered
securities of reporting companies. Thus, while the states may require certain
limited notice filings and payment of filing fees by Proquest as a precondition
to secondary trading of its shares in those states, they cannot, so long as
Proquest is a reporting issuer, prohibit, limit or condition trading in
Proquest's securities based on the fact that Proquest is or ever was a blank
check company. Proquest will comply with such state limited notice filings as
may be necessary in regard to secondary trading. At this time, Proquest's stock
is not actively traded in any market, and an active market in its common stock
is not expected to arise, if ever, until after completion of a business
combination.
NO INVESTMENT COMPANY ACT REGULATION
Prior to completing a combination, Proquest will not engage in the business
of investing or reinvesting in, or owning, holding or trading in securities, or
otherwise engaging in activities which would cause it to be classified as an
"investment company" under the 1940 Act. To avoid becoming an investment
company, not more than 40% of the value of Proquest's assets (excluding
government securities and cash and cash equivalents) may consist of "investment
securities," which is defined to include all securities other than U.S.
government securities and securities of majority-owned subsidiaries. Because
Proquest will not own less than a majority of any assets or business acquired,
it will not be regulated as an investment company. Proquest will not pursue any
combination unless it will result in Proquest owning at least a majority
interest in the business acquired.
COMPETITION
Proquest will be in direct competition with many entities in its efforts to
locate suitable business opportunities. Included in the competition will be
business development companies, venture capital partnerships and corporations,
small business investment companies, venture capital affiliates of industrial
and financial companies, broker-dealers and investment bankers, management and
management consultant firms and private individual investors. Most of these
entities will possess greater financial resources and will be able to assume
greater risks than those which Proquest, with its limited capital, could
consider. Many of these competing entities will also possess significantly
greater experience and contacts than Proquest's Management. Moreover, Proquest
also will be competing with numerous other blank check companies for such
opportunities.
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EMPLOYEES
The only employees of Proquest currently are its officers. It is not
expected that Proquest will have additional employees except as a result of
completing a combination.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Proquest's plan of operation over the next twelve months is set forth above
under ITEM 1 (Description of Business). This plan of operation has been adopted
in order to attempt to create value for Proquest's shareholders.
RESULTS of OPERATIONS
Proquest had no operations or revenues in 1999 or in the years ended
December 31, 1998 and 1997, other than seeking to enter into a business
combination and is still in the development stage. Proquest anticipates no
operations unless and until it completes a business combination as described
above.
LIQUIDITY and CAPITAL RESOURCES
As of the date of this Registration Statement, Proquest has virtually no
cash on hand and minimal debts. Proquest has no commitment for any capital
expenditure and foresees none. However, Proquest will incur routine fees and
expenses incident to its reporting duties as a public company, and it will incur
fees and expenses in the event it makes or attempts to make an acquisition. As a
practical matter, Proquest expects no significant operating costs other than
professional fees payable to attorneys and accountants. To the extent legal
services are performed by shareholder John Brasher, an attorney, he has agreed
not to charge Proquest for those services, although any other counsel and all
accountants utilized are expected to charge Proquest their customary rates.
Proquest does not anticipate that funding will be necessary in order to
complete a proposed combination, except possibly for fees and costs of
Proquest's professional advisers. Accordingly, there are no plans to raise
capital to finance any business combination, nor does management believe that
any combination candidate will expect cash from Proquest. Proquest hopes to
require the candidate companies to deposit with Proquest an advance which
Proquest can use to defray professional fees and costs and travel, lodging and
other due diligence costs of Proquest's management. Otherwise, management would
have to advance such costs out of their own pockets, and there is no assurance
they will advance such costs.
Other routine expenses, such as making required filings with the Securities
and Exchange Commission, inevitably will be incurred. In order to pay these,
Proquest will be forced to borrow money or prevail upon existing shareholders to
contribute additional funds, whether as a loan or investment, to Proquest. It is
by no means certain that existing shareholders will want or be financially able
to do so. There are no plans to sell additional securities of Proquest to raise
capital. Proquest's failure to timely file reports required under the Securities
Exchange Act of 1934, as amended, could subject it to fines and penalties and
make it less desirable to a potential combination candidate. None of these
sources of funds is assured and, if no funds can be raised, Proquest may be
effectively unable to pursue its business plan.
Proquest shareholders and management members who advance money to Proquest
to cover operating expenses will expect to be reimbursed by the company
acquired, prior to or at the time of completing the combination. Proquest has no
intention of borrowing money to pay any officer, director or shareholder of
Proquest or their affiliates.
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YEAR 2000 ISSUES
Many computers and computer programs in use around the world for purposes
of economy contain only two fields for expression of dates and were programmed
to assume that all dates entered are for years in the twentieth century
beginning with "19" (e.g., 99 means 1999). It is believed that many computers
and software programs will crash on commencement of the year 2000, because they
will not recognize dates beginning with "20" instead of "19" and that widespread
computer crashes will have significant economic effects on governments,
companies and individuals. This is known as the "Y2K" problem or the "millennium
bug." The extent, severity and duration of the Y2K problem are unknown and
impossible to forecast. Moreover, experts disagree on the extent, severity and
duration of the Y2K problem, and on the economic losses and other damage that
may occur as a result of it.
Proquest has no operations or revenues, does no business with customers,
vendors or suppliers, and has no contracts or material relationships with other
companies. Proquest therefore does not anticipate that it will suffer any losses
as a result of Y2K issues. However, if general economic problems resulting from
Y2K issues are severe and prolonged, demand for blank check companies such as
Proquest could be reduced or eliminated for an unknown (and unknowable) period
of time. Because Proquest regularly backs up its records and documents
maintained on computer, any computer failure should not directly cause Proquest
more than a modest inconvenience at worst.
ITEM 3. DESCRIPTION OF PROPERTY.
Proquest neither owns nor leases any real estate or other properties.
Proquest's offices are located at 90 Madison Street, Suite 707, Denver, Colorado
80206, and are provided at no charge by Proquest's counsel. This arrangement is
entirely adequate for Proquest's current needs. Proquest does not have any plans
to acquire any properties or lease offices, and management does not anticipate
that Proquest will take office space unless and until it has completed a
business combination, in which case Proquest's offices almost certainly will be
the same as those of the business opportunity acquired.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
BENEFICIAL OWNERSHIP
The following table sets forth, as of the date of this Registration
Statement, the stock ownership of each director and executive officer of
Proquest, of all directors and executive officers of Proquest as a group, and of
each person known by Proquest to be a beneficial owner of 5% or more of its
Common Stock. Except as otherwise noted, each person listed below is the sole
beneficial owner of the shares and has sole investment and voting power as such
shares. No person listed below has any option, warrant or other right to acquire
additional securities of Proquest, except as may be otherwise noted.
Name and Address Amount & Nature
of Beneficial of Beneficial Percent
Owner Ownership of Class
----- --------- --------
*Randy J. Sasaki .......................... 90,522 (1) 7.9%
2431 West Coast Highway, Suite 202
Newport Beach, California 92663
*Mark Rahe ................................ -0- -0-
12122 Juniper
Overland Park, Kansas 66209
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Ray Polik ................................. 201,160 17.7%
16651 Edgewater Lane
Huntington Beach, CA 92649
Ricky Chow ................................ 201,160 17.7%
2135 East California
San Marino, CA 91108
Trout Trading Company, Inc. ............... 181,043 (1) 16.0%
3334 East Pacific Coast Hwy.
No. 299
Corona del Mar, CA 92645
Pacific Affiliates, Inc. .................. 100,578 8.9%
9634 S. Santa Monica Blvd.
Beverly Hills, CA 90210
*All directors & officers ................. 90,522 7.9%
as a group (1 person)
(1) Trout Trading Company, Inc. is owned 50% by Jane Sasaki and 50% by
Rorianne Sasaki, respectively the mother and wife of Randy J. Sasaki.
Mr. Sasaki claims beneficial ownership of half the shares owned by
Trout Trading, representing the half indirectly owned by his wife.
Despite not having received any compensation and not having otherwise
engaged in any transactions involving the acquisition or disposition of assets
with Proquest, the current directors and executive officers of Proquest may be
deemed to be "promoters" and "founders" of Proquest.
CHANGES in CONTROL
A change of control of Proquest probably will occur upon consummation of a
business combination, which is anticipated to involve significant change in
ownership of Proquest and in the membership of the board of directors. The
extent of any such change of control in ownership or board composition cannot be
predicted at this time.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Executive officers (none of whom have an employment or similar contract)
continue in office at the pleasure of the Board of Directors. The following
table sets forth the name, age, position held and tenure of each director and
executive officer:
Name Age Position Held and Tenure
---- --- ------------------------
Randy J. Sasaki 41 President, Chief Executive Officer,
Director, Chairman of the Board,
since inception
Mark Rahe 40 Secretary
Mark Rahe is the brother-in-law of Randy J. Sasaki. Otherwise, there are no
family relationships among the officers and directors. There is no arrangement
or understanding between Proquest (or any of its directors or officers) and any
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other person pursuant to which such person was or is to be selected as a
director or officer, or under which any officer or director will resign at the
request of another person, and no officer or director is acting or will act on
behalf of or at the direction of any other person. The directors and officers
are expected to devote their time to Proquest's affairs on an "as needed" basis,
but are not required to make any specific portion of their time available to
Proquest. It is anticipated that officers and director will, on the average,
devote no more than 15 hours per week to Proquest's affairs.
