Interquest files for bankruptcy protection during two-week restructuring period

A former high-flying celebrity among new media companies is devoting the next two weeks to getting its financial house in order after filing for bankruptcy protection July 19. After nearly a year, Montreal-based Interquest Inc was unable to complete an announced reverse takeover of Alberta junior capital pool company Prairie Fire Oil and Gas, denying it access to much-needed expansion and acquisition capital, or its intended purchase of Point-Net Communications Inc, an R&D-intensive company located in Montreal’s Cité de Multimédia (CNM, Aug. 25/00). INTERQUEST INC4850, de l’Aviation, Suite 200Saint-Hubert, QC J3Z 1H5 Tel: (450) 462-6886Fax: (450) 462-6996http://www.facesinterquest.com/ Details of the company’s troubles are sketchy, but fingers are being pointed at the Quebec Securities Commission which apparently acted too slowly to provide both Prairie Fire and Interquest with crucial details about the liquidity of the new stock on the Canadian Venture Exchange. Also left unanswered are questions about Interquest’s failure to raise a meager $2.5 million in capital – a detail upon which the proposed deal hinged. Observers say that should have been a relatively easy feat in the hot VC market which, for the most part, has been in place since the agreement was made public. Interquest chair and co-founder Pierre Coté says the company will spend the next two weeks on a restructuring plan that will hopefully see the delivery of 11,000 CDs of its software to around 200 different customers. Those CDs are currently under seizure by the bankruptcy trustees, and negotiations for their release continue. The company’s staff, which has dropped from about 26 last year to a current three, is also trying to find ways to reduce expenses and sell equipment. Whether the company can emerge from bankruptcy protection will depend on the sales of those CDs, which were expected to bring in $120,000 in revenue, significantly more than the $70,000 Coté says was projected as necessary to continue operations. Fonds presence causes "friction" Coté told CNM that he is also negotiating an exit strategy for Interquest’s major shareholder, The Fonds de Solidarité du Québec, which acquired a 20 per cent stake in return for $1 million. He doesn’t elaborate, but says their presence as common shareholders has created friction within the company, and that if Interquest emerges from bankruptcy protection, it will do so without The Fonds. Coté says he has a commitment of $1 million from new shareholders hoping to buy the Fonds out. Interquest gained international attention when it scored a sexy deal to provide its sketch/profile technology to Fox TV’s America’s Most Wanted. Last August, at the Multimedia International Market show in Montreal, Interquest executives announced that they’d engineered a reverse takeover of Prairie Fire as well as the acquisition of Point-Net Communications to boost its R&D capabilities. The company also announced plans to consolidate its operations in Montreal’s Cité de Multimédia. The acquisitions marked a high-profile run-up to celebrity status in the wake of the November 1998 release of its first product, Faces: the Ultimate Composite Picture. The software was picked up by the popular crime show, as well as 60,000 police and forensic officers worldwide to help identify crime suspects. Using the program, police and others can quickly manipulate facial features to create composite sketches. Coté referred calls about the failed reverse takeover to staff, who were on vacation and not able to respond to Canadian NEW MEDIA’s requests for an interview. David Tonken, Prairie Fire’s president, told CNM in a recorded message that, "all we knew was that with uncertainty (about the stock’s liquidity) and the inability to raise funds, (Interquest) weren’t able to complete the transaction." He said the free-trading status of the company’s shares was in doubt, and that the requisite $2.5 million couldn’t be raised by Interquest’s executives. Investors have also been told that one of Prairie Fire’s largest investors, Cannaccord Capital, was unhappy with the slow progress of the takeover. The junior capital pool is now looking for another new media company with which to strike a deal and thus complete its qualifying business transaction as part of its listing. Interquest began in 1995 as an R&D company, and has received significant government funding, including $1 million of the Export Development Corporation of Canada to market its software in the U.S. It had planned to file an IPO in mid-September in the hope of raising a further $6-$10 million.

Interquest files for bankruptcy protection during two-week restructuring period

News | 07/26/2000 4:00 am EDT

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