US SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
MILLENNIUM QUEST, INC.
(Name of Small Business Issuer in its charter)
Delaware 87-0430320
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
4089 Mount Olympus Way, Salt Lake City, Utah 84124
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(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (801) 278-6990
Securities to be registered under Section 12(b) of the Act:
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
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TABLE OF CONTENTS
ITEM NUMBER AND CAPTION
Part I Page No.
Item 1. Description of Business .........................................1
Item 2. Management's Discussion and Analysis or Plan of Operation........7
Item 3. Description of Property..........................................9
Item 4. Security Ownership of Certain Beneficial Owners and Management...9
Item 5. Directors, Executive Officers, Promoters and Control Persons.....10
Item 6. Executive Compensation...........................................11
Item 7. Certain Relationships and Related Transactions...................11
Item 8. Description of Securities........................................12
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters.............................12
Item 2. Legal Proceedings................................................13
Item 3. Changes in and Disagreements with Accountants....................13
Item 4. Recent Sales of Unregistered Securities..........................13
Item 5. Indemnification of Directors and Officers........................13
PART F/S.............................................................16, F-1
PART III
Item 1. Index to Exhibits................................................16
Item 2. Description of Exhibits..........................................17
SIGNATURES................................................................17
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ITEM 1. DESCRIPTION OF BUSINESS
General
Millennium Quest, Inc. (the "Company"), a Delaware corporation, is
attempting to locate a business enterprise which it may acquire, merge or
reorganize with, or become engaged in. The Company has been inactive for
several years, and to date has not located any specific business enterprise
for its involvement, nor has it entered into any arrangement or agreements
with respect thereto.
History
Millennium Quest, Inc. (the "Company") was organized under the laws of
the state of Delaware on February 4, 1986, under the name "Teracom, Inc.," for
the purpose of seeking a business opportunity which the Company could acquire,
merge with, or become engaged in. Immediately following the organization of
the Company, it sold a total of 400,000 shares of common stock, as presently
constituted, to its officers, directors and other shareholders for a total of
for a total of $20,000 in cash. In order to provide the Company with
additional capital to seek to acquire or enter into a business opportunity, in
March, 1987, the Company completed a public offering of 806,750 shares of
common stock at a sales price of $.20 per share, as presently constituted
after giving effect to a 1 for 10 reverse split effected by the Company in
January, 1989, described below, or an aggregate offering of $161,350.
Following the offering, the original officers, directors and shareholders
contributed back to the Company a total of 58,750 shares of common stock, to
meet certain dilution requirements of the Utah Securities Division, the state
in which the offering was conducted. The offering was registered by
qualification in the state of Utah, and was made in reliance on Rule 504 of
Regulation D under the Securities Act of 1933, as amended. The Company
received net proceeds from the offering of approximately $133,000 after
offering costs.
In December, 1988, the Company entered into a reorganization with Dix
Hills Equities Group, Inc. ("Dix Hills"), a closely-held Delaware corporation,
which transaction was later rescinded in May, 1994, as described below. Under
the terms of the reorganization, the Company acquired all of the issued and
outstanding shares of Dix Hills in exchange for the issuance of a total of
4,592,000 shares of restricted common stock, or a controlling interest of
approximately 80%, to the Dix Hills shareholders. As a result of this
transaction, Dix Hills, a company engaged in the air conditioning and heating
business, became a wholly-owned subsidiary of the Company. In connection with
the reorganization, the officers and directors of the Company resigned, and
the designees of Dix Hills were appointed as the new directors and officers of
the Company; the Company effected a 1-for-ten reverse split in its issued and
outstanding shares; and the Company changed its name to "Dix Hills Equities
Group, Inc." All share figures in this report give effect to the 1 for 10
reverse split described above.
In October, 1991, a group of interested shareholders, consisting of
Coombs & Company, a Washington state partnership, and the present officers and
directors, filed a lawsuit in the United States District Court for the
District of Utah, against Dix Hills and the new management of the Company (the
"Dix Hills Group"), alleging a number of claims against the Dix Hills
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Group, including federal securities law claims. In September, 1993, the
parties to the lawsuit entered into a settlement agreement, under the terms of
which the Dix Hills Group agreed to rescind the reorganization agreement, and
to return the control and status of the public company back to its
pre-acquisition officers and directors. The settlement agreement provided for
the payment by the Dix Hills Group to the Company of the sum of $80,000. In
connection with the settlement, in May, 1994, the Dix Hills Group returned to
the Company, for cancellation, all of the 4,592,000 post-split shares of
common stock issued in the reorganization, together with an additional 186,360
shares of common stock owned by former management. As a result of the
settlement agreement, the Dix Hills Group resigned as officers and directors
of the Company, and present management was appointed.
In April, 2000, the Company changed its name to "Millennium Quest, Inc."
In February, 1999, the Company issued a total of 1,000,000 shares of
restricted common stock, to its officers, directors and two other
shareholders, in consideration of the efforts undertaken by these individuals
to accomplish the recission, described above, and to reactivate the business
of the Company.
Business - General
As indicated, the Company is seeking a business enterprise for
acquisition, reorganization or merger, or participation by the Company. Over
the past few months, the Company's efforts have been focused on updating the
Company's financial statements and preparing this filing, and the Company has
not conducted any substantive review of any business ventures for possible
acquisition or participation by the Company. The Company has not entered into
any agreement, nor does it have any commitment or understanding to enter into
or become engaged in a transaction as of the date of this filing. The Company
will investigate, review, and evaluate business opportunities as they become
available and will seek to acquire or become engaged in business opportunities
at such time as specific opportunities warrant.
It is anticipated that opportunities will be made available to the
Company through its officers and directors and through professional advisors
including securities broker-dealers and through members of the financial
community.
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis regarding the quality of
the other firm's management and personnel, the asset base of such firm or
enterprise, the anticipated acceptability of new products or marketing
concepts, the merit of the firms business plan, and numerous other factors
which are difficult, if not impossible, to analyze through the application of
any objective criteria.
For the past few years, the Company has had no active business
operations, and has been seeking to acquire an interest in a business with
long-term growth potential. The Company currently has no commitment or
arrangement to participate in a business and cannot now predict what type of
business it may enter into or acquire. It is emphasized that the business
objectives discussed herein are extremely general and are not intended to be
restrictive on the discretion of the Company's management.
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There are no plans or arrangements proposed or under consideration for
the issuance or sale of additional securities by the Company prior to the
identification of an acquisition candidate. Consequently, management
anticipates that it may be able to participate in only one potential business
venture, due primarily to the Company's limited capital. This lack of
diversification should be considered a substantial risk, because it will not
permit the Company to offset potential losses from one venture against gains
from another.
The Company has voluntarily filed this registration statement on Form
10-SB to become subject to the reporting requirements under the Securities
Exchange Act of 1934 (the "Exchange Act"), based on management's belief that
the Company's reporting status will enhance its ability to locate and acquire
a business opportunity. The Company intends to continue to voluntarily file
reports under the Exchange Act, regardless of whether its obligation to do so
is suspended by rule or statute.