BIOGRAPHICAL INFORMATION
RANDY J. SASAKI. Mr. Sasaki currently is co-owner and director of Pacific
Consulting Group, Inc., a Nevada corporation headquartered in Newport Beach,
California, which provides business consulting services. Formerly, he was
engaged as a private consultant by JDK & Associates, Inc., a public relations
firm based in Newport Beach, California since mid-1993. From January 1992 to
mid-1993, Mr. Sasaki attended Metropolitan State University in Denver, where he
was working toward a masters degree in finance. Since 1990 he has been an owner
and director of Ceiling Systems BV, a Netherlands company established to market
and sublicense patented technology and equipment associated with the renovation
of commercial buildings, and from 1989 to 1992, he served as manager of Ceiling
Systems, Inc., a corporation headquartered in Denver which developed patented
technology used in the renovation of commercial building ceilings. From 1988 to
1989, Mr. Sasaki was sales manager and a minority owner of Manhattan
Corporation, a Denver-based company engaged in the business of switching mutual
funds, primarily managing retirement plans of United Airlines pilots. In 1985,
while working part-time at Continental Airlines as a customer service
representative, Mr. Sasaki began trading futures on the New York Futures
Exchange for his own account. He and an associate were ranked 12th in the United
States during the 1986 U.S. Trading Championship sponsored by and reported
Investor's Daily on January 6, 1986, also reported in Barron's and Stocks &
Commodities.
MARK RAHE. Mr. Rahe received his BSBA in Accounting from the University of
Iowa in 1982. Since 1995, he has been with AccountData Staffing, Inc. as an
owner/executive recruiter. This company operates as a temporary and permanent
placement firm with a focus on financial and information services professionals.
From 1994 to 1995, Mr. Rahe was with AccountingSolutions, a division of Staffing
Resources, Inc., as a general manager. He was responsible for establishing an
accounting specialty division and new offices in various Midwestern cities,
which included development of long-term strategies, annual budgeting, oversight
of monthly operating results and the hiring & training of new personnel. While
with Accountants on Call/Accountants Executive Search, from 1991 to 1994, he
managed their St. Louis office and initiated a Denver office for the company in
1993.
CURRENT INVOLVEMENTS with OTHER BLANK CHECK COMPANIES
RANDY J. SASAKI. Mr. Sasaki is an officer or director of the following
other blank check companies, each of which has a business plan substantially
identical to that of Proquest:
RENEGADE VENTURE (NEV.) CORPORATION ("RDVN") - Organized in Nevada 1997 as
the successor by merger to Renegade Venture Corporation, a Colorado
corporation, for the purpose of redomiciliation from Colorado to Nevada.
RDVN is currently seeking to enter into a business combination under the
direction of Mr. Sasaki and Mr. Rahe. RDVN files reports with the
Securities and Exchange Commission pursuant to Section 15(d) of the
Securities Exchange Act of 1934 and is current in its reporting. RDVN's
common stock is quoted on the OTC Bulletin Board under symbol RDVN but is
not actively traded. RDVN has never entered into a business combination of
any kind. Mr. Sasaki has since April 1994, been the President, CEO and a
director of RDVN, which currently is seeking to enter into a business
combination.
MARK RAHE. Mr. Rahe is not an officer or director of any other blank check
company.
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PRIOR EXPERIENCE with BLANK CHECK COMPANIES
Neither Mr. Sasaki nor Mr. Rahe has ever been an executive officer or
director of a blank check or "blind pool" company at the time such company
conducted a public offering. Mr. Rahe has no previous experience as an officer
or director of a blank check company. Mr. Sasaki has, however, previously been
an executive officer and director of a blank check company, and his experience
is detailed below.
CASHBUILDERS, INC. ("CASH") - Organized 1982 in Colorado. Mr. Sasaki and others
purchased a controlling stock interest in CASH, which then was a blank
check company, in a 1994 private transaction for cash payments totalling
approximately $50,000. Pursuant to a Reorganization and Asset Purchase
Agreement dated December 18, 1995, with FANATICS ONLY LLC, a Colorado
limited liability company that organized and ran fantasy sports leagues
("FOL"), and the members of FOL, CASH purchased all the assets and existing
business of FOL. In payment for those assets, CASH issued 6,420,000 shares
of its common stock to the FOL members and assumed all liabilities and
obligations of FOL. Neither Mr. Sasaki nor any other person sold any shares
of CASH or received any compensation or other remuneration in connection
with the purchase of FOL assets, and a total of 1,151,243 of the shares of
CASH then issued and outstanding shares were cancelled without remuneration
to the holders, as part of the transaction. Mr. Sasaki and the other
officers and directors of CASH resigned all offices and directorships at
the effective date of the FOL asset purchase. The issuance of the shares to
the FOL members and change in the officers and directors resulted in a
complete change in control of CASH. Prior to the change in control, CASH
filed an information statement as required by SEC Rule 14f-1 and provided
the information statement to its shareholders. Following the asset sale,
CASH changed its name to "Fanatics Only, Inc." and its trading symbol
changed to FONL, but its shares have never traded actively. CASH has filed
for bankruptcy protection and appears to no longer be in business.
POTENTIAL CONFLICTS of INTEREST
The Company's officers and directors are affiliated with one or more other
blank check companies - disclosed above - having a similar business plan to that
of Proquest ("Affiliated Companies") which may compete directly or indirectly
with Proquest. Proquest has not identified a specific business area, industry or
industry segment in which it will seek combination candidates. Proquest has made
a determination that it will not concentrate its search for combination
candidates in any particular business, industry or industry segment, since any
such determination is potentially limiting and confers no advantage to Proquest
or its shareholders. Certain specific conflicts of interest may include those
discussed below.
1. The interests of any Affiliated Companies from time to time may be
inconsistent in some respects with the interests of Proquest. The nature of
these conflicts of interest may vary. There may be circumstances in which an
Affiliated Company may take advantage of an opportunity that might be suitable
for Proquest. Although there can be no assurance that conflicts of interest will
not arise or that resolutions of any such conflicts will be made in a manner
most favorable to Proquest and its shareholders, the officers and directors of
Proquest have a fiduciary responsibility to Proquest and its shareholders and,
therefore, must adhere to a standard of good faith and integrity in their
dealings with and for Proquest and its shareholders.
2. The officers and directors of Proquest serve as officers or directors of
one or more Affiliated Companies and may serve as officers and directors of
other Affiliated Companies in the future. Proquest's officers and directors are
required to devote only so much of their time to Proquest's affairs as they deem
appropriate, in their sole discretion. As a result, Proquest's officers and
directors may have conflicts of interest in allocating their management time,
services, and functions among Proquest and any current and future Affiliated
Companies which they may serve, as well as any other business ventures in which
they are now or may later become involved.
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3. The Affiliated Companies may compete directly or indirectly with that of
Proquest for the acquisition of available, desirable combination candidates.
There may be factors unique to Proquest or an Affiliated Company which
respectively makes it more or less desirable to a potential combination
candidate, such as age of the company, name, capitalization, state of
incorporation, contents of the articles of incorporation, etc. However, any such
direct conflicts are not expected to be resolved through arm's-length
negotiation, but rather in the discretion of management. While any such
resolution will be made with due regard to the fiduciary duty owed to Proquest
and its shareholders, there can be no assurance that all potential conflicts can
be resolved in a manner most favorable to Proquest as if no conflicts existed.
Members of Proquest's management who also are members of management of another
Affiliated Company will also owe the same fiduciary duty to the shareholders of
the other Affiliated Company.
4. Certain conflicts of interest exist and will continue to exist between
Proquest and its officers and directors due to the fact that each has other
employment or business interests to which he devotes his primary attention. Each
officer and director is expected to continue to do so in order to make a living,
notwithstanding the fact that management time should be devoted to Proquest's
affairs. Proquest has not established policies or procedures for the resolution
of current or potential conflicts of interest between Proquest and its
management.
As a practical matter, such potential conflicts could be alleviated only if
the Affiliated Companies either are not seeking a combination candidate at the
same time as the Company, have already identified a combination candidate, are
seeking a combination candidate in a specifically identified business area, or
are seeking a combination candidate that would not otherwise meet Proquest's
selection criteria. It is likely, however, that the combination criteria of
Proquest and any Affiliated Companies will be substantially identical.
