ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Pro Quest, Inc. (the "Company") was incorporated under the laws of the State of Colorado on March 10, 1987. The Company was formed for the purpose of engaging in sports promotion activities and also for the purpose of evaluating, structuring and completing the merger with, or acquisition of, one or more private companies, partnerships or sole proprietorships. In evaluating merger or acquisition candidates, particular emphasis was placed on businesses engaged in sports promotion activities or other sports-related activities, though not to the total exclusion of businesses engaged in other industries.
On July 6, 1987, the Company commenced a public offering of securities pursuant to a Registration Statement on Form S-18. The offering closed on July 21, 1987, after the sale of 30,000,000 units. Each unit consisted of one Common Share, par value $.0001 per share, one Class A Warrant, one Class B Warrant and one 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. The Company 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 offering were $300,000. Commissions and offering expenses payable by the Company totaled $61,914. Net proceeds to the Company were approximately $238,086.
The Company 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, and the remaining 19,412,4550 Class A Warrants were redeemed. As a result, the Company received $208,308 in proceeds, net of $3,441 in redemption expenses. No calls or redemptions have been made of the Class B or Class C Warrants.
The Company was formed primarily to engage in sports promotion or other sports-related activities. The Company proposed to establish such activities, in part, through the merger or acquisition of one or more "target" entities already engaged in such activities. Such entities were expected to consist of private companies, partnerships or sole proprietorships.
For approximately eighteen (18) months following the completion of the Company's public offering, management evaluated several merger or acquisition candidates. After preliminary evaluations, management identified several candidates considered to be worthy of in-depth evaluations, consisting of, among others, R. S. Specialties, Inc. ("R.S."), M & M Travel, Ltd. ("M&M"), The Leland Corporation ("Leland"), For Your Eyes Only, Inc. ("FYE"), Actoma Resources, Ltd. ("Actoma"), and Factory Outlet II dba Martial Arts Supply. After review of the candidates, the Company entered into letters of intent with each of them with a view toward completing acquisitions or mergers. However, none of the efforts were successful and the Company abandoned the prospects.
In August, 1987, the Company 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, of which Messrs. Petrucci and Crawford were officers, directors and shareholders, proposed to engage in sports-medicine activities following successful completion of a public offering. The Company abandoned its investment in IMS in 1988. The Company loss with respect to the investment was reflected in the operating statements of the Company for the fiscal year ended December 31, 1988.
In January, 1988, the Company 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 the Company might have offered. Pro Quest Marketing Associates, Inc. engaged primarily in organizational activities. It discontinued operation in the July of 1988.
In May, 1988, the Company entered into a contract with a New Jersey-based investment banking firm, Financial Resources Corporation ("FRC"), which provided for such firm to locate, screen and present viable acquisition candidates to the Company. In connection with the contract, the Company paid an initial fee of $15,000. Subsequently, additional fees in the amount of $30,000 which were due under the terms of the contract were satisfied by the issuance of 34,000,000 shares of restricted common stock of the Company in exchange for the outstanding fees plus a payment of $4,000.
In October, 1988 the Company terminated, for cause, the consulting contract with FRC. Effective September 30, 1994, the 33,150,000 shares of the Company issued to FRC were repurchased in exchange for cancellation of obligations of FRC to the Company and a waiver of claims between the parties. The Company will not receive any of the initial $15,000 payment of fees, however.
On November 18, 1988, the Company entered into an agreement of merger which provided for a tax-free exchange of 166,000,000
restricted shares of the Company for all of the outstanding shares of Kettenbauer Technology Corporation ("Kettenbauer"). Kettenbauer held rights to a proprietary process to purify toxic waste. The agreement was mutually rescinded in December of 1988.
The Company has been inactive since December 31, 1988. For the fiscal year ended December 31, 1996, the Company had a net loss of $8,273 and a cumulative loss from inception of $554,163. Stockholder deficit as of December 31, 1996, was $36,758.