Selection of a Business
The Company anticipates that businesses for possible acquisition will be
referred by various sources, including its officers and directors,
professional advisors, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals.
The Company will not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its officers and
directors and their affiliates, as well as indirect associations between them
and other business and professional people. By relying on "word of mouth,"
the Company may be limited in the number of potential acquisitions it can
identify. While it is not presently anticipated that the Company will engage
unaffiliated professional firms specializing in business acquisitions or
reorganizations, such firms may be retained if management deems it in the best
interest of the Company.
Compensation to a finder or business acquisition firm may take various
forms, including one-time cash payments, payments based on a percentage of
revenues or product sales volume, payments involving issuance of securities
(including those of the Company), or any combination of these or other
compensation arrangements. Consequently, the Company is currently unable to
predict the cost of utilizing such services. Management of the Company will
not be paid a finder's fee for locating a business opportunity.
The Company will not restrict its search to any particular business,
industry, or geographical location, and management reserves the right to
evaluate and enter into any type of business in any location. The Company may
participate in a newly organized business venture or a more established
company entering a new phase of growth or in need of additional capital to
overcome existing financial problems. Participation in a new business venture
entails greater risks since in many instances management of such a venture
will not have proved its ability, the eventual market of such venture's
product or services will likely not be established, and the profitability of
the venture will be unproved and cannot be predicted accurately. If the
Company participates in a more established f-in-n with existing financial
problems, it may be subjected to risk because the financial resources
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of the Company may not be adequate to eliminate or reverse the circumstances
leading to such financial problems.
In seeking a business venture, the decision of management will not be
controlled by an attempt to take advantage of any anticipated or perceived
appeal of a specific industry, management group, product, or industry, but
will be based on the business objective of seeking long-term capital
appreciation in the real value of the Company. The Company will not acquire
or merge with a business or corporation in which the Company's officers,
directors, or promoters, or their affiliates or associates, have any direct or
indirect ownership interest.
The analysis of new businesses will be undertaken by or under the
supervision of the officers and directors. In analyzing prospective
businesses, management will consider, to the extent applicable, the available
technical, financial, and managerial resources; working capital and other
prospects for the future; the nature of present and expected competition; the
quality and experience of management services which may be available and the
depth of that management; the potential for further research, development, or
exploration; the potential for growth and expansion; the potential for profit;
the perceived public recognition or acceptance of products, services, or trade
or service marks; name identification; and other relevant factors.
The decision to participate in a specific business may be based on
management's analysis of the quality of the other firm's management and
personnel, the anticipated acceptability of new products or marketing
concepts, the merit of technological changes, and other factors which are
difficult, if not impossible, to analyze through any objective criteria. It
is anticipated that the results of operations of a specific firm may not
necessarily be indicative of the potential for the future because of the
requirement to substantially shift marketing approaches, expand significantly,
change product emphasis, change or substantially augment management, and other
factors.
The Company will analyze all available factors and make a determination
based on a composite of available facts, without reliance on any single
factor. The period within which the Company may participate in a business
cannot be predicted and will depend on circumstances beyond the Company's
control, including the availability of businesses, the time required for the
Company to complete its investigation and analysis of prospective businesses,
the time required to prepare appropriate documents and agreements providing
for the Company's participation, and other circumstances.
Acquisition of a Business
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, or other reorganization
with another corporation or entity; joint venture; license; purchase and sale
of assets; or purchase and sale of stock, the exact nature of which cannot now
be predicted. Notwithstanding the above, the Company does not intend to
participate in a business through the purchase of minority stock positions.
On the consummation of a transaction, it is likely that the present management
and shareholders of the Company will not be in control of the Company. In
addition, a majority or all of the Company's directors may, as part of
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the terms of the acquisition transaction, resign and be replaced by new
directors without a vote of the Company's shareholders.
In connection with the Company's acquisition of a business, the present
shareholders of the Company, including officers and directors, may, as a
negotiated element of the acquisition, sell a portion or all of the Company's
Common Stock held by them at a significant premium over their original
investment in the Company. As a result of such sales, affiliates of the
entity participating in the business reorganization with the Company would
acquire a higher percentage of equity ownership in the Company. Management
does not intend to actively negotiate for or otherwise require the purchase of
all or any portion of its stock as a condition to or in connection with any
proposed merger or acquisition. Although the Company's present shareholders
did not acquire their shares of Common Stock with a view towards any
subsequent sale in connection with a business reorganization, it is not
unusual for affiliates of the entity participating in the reorganization to
negotiate to purchase shares held by the present shareholders in order to
reduce the amount of shares held by persons no longer affiliated with the
Company and thereby reduce the potential adverse impact on the public market
in the Company's common stock that could result from substantial sales of such
shares after the business reorganization. Public investors will not receive
any portion of the premium that may be paid in the foregoing circumstances.
Furthermore, the Company's shareholders may not be afforded an opportunity to
approve or consent to any particular stock buy-out transaction.
In the event sales of shares by present shareholders of the Company,
including officers and directors, is a negotiated element of a future
acquisition, a conflict of interest may arise because directors will be
negotiating for the acquisition on behalf of the Company and for sale of their
shares for their own respective accounts. Where a business opportunity is
well suited for acquisition by the Company, but affiliates of the business
opportunity impose a condition that management sell their shares at a price
which is unacceptable to them, management may not sacrifice their financial
interest for the Company to complete the transaction. Where the business
opportunity is not well suited, but the price offered management for their
shares is high, Management will be tempted to effect the acquisition to
realize a substantial gain on their shares in the Company. Management has not
adopted any policy for resolving the foregoing potential conflicts, should
they arise, and does not intend to obtain an independent appraisal to
determine whether any price that may be offered for their shares is fair.
Stockholders must rely, instead, on the obligation of management to fulfill
its fiduciary duty under state law to act in the best interests of the Company
and its stockholders.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of the transaction, the Company may agree to register such
securities either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. Although the terms of such
registration rights and the number of securities, if any, which may be
registered cannot be predicted, it may be expected that registration of
securities by the Company in these circumstances would entail substantial
expense to the Company. The issuance of substantial additional securities and
their potential sale into any trading market which may develop in the
Company's securities may have a depressive effect on such market.
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While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to structure the acquisition as a so-called
"tax-free" event under sections 351 or 368(a) of the Internal Revenue Code of
1986, (the "Code"). In order to obtain tax-free treatment under section 351
of the Code, it would be necessary for the owners of the acquired business to
own 80% or more of the voting stock of the surviving entity. In such event,
the shareholders of the Company would retain less than 20% of the issued and
outstanding shares of the surviving entity. Section 368(a)(1) of the Code
provides for tax-free treatment of certain business reorganizations between
corporate entities where one corporation is merged with or acquires the
securities or assets of another corporation. Generally, the Company will be
the acquiring corporation in such a business reorganization, and the tax-free
status of the transaction will not depend on the issuance of any specific
amount of the Company's voting securities. It is not uncommon, however, that
as a negotiated element of a transaction completed in reliance on section 368,
the acquiring corporation issue securities in such an amount that the
shareholders of the acquired corporation will hold 50% or more of the voting
stock of the surviving entity. Consequently, there is a substantial
possibility that the shareholders of the Company immediately prior to the
transaction would retain less than 50% of the issued and outstanding shares of
the surviving entity. Therefore, regardless of the form of the business
acquisition, it may be anticipated that stockholders immediately prior to the
transaction will experience a significant reduction in their percentage of
ownership in the Company.