Ultimately, Proquest's shareholders ultimately must rely on the fiduciary
responsibility owed to them by Proquest's officers and directors.
There can be no assurance that members of management will resolve all
conflicts of interest in Proquest's favor. The officers and directors are
accountable to Proquest and its shareholders as fiduciaries, which means that
they are legally obligated to exercise good faith and integrity in handling
Proquest's affairs and in their dealings with Proquest. Failure by them to
conduct Proquest's business in its best interests may result in liability to
them. The area of fiduciary responsibility is a rapidly developing area of law,
and persons who have questions concerning the duties of the officers and
directors to Proquest should consult their counsel.
INDEMNIFICATION of DIRECTORS and OFFICERS
See discussion under Part II, ITEM 5 below.
EXCLUSION of DIRECTOR LIABILITY
Pursuant to the General Corporation Law of Nevada, Proquest's Certificate
of Incorporation, as amended, excludes personal liability on the part of its
directors to Proquest for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law or for
improper payment of dividends. This exclusion of liability does not limit any
right which a director may have to be indemnified and does not affect any
director's liability under federal or applicable state securities laws.
ITEM 6. EXECUTIVE COMPENSATION.
CASH and OTHER COMPENSATION
Since inception of Proquest and through the date of this Registration
Statement, no director or executive officer has received cash or cash equivalent
compensation from Proquest. Proquest has no other agreement or understanding,
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express or implied, with any director or executive officer concerning employment
or cash or other compensation for services. Proquest may pay compensation to
officers and other employees should it succeed in acquiring a business and funds
exist for compensation.
COMPENSATION PURSUANT to PLANS
Since inception of Proquest and through the date of this Registration
Statement, no director or executive officer has received compensation from
Proquest pursuant to any compensatory or benefit plan. There is no plan or
understanding, express or implied, to pay any compensation to any director or
executive officer pursuant to any compensatory or benefit plan of Proquest,
although Proquest anticipates that it will compensate its officers and directors
for services to Proquest with stock or options to purchase stock, in lieu of
cash.
Proquest currently has in place an employee stock compensation plan and
compensatory stock option plan. Proquest has no long-term incentive plans, as
that term is defined in the rules and regulations of the Securities and Exchange
Commission. There are no other compensatory or benefit plans, such as retirement
or pension plans, in effect or anticipated to be adopted, although other plans
may be adopted by new management following completion of a business combination.
EMPLOYEE STOCK COMPENSATION PLAN
Proquest has adopted the 1997 Employee Stock Compensation Plan for
employees, officers, directors of Proquest and advisors to Proquest (the "ESC
Plan"). Proquest has reserved a maximum of 1,000,000 Common Shares to be issued
upon the grant of awards under the ESC Plan. Employees will recognize taxable
income upon the grant of Common Stock equal to the fair market value of the
Common Stock on the date of the grant and Proquest will recognize a compensating
deduction for compensation expense at such time. The ESC Plan will be
administered by the Board of Directors or a committee of directors. No shares
have been awarded or currently are anticipated to be awarded under the ESC Plan.
COMPENSATORY STOCK OPTION PLAN
Proquest has adopted the 1997 Compensatory Stock Option Plan for officers,
employees, directors and advisors (the "CSO Plan"). Proquest has reserved a
maximum of 1,000,000 Common Shares to be issued upon the exercise of options
granted under the CSO Plan. The CSO Plan will not qualify as an "incentive stock
option" plan under Section 422 of the Internal Revenue Code of 1986, as amended.
Options will be granted under the CSO Plan at exercise prices to be determined
by the Board of Directors or other CSO Plan administrator. With respect to
options granted pursuant to the CSO Plan, optionees will not recognize taxable
income upon the grant of options granted at or in excess of fair market value.
However, optionees will realize income at the time of exercising an option to
the extent the market price of the common stock at that time exceeds the option
exercise price, and Proquest must recognize a compensation expense in an amount
equal to any taxable income realized by an optionee as a result of exercising
the option. The CSO Plan will be administered by the Board of Directors or a
committee of directors. No options have been granted or currently are
anticipated to granted under the CSO Plan.
EMPLOYMENT CONTRACTS
No person has entered into any employment or similar contract with
Proquest. It is not anticipated that Proquest will enter into any employment or
similar contract unless in conjunction with or following completion of a
business combination.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Proquest is indebted to Mr. Sasaki for approximately $30,248 for sums
advanced to or on behalf of Proquest and to Trout Trading Company, Inc. for
approximately $3,513, but otherwise is not indebted to any officer, director,
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promoter or control person. Proquest has no understanding with its officers,
directors or shareholders, pursuant to which such persons are required to
contribute capital to Proquest, loan money or otherwise provide funds to
Proquest, although management has in the past and expects in the future to make
funds available to Proquest to cover operating expenses.
There were no transactions, or series of transactions, for the years ended
December 31, 1998 or 1997, nor are there any currently proposed transactions, or
series of transactions, to which Proquest is a party, in which the amount
exceeds $60,000, and in which to the knowledge of Proquest any director,
executive officer, nominee, five percent or greater shareholder, or any member
of the immediate family of any of the foregoing persons, have or will have any
direct or indirect material interest.
Proquest is obligated to deliver shares of its common stock to former
officers and directors in order to settle old cash advances by them to Pro Quest
Colorado, as follows: Daryl Maccarter - 5,000 shares, and John Crawford - 4,000
shares. In addition, Proquest is obligated to deliver 4,000 shares to Ivan
Braverman to settle certain former accounting services rendered.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of Proquest consists of 50,000,000 shares of
Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001
par value.
COMMON STOCK
At November 15, 1999, there were 1,134,379 shares of Common Stock
outstanding, held of record by approximately 215 persons, which number does not
include shares held in nominee or "street" name. The holders of Common Stock are
entitled to one vote for each share held. Proquest's Certificate of
Incorporation provides that the affirmative vote of a majority of the votes cast
at a shareholder's meeting is sufficient to effect any corporate action upon
which shareholders may or must vote. Common Shares do not carry cumulative
voting rights, thus holders of more than 50% of the Common Stock have the power
to elect all directors if they wish and, as a practical matter, to control
Proquest. Holders of Common Stock are not entitled to preemptive rights, and the
Common Stock is not subject to redemption.
Proquest's bylaws provide for a board of one director, all of whom are
elected for one-year terms at the annual meeting of shareholders. The
affirmative vote of a simple majority of the outstanding Common Stock is
necessary to remove a director. A special meeting of shareholders may be called
by the Chairman of the Board, the President, a majority of the Board of
Directors, or shareholders owning in the aggregate 10% or more of the Common
Stock. Holders of Common Stock are entitled to receive, pro rata, dividends if,
when and as declared by the Board of Directors out of funds legally available
therefor.
Upon liquidation, dissolution or winding up of Proquest, holders of Common
Stock are entitled to share ratably in Proquest's assets legally available for
distribution to its shareholders after payment of liquidation preference and
outstanding redemption rights (if any) on any Preferred Stock outstanding and
are not subject to further calls or assessments.
PREFERRED STOCK
Although no shares of Preferred Stock are being registered in this
Registration Statement or have previously been registered under the Exchange
Act, this discussion is included to enhance the reader's understanding of
Proquest. No Preferred Shares are issued or outstanding, and Proquest has no
20
<PAGE>
plans to issue any Preferred Shares. The Board of Directors has the authority to
issue Preferred Stock in one or more series and to fix the voting powers,
conversion rights, other special rights and qualifications, limitations and
restrictions of each series, without any further vote or action by the
shareholders. It is not possible to state the actual effect of the authorization
of any Preferred Stock upon the rights of holders of the Common Stock, until the
Board of Directors determines the specific rights of the holders of the
Preferred Stock. However, the Preferred Stock may have adverse effects upon the
holders of the Common Stock, including (i) restrictions on dividends on the
Common Stock if dividends on the Preferred Stock have not been paid, (ii)
dilution of the voting power of the Common Stock to the extent that the
Preferred Stock has voting rights, (iii) dilution of the equity interest of the
Common Stock to the extent that the Preferred Stock is converted into Common
Stock, or (iv) the Common Stock not being entitled to share in Proquest's assets
upon liquidation until satisfaction of any liquidation preference granted the
holders of the Preferred Stock. Proquest does not currently anticipate that it
will issue Preferred Stock in connection with any business combination, but
issuance for this purpose is a possibility. Proquest has not authorized such
number of Preferred Shares for anti-takeover or similar purposes.
ANNUAL REPORTS
Proquest intends to furnish its shareholders with annual reports containing
financial statements of Proquest as examined and reported upon by independent
public accountants. Proquest will distribute other reports as determined by the
Board of Directors.