SUBSEQUENT EVENTS
On November 23, 1994, Stephen G. Petrucci as Seller and Randy Sasaki as Purchaser entered into a Stock Purchase Agreement pursuant to which the Purchaser will acquire 27,500,000 shares of the Company from Seller.
The transaction has not closed as of March 1, 1997, although the parties have taken significant steps to complete it. There is no assurance that the transaction will close, but management believes that it will be successfully concluded by April 30, 1997. For further discussion, see Item 11 of this Form 10-K.
The Purchaser has not provided to management any specific plan for his ownership of the shares of the Company. Management believes that the Purchaser will seek to require the Company to elect new management. There is no assurance that by reason of the Purchaser's ownership, the capitalization, ownership, management or operation of the Company will remain unchanged.
BACKLOG
Backlog is not material to an understanding of the Company's present business activities. The Company has no business and therefore is not subject to renegotiation of profits or termination of contracts or subcontracts, either at the election of the federal government or otherwise.
REGULATION
Compliance with federal, state and local laws does not have a material effect on the Company's present operations. The Company has not been a party to any bankruptcy, receivership, reorganization, readjusting or similar proceeding. The Company has no present operations, is not
subject to seasonal variation, and is not involved in any industry segment.
EMPLOYEES
The Company has no employees. The president, Mr. Petrucci, from time to time performs certain legal functions on behalf of the Company at no cost to the Company. At some future date, the Board of Directors may elect to compensate Mr. Petrucci for the aforementioned services.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not maintain a full time office. From 1989 through August 1994, certain space has been provided by Mr. Petrucci at no cost to the Company.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding. Certain holders of accounts payable by the Company may attempt to collect amounts owed to them; however, management believes that collection of some of those amounts may be barred by applicable statute(s) of limitations.
Taxes may be payable by the Company and are reflected as an obligation of the Company in its financial statements. Management knows of no efforts to date to enforce collection of those taxes; however, there is no assurance that the taxes will be avoided, forgiven or otherwise compromised or that efforts to collect them by legal proceedings or levy will not be employed.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS
Trading in the stock of the Company was voluntarily suspended in November, 1988. Management does not know of any trading or private sales activity of the stock since that date, other than as specifically described in Item 11 of this Form 10-K.
Prior to the suspension of trading, the Company's Common Shares were traded over-the-counter and were listed in the "pink sheets" maintained by members of the National Association of Securities Dealers, Inc. ("NASD"). At the time of the suspension of trading, the "High" Bid price per Share never exceeded $.01, and the "Low" Bid price per Share was $.0025.
The number of record holders of Common Shares as of September 1, 1994 (the last date obtained by management) was approximately 215.
Holders of Common Shares are entitled to receive such dividends as may be declared by the Company's Board of Directors. No dividends on the Common Shares have been paid by the Company nor does the Company anticipate that dividends can or will be paid in the foreseeable future.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data for the last five (5) fiscal years ended December 31:
FISCAL YEAR ENDED DECEMBER 31 INCOME (LOSS) STATEMENT 1996 1995 1994 1993 1992 - ---------------------------- ---- ---- ---- ---- ---- Revenues $0 $62,985 $0 $0 $0 Cost and Expense 8,273 14,049 1,252 2,689 10,060 Income (Loss) from Continuing Operations (8,273) 48,936 (1,252) (2,689) (10,060) Income (Loss from Continuing Operations per Common Share * * * * * BALANCE SHEET Current Assets 0 0 0 0 0 Working Capital 0 0 0 0 0 Total Assets 1,205 5,877 10,551 10,551 10,551 Total Liabilities 37,963 34,362 125,346 120,580 117,891 Shareholders' Equity * * * * * Dividends Declared/Paid per Common Share 0 0 0 0 0
* LESS THAN $.01 PER SHARE
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(a) FINANCIAL CONDITION
The Company utilized substantially all of its funds in 1987 and 1988 investigating several merger/acquisition candidates. It currently has no funds available, without debt or equity financing, to proceed with ongoing internal operations. It has been inactive since December 31, 1988.