Notwithstanding the fact that the Company is technically the acquiring
entity in the foregoing circumstances, generally accepted accounting
principles will ordinarily require that such transaction be accounted for as
if the Company had been acquired by the other entity owning the business and,
therefore, will not permit a write-up in the carrying value of the assets of
the other company.
The manner in which the Company participates in a business will depend on the
nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require
specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to such
closing, will outline the manner of bearing costs if the transaction is not
closed, will set forth remedies on default, and will include miscellaneous
other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business will be
dependent on the nature of the business and the interest acquired. The
Company is unable to predict whether the Company will be in control of the
business or whether present management will be in control of the Company
following the acquisition. It may be expected that the business will present
various risks, which cannot be predicted at the present time.
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Governmental Regulation
It is impossible to predict the government regulation, if any, to which
the Company may be subject until it has acquired an interest in a business.
The use of assets and/or conduct of businesses which the Company may acquire
could subject it to environmental, public health and safety, land use, trade,
or other governmental regulations and state or local taxation. In selecting a
business in which to acquire an interest, management will endeavor to
ascertain, to the extent of the limited resources of the Company, the effects
of such government regulation on the prospective business of the Company. In
certain circumstances, however, such as the acquisition of an interest in a
new or start-up business activity, it may not be possible to predict with any
degree of accuracy the impact of government regulation. The inability to
ascertain the effect of government regulation on a prospective business
activity will make the acquisition of an interest in such business a higher
risk.
Competition
The Company will be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by
virtue of their stronger financial resources and prior experience in business.
There is no assurance that the Company will be successful in obtaining
suitable investments.
Employees
The Company is a development stage company and currently has no
employees. Executive officers, who are not compensated for their time
contributed to the Company, will devote only such time to the affairs of the
Company as they deem appropriate, which is estimated to be no more than 20
hours per month per person, until such time as the Company enters into active
negotiations to acquire or reorganize with a business. Management of the
Company expects to use consultants, attorneys, and accountants as necessary,
and does not anticipate a need to engage any full-time employees so long as it
is seeking and evaluating businesses. The need for employees and their
availability will be addressed in connection with a decision whether or not to
acquire or participate in a specific business industry.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Six Months Ended June 30, 2000 and 1999 and Calendar Years Ended
December 31, 1999 and 1998
The Company has had no revenue from continuing operations for the six
month periods ended June 30, 2000 and 1999, or the years ended December 31,
1999 and 1998. General and administrative expenses for the six month periods
ended June 30, 2000 and 1999, and for the years ended December 31, 1999 and
1998, consisted of general corporate administration costs.
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These costs were $5,000 and $10,506 for the six month periods ended June 30,
2000 and 1999, respectively. These costs were $17,076 and $2,147 for the
years ended December 31, 1999 and 1998, respectively. All remaining expenses
are attributable to costs and professional fees incurred to update the Company
in order to make a Form 10-SB filing.
The Company had an interest income of $533 and $612 for the six month
periods ended June 30, 2000 and 1999. Interest income for the Company for the
years ended December 31, 1999 and 1998, was $1,144 and $1,386.
As a result of all of these factors, the Company has realized a net loss
for the six months ended June 30, 2000 and 1999 of $4,467 and $9,894,
respectively, and for the years ended December 31, 1999 and 1998, a net loss
of $15,932 and $761, respectively.
Liquidity and Capital Resources
At June 30, 2000, the Company had working capital of approximately
$35,020, as compared to working capital of approximately $35,620 at December
31, 1999. Working capital as of both dates consists of cash. Although the
Company's most significant assets consist largely of cash and cash
equivalents, the Company has no intent to become, or hold itself out to be,
engaged primarily in the business of investing, reinvesting, or trading in
securities. Accordingly, the Company does not anticipate being required to
register pursuant to the Investment Company Act of 1940, and expects to be
limited in its ability to invest in securities, other than cash equivalents
and government securities, in the aggregate amount of over 40% of its assets.
There can be no assurance that any investment made by the Company will not
result in losses.
The Company has very limited liquid assets, and such assets may not be
sufficient for the Company to meet its operating needs over the next twelve
months. The Company does not anticipate, however, that it will require
substantial revenue, or additional cash assets, until it enters into an
acquisition or reorganization transaction with a business opportunity. The
Company has no material revenues and its needs for capital will in all
likelihood change dramatically if it acquires an interest in a business
opportunity in the next twelve months. The Company's current operating plan
is to (a) cover the administrative and reporting requirements of a public
company; and (b) search for, and investigate, potential businesses, products,
technologies and companies for acquisition. At present, the Company has no
understandings, commitments or agreements with respect to the acquisition of
any business, product, technology or company, and there can be no assurance
that the Company will be able to identify any such business, product,
technology or entity suitable for an acquisition or reorganization
transaction. Moreover, there can be no assurance the Company will be
successful in its efforts to enter into consummate an acquisition or
reorganization transaction on terms favorable or beneficial to the Company and
its shareholders, or that it, or its successor, will be able to effectively
manage the business opportunity the Company acquires or becomes engaged in.
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ITEM 3. DESCRIPTION OF PROPERTY
The Company uses offices and related clerical services at 4089 Mount
Olympus Way, Salt Lake City, Utah 84124, provided by Terry Cononelos, the
Secretary/Treasurer and a Director of the Company at no charge.
The Company owns no properties.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of the date of filing of this report,
the number and percentage of the outstanding shares of common stock which,
according to the information supplied to the Company, were beneficially owned
by (i) each person who is currently a director of the Company, (ii) each
executive officer, (iii) all current directors and executive officers of the
Company as a group and (iv) each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table have sole voting
and dispositive power with respect to all shares beneficially owned, subject
to community property laws where applicable.
Common
Name and Address Shares Percent of Class(1)
------------------- -------- ------------------
Dimitri Cocorinis(2)(4)
1346 East Harrison Avenue
Salt Lake City, Utah 84105 436,925 22.27
Terry Cononelos(3)(4)
4089 Mount Olympus Way
Salt Lake City, Utah 84124 436,925 22.27
Jack Coombs(4)
2581 East 1300 South
Salt Lake City, Utah 84108 295,000 15.04
All Executive officers and Directors
as a Group (2 persons) 873,850 44.54
(1) All shares are held of record and beneficially.
(2) Dimitri Cocorinis is the President and a Director of the Company.
(3) Terry Cononelos is the Secretary/Treasurer and a Director of the
Company.
(4) These individuals were issued restricted stock in February, 1999, in
consideration of services rendered to the Company.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Directors and Officers
The following table sets forth the names, ages, and positions with the
Company for each of the directors and officers of the Company.