TRANSFER AGENT
The transfer agent and registrar for Proquest's common stock is SECURITIES
TRANSFER CORPORATION, 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.
Their telephone number is (972) 447-9890, and their facsimile number is (972)
248-4797.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
PRICE RANGE of the COMMON STOCK
The common stock of Proquest is the subject of an unpriced quotation
(meaning quoted "name only" without bid or asked prices posted) in the National
Quotation Bureau's so-called "pink sheets" under symbol PROQ. The common stock
has not traded to management's knowledge, and any trading in the common stock at
this time would occur in the over-the-counter market. No active trading market
is expected to arise (if one ever arises), unless and until Proquest
successfully completes a business combination. No shareholder has entered into a
lock-up or similar agreement as to his common shares.
DIVIDENDS
Proquest has not declared or paid any dividends on its Common Stock to
date. Management anticipates that any future earnings will be retained as
working capital and used for business purposes. Accordingly, it is unlikely that
Proquest will declare or pay any such dividends in the foreseeable future.
PUBLIC MARKET for the COMMON SHARES
There currently is no public market for Proquest's common stock, and no
assurance can be given that a market will develop or that a shareholder ever
will be able to liquidate his investment without considerable delay, if at all.
21
<PAGE>
If a market should develop, the price may be highly volatile. Unless and until
Proquest's common shares are quoted on the NASDAQ system or listed on a national
securities exchange, it is likely that the common shares will be defined as
"penny stocks" under the Exchange Act and SEC rules thereunder. The Exchange Act
and penny stock rules generally impose additional sales practice and disclosure
requirements upon broker-dealers who sell penny stocks to persons other than
certain "accredited investors" (generally, institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 jointly with spouse) or in transactions
not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must
make a suitability determination for each purchaser and receive the purchaser's
written agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, the compensation to
be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the SEC. So long as Proquest's common shares are
considered "penny stocks", many brokers will be reluctant or will refuse to
effect transactions in Proquest's shares, and many lending institutions will not
permit the use of penny stocks as collateral for any loans.
RULE 144 RESALES
Proquest has 1,134,379 common shares issued and outstanding, of which
approximately 419,379 shares are unrestricted and may be freely traded in the
securities markets. Rule 144 provides that a person who acquired securities in a
transaction (or chain of transactions) not involving any public offering and has
beneficially owned those securities, fully paid, for a period of at least one
year may, under certain conditions, sell every three months, in brokerage
transactions, a number of shares that does not exceed one percent (1%) of the
issuer's outstanding common stock. For issuers whose shares are listed on a
stock exchange or NASDAQ, a shareholder may alternatively sell a number of
shares that does not exceed the average weekly trading volume during the four
calendar weeks prior to his or her sale.
However, if a person has beneficially owned securities for a period of two
years and has not been an affiliate (control person) of the issuer for the
preceding three-month period, the person may request that all restrictive
legends affecting the securities be removed, and there is no limit on the number
of shares that the non-affiliate may then sell. The sale of a substantial number
of shares of Proquest under Rule 144 or under any other exemption from the Act
could have a depressive effect upon the price of Proquest's common shares in any
market that may develop. Under current SEC rules, no Proquest common shares may
be resold under Rule 144 during the ninety (90)-day period following
effectiveness of this Registration Statement.
PRIOR STOCK PURCHASE TRANSACTION
In November 1994, Ray Polik, Ricky Chow, Pacific Affiliates, Inc. and Trout
Trading Company, Inc. entered into a stock purchase agreement with Stephen
Petrucci for the purchase of 683,941 shares of Pro Quest Colorado (68,394,125
prior to reincorporation to Nevada) in the following proportions: Ray Polik -
201,160; Ricky Chow - 201,160; Trout Trading Company, Inc. - 181,043; Pacific
Affiliates, Inc. - 100,578. Pursuant to that agreement, Petrucci was paid
$65,000 for the shares in November 1994. Polik, Chow, Pacific Affiliates and
Trout Trading provided those funds at the time of purchase. The purchased shares
were delivered by Mr. Petrucci, together with signed stock powers, in November
of 1994. Mr. Petrucci relied upon Section 4(1) of the Securities Act of 1933 for
the private sale, since he had held the shares for approximately seven years,
which indicated his own original investment intent, and the transfers to the
four purchasers were not in the nature of a public offering or distribution.
At the time of the stock purchase in 1994, the 683,941 shares were not
immediately transferred to the purchasers but remained in the name of the
seller. The share certificates and stock powers were held by ProQuest counsel in
their law firm's safe until 1999, when the physical transfers of the shares took
place. However, the purchase agreement was made and the sale and payment for the
shares took place in 1994, and the delivery of the shares to the purchasers took
22
<PAGE>
place in 1994. For these reasons, management believes that the 683,941 shares
may be deemed purchased in 1994 and to have been beneficially owned by the
purchasers from that time forward, in which event the holding period of Rule 144
would be satisfied, notwithstanding the fact that the physical transfers of the
shares into the purchasers' names took place in 1999. Accordingly, these shares
may be eligible for resale under Rule 144 whenever the conditions of Rule 144
are met.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal proceedings which are pending or have been threatened
against Proquest or any officer, director or control person of which management
is aware.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Neither Proquest not its predecessor, Pro Quest Colorado, has sold or
issued any shares of common stock during the three-year period preceding the
filing of this Registration Statement.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Nevada law, Proquest's Certificate of Incorporation, as
amended, provides that Proquest will indemnify its officers and directors
against attorneys' fees and other expenses and liabilities they incur to defend,
settle or satisfy any civil or criminal action brought against them arising out
of their association with or activities on behalf of Proquest unless, in any
such action, they are adjudged to have acted with gross negligence or to have
engaged in willful misconduct. Proquest may also bear the expenses of such
litigation for any such persons upon their promise to repay such sums if it is
ultimately determined that they are not entitled to indemnification. Such
expenditures could be substantial and may not be recouped, even if Proquest is
so entitled. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling Proquest pursuant to the foregoing provisions, Proquest has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. Furthermore, it should be noted that a successful
indemnification of any officer or director could deplete the assets of Proquest.
PART F/S
AUDITED FINANCIAL STATEMENTS.
Independent Auditors' Report ......................................... F-1
Balance Sheets as of December 31, 1998 and 1997....................... F-2
Statements of Operations for the years ended December 31, 1998
and 1997 and from March 10, 1987 (inception) to December 31, 1998 ... F-3
Statement of Stockholders' Equity for the period from
March 10, 1987 (inception) to December 31, 1998 ..................... F-4
Statements of Cash Flows for the years ended December 31, 1998
and 1997 and from March 10, 1987 (inception) to December 31, 1998 ... F-5
23
<PAGE>
Notes to Financial Statements ........................................ F-6
MANAGEMENT PREPARED INTERIM UNAUDITED FINANCIAL STATEMENTS.
Balance Sheet as of September 30, 1999 ............................... F-9
Statement of Operations for the nine months ended March 31, 1999
and for the period from March 10, 1987 (inception) to September
30, 1999 ............................................................ F-10
Statement of Cash Flows for the nine months ended March 31, 1999
and for the period from March 10, 1987 (inception) to September
30, 1999 ............................................................ F-11
Statement of Stockholders' Equity for the period from
March 10, 1987 (inception) to September 30, 1999 .................... F-12
Notes to Interim Financial Statements ................................ F-13
24
<PAGE>
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2280 South Xanadu Way
Suite 370
Aurora, Colorado 80014
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors and Stockholders
Proquest Capital Corporation
I have audited the accompanying consolidated balance sheets of Proquest
Capital Corporation as of December 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended and the period March 10, 1987 (inception) to December 31,
1998. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Proquest
Capital Corporation as of December 31, 1998 and 1997 , and the results of its
operations and its cash flows for the years then ended and the period March 10,
1987 (inception) to December 31, 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Larry O'Donnell
- -------------------
Larry O'Donnell, CPA PC
Aurora, Colorado
February 8, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
BALANCE SHEETS
Dec 31 Dec 31
1998 1997
---- ----
ASSETS
Current Assets:
<S> <C> <C>
Cash held in trust account $ 613 $ 745
Plant, Property and Equipment -0- -0-
Other Assets:
Organization costs - net 200 200
--------- ---------
TOTAL ASSETS $ 813 $ 945
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued legal expenses $ 20,641 $ 12,916
Payable to officer/director 18,262 18,262
Note payable 30,000 30,000
Accrued interest 11,649 8,049
--------- ---------
Total Liabilities 80,552 69,227
--------- ---------
Stockholders' Equity:
Preferred Stock: 5,000,000 shares authorized; $.001 par
value; none issued and outstanding -0- -0-
Common Stock: 50,000,000 shares authorized; $.001 par
value; 1,445,879 shares issued and outstanding 1,446 1,446
Paid in Capital 477,085 477,085
Contributed Stock 1,500 1,500
Issuable Stock 37,374 37,374
Deficit accumulated during the development stage (597,144) (585,687)
--------- ---------
Total Stockholders' Equity (79,739) (68,282)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 813 $ 945
========= =========
The accompanying notes are an integral part of the financial statements
F-2
</TABLE>
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Periods as Noted
Year Year Mar. 10, 1987
Ended Ended (Inception)
12-31-98 12-31-97 to 12-31-98
-------- -------- -----------
Revenues:
Interest income $ -0- $ -0- $ 10,269
Other -0- -0- 64,703
------------ ------------ -----------
Total Revenue -0- -0- 74,972
------------ ------------ -----------
Cost and Expenses:
General and Admin 7,857 26,919 464,197
Business evaluation -0- -0- 128,759
Bad debt -0- -0- 28,295
Depreciation -0- 1,005 13,290
Interest 3,600 3,600 29,775
Write-off equip. -0- -0- 5,000
Worthless stock -0- -0- 2,800
------------ ------------ -----------
Total Expenses 11,457 31,524 672,116
------------ ------------ -----------
Net (Loss) from Operations (11,457) (31,524) (597,144)
Other Income (Expense) -0- -0- -0-
------------ ------------ -----------
Net (Loss) for the Period $ (11,457) $ (31,524) $ (597,144)
============ ============ ===========
(Loss) per common share $ (.008) $ (.022) $ (.426)
============ ============ ===========
Weighted Average Shares Outstanding 1,445,879 1,445,879 1,402,270
============ ============ ===========
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Deficit Accum'd
------------------------------ Paid -in Stk to be from
Shares Amount Capital Issued Inception
------ ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C>
BALANCES
12-31-96 111,437,450 $ 11,144 $ 468,887 $ 37,374 (554,163)
1-1-97 record Com.