(b) RESULTS OF OPERATIONS
The Company is inactive. It has had no operation(s) since December, 1988. As of that date, the Company had no Current Assets, and Total Assets (consisting entirely of office equipment and organization expenses) were $15,754.
For the fiscal year ending December, 1996, the Company had a net loss of $8,273 which was entirely the result of accruing
interest on outstanding obligations of the Company, and depreciation of equipment, and not a result of any operation(s).
(c) EFFECT OF INFLATION
Inflation and changing prices do not have a significant effect on the Company since presently it has no sales revenues or business activity.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Opinion of independent certified public accountant as of December 31, 1996
Balance Sheets, audited, as of December 31, 1996, and 1995
Consolidated Statements of Operations, audited, for the years ended December 31, 1996, 1995, and 1994
Consolidated Statement of Stockholders' Equity (Deficit), audited, for the year ending December 31, 1996
Consolidated Statements of Cash Flow, audited, for the years ended December 31, 1996, 1995, and 1994.
Schedule
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no material disagreements with its independent accountants on any matter of accounting principles or practices or financial statement disclosure since inception.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are listed below. Directors hold office until the next annual meeting of shareholders and until a successor is elected and qualified, or until their resignation. The Company has provided for the classification of the Board of Directors upon its expansion to six or more members. At the first annual meeting of shareholders held after such expansion, three classes of directors, as nearly equal in number as possible, will be elected to serve until the third, second, and next succeeding annual meeting, respectively. At subsequent meetings, persons being elected to fill directorships will hold office for terms expiring at the third succeeding annual meeting or upon their prior resignation or removal. Executive officers are elected by the Board of Directors to serve until their resignation or their earlier removal by the Board.
Name Age Position ---- ---- -------- Stephen G. Petrucci 45 President and Director
Daryl K. MacCarter 50 Vice President, Secretary/ Treasurer and Director
John J. Crawford 47 Director
STEPHEN G. PETRUCCI. Mr. Petrucci has been President and a Director of the Company since March, 1987. He received a degree of Bachelor of Business Administration from the University of Notre Dame at South Bend, Indiana in 1973. He also received a Master of Science degree from Western Michigan University in 1977 and a Juris Doctor degree from the University of Denver, College of Law 1980. Mr. Petrucci has been licensed to practice law in the State of Colorado since 1981, and is a past member of the American, Colorado and Denver Bar Associations, the Association of Trial Lawyers of America and the Colorado Trial Lawyers Association. He has been admitted to practice before the Supreme Court of the State of Colorado since 1981 and the United States Court of Appeals for the 10th Circuit since 1983. He is currently in private practice in Denver, Colorado, concentrating in mergers and acquisitions, contract and general corporate law.
DARYL K. MACCARTER, M.D. Dr. MacCarter has been Vice President, Secretary/Treasurer and a director of the Company since March, 1987. He received a Bachelor of Science degree in Pre-Medicine from Montana State University in Bozeman, Montana in 1969. He received a Master of Science degree in Pharmacology/ Physiology from the University of North Dakota, Grand Forks, North Dakota in 1972 and Doctor of Medicine degree from the University of Minnesota
Medical School, Minneapolis, Minnesota in 1975. Dr. MacCarter did his internal medicine residency at Yale University Affiliated Hospitals, Waterbury, Connecticut and his Rheumatology fellowship at the University of Michigan, Ann Arbor, Michigan in 1979 through 1980. He is board certified in internal medicine and rheumatology and is a Fellow of the American College of Physicians.
JOHN J. CRAWFORD. Mr. Crawford has served as a director of the Company since March, 1987. He received a Bachelor of Science degree in Psychology in 1970 from Colorado State University, Fort Collins, Colorado.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid by the Company during the fiscal year ended December 31, 1994, to all officers and directors as a group. No officer or director received cash or cash-equivalent compensation of any kind.