Name Age Positions(1) Since
Dimitri Cocorinis 45 President and Director 1994
Terry Cononelos 46 Secretary/Treasurer and
Director 1994
(1) All executive officers are elected by the Board and hold office until
the next Annual Meeting of stockholders and until their successors are elected
and qualify.
The following is information on the business experience of each director
and officer.
Dimitri Cocorinis, is the President and a director of the Company. Mr.
Cocorinis has been a registered investment advisor for Wasatch Advisors, an
investment advisory firm, for over ten (10) years. As an employee of Wasatch
Advisors, Mr. Cocorinis is a senior trader and a money manager of mutual funds
for institutional investors. From approximately 1980 until his current
employment at Wasatch Advisors, Mr. Cocorinis was a real estate agent for
Sugarhouse Realty, a Salt Lake City based real estate company. Mr. Cocorinis
received his bachelor of arts degree from the University of Utah in
philosophy. He also has a liberal arts degree from Franklin College in
Lugano, Switzerland.
Terry Cononelos, is the Secretary and a director of the Company. Mr.
Cononelos has been a real estate agent with Chapman Richards, a Salt Lake City
real estate firm, for the past eight years. From 1980 until his current
position, he was a real estate agent at Sugarhouse Realty. Mr. Cononelos
received his bachelor's degree in accounting from the University of Utah in
1977.
Mr. Cocorinis and Mr. Cononelos are cousins.
Other Shell Company Activities
Neither of the officers and directors are involved in any other shell
corporations, as an officer, director or principal shareholder, and have not
had any such involvement for over ten (10) years.
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ITEM 6. EXECUTIVE COMPENSATION
The Company has no agreement or understanding, express or implied, with
any officer, director, or principal stockholder, or their affiliates or
associates, regarding employment with the Company or compensation for
services. The Company has no plan, agreement, or understanding, express or
implied, with any officer, director, or principal stockholder, or their
affiliates or associates, regarding the issuance to such persons of any shares
of the Company's authorized and unissued common stock. There is no
understanding between the Company and any of its present stockholders
regarding the sale of a portion or all of the common stock currently held by
them in connection with any future participation by the Company in a business.
There are no other plans, understandings, or arrangements whereby any of the
Company's officers, directors, or principal stockholders, or any of their
affiliates or associates, would receive funds, stock, or other assets in
connection with the Company's participation in a business. No advances have
been made or contemplated by the Company to any of its officers, directors, or
principal stockholders, or any of their affiliates or associates.
There is no policy that prevents management from adopting a plan or
agreement in the future that would provide for cash or stock based
compensation for services rendered to the Company.
On acquisition of a business, it is possible that current management will
resign and be replaced by persons associated with the business acquired,
particularly if the Company participates in a business by effecting a stock
exchange, merger, or consolidation as discussed under "BUSINESS." In the event
that any member of current management remains after effecting a business
acquisition, that member's time commitment and compensation will likely be
adjusted based on the nature and location of such business and the services
required, which cannot now be foreseen.
In February, 1999, the Company granted to its officers and directors, and
two other shareholders, a total of 1,000,000 shares of restricted common
stock, for services rendered on behalf of the Company over the preceding
several years. (See "ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.")
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February, 1999, the Company issued a total of 1,000,000 shares of
restricted common stock to its two officers and directors, and to two other
shareholders for services rendered by these individuals over the preceding
several years in effecting a recission of the transaction with Dix Hills,
described under "ITEM 1. BUSINESS," and in undertaking efforts to bring the
Company current. These shares were issued as follows: Terry Cononelos and
Dimitri Cocorinis (officers and directors) - 350,000 shares each; Jack Coombs
- 250,000 shares; and Jeff Helotes - 50,000 shares. At the time of issuance
of these shares, and since the date of issuance, there has been no market for
the common stock of the Company. These shares were issued in reliance upon
the exemption from registration set forth under Section 4(2) of the Securities
Act of 1933, as amended, and applicable exemptions in the state of Utah.
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Except for the transaction described above, there are no proposed
transactions and no transactions during the past two years to which the
Company was (or is) a party, and in which any officer, director, or principal
shareholder, or their affiliates or associates, was also a party.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of common stock, par
value $0.001 per share, of which 1,961,643 shares are issued and outstanding.
Holders of common stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of stockholders. Shares of common stock do
not carry cumulative voting rights and, therefore, holders of a majority of
the outstanding shares of common stock will be able to elect the entire board
of directors, and, if they do so, minority stockholders would not be able to
elect any members to the board of directors. The Company's board of directors
has authority, without action by the Company's stockholders, to issue all or
any portion of the authorized but unissued shares of common stock, which would
reduce the percentage ownership in the Company of its stockholders and which
may dilute the book value of the common stock. Stockholders of the Company
have no pre-emptive rights to acquire additional shares of common stock. The
common stock is not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation of the Company, the shares of
common stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. Holders of common stock are entitled to
receive such dividends as the board of directors may from time to time declare
out of funds legally available for the payment of dividends. The Company has
not paid dividends on its common stock and does not anticipate that it will
pay dividends in the foreseeable future.
The Company is also authorized to issue a total of 5,000,000 shares of
preferred stock, par value $0.001 per share, none of which are issued and
outstanding. The Company does not currently have any plans to issue any
shares of preferred stock. The Company's board of directors has authority,
without action by the shareholders, to issue all or any portion of the
unissued preferred stock in one or more series and to determine the voting
rights, preferences as to dividends and liquidation, conversion rights and
other rights of such series. The preferred stock, if and when issued, may
carry rights superior to those of the common stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
There is no established trading market for the common stock, and there
has not been a trading market in the Company's common stock for the past
several years. For the past several years, there have been no public
transactions in the common stock of the Company, to the best knowledge of the
Company. The Company's common stock is not quoted on the OTC Bulletin Board,
the "pink sheets," or in any other quotation system. Following the filing and
review of this Form 10-SB, the Company anticipates that it will seek to have
its common stock quoted on the OTC Bulletin Board; however, there can be no
assurance the Company will be successful in accomplishing this objective.
12
<PAGE>
Since its inception, no dividends have been paid on the Company's common
stock. The Company intends to retain any earnings for use in its business
activities, so it is not expected that any dividends on the common stock will
be declared and paid in the foreseeable future.
At September 15, 2000, there were approximately 166 holders of record of
the Company's Common Stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, and
to the best of its knowledge, no such proceedings by or against the Company
have been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants since the
Company's organization.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In February, 1999, the Company issued a total of 1,000,000 shares of
restricted common stock to its officers and directors and two other
shareholders, for services rendered. (See "ITEM 7. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.")
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Corporation Law provides in relevant part as
follows:
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person 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 attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
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 the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
13
<PAGE>
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person 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 attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination shall
be made, with respect to a person who is a director or officer at the time of
such determination, (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other
14
<PAGE>
rights to which those seeking indemnification or advancement of expenses may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who 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 any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
15
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The following financial statements of the Company appear at the end of
this report beginning with the Index to Financial Statements on page F-1.