stock held in trust 33,150,000 3,315 (3,315)
9-18-97 record 1 for
100 reverse split (143,141,571) (13,013) 13,013
Year ended 12-31-97
(Loss) (31,524)
------------- ------------- ------------- ------------- -------------
BALANCES
12-31-97 1,445,879 1,446 478,585 37,374 (585,687)
Year Ended 12-31-98
(Loss) (11,457)
------------- ------------- ------------- ------------- -------------
BALANCES
12-31-98 1,445,879 $ 1,446 $ 478,585 $ 37,374 (597,144)
============= ============= ============= ============= =============
The accompanying notes are an integral part of the financial statements
F-4
</TABLE>
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Periods as Noted
Mar.10,1987
Year Ended Year Ended (Inception)
12-31-98 12-31-97 to 12-31-98
-------- -------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Operating (Loss) $ (11,457) $ (31,524) $(597,144)
Add non cash expenses:
Depreciation 1,005 18,290
Stock issued for service 32,100
Accrued expenses 3,600 3,600 46,038
Worthless securities 2,800
Changes in:
Other Assets (1,045)
Accounts payable 7,725 12,916 64,236
Bad debts - net (36,940)
--------- --------- ---------
CASH (USED) IN OPERATING ACTIVITIES
(132) (14,003) (471,665)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase furn & equip (18,693)
Invest in Sub (2,800)
Organization exp (200)
Note receivable (25,000)
Advance to officer (51,750)
--------- --------- ---------
CASH (USED) IN INVESTING ACTIVITIES
-0- -0- (98,443)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock sale to insiders 5,051
Stock sale to public 238,086
Exercise A warrants 208,308
Short term debt 74,528
Note payable other 30,000
Officer/director loan 14,748 14,748
--------- --------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES
-0- 14,748 570,721
--------- --------- ---------
NET INCREASE (DECREASE) (132) 745 613
Beginning cash balance 745 -0- -0-
--------- --------- ---------
ENDING CASH BALANCE $ 613 $ 745 $ 613
========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1998
NOTE 1: THE COMPANY
Development Stage Operations - The Company was organized under the laws of the
state of Colorado on March 10, 1987, under the name of Pro Image, Inc.. Later,
the Company attempted operations under the name Pro Quest, Inc.. In July 1997,
Proquest Capital Corporation was created in Nevada, and the Colorado corporation
was merged into the Nevada corporation.
The Company completed a public registration of its common stock and warrants to
purchase common stock on form S-18 in July 1987. The Company used these funds to
investigate various business acquisition opportunities. Because none of the
businesses proved viable, none of the costs incurred were capitalized. The
Company remains in the development stage as defined in FASB 7.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements requires management
to make estimates and assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
Income Taxes - There is no provision for income taxes because the Company has
incurred net operating losses. No income tax benefit from these losses has been
recorded for financial accounting purposes. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
the statement of operations in the period that includes the enactment date.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.
Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with a maturity of three
months or less to be cash equivalents.
Loss per Common Share - Loss per common share is computed by dividing the net
loss by the weighted average shares outstanding during the period.
Amortization - Organization costs will be amortized using the straight-line
method over a period of five years upon commencement of operations.
Depreciation of furniture and equipment was computed over the estimated useful
life of the asset. None of this equipment is in the possession of current
management, and the costs of these items plus their accumulated depreciation
have been eliminated.
F-6
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
Notes to the Financial Statements Continued
NOTE 3: PUBLIC OFFERING
In July 1987 the Company completed a public offering of 30,000,000 units at $.01
per unit. Each unit consisted of one common share and three warrants. The
offering netted proceeds of $238,086. Each warrant is separately detachable and
transferable from the common share and was convertible into common shares for
prices ranging from $.02 to $.10 per share, with option periods from 12 to 24
months, respectively. As of December 31, 1987, all A warrants were redeemed or
exercised and netted proceeds of $208,308. Redemption of all warrants may occur
at a price of $.001 per share, with 20 days written notice to warrant holders.
The Company is required to file post effective amendments to keep its original
registration statement current during the warrant exercise period, including
extensions, if any.
NOTE 4: CHANGE IN NUMBER OF AUTHORIZED SHARES AND PAR VALUES
Proquest Capital Corporation was incorporated in Nevada and was the surviving
entity in the merger with Pro Quest Inc. (a Colorado corporation). The capital
stock which the surviving corporation is authorized to issue is as follows:
Common Stock 50,000,000 $.001 par value
Preferred Stock 5,000,000 $.001 par value
NOTE 5: REVERSE SPLIT OF COMMON SHARES
Concurrent with the merger of the two corporations, the issued and outstanding
shares of Pro Quest Inc. (144,587,450) became transferable into the stock of
Proquest Capital Corporation at the rate of one share of Proquest Capital
Corporation for 100 shares of Pro Quest Inc.. Therefore, as of September 18,
1997, the issued and outstanding shares became 1,445,879. An additional 4.5
shares were issued due to rounding. The capital stock account and the paid in
capital account have been changed in order to accommodate this transaction.
NOTE 6: PREFERRED STOCK
No shares of the Company's preferred stock have been issued. Dividends, voting
rights and other terms, rights and preferences of the preferred shares have not
been designated. The Board of Directors may establish these provisions from time
to time.
NOTE 7: STOCK OPTION PLANS
By majority consent of shareholders, a Compensatory Stock Option Plan (CSO Plan)
and Employee Stock Compensation Plan (ESC Plan) were ratified and approved on
September 18, 1997. The Board of Directors set aside 1,000,000 shares of common
stock to be issued upon the exercise of options granted under the CSO Plan and
1,000,000 shares of common stock issuable upon awards under the ESC Plan.
F-7
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
Notes to the Financial Statements Continued
NOTE 8: STOCKHOLDER EQUITY TRANSACTIONS
During September, 1994, the Company redeemed 259,691 shares of its common stock
in exchange for a note payable of approximately $3,514, which is non interest
bearing and due on demand.
In September, 1994, a stockholder contributed 71,809 shares of the Company's
common stock to the Company, which were subsequently canceled.
The Company has agreed to issue 13,000 shares of stock in satisfaction of
$37,374 of liabilities. This stock has not as yet been issued.
NOTE 9: NOTE PAYABLE
On October 6, 1995, the Company signed a $30,000 note payable to its accounting
firm for services performed from 1991 thru 1995. The note is unsecured and
accrues interest at the rate of 12% per year, payable at maturity. Payment of
the note is due on demand after April 1, 1996.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Termination of Agreements - During the course of the Company's existence, it
entered into several significant agreements involving services to be performed
on behalf of the Company. The majority of these agreements were terminated
during 1988 by the Company for cause prior to their contractual conditions for
termination. Although there is presently no action at law in which the Company
is a defendant, it is possible that one or more of the parties to these
agreements may seek legal action against the Company for the balance of the
agreement. The Company is unable to quantify the amount, if any, which others
may feel is due and payable as a result of the early termination of an
agreement. It is estimated that such unpaid balances may exceed $100,000.
