<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Form 10-QSB
---------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- ------
Commission File Number 000-30264
--------------------------------
MEGACHAIN.COM, LTD.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3177042
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
34 West 8th Avenue
Vancouver, BC, CANADA V5Y 1M7
(Address of principal executive offices including zip code)
-----------------------------------
Registrant's telephone number, including area code:
(604) 873-3847
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 10, 2000.
Class Outstanding at May 10, 2000
----- -------------------------------
Common Stock, $0.001 Par Value 16,154,000
<PAGE> 2
MEGACHAIN.COM, LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD; FORMERLY
NORTHERN LIGHTS SOFTWARE, LTD.)
INDEX
<TABLE>
<CAPTION>
Number Page
- ------ ----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- 3
March 31, 2000 (unaudited) and June 30, 1999
Condensed Consolidated Statements of Operations (unaudited) -- 4
Three and Six Months Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Shareholders' Equity -- 5
March 31, 2000 (unaudited) and June 30, 1999
Condensed Consolidated Statements of Cash Flows (unaudited) -- 6
Nine Months Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II. Other Information 9
</TABLE>
2
<PAGE> 3
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 2000 June 30,1999
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 255,497 $ 713,874
Miscellaneous receivables 8,042 7,970
Prepaid expenses 1,031 18,100
-------------- -------------
264,570 739,944
PROPERTY AND EQUIPMENT - Net 44,789 11,512
INTANGIBLE ASSETS - Net 232,500 277,500
-------------- -------------
TOTAL ASSETS $ 541,859 $ 1,028,956
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Account payable and accrued expenses $ 8,136 $ 18,123
-------------- -------------
TOTAL CURRENT LIABILITIES 8,136 18,123
-------------- -------------
STOCKHOLDERS' EQUITY
PREFERRED STOCK; $.0001 par value; 5,000,000 shares
authorized; and no shares issued and outstanding - -
COMMON STOCK; $.0001 par value; 30,000,000 shares authorized;
19,654,000 shares issued; 16,154,000 shares outstanding 1,615 1,615
ADDITIONAL PAID-IN CAPITAL 2,761,186 2,663,186
ACCUMULATED DEFICIT (2,234,121) (1,653,968)
ACCUMULATED OTHER COMPREHENSIVE INCOME 5,043 -
LESS: TREASURY STOCK - 3,500,000 shares at cost - -
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 533,723 1,010,833
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 541,859 $ 1,028,956
============== =============
</TABLE>
See the accompanying notes.
-3-
<PAGE> 4
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
-------------------------------- -------------------------------
2000 1999 2000 1999
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
EXPENSES
Software development $ 57,333 $ 20,000 $ (42) $ 20,000
Selling and marketing 95,826 - 25,121 -
General and administrative expenses 441,293 42,801 103,468 42,801
-------------- ------------ ------------- ------------
LOSS FROM OPERATIONS 594,452 62,801 128,547 62,801
INTEREST INCOME 14,299 - 4,531 -
-------------- ------------ ------------- ------------
NET LOSS $ 580,153 $ 62,801 $ 124,016 $ 62,801
============== ============ ============= ============
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK $ (0.04) $ (0.01) $ (0.01) $ (0.01)
============== ============ ============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING OF
COMMON STOCK 16,154,000 8,154,000 16,154,000 8,154,000
============== ============ ============= ============
</TABLE>
See accompanying notes.
-4-
<PAGE> 5
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
--------------------- Paid-In Accumulated Comprehensive Treasury Comprehensive
Shares Amount Capital Deficit Income Stock Loss
---------- ------ ---------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1999 16,154,000 $1,615 $2,663,186 $ (1,653,968) $ - $ - $ -
Common stock options issued
for consulting expense - - 98,000 - - - -
Net loss for the nine months
ended March 31, 2000 - - - (580,153) - - (580,153)
Foreign currency translation
adjustments - - - - 5,043 - 5,043
COMPREHENSIVE LOSS - - - - - - $ (575,110)
---------- ------ ---------- ------------ ------------- ---------- -------------
BALANCE AT MARCH 31, 2000 16,154,000 $1,615 $2,761,186 $(2,234,121) $ 5,043 $ -
========== ====== ========== ============ ============= ==========
</TABLE>
See accompanying notes.