(a) Audited Financial Statements
Independent Auditors' Report
Balance Sheet as of December 31, 1999
Statements of Operations for the years ended December 31, 1999 and 1998
and for the period from inception on February 4, 1986 through
December 31, 1999
Statement of Stockholders' Equity from inception on February 4, 1986
through December 31, 1999
Statements of Cash Flows for the years ended December 31, 1999 and 1998
and For the period from inception on February 4, 1986 through
December 31, 1999
Notes to Financial Statements
(b) Unaudited Financial Statements
Balance Sheet as of June 30, 2000
Statements of Operations for the six months ended June 30, 2000 and 1999
and for the period from inception on February 4, 1986 through June
30, 2000
Statement of Stockholders' Equity from inception on February 4, 1986
through June 30, 2000
Statements of Cash Flows for the six months ended June 30, 2000 and 1999
and for The period from inception on February 4, 1986 through June
30, 2000
Notes to Unaudited Financial Statements
PART III
ITEM 1. INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
Exhibit SEC Ref.
No. No Description/Title of Document Page
-------- -------- ----------------------------------- ------
1 (3)(i) Articles of Incorporation, as amended E-1
2 (3)(ii) Bylaws E-15
(27) Financial Data Schedules*
* The Financial Data Schedules are presented only in the electronic
filing with the Securities and Exchange Commission
16
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
See Item 1, Part III, above.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
MILLENNIUM QUEST, INC.
Date: September 15, 2000 By: /s/ Dimitri Cocorinis
----------------------------
Dimitri Cocorinis, President
In accordance with the Exchange Act, the registration statement has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: September 15, 2000 /s/ Dimitri Cocorinis
----------------------------
Dimitri Cocorinis, Director
Date: September 15, 2000 /s/ Terry Cononelos
----------------------------
Terry Cononelos, Director
17
<PAGE>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
CONTENTS
PAGE
Independent Auditors' Report F-2
Balance Sheet, December 31, 1999 F-3
Statements of Operations, for the years ended
December 31, 1999 and 1998 and for the period
from inception on February 4, 1986 through
December 31, 1999 F-4
Statement of Stockholders' Equity from inception
on February 4, 1986 through December 31, 1999 F-5
Statements of Cash Flows for the years ended
December 31, 1999 and 1998 and for the period
from inception on February 4, 1986 through
December 31, 1999 F-7
Notes to Financial Statements F-8
F-1
<PAGE> 18
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
430 East 400 South
Salt Lake City, Utah 84111
(801)328-2727 - FAX 328-1123
INDEPENDENT AUDITORS' REPORT
Board of Directors
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Millennium Quest, Inc. [a
development stage company] at December 31, 1999, and the related statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1999 and 1998 and from inception on February 4, 1986 through December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Millennium Quest, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for
the years ended December 31, 1999 and 1998, and from inception on February 4,
1986 through December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
February 9, 2000
Salt Lake City, Utah
F-2
<PAGE> 19
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
BALANCE SHEET
ASSETS
December 31,
1999
-------------
CURRENT ASSETS:
Cash in bank $ 35,620
-------------
$ 35,620
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,399
-------------
Total Current Liabilities $ 2,399
-------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5,000,000 shares authorized, no
shares issued and outstanding -
Common stock, $.001 par value,
200,000,000 shares authorized,
1,961,643 shares issued and
outstanding 1,962
Capital in excess of par value 161,088
Deficit accumulated during the
development stage (129,829)
-------------
Total Stockholders' Equity 33,221
-------------
$ 35,620
=============
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 20
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
STATEMENTS OF OPERATIONS
Years Ended From Inception
December 31, on February 4,
---------------------------- 1986 Through
1999 1998 December 31, 1999
------------- -------------- ---------------
REVENUE $ - $ - $ -
------------- -------------- ---------------
OPERATING EXPENSES:
General and administrative 17,076 2,147 63,726
------------- -------------- ---------------
LOSS FROM OPERATIONS (17,076) (2,147) (63,726)
------------- -------------- ---------------
OTHER INCOME:
Interest and other income 1,144 1,386 19,723
------------- -------------- ---------------
Total Other Income 1,144 1,386 19,723
------------- -------------- ---------------
LOSS BEFORE INCOME TAXES (15,932) (761) (44,003)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
------------- -------------- ---------------
LOSS FROM CONTINUING OPERATIONS (15,932) (761) (44,003)
------------- -------------- ---------------
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued subsidiary - - (131,258)
Gain on disposal of
discontinued subsidiary - - 45,432
------------- -------------- ---------------
LOSS FROM DISCONTINUED
OPERATIONS - - (85,826)
------------- -------------- ---------------
NET LOSS $ (15,932) $ (761) $ (129,829)
============= ============== ===============
INCOME (LOSS) PER COMMON SHARE:
Income (loss) from continuing
operations $ (.01) $ (.00) $ (.02)
(Loss) from discontinued
operations - - (.05)
Gain on disposal of subsidiary - - .02
------------- -------------- ---------------
LOSS PER COMMON SHARE $ (.01) $ (.00) $ (.04)
============= ============== ===============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 21
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 4, 1986
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Earnings
(Deficit)
Accumulated
Preferred Stock Common Stock Capital in During the
---------- ---------- ------------ ------------ Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, February 4, 1986 - $ - - $ - $ - $ -
Shares issued to initial
stockholders for cash,
February, 1986 at $.05 per
share, restated for stock split - - 400,000 400 19,600 -
Net income for the period
ended December 31, 1986 - - - - - 288
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1986 - - 400,000 400 19,600 288
Shares of common stock sold
to public for cash, March
1987 at $.20 per share - - 806,750 807 132,243 -
Shares issued to initial
stockholders contributed back
to Company to meet dilution
requirements - - (58,750) (59) 59 -
Net loss for the year
ended December 31, 1987 - - - - - (958)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1987 - - 1,148,000 1,148 151,902 (670)
Shares issued for acquisition
of subsidiary, December 27,
1988 at $.001 per share - - 4,592,000 4,592 (4,592) -
Net loss for the year
ended December 31, 1988 - - - - - (21,039)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1988 - - 5,740,000 5,740 147,310 (21,709)
Net loss for the year
ended December 31, 1989 - - - - - (40)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1989 - - 5,740,000 5,740 147,310 (21,749)
Net loss for the year
ended December 31, 1990 - - - - - (40)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1990 - - 5,740,000 5,740 147,310 (21,789)
Net loss for the year
ended December 31, 1991 - - - - - (131,261)
---------- ---------- ------------ ------------ ------------ ------------
[Continued]
F-5
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 4, 1986
THROUGH DECEMBER 31, 1999
[Continued]
Earnings
(Deficit)
Accumulated
Preferred Stock Common Stock Capital in During the
---------- ---------- ------------ ------------ Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1991 - - 5,740,000 5,740 147,310 (153,050)
Net loss for the year
ended December 31, 1992 - - - - - -
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1992 - - 5,740,000 5,740 147,310 (153,050)
Net loss for the year
ended December 31, 1993 - - - - - -
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1993 - - 5,740,000 5,740 147,310 (153,050)
Cancellation of shares for
Recission of previous acquisition
agreement, May 4, 1994, at $.001
per share - - (4,778,360) (4,778) 4,778 -
Other adjustments - - 3 - - -
Net income for the year
ended December 31, 1994 - - - - - 44,939
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1994 - - 961,643 962 152,088 (108,111)
Net loss for the year
ended December 31, 1995 - - - - - (5,040)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 - - 961,643 962 152,088 (113,151)
Net income for the year
ended December 31, 1996 - - - - - 991
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1996 - - 961,643 962 152,088 (112,160)
Net loss for the year
ended December 31, 1997 - - - - - (976)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1997 - - 961,643 962 152,088 (113,136)
Net loss for the year
ended December 31, 1998 - - - - - (761)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1998 - - 961,643 962 152,088 (113,897)
Shares issued for services
rendered, February 26, 1999
at $.01 per share - - 1,000,000 1,000 9,000 -
Net loss for the year
ended December 31, 1999 - - - - - (15,932)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1999 - $ - 1,961,643 $ 1,962 $ 161,088 $ (129,829)
========== ========== ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement.