Delinquent Payroll Taxes - In 1995, the Company wrote off a payroll tax
liability of $7,750. Management knows of no effort to enforce the collection of
these taxes and is uncertain about their validity. However, there is no
assurance that the taxes will be avoided, forgiven or otherwise compromised and
that efforts to collect them by legal proceedings or levy will not be employed.
Complaint Filed - The Company's previous public relations firm filed a complaint
relative to the payment of $2,500 incurred under a service contract. The Company
was not given proper notice and a judgment in the sum of $2,500 was entered.
Management believes this judgment will eventually be concluded in the favor of
the Company.
NOTE 11: GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis which contemplates that Company's assets will be realized and liabilities
will be satisfied in the normal course of business. Because the Company has
generated a negative equity deficit of $79,739 at December 31, 1998, its ability
to survive as a going concern is dependent upon its ability to accomplish any of
the following: 1) merge with another company, 2) generate sufficient cash flow
to meet its obligations on a timely basis, 3) obtain financing and 4) ultimately
generate profitable operations.
F-8
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
Sep 30 Dec 31
1999 1998
--------- ---------
Current Assets:
Cash held in trust account $ 13 $ 613
Plant, Property and Equipment: -0- -0-
Other Assets:
Organization costs - net- 200 200
--------- ---------
TOTAL ASSETS $ 213 $ 813
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued legal expenses $ 20,645 $ 20,641
Payable to officer/director 21,262 18,262
Note payable 30,000 30,000
Accrued Interest 13,549 11,649
--------- ---------
Total Liabilities 85,456 80,552
--------- ---------
Stockholders' Equity:
Preferred Stock: 5,000,000 shares
Authorized; $.001 par value; none
issued and outstanding -0- -0-
Common Stock: 50,000,000 shares
authorized; $.001 par value;
1,445,879 shares issued & outstanding 1,446 1,446
Paid in Capital 477,085 477,085
Contributed Stock 1,500 1,500
Issuable Stock 37,374 37,374
Deficit accumulated during
The development stage (602,648) (597,144)
--------- ---------
Total Stockholders' Equity (85,243) (79,739)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 213 $ 813
========= =========
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Periods as Noted
(Unaudited) (Audited)
9 Months Year Mar 10, 1987
Ended Ended (Inception) to
9-30-99 12-31-98 9-30-99
----------- ----------- -----------
Revenues:
Interest Income $ -- $ -- $ 10,269
Other -- -- 64,703
-----------
Total Revenue -- -- 74,972
-----------
Costs and Expenses:
General and Admin 3,604 7,857 467,801
Business evaluation 128,759
Bad Debt 28,295
Depreciation 13,290
Interest 1,900 3,600 31,675
Write-off equipment 5,000
Worthless stock 2,800
----------- ----------- -----------
Total Expenses 5,504 11,457 677,620
----------- ----------- -----------
Net (Loss) from Operations (5,504) (11,457) (602,648)
Other Income (Expense) -0- -0- -0-
----------- ----------- -----------
Net (Loss) for the Period $ (5,504) $ (11,457) $ (602,648)
=========== =========== ===========
(Loss) per common share $ (.004) $ (.008) $ (.427)
=========== =========== ===========
Weighted Average
Shares Outstanding 1,445,879 1,445,879 1,412,202
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Periods as Noted
9 Months Year Mar 10, 1987
Ended Ended (Inception) to
9-30-99 12-31-98 Sept 30, 1999
------- -------- -------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Operating (Loss) $ (5,504) $ (11,457) $(602,648)
Add non cash expenses:
Depreciation 18,290
Stock issued for service 32,100
Accrued Expenses 1,900 3,600 47,938
Worthless securities 2,800
Changes in:
Other assets (1,045)
Accounts payable 4 7,725 64,240
--------- --------- ---------
Bad debts - net -- -- (36,940)
CASH (USED) IN OPERATING ACTIVITIES: (3,600) (132) (475,265)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase furniture & equip (18,693)
Invest in Subsidiary (2,800)
Organization exp (200)
Note receivable (25,000)
Advance to officer (51,750)
--------- --------- ---------
CASH (USED) IN INVESTING ACTIVITIES -0- -0- (98,443)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock sale to insiders 5,051
Stock sale to public 238,086
Exercise A warrants 208,308
Short term debt 74,528
Note payable other 30,000
Officer/director loan 3,000 17,748
--------- --------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES 3,000 -0- 573,721
NET INCREASE (DECREASE) (600) (132) 13
Beginning Cash Balance 613 745 -0-
--------- --------- ---------
ENDING CASH BALANCE $ 13 $ 613 $ 13
========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
<TABLE>
<CAPTION>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Deficit
---------------------------- Paid-in Stk to be Accum'd from
Shares Amount Capital Issued Inception
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCES
12-31-96 111,437,450 $ 11,144 $ 468,887 $ 37,374 (554,163)
1-1-97 record
Com. Stock held
in trust 33,150,000 3,315 (3,315)
9-18-97 record
1 for 100 reverse
split (143,141,571) (13,013) 13,013
Year ended
12-31-97 (Loss) (31,524)
------------ ------------ ------------ ------------ ------------
BALANCES
12-31-97 1,445,879 1,446 478,585 37,374 (585,687)
Year Ended
12-31-98 (Loss) (11,457)
------------ ------------ ------------ ------------ ------------
BALANCES
12-31-98 1,445,879 1,446 478,585 37,374 (597,144)
9 Months Ended
9-30-99 (Loss) (5,504)
------------ ------------ ------------ ------------ ------------
BALANCES
9-30-99 1,445,879 $ 1,446 $ 478,585 $ 37,374 $ (602,648)
============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
F-12
</TABLE>
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
NOTE 1: THE COMPANY
Development Stage Operations - The Company was organized under the laws of the
state of Colorado on March 10, 1987, under the name of Pro Image, Inc. Later,
the Company attempted operations under the name Pro Quest, Inc. In July 1997,
Proquest Capital Corporation was created in Nevada, and the Colorado corporation
was merged into the Nevada corporation.
The Company completed a public registration of its common stock and warrants to
purchase common stock on form S-18 in July 1987. The Company used these funds to
investigate various business acquisition opportunities. Because none of the
businesses proved viable, none of the costs incurred were capitalized. The
Company remains in the development stage as defined in FASB 7.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.
Income Taxes - There is no provision for income taxes because the Company has
incurred net operating losses. No income tax benefit from these losses has been
recorded for financial accounting purposes. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
the statement of operations in the period that includes the enactment date.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.
F-13
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
NOTE 2: CONTINUED:
Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with a maturity of three
months or less to be cash equivalents.
Loss per Common Share - Loss per common share is computed by dividing the net
loss by the weighted average shares outstanding during the period.
Amortization - Organization costs are amortized using the straight-line method
over a period of five years upon commencement of operations.
Depreciation of furniture and equipment was computed over the estimated useful
life of the asset. None of this equipment is in the possession of current
management, and the costs of these items plus their accumulated depreciation
have been eliminated.
NOTE 3: PUBLIC OFFERING
In July 1987 the Company completed a public offering of 30,000,000 units at $.01
per unit. Each unit consisted of one common share and three warrants. The
offering netted proceeds of $238,086. Each warrant is separately detachable and
transferable from the common share and was convertible into common shares for
prices ranging from $.02 to $.10 per share, with option periods from 12 to 24
months, respectively. As of December 31, 1987, all A warrants were redeemed or
exercised and netted proceeds of $208,308. Redemption of all warrants may occur
at a price of $.001 per share, with 20 days written notice to warrant holders.
The Company is required to file post effective amendments to keep its original
registration statement current during the warrant exercise period, including
extensions, if any.
NOTE 4: CHANGE IN NUMBER OF AUTHORIZED SHARES AND PAR VALUES
Proquest capital Corporation was incorporated in Nevada and was the surviving
entity in the merger with Pro Quest Inc. (a Colorado corporation). The capital
stock which the surviving corporation is authorized to issue is as follows:
Common Stock 50,000,000 $.001 par value
Preferred Stock 5,000,000 $.001 par value
F-14
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
NOTE 5: REVERSE SPLIT OF COMMON SHARES
Concurrent with the merger of the two corporations, the issued and outstanding
shares of Pro Quest Inc. (144,587,450) became transferable into the stock of
Proquest Capital Corporation at the rate of one share of Proquest Capital
Corporation for 100 shares of Pro Quest Inc. Therefore, as of September 18,
1997, the issued and outstanding shares became 1,445,879. An additional 4.5
shares were issued due to rounding. The capital stock account and the paid in
capital account have been changed in order to accommodate this transaction.
NOTE 6: PREFERRED STOCK
No shares of the Company's preferred stock have been issued. Dividends, voting
rights and other terms, rights and preferences of the preferred shares have not
been designated. The Board of Directors may establish these provisions from time
to time.