Cash or Cash Name of Individual Capacity in Equivalent or Number in Group Which Served Compensation - ------------------ ------------ ------------- Stephen G. Petrucci President (CEO) $ -0-
All Officers and Officers and $ -0- directors directors of the Company
Through 1988, non-management Board members were paid $250 for attendance at meetings of the Board of Directors. The Company established an Incentive Stock Option Plan and a Non-Qualified Stock Option Plan, under which an aggregate of 7,000,000 Common Shares have been reserved for issuance. No options have been issued pursuant to either stock option plan of the Company. No directors have been paid fees since 1988.
On November 23, 1994, Stephen G. Petrucci as "Seller" and Randy Sasaki as "Purchaser" entered into a certain Stock Purchase Agreement (the "Agreement" referred to throughout this Form 10-K). Pursuant to the Agreement, the Purchaser or his designees will acquire 27,500,000 Common Shares of stock of the Company (or approximately 20% of the outstanding common shares). The transaction contemplated by the Agreement has not closed as of March 1, 1997.
The Purchaser has not provided the Company with either Forms 3, 4, or 5 or any representation(s) regarding Form 5. The filing of those Forms may be delinquent if the Purchaser under the Agreement has "beneficial ownership" as defined in those Forms and the Securities Exchange Act of 1934 and Rules and Regulations promulgated thereunder.
If filing of any of the Forms was required on or after November 23, 1994, delinquencies may have occurred or currently exist: (i) Form 3 must be filed 10 days after a person becomes an officer, director, or 10% beneficial owner (or holder) of certain securities; (ii) Form 4 must be filed on or before the tenth day after the end of the month in which a reporting person acquires or disposes of the Company's securities; Form 5 must be filed on or before the 45th day after the Company's fiscal year in accordance with Rule 16a-3(f). The Purchaser under the Agreement has advised management that he will undertake to make such filings as soon as reasonably possible and in all events within the time limits set above AFTER the closing of the transaction(s) contemplated by the Agreement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of Common Shares of the Company by each person who, at September 1, 1994, hold of record or is known by management of the Company to own beneficially more than 5% of the Common Shares of the Company and, in addition, by all officers and directors of the Company individually and as a group. The shareholders listed below have sole voting and investment power except as noted.
Common Shares Percentage of Name and Address Owned Class Owned ---------------- -------------- -------------
Stephen G. Petrucci 69,500,000 48.07% 6227 East Long Place Englewood, Colorado 80112
Daryl K. MacCarter (1) 500,000 .35% #2 Mockingbird Lane Englewood, Colorado 80111
John J. Crawford (1) -0- -0- Suite 1700 6400 S. Fiddler's Green Circle Englewood, Colorado 80111
All Directors and 70,000,000 48.42% Officers as a Group (three persons)
- ------ (1) Daryl K. MacCarter and John J. Crawford will receive 500,000 and 400,000 shares, respectively, per the settlement of notes payable dated October 23, 1995.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ----
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Schedule V Property, Plant and Equipment
Accumulated Depreciation of Property, Plant and Equipment
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF PRO QUEST, INC. AND SUBSIDIARIES DENVER, COLORADO
I have audited the accompanying consolidated balance sheets of Pro Quest, Inc. and subsidiaries (a development stage enterprise) as of December 31, 1996 and 1995, and the related consolidated statements of operations, changes in stockholders' (deficit), and cash flows for each year in the three year period ended December 31, 1996, and the schedules listed in the Index. The financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on the financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements and the schedules referred to above present fairly, in all material respects, the financial position of Pro Quest, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each year in the three year period ended December 31, 1996 in conformity with generally accepted accounting principles in all material respects when read in conjunction with the financial statements, the information therein set forth.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses during its development stage and has limited capital that raises substantial doubt about the entity's ability to continue as a going concern.
/s/ Janet Loss, C.P.A., P.C.