F-6
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
For the
Years Ended From Inception
December 31, on February 4,
--------------------------- 1986 Through
1999 1998 December 31,1999
------------- ------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $ (15,932) $ (761) $ (129,829)
------------- ------------- --------------
Adjustments to reconcile net loss to net cash
used by operating activities:
Non-cash expense 10,000 - 10,000
Amortization expense - - 200
Changes in assets and liabilities:
Increase (decrease) in accounts payable (1,000) 1,170 2,399
------------- ------------- --------------
Total Adjustments 9,000 1,170 12,599
------------- ------------- --------------
Net Cash Flows (Used) by
Operating Activities (6,932) 409 (117,230)
------------- ------------- --------------
Cash Flows from Investing Activities:
Organization costs - - (200)
------------- ------------- --------------
Net Cash (Used) by Investing Activities - - (200)
------------- ------------- --------------
Cash Flows from Financing Activities:
Proceeds from common stock issuance - - 181,350
Stock offering costs - - (28,300)
------------- ------------- --------------
Net Cash Provided by Financing Activities - - 153,050
------------- ------------- --------------
Net Increase (decrease) in cash (6,932) 409 35,620
Cash at Beginning of Period 42,552 42,143 -
------------- ------------- --------------
Cash at End of Period $ 35,620 $ 42,552 $ 35,620
============= ============= ==============
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental schedule of Noncash Investing and Financing Activities:
Year ended December 31, 1999:
The Company issued 1,000,000 shares of common stock for services rendered valued at
$10,000 (or $.01 per share).
Year ended December 31, 1998:
None
The accompanying notes are an integral part of these financial statements.
F-7
</TABLE>
<PAGE> 24
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of
Delaware on February 4, 1986 as Teracom, Inc. The name was subsequently
changed to Dix Hills Equities Group, Inc. in connection with an acquisition of
a subsidiary in December, 1988. The acquisition was subsequently rescinded
during 1994 [See Note 5]. During April 2000, the name of the Company was
changed to Millennium Quest, Inc The Company has not commenced planned
principal operations and is considered a development stage company as defined
in SFAS No. 7. The Company has, at the present time, not paid any dividends
and any dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Organization Costs - The Company previously expensed its organization costs,
which reflect amounts expended to organize the Company, over sixty [60] months
using the straight line method.
Restatement of Financial Statements - During January, 1989, the company
effected a 1 for 10 reverse split of its common stock. The financial
statements have been restated to reflect these changes for all periods
presented [See Note 3].
Cash and Cash Equivalents - For purposes of the financial statements, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimated.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented [See Note 6].
Income Taxes -The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" which requires an asset/liability approach for the effect of income
taxes [See Note 2].
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities ", SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections", SFAS No. 136, "Transfers of Assets to a not for profit
organization or charitable trust that raises or holds contributions for
others", and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities deferral of the effective date of FASB statement No. 133 ( an
amendment of FASB Statement No. 133.)," were recently issued. SFAS No. 132,
133, 134, 135, 136 and 137 have no current applicability to the Company or
their effect on the financial statements would not have been significant.
F-8
<PAGE> 25
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards. At December 31, 1999, the Company has available
unused operating loss carryforwards of approximately $109,000, which may be
applied against future taxable income and which expire in various years
through 2019.
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the tax effect of the loss carryforwards and,
therefore, no deferred tax asset has been recognized in the financial
statements for the loss carryforwards. The net deferred tax assets are
approximately $37,000, and $31,600 as of December 31, 1999 and 1998 with an
offsetting valuation allowance at each year end of the same amount, resulting
in a change in the valuation allowance of approximately $5,400 and $200 during
1999 and 1998.
NOTE 3 - CAPITAL STOCK
Public Offering of Common Stock - During March, 1987, the Company completed a
public offering of 806,750 shares of its previously authorized, but unissued
common stock. This offering was registered by qualification in the State of
Utah and was made in reliance on Rule 504 of Regulation D under the Securities
Act of 1933. An offering price of $.20 per share was arbitrarily determined
by the Company and the sales agent. Total proceeds of the offering amounted
to $161,350 and stock offering costs of $28,300 were offset against capital in
excess of par value.
Stock Split - In January, 1989, the Board of Directors authorized a 1 for 10
reverse stock split, thereby decreasing the number of shares issued and
outstanding to 5,740,000. All references in the accompanying financial
statements to the number of common and per-share amounts have been restated to
reflect the stock split for all periods presented.
Preferred Stock - The Company has 5,000,000 shares of preferred stock
authorized $.001 par value with such rights, preferences and designations and
to be issued in such series as determined by the Board of Directors. No
shares are issued and outstanding at December 31, 1999.
Cancellation of Common Stock - During 1994, 4,778,360 shares of common stock
were returned for cancellation due to the recission of the acquisition which
had occurred in 1988.
Common Stock - During February 1999, the Company issued 1,000,000 shares of
its previously authorized, but unissued common stock. This stock was issued
for services rendered valued at $10,000 (or $.01 per share).
F-9
<PAGE> 26
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - During the year ended December 31, 1999 the Company
issued 1,000,000 shares of common stock for services rendered valued at
$10,000. During 1998 the Company did not pay any compensation to its officers
or directors.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his home as
a mailing address, as needed, at no expense to the Company.
NOTE 5 - ACQUISITION/RECISSION
In December, 1988, the Company entered into an acquisition agreement wherein
the Company issued 4,592,000 shares of common stock to acquire all of the
issued and outstanding shares of Dix Hills Equities Group, Inc., making it a
wholly owned subsidiary of the Company. The Company changed its name to Dix
Hills Equities Group, Inc. A Class Action Securities fraud lawsuit was
subsequently filed against the Company and its officers (post acquisition) in
October, 1991. In September of 1993 an agreement was reached to rescind the
acquisition agreement and to return the control and status of the parent
company back to its pre-acquisition officers. In May, 1994, 4,592,000 shares
of common stock issued for the acquisition were returned for cancellation
along with an additional 186,360 shares owned by former management.