NOTE 7: STOCK OPTION PLANS
By majority consent of shareholders, a Compensatory Stock Option Plan (CSO Plan)
and an Employee Stock Compensation Plan (ESC Plan) were ratified and approved on
September 18, 1997. The Board of Directors set aside 1,000,000 shares of common
stock to be issued upon the exercise of options granted under the CSO Plan and
1,000,000 shares of common stock issuable upon awards under the ESC Plan.
NOTE 8: STOCKHOLDER EQUITY TRANSACTIONS
During September 1994, the Company redeemed 259,691 shares of its common stock
in exchange for a note payable of approximately $3,514, which is non interest
bearing and due on demand.
In September 1994, a stockholder contributed 71,809 shares of the Company's
common stock to the Company, which were subsequently cancelled.
The Company has agreed to issue 13,000 shares of stock in satisfaction of
$37,374 of liabilities. This stock has not as yet been issued.
NOTE 9: NOTE PAYABLE
On October 6, 1995, the Company signed a $30,000 note payable to its accounting
firm for services performed from 1991 through 1995. The note is unsecured and
accrues interest at the rate of 12% per year, payable at maturity. Payment of
the note is due on demand after April 1, 1996.
F-15
<PAGE>
PROQUEST CAPITAL CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
NOTE 10: COMMITMENTS AND CONTINGENCIES
Termination of Agreements - During the course of the Company's existence, it
entered into several significant agreements involving services to be performed
on behalf of the Company. The majority of these agreements were terminated
during 1988 by the Company for cause prior to their contractual conditions for
termination. Although there is presently no action at law in which the Company
is a defendant, it is possible that one or more of the parties to these
agreements may seek legal action against the Company for the balance of the
agreement. The Company is unable to quantify the amount, if any, which others
may feel is due and payable as a result of the early termination of an
agreement. It is estimated that such unpaid balances may exceed $100,000.
Delinquent Payroll Taxes - In 1995, the Company wrote off a payroll tax
liability of $7,750. Management knows of no effort to enforce the collection of
these taxes and is uncertain about their validity. However, there is no
assurance that the taxes will be avoided, forgiven or otherwise compromised and
that efforts to collect them by legal proceedings or levy will not be employed.
Complaint Filed - The Company's previous public relations firm filed a complaint
relative to the payment of $2,500 incurred under a service contract. The Company
was not given proper notice and a judgement in the sum of $2,500 was entered.
Management believes this judgment will eventually be concluded in the favor of
the Company.
NOTE 11: GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis which contemplates that Company's assets will be realized and liabilities
will be satisfied in the normal course of business. Because the Company has
generated a negative equity deficit of $85,243 at September 30, 1999, its
ability to survive as a going concern is dependent upon its ability to
accomplish any of the following: 1) merge with another company, 2) generate
sufficient cash flow to meet its obligations on a timely basis, 3) obtain
financing and 4) ultimately generate profitable operations.
F-16
<PAGE>
PART III
ITEM 1. LIST OF EXHIBITS.
The following exhibits are either filed with this registration statement or
have previously been filed with the SEC and are incorporated by reference to
another report, registration statement or form. As to any shareholder of record
requesting a paper copy of this registration statement, Proquest will furnish
any exhibit indicated in the list below as filed with this report upon payment
to Proquest of its expenses in furnishing the information.
2.1 Articles and Certificate of Merger (with Merger
Agreement attached thereto as Exhibit A), merging
Pro Quest, Inc. a Colorado corporation, with and
into Proquest Capital Corporation (Incorporated by
reference to Exhibit 2.1 to report on Form 8-K
dated September 19, 1997)..................................... 2
3.1 Certificate of Incorporation of Proquest Capital
Corporation, as filed with the Nevada Secretary of
State on September 9, 1997 (Incorporated by
reference to Exhibit 3.1 to report on Form 8-K
dated Sept. 19, 1997 ......................................... 2
3.2 BYLAWS of Proquest Capital Corporation
(Incorporated by reference to Exhibit 3.2 to
report on Form 8-K dated Sept. 19, 1997)...................... 2
3.3 Articles of Incorporation of Pro Image, Inc., as
filed with the Colorado Secretary of State on
March 10, 1987................................................ 1
3.4 Amendment to the Articles of Incorporation of Pro
Image, Inc. as filed with the Colorado Secretary
of State on June 24, 1987, changing the corporate
name to Pro Quest, Inc........................................ 1
4.1 Specimen common stock certificate............................. 1
10.1 1997 Compensatory Stock Option Plan of Proquest
Capital Corporation (Incorporated by reference to
Exhibit 10.1 to report on Form 8-K dated Sept. 19,
1997)......................................................... 2
10.2 1998 Employee Stock Compensation Plan of Proquest
Capital Corporation (Incorporated by reference to
Exhibit 10.2 to report on Form 8-K dated Sept. 19,
1997)......................................................... 2
1 - Filed herewith as an exhibit.
2 - Incorporated by reference to another registration statement,
report or document.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATED: November 29, 1999
PROQUEST CAPITAL CORPORATION
By /s/ Randy J. Sasaki
----------------------
Randy J. Sasaki, President and
Chief Executive Officer
26
EXHIBIT 3.3
ARTICLES OF INCORPORATION
OF
PRO IMAGE, INC.
Under Section 7-2-102 of the Colorado Corporation Code
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
laws of the State of Colorado, HEREBY CERTIFIES THAT:
FIRST: The name of the Corporation is PRO IMAGE, INC.
SECOND: The Corporation shall have perpetual existence.
THIRD: The nature of the business of the Corporation and the objects and
purposes and business thereof proposed to be transacted, promoted or carried on
are as follows:
1. To engage in sports consulting and promotion and any and all
aspects thereof.
2. To purchase, improve, develop, subdivide, lease, exchange, sell,
dispose of, mortgage, pledge and otherwise deal in and turn to account,
real estate or any interest therein; to purchase, lease, alter, remodel,
build, construct, erect, occupy and manage buildings and improvements of
every kind and character whatever; and to finance the purchase,
improvement, development and construction of land, buildings or other
improvements to real estate or any interest therein.
3. To carry on any other business, whether or not related to the
foregoing, including the transaction of all lawful business for which
corporations may be organized pursuant to the Colorado Corporation Code, to
have and exercise all powers, privileges and immunities now or hereafter
conferred upon or permitted to corporations by the laws of the State of
Colorado, and to do any and all things herein set forth to the same extent
as natural persons could do insofar as permitted by the laws of the State
of Colorado.
It is the intention that the purposes, objects and powers specified by the
foregoing clauses shall not, except as otherwise expressed, be limited or
restricted by reference to or inference from the terms of any other clause in
these Articles of Incorporation, but each purpose, object or power stated in the
foregoing clauses shall be regarded as an independent purpose, object or power.
FOURTH: The total number of shares of all classes which the Corporation
shall have authority to issue is 820,000,000, of which 20,000,000 shares shall
be Preferred Shares, par value $.10 per share, and 800,000,000 shall be Common
Shares, par value $.0001 per share, and the designations, preferences,
limitations and relative rights of the shares of each class are as follows:
1 . Preferred Shares.
The Corporation may divide and issue the Preferred Shares in series.
Preferred Shares of each series when issued shall be designated to
distinguish it from the shares of all other series. The Board of Directors
is hereby expressly vested with authority to divide the class of Preferred
Shares into series and to fix and determine the relative rights and
<PAGE>
preferences of the shares of any such series so established to the full
extent permited by these Articles of Incorporation and the laws of the
State of Colorado in respect of the following:
(a) The number of shares to constitute such series, and the
distinctive designations thereof;
(b) The rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from which any
dividend shall accrue;
(c) Whether shares may be redeemed and, if so, redemption price and
the terms and conditions of redemption;
(d) The amount payable upon shares in event of involuntary
liquidation;
(e) The amount payable upon shares in event of voluntary liquidation;
(f) Sinking fund or other redemption' or purchase of shares;
(g) The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion;
(h) Voting powers, if any; and
(i) Any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on an increase in
the number of shares of any series theretofore authorized and any
limitation or restriction of rights or powers to which shares of any future
series shall be subject.
2 . Common Shares
(a) The rights of holders of Common Shares to receive dividends or
share in the distribution of assets in the event of liquidation,
dissolution or winding up of the affairs of the Corporation shall be
subject to the preferences, limitations and relative rights of the
Preferred Shares fixed in the resolution or resolutions which may be
adopted from time to time by the Board of Directors of the Corporation
providing for the issuance of one or more series of the Preferred Shares.
(b) The holders of the Common Shares shall be entitled to one vote for
each share of Common Shares held by them of record at the time for
determining the holders thereof entitled to vote.