JANET LOSS, C.P.A., P.C. CERTIFIED PUBLIC ACCOUNTANT DENVER, COLORADO FEBRUARY 4, 1997
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 -------------------------------- --------------------------------
1996 1995 ---------- ---------- ASSETS
PROPERTY, PLANT AND EQUIPMENT, at cost, net of depreciation of $12,285 and $7,612 $ 1,005 $ 5,677
OTHER ASSET, organization cost 200 200 ---------- ---------- Total Assets $ 1,205 $ 5,877 ---------- ---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES: Accrued expenses $ 4,449 $ 848 Notes payable to officers/directors 3,514 3,514 Notes payable, other 30,000 30,000 ---------- ----------
Total Current Liabilities 37,963 34,362 ---------- ----------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' (DEFICIT): Preferred stock, 20,000,000 shares authorized, $.10 par value, no shares issued and outstanding - - Common stock, 800,000,000 shares authorized; $.0001 par value, 111,437,450 shares issued and outstanding, respectively 11,144 11,144 Additional paid-in capital 467,387 467,387 Contributed capital 1,500 1,500 Common stock issuable 37,374 37,374 (Deficit) accumulated during the development stage (554,163) (545,890) ---------- ----------
Total Stockholders' (Deficit) (36,758) (28,485) ---------- ----------
Total Liabilities and Stockholders' (Deficit) $ 1,205 $ 5,877 ---------- ---------- ---------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------- --------------------------------
*Less than $.01 per share
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) ------------------------------------------------- -------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOW
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Notes payable and accrued interest of $51,685 were assumed by the president for repayment of advances during 1988.Common stock was redeemed for $3,514 in notes payable during 1994.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------------------------- -----------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND ACTIVITY Pro Quest, Inc. (a development stage company) (the Company) was incorporated under the laws of Colorado on March 10, 1987, initially under the name Pro Image, Inc. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. The Company completed a public registration of its common stock and warrants to purchase common stock on Form S-18 during July 1987.
The Company's primary activities after the conclusion of its public offering was to investigate various business acquisition opportunities. Accordingly, the Company expanded its operations and evaluated a number of businesses. Principally all of the operating expenses after September 30, 1987 related to the investigation process, but because none of the businesses ultimately proved viable for the Company, none of the costs incurred were capitalized.
The Company has been inactive since 1988.
PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
FURNITURE AND FIXTURES Furniture and fixtures are stated at cost and being depreciated over the estimated life of the assets. In 1989, the Company wrote down the value of the assets by $5,000 to account for obsolete telephone system and office equipment.
INCOME TAXES Prior to January 1, 1993, income taxes were provided on all revenue and expense items, regardless of the period in which such items are recognized for tax purposes, except for those items representing a permanent difference between pre-tax accounting income and taxable income. No income tax benefit was recorded for financial accounting purposes until realized. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes (FAS 109). Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end. The Company provides a valuation allowance to reduce deferred tax assets to their net realizable value. For financial reporting, the start-up costs are expensed as incurred; for tax purposes they are capitalized and will be amortized over a period of five years commencing in the month when operations begin. The adoption of FAS 109 did not have a material effect on the Company's consolidated financial statements, therefore, there was no cumulative effect on this change in accounting for income taxes during prior periods.
CASH EQUIVALENTS For the 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 SHARE Net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding. Shares issued to insiders are considered outstanding since inception.
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------------------------- -----------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ORGANIZATION COSTS Organization costs will be amortized over a period of five years commencing in the month when operations begin.
NOTE 2 - GOING CONCERN BASIS
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a negative equity deficit of $(36,758) at December 31, 1996.
The Company's continuation as a going concern is dependent upon its ability to merge with another company, to generate sufficient cash flow to meet its obligations on a timely basis, to obtain financing as may be required, and to ultimately obtain profitable operations.