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for the
periods presented:
For the From Inception
Year Ended on February 4,
December 31, 1986 Through
------------------------ December 31,
1999 1998 1999
------------ ----------- ------------
Loss from continuing operations
available to common shareholders
(numerator) $ (15,932) $ (761)$ (44,003)
Loss from discontinued operations
available to common shareholders
(numerator) - - (131,258)
Gain on disposal of discontinued
Subsidiary (numerator) - - 45,432
------------ ------------ -----------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 1,810,955 961,643 2,845,912
------------ ------------ -----------
F-10
<PAGE> 27
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - SUBSEQUENT EVENTS
On April 10, 2000 the Company filed a certificate of amendment with the state
of Delaware changing the name of the Company to Millennium Quest, Inc. The
Company also reduced the number of authorized shares of preferred stock from
10,000,000 to 5,000,000 shares.
<PAGE> 28
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
CONTENTS
PAGE
Unaudited Balance Sheet, June 30, 2000 F-13
Unaudited Statements of Operations, for the
six months ended June 30, 2000 and 1999 and for the
period from inception on February 4, 1986
through June 30, 2000 F-14
Unaudited Statement of Stockholders' Equity, from
inception on February 4, 1986 through June 30, 2000 F-15
Unaudited Statements of Cash Flows, for the six
months ended June 30, 2000 and 1999, and for the period
from inception on February 4, 986 through June 30, 2000 F-18
Notes to Unaudited Financial Statements F-19
<PAGE> 29
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED BALANCE SHEET
ASSETS
June 30,
2000
-------------
CURRENT ASSETS:
Cash in bank $ 35,020
-------------
Total Current Assets 35,020
-------------
$ 35,020
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,266
-------------
Total Current Liabilities 6,266
-------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.001 par value, 20,000,000 shares
authorized, 1,961,643 shares issued and outstanding 1,962
Capital in excess of par value 161,088
Deficit accumulated during the development stage (134,296)
-------------
Total Stockholders' Equity 28,755
-------------
$ 35,020
=============
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 30
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED STATEMENTS OF OPERATIONS
For the Six From Inception
Months Ended on February 4,
June 30, 1986 Through
--------------------------- June 30,
2000 1999 2000
------------- ------------- -------------
REVENUE $ - $ - $ -
OPERATING EXPENSES:
General and Administrative 5,000 10,506 68,726
------------- ------------- -------------
LOSS FROM OPERATIONS (5,000) (10,506) (68,726)
------------- ------------- -------------
OTHER INCOME:
Interest Income 533 612 20,256
------------- ------------- -------------
Total Other Income 533 612 20,256
------------- ------------- -------------
LOSS BEFORE INCOME TAXES (4,467) (9,894) (48,470)
CURRENT TAX EXPENSE - - -
DEFFERED TAX EXPENSE - - -
------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS (4,467) (9,894) (48,470)
------------- ------------- -------------
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued subsidiary - - (131,258)
Gain on disposal of discontinued
subsidiary - - 45,432
------------- ------------- -------------
LOSS FROM DISCONTINUED OPERATIONS - - (85,826)
------------- ------------- -------------
NET LOSS $ (4,467) $ (9,894) $ (134,296)
============= ============= =============
INCOME (LOSS) PER COMMON SHARE:
(Loss) from continuing
operations $ (.00) $ (.00) $ (.02)
(Loss) from discontinued
operations - - (.05)
Gain on disposal of subsidiary - - .02
------------- ------------- -------------
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.05)
============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 31
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 4, 1986
THROUGH JUNE 30, 2000
<TABLE>
<CAPTION>
Earnings
(Deficit)
Accumulated
Preferred Stock Common Stock Capital in During the
---------- ---------- ------------ ------------ Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, February 4, 1986 - $ - - $ - $ - $ -
Shares issued to initial
stockholders for cash,
February, 1986 at $.05 per
share, restated for stock split - - 400,000 400 19,600 -
Net income for the period
ended December 31, 1986 - - - - - 288
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1986 - - 400,000 400 19,600 288
Shares of common stock sold
to public for cash, March
1987 at $.20 per share - - 806,750 807 132,243 -
Shares issued to initial
stockholders contributed back
to Company to meet dilution
requirements - - (58,750) (59) 59 -
Net loss for the year
ended December 31, 1987 - - - - - (958)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1987 - - 1,148,000 1,148 151,902 (670)
Shares issued for acquisition
of subsidiary, December 27,
1988 at $.001 per share - - 4,592,000 4,592 (4,592) -
Net loss for the year
ended December 31, 1988 - - - - - (21,039)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1988 - - 5,740,000 5,740 147,310 (21,709)
Net loss for the year
ended December 31, 1989 - - - - - (40)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1989 - - 5,740,000 5,740 147,310 (21,749)
Net loss for the year
ended December 31, 1990 - - - - - (40)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1990 - - 5,740,000 5,740 147,310 (21,789)
Net loss for the year
ended December 31, 1991 - - - - - (131,261)
---------- ---------- ------------ ------------ ------------ ------------
[Continued]
F-15
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 4, 1986
THROUGH JUNE 30, 2000
[Continued]
Earnings
(Deficit)
Accumulated
Preferred Stock Common Stock Capital in During the
---------- ---------- ------------ ------------ Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1991 - - 5,740,000 5,740 147,310 (153,050)
Net loss for the year
ended December 31, 1992 - - - - - -
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1992 - - 5,740,000 5,740 147,310 (153,050)
Net loss for the year
ended December 31, 1993 - - - - - -
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1993 - - 5,740,000 5,740 147,310 (153,050)
Cancellation of shares for
Recission of previous acquisition
agreement, May 4, 1994, at $.001
per share - - (4,778,360) (4,778) 4,778 -
Other adjustments - - 3 - - -
Net income for the year
ended December 31, 1994 - - - - - 44,939
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1994 - - 961,643 962 152,088 (108,111)
Net loss for the year
ended December 31, 1995 - - - - - (5,040)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 - - 961,643 962 152,088 (113,151)
Net income for the year
ended December 31, 1996 - - - - - 991
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1996 - - 961,643 962 152,088 (112,160)
Net loss for the year
ended December 31, 1997 - - - - - (976)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1997 - - 961,643 962 152,088 (113,136)
Net loss for the year
ended December 31, 1998 - - - - - (761)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, December 31, 1998 - - 961,643 962 152,088 (113,897)
Shares issued for services
rendered, February 26, 1999
at $.01 per share - - 1,000,000 1,000 9,000 -
Net loss for the year
ended December 31, 1999 - - - - - (15,932)
---------- ---------- ------------ ------------ ------------ ------------
[Continued]
F-16
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 4, 1986
THROUGH JUNE 30, 2000
[Continued]
Earnings
(Deficit)
Accumulated
Preferred Stock Common Stock Capital in During the
---------- ---------- ------------ ------------ Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999 - - 1,961,643 1,962 161,088 (129,829)
Net loss for the period
ended June 30, 2000 - - - - - (4,467)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, June 30, 2000 - $ - 1,961,643 $ 1,962 $ 161,088 $ (134,296)
========== ========== ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement.