FIFTH: The business and affairs of the Corporation shall be managed by the
Board of Directors. The number of directors constituting the Board of Directors
shall be fixed in the manner provided in the By-laws of the Corporation, subject
to the limitation that the initial Board of Directors of the Corporation shall
consist of one person, whose name and address is as follows:
Stephen G. Petrucci Plaza Tower One, Suite 1700
6400 South Fiddler's Green Circle
Englewood, Colorado 80111
<PAGE>
Each person shall serve as a director of the Corporation until the first annual
meeting of shareholders or until his successor shall have been elected and
qualified.
In the event, in accordance with the By-laws of the Corporation, the Board
of Directors shall consist of six or more members, the directors may thereupon
be divided into three classes, each class to be as nearly equal in number as
possible, the term of office of directors of the first class to expire at the
first annual meeting of shareholders after their election, that of the second
class to expire at the second annual meeting after their election, and that of
the third class to expire at the third annual meeting after their election. At
each annual meeting following such classification and division of the members of
the Board of Directors, a number of directors equal to the number of
directorships in the class whose term expires at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting of
shareholders of the Corporation.
SIXTH: Cumulative voting shall not be allowed in the election of directors.
SEVENTH: Shareholders shall not have a preemptive right to subscribe for,
purchase or acquire additional unissued or treasury shares of the Corporation or
securities convertible into shares or carrying share purchase warrants or
privileges as the same may be issued from time to time by the Corporation.
EIGHTH: The address of the Corporation's initial registered office is Suite
310, 5575 DTC Parkway, Englewood, Colorado 80111, and the name of the initial
registered agent is Robert W. Walter, whose address is Suite 310, 5575 DTC
Parkway, Englewood, Colorado 80111.
NINTH: The name and address of the incorporator are:
Kathleen Vantine Suite 310
5575 DTC Parkway
Englewood, Colorado 80111
TENTH: The Board of Directors shall have the power to enact, alter, amend
and repeal such By-laws not inconsistent with the laws of the State of Colorado
and these Articles of Incorporation as it may deem best for the management of
the Corporation.
ELEVENTH: When, with respect to any action to be taken by the shareholders
of the Corporation, the Colorado Corporation Code requires the vote or
concurrence of the holders of two-thirds of the outstanding shares, or of any
class or series entitled to vote thereon, any such action shall be taken and
shall be effective by the vote or concurrence of the holders of a majority of
the outstanding shares, or of any class or series entitled to vote thereon,
notwithstanding the requirements of the Colorado Corporation Code.
TWELFTH: The following paragraphs are inserted for the management of the
business and for the conduct of the affairs of the Corporation and the same are
in furtherance of and not in limitation or exclusion of the powers conferred by
law:
1. Contracts with Directors and officers.
(a) No contract or other transaction between the Corporation and one
or more of its directors or any other corporation, firm, association or
entity in which one or more of the directors of the Corporation are
directors or officers or are financially interested, shall be either void
<PAGE>
or voidable solely because such directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes or approves such
contract or transaction or solely because their votes are counted for such
purpose if:
(i) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes,
approves or ratifies the contract or transaction by a vote or consent
sufficient for that purpose without counting the votes or consents of
the interested directors; or
(ii) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve
or ratify such contract or transaction by vote or written consent; or
(iii) The contract or transaction is fair or reasonable to the
Corporation.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or
transaction.
2. Indemnification of Officers, Directors and Others
The Board of Directors of the Corporation shall have the power to:
(a) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in the best interests of the Corporation and, with respect to any
criminal action or proceedings, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction or upon a plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of the Corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in the best interests of the
Corporation; but no indemnification shall be made in respect of any claims,
issue or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action or suit
was brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which
such court deems proper.
<PAGE>
(c) indemnify a director, officer, employee or agent of the
Corporation to the extent that such person has been successful on the
merits in defense of any action, suit or proceeding referred to in
subparagraph (a) or (b) of this Paragraph 2 or in defense of any claim,
issue, or matter therein, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection therewith.
(d) Authorize indemnification under subparagraph (a) or (b) of this
Paragraph 2 (unless ordered by a court) in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in said subparagraph (a) or (b). Such
determination shall be made by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit
or proceeding, or, if such a quorum is not obtainable or even if obtainable
a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or by the shareholders.
(e) Authorize payment of expenses (including attorney's fees) incurred
in defending a civil or criminal action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding as authorized in
subparagraph (d) of this Paragraph 2 upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount
unless it is ultimately determined that he is entitled to be indemnified by
the Corporation as authorized in this Paragraph 2.
(f) Purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or who is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability under the provisions of this Paragraph 2.
The indemnification provided by this Paragraph 2 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these Articles of Incorporation, and the By-laws, agreement, vote of
shareholders or disinterested directors or otherwise, and any procedure provided
for by any of the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of heirs, executors and administrators of such a
person.
3. Corporate Opportunity.
The officers, directors and other members of management of this Corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which this Corporation has expressed an
interest as determined from time to time by this Corporation's Board of
Directors as evidenced by resolutions appearing in the Corporation's minutes.
Once such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors, and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter any
officers, directors or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its Board of
Directors, has designated an area of interest, the officers, directors and other
members of management of this Corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the right of any
officer, director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than an officer, director of member of
management) from any duties which he may have to this Corporation.
IN WITNESS WHEREOF, the undersigned has signed and acknowledged Articles of
incorporation this 10th day of March, 1987.
/s/ Kathleen Vantine
--------------------
Kathleen Vantine, Incorporator
Suite 310
5575 DTC Parkway
Englewood, Colorado 80111
EXHIBIT 3.4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PRO IMAGE, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
under-signed corporation adopts the following Articles of Amendment to its
Articles of Incorporation;
FIRST: The name of the Corporation Is Pro Image, Inc
SECOND: The following amendment to the Articles of incorporation was
adopted on June 22, 1987 by the shareholders of the Corporation in the manner
prescribed by Colorado Corporation Code:
RESOLVED, that the Articles of Incorporation of the Corporation shall
be amended in order to change the name of the Corporation to Pro Quest,
Inc.
THIRD: The number of Common Shares of the Company issued and outstanding at
the time of such adoption was 70,000,000; the number of Common Shares entitled
to vote thereon was 70,000,000.
FOURTH: The number of Common Shares voted for such amendment was
70,000,000; the number of Common Shares voted against such amendment was -0-.
PRO IMAGE, INC.
By: /s/ Stephen G. Petrucci
---------------------------
Stephen G. Petrucci, President
By: /s/ Daryl K. McCarter
-------------------------
Daryl K. McCarter, Secretary
Exhibit 4.1
FORM OF COMMON STOCK CERTIFICATE
PROQUEST CAPITAL CORPORATION
Organized under the laws of the State of Nevada
Common Stock CUSIP 743468 10 0
$.001 Par Value
Number____ Shares____
THIS CERTIFIES that
is the registered owner of
fully paid and non-assessable shares of common stock, $.001 par value, of
PROQUEST CAPITAL CORPORATION, a Nevada corporation, transferable on the books of
the Corporation by the registered holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This Certificate
and the shares represented hereby are issued and shall be subject to all of the
provisions of the Corporation's Articles of Incorporation and all amendments
thereto (copies of which are on file with the Transfer Agent and in the office
of the Secretary of State of Nevada) to all of which the holder, by acceptance
hereof, assents. This Certificate is not valid unless countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Company and the facsimile signatures of
its duly authorized officers.
Dated:
By: (SEAL) By:
_______________________________ __________________________
President Secretary
Countersigned and Registered:
TRANSFER AGENT:
By:
_______________________________
Authorized Officer
<PAGE>
[Reverse side of Certificate]
PROQUEST CAPITAL CORPORATION
Transfer Fee: $____ per Certificate
The Corporation is authorized to issue shares of more than one class,
namely 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. Pursuant to the Nevada General Corporation Law, the Corporation will
furnish to any shareholder upon request (addressed to the attention of the
Company Secretary) and without charge a full statement of the designations,
preferences, limitations and relative rights of the shares of each class
authorized to be issued by the Corporation and of variations in the relative
rights and preferences between the shares of each series of preferred stock of
the Corporation insofar as any such series has been fixed and determined, and a
statement of the authority of the Board of Directors of the Corporation to fix
and determine the relative rights and preferences of subsequent series of
preferred stock.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the
entireties _____________Custodian__________
JT TEN - as joint tenants with (Cust) (Minor)
right of survivorship under Uniform Gifts to Minors
and not as tenants Act____________________________
in common and not as (State)
community property
[here place the usual form of Assignment]
SIGNATURE GUARANTEED: The signature(s) to this assignment must correspond
with the name(s) as written upon the face of this
certificate in every particular, without any
alteration or enlargement, or any other change
whatever. Each signature(s) must be guaranteed by a
bank, trust company or other eligible guarantor
institution that is a member of an approved
signature guarantee medallion program pursuant to
SEC Rule 17Ad-15.