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 (A, B, and C). The net proceeds after offering costs were $238,086. Each warrant is separately detachable and transferable from the common shares, and may be converted 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 of the A warrants were redeemed or exercised. The exercise of the A warrants resulted in the Company receiving net proceeds of $208,308 after expenses. Redemption of all warrants may occur at a price of $.0001 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 - STOCK OPTION PLANS
Effective April 1, 1987, the Company adopted an incentive stock option plan (ISO Plan) for Company executives and key employees which provides that 2,000,000 shares of common stock will be reserved for issuance to employees at an exercise price of not less than the fair market value at the date of grant of the option unless such employees own 10% or more of the outstanding shares of the Company, in which case the exercise price shall be 110% of the fair market value. All shares granted shall be granted within 10 years from the date of the ISO Plan approval. All options granted must be exercised within five years of the date granted. No optionee may be granted more than $100,000 (aggregate fair market value) in common shares unless provided for in accordance with Internal Revenue Code Regulations.
Also effective on the same date as the above plan, the Company adopted a nonqualified stock option plan under which the Company has reserved 5,000,000 shares of common stock for issuance. The exercise price at the date of grant may be a minimum of 25% to a maximum of 100% of the fair market value of the underlying stock. There are restrictions on the number of shares which may be exercised during the first five years from the date of grant. To date no options have been granted under either of the above plans.
NOTE 5 - RELATED PARTY TRANSACTIONS
In addition to transactions discussed throughout the notes, the following are additional related party transactions:
OFFICE RENTALS The Company maintains its offices on a rent-free basis from a stockholder of the Company.
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------------------------- -----------------------------
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES PAYABLE During September 1994, the Company redeemed 25,969,091 shares of its common stock for notes payable of approximately $3,514 which are non interest bearing and due on demand.
CONTRIBUTED CAPITAL During September 1994, a stockholder contributed 7,180,909 shares of the Company's common stock to the Company. The Company subsequently canceled the shares.
COMMON STOCK ISSUABLE 1,300,000 shares of stock will be issued for debt cancellation of $37,374.
NOTE 6 - COMMITMENTS AND CONTINGENCIES, AND SUBSEQUENT EVENTS
On October 6, 1995 the Company signed a $30,000 note payable to its accounting firm for services performed during a continuous engagement from 1991 through 1995. The note is unsecured and due upon demand after April 1, 1995 with interest accruing at 12% per year. The note balance consists of prior accounts payable balance of $21,472 and fees incurred after 1994 of $8,528.
TERMINATION OF AGREEMENTS During the course of the Company's existence, it had entered into several significant agreements involving services to be performed on behalf of the Company and/or Pro Quest Marketing Associates, Inc. The majority of these agreements were terminated during 1988 by the Company prior to their termination, for a variety of reasons, but in all cases, for cause. Although there are presently no actions at law in which the Company is 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 agreements. 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 the agreements, however, the unpaid balance of the agreements exceeds $100,000.
The Company's previous public relations firm filed a complaint relative to the payment of $2,500 incurred under a services contract between the two companies. The Company was not given proper notice of this filing and a judgment in the sum of $2,500 was subsequently entered. Management believes that this judgment will be eventually concluded in the favor of Pro Quest.
DELINQUENT PAYROLL TAXES - CONTINGENT LIABILITY In 1995, the Company wrote off the payroll tax liability of $7,750.26 in its financial statements. Management knows of no efforts to date to enforce collection of the above-mentioned payroll taxes and is uncertain about the validity of these taxes. However, there is no assurance that the taxes will be avoided, forgiven or otherwise compromised or that efforts to collect them by legal proceedings or levy will not be employed.
PRO QUEST, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) SCHEDULES FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
-------------------------------------------- --------------------------------------------
PROPERTY, PLANT AND EQUIPMENT SCHEDULE V
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PRO QUEST, INC.
Date: March 31, 1997 By: /s/ STEPHEN G. PETRUCCI ------------------------ Stephen G. Petrucci President (CEO)
Date: March 31, 1997 By: /s/ DARYL K. MAC CARTER ------------------------- Daryl K. MacCarter Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Signature Title Date - --------- ------ -----
/s/ STEPHEN G. PETRUCCI - ------------------------ President March 31, 1997 Stephen G. Petrucci (Principal Executive Officer) & Director
/s/ DARYL K. MacCARTER - ------------------------ Vice President, March 31, 1997 Daryl K. MacCarter Secretary/Treasurer & Director