F-17
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
UNAUDITED STATEMENTS OF CASH FLOWS
For the Six From Inception
Months Ended on February 4,
June 30, 1986 Through
--------------------------- June 30,
2000 1999 2000
------------- ------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $ (4,467) $ (9,894) $ (134,296)
Adjustments to reconcile net loss to net cash
used by operating activities:
Non-cash expense - 10,000 10,000
Amortization expense - - 200
Changes in assets and liabilities:
Increase (decrease) in accounts payable 3,867 - 6,266
------------- ------------- --------------
Net Cash Flows (Used) by Operating Activities (600) 106 (117,830)
------------- ------------- --------------
Cash Flows from Investing Activities:
Organization costs - - (200)
------------- ------------- --------------
Net Cash (Used) by Investing Activities - - (200)
------------- ------------- --------------
Cash Flows from Financing Activities:
Proceeds from common stock issuance - - 181,350
Stock offering costs - - (28,300)
------------- ------------- --------------
Net Cash Provided by Financing Activities - - 153,050
------------- ------------- --------------
Net Increase (decrease) in cash (600) 106 35,020
Cash at Beginning of Period 35,620 42,552 -
------------- ------------- --------------
Cash at End of Period $ 35,020 $ 42,658 $ 35,020
============= ============= ==============
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For the period ended June 30, 2000:
None
For the period ended June 30, 1999:
The Company issued 1,000,000 shares of common stock for services rendered valued at $10,000
(or $.01 per share)
The accompanying notes are an integral part of these financial statements.
F-18
</TABLE>
<PAGE> 35
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of
Delaware on February 4, 1986 as Teracom, Inc. The name was subsequently
changed to Dix Hills Equities Group, Inc. in connection with an acquisition of
a subsidiary in December, 1988. The acquisition was subsequently rescinded
during 1994. During April 2000 the name of the Company was changed to
Millennium Quest, Inc. The Company has not commenced planned principal
operations and is considered a development stage company as defined in SFAS
No. 7. The Company has, at the present time, not paid any dividends and any
dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.
Condensed Financial Statements - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
June 30, 2000 and 1999 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1999
audited financial statements. The results of operations for the periods ended
June 30, 2000 are not necessarily indicative of the operating results for the
full year.
Organization Costs - The Company previously amortized its organization costs,
which reflect amounts expended to organize the Company, over sixty [60] months
using the straight line method.
Restatement of Financial Statements - During January, 1989, the company
effected a 1 for 10 reverse split of its common stock. The financial
statements have been restated to reflect these changes for all periods
presented [See Note 3].
Cash and Cash Equivalents - For purposes of the financial statements, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimated.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented [See Note 4].
F-19
<PAGE> 36
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
Income Taxes -The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" which requires an asset/liability approach for the effect of income
taxes [See Note 2].
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities ", SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections", SFAS No. 136, "Transfers of Assets to a not for profit
organization or charitable trust that raises or holds contributions for
others", and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities deferral of the effective date of FASB statement No. 133 ( an
amendment of FASB Statement No. 133.)," were recently issued. SFAS No. 132,
133, 134, 135, 136 and 137 have no current applicability to the Company or
their effect on the financial statements would not have been significant.
NOTE 2 -INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards. At June 30, 2000 the Company has available unused
operating loss carryforwards of approximately $114,000, which may be applied
against future taxable income and which expire in various years through 2020.
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the tax effect of the loss carryforwards and,
therefore, no deferred tax asset has been recognized in the financial
statements for the loss carryforwards. The net deferred tax assets are
approximately $38,500 as of June 30, 2000 with an offsetting valuation
allowance at period end of the same amount, resulting in a change in the
valuation allowance of approximately $1,500 during the period ended June 30,
2000.
NOTE 3 - CAPITAL STOCK
Public Offering of Common Stock - During March, 1987, the Company completed a
public offering of 806,750 shares of its previously authorized, but unissued
common stock. This offering was registered by qualification in the State of
Utah and was made in reliance on Rule 504 of Regulation D under the Securities
Act of 1933. An offering price of $.20 per share was arbitrarily determined
by the Company and the sales agent. Total proceeds of the offering amounted
to $161,350 and stock offering costs of $28,300 were offset against capital in
excess of par value.
F-20
<PAGE> 37
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK [CONTINUED]
Stock Split - In January, 1989, the Board of Directors authorized a 1 for 10
reverse stock split, thereby decreasing the number of shares issued and
outstanding to 5,740,000. All references in the accompanying financial
statements to the number of common and per-share amounts have been restated to
reflect the stock split for all periods presented.
Preferred Stock - The Company has 5,000,000 shares of preferred stock
authorized $.001 par value with such rights, preferences and designations and
to be issued in such series as determined by the Board of Directors. No
shares are issued and outstanding at June 30, 2000.
Cancellation of Common Stock - During 1994, 4,778,360 shares of common stock
were returned for cancellation due to the recission of the acquisition which
had occurred in 1988.
Common Stock - During February 1999, the Company issued 1,000,000 shares of
its previously authorized, but unissued common stock. This stock was issued
for services rendered and is valued at $10,000 (or $.01 per share).
NOTE 4 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for the
periods presented:
For the Six From Inception
Months Ended on February 4,
June 30, 1986 Through
------------------------- June 30,
2000 1999 2000
------------ ------------ -------------
Loss from continuing operations
available to common shareholders
(numerator) $ (4,467) $ (9,894) $ (48,470)
------------ ------------ -------------
Loss from discontinued operations
available to common shareholders
(numerator) $ - $ - $ (131,258)
------------ ------------ -------------
Gain on disposal of discontinued
Subsidiary (numerator) $ - $ - $ 45,432
------------ ------------ -------------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 1,961,643 1,657,773 2,815,317
------------ ------------ -------------
F-21
<PAGE> 38
MILLENNIUM QUEST, INC.
(Formerly Dix Hills Equities Group, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 5 - RELATED PARTY TRANSACTIONS
Management Compensation - During the six months ended June 30, 1999 the
Company issued 1,000,000 shares of common stock for services rendered valued
at $10,000.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his home as
a mailing address, as needed, at no expense to the Company.
NOTE 6 - ACQUISITION/RECISSION
In December, 1988, the Company entered into an acquisition agreement wherein
the Company issued 4,592,000 shares of common stock to acquire all of the
issued and outstanding shares of Dix Hills Equities Group, Inc., making it a
wholly owned subsidiary of the Company. The Company changed its name to Dix
Hills Equities Group, Inc. A Class Action Securities fraud lawsuit was
subsequently filed against the Company and its officers (post acquisition) in
October, 1991. In September of 1993 an agreement was reached to rescind the
acquisition agreement and to return the control and status of the parent
company back to its pre-acquisition officers. In May, 1994, 4,592,000 shares
of common stock issued for the acquisition were returned for cancellation
along with an additional 186,360 shares owned by former management.
F-22
<PAGE> 39