-5-
<PAGE> 6
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (580,153) $ (62,801)
Adjustments to reconcile net loss to net cash
used in operating activities
Issuance of common stock options for consulting expense 98,000 -
Depreciation and amortization 47,967 7,500
Changes in assets and liabilities
(Increase) decrease in
Miscellaneous receivables 44 (1,575)
Prepaid expenses 17,207 -
Decrease in
Accounts payable and accrued expenses (10,106) -
---------- ----------
Net cash used in operating activities (427,041) (56,876)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (35,842) -
EFFECTS OF EXCHANGE RATES ON CASH 4,506 -
---------- ----------
NET DECREASE IN CASH (458,377) (56,876)
CASH - BEGINNING OF PERIOD 713,874 -
---------- ----------
CASH - END OF PERIOD $ 255,497 $ (56,876)
========= ==========
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - INTERIM FINANCIAL INFORMATION
The financial statements of Megachain.com, Ltd. and Subsidiaries (the "Company")
as of March 31, 2000, and for the nine months and three months ended March 31,
2000, and 1999 and related footnote information are unaudited. All adjustments
(consisting only of normal recurring adjustments) have been made which, in the
opinion of management, are necessary for a fair presentation. Results of
operations for the nine months and three months ended March 31, 2000 and 1999
are not necessarily indicative of the results that may be expected for any
future period. The balance sheet at June 30, 1999 was derived from audited
financial statements.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been omitted. These financial statements should be read in conjunction with
the financial statements and notes for the year ended June 30, 1999, included in
the Form 10-SB.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its Subsidiaries. All material intercompany balances and intercompany
transactions have been eliminated.
NOTE 3 - MANAGEMENT PLANS
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The company has
developed software for the enhancement of sales on the internet and has not
received any revenues from operations. These factors raise substantial doubt
about the ability of the company to continue as a going concern.
The Company is devoting substantially all of its present efforts to establishing
its business, and although certain planned operations have commenced there have
been no significant revenues derived there from. The Company can provide any
company having an internet presence, a powerful, cost effective means of
advertising and selling their products through an innovative Internet Multi
Level marketing system which combines multi-level marketing techniques and the
use of personalized, permission based email. The Company will receive a referral
fee for each individual who registers on the advertisers' web page.
Aggressive sales and marketing efforts continue. Key elements of the strategy
are to: (1) Alert the media of the MegaChain system rollout via direct contact
and press releases, (2) Promote MegaChain on search engines and banner
advertising, (3) Identify and capture those companies most likely to benefit
from a MLM sales force and a direct email campaign.
At present the Company is expending approximately $50,000 per month in the
further development of its operations. The Company currently contracts 4
individuals on a full time basis. The Company's cash reserve is sufficient to
cover the operating expenses of the Company until September 1, 2000.
The balance sheet does not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary in the event the Company
cannot continue in existence.
-7-
<PAGE> 8
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 4 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", beginning July 1, 1998. Comprehensive income
is a more inclusive financial reporting methodology that includes disclosure of
certain financial information that historically has not been recognized in the
calculation of net income. The component of comprehensive income consists of
foreign currency translation adjustments of $5,043 and $-0- for the nine months
ended March 31, 2000 and 1999.
NOTE 5 - STOCK OPTIONS
In August 1999, the Board of Directors approved the establishment of a stock
option plan and 825,000 options were granted, expiring in five years, to
purchase 825,000 shares of common stock at an exercise price of $.75., which
represents the fair value of the common stock at date of grant. 350,000 options
were granted to non-employees and 475,000 options were granted to officers and
non-employee members of the Board of Directors. As permitted under SFAS No. 123,
the Company accounts for stock options granted to officers, employees and
non-employee members of the Board of Directors as prescribed under Accounting
Principles Board Opinion No. 25 which recognizes compensation cost based upon
the intrinsic value of the equity award. Accordingly, no compensation expense
will be recognized for such equity awards.
However, in accordance with SFAS No. 123, compensation cost associated with the
350,000 stock options granted to non-employees was accounted for based on the
fair value at the date of grant estimated using the Black-Scholes model with the
following assumptions: no dividend yield, expected volatility of 60%, and a
risk-free interest rate of 5.5%. The Black-Scholes model valued these options at
a total of $98,000, which was charged to operations for the nine months ended
March 31, 2000.
-8-
<PAGE> 9
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(a) Plan of Operation
Approximately $287,000 has been spent to date on designing the web site,
purchasing hardware platforms and software licenses, and developing the
functionality of the software suite. The Company is devoting substantially all
of its present efforts to establishing its business, and, although certain
planned operations have commenced, there have been no significant revenues
derived there from. Efforts towards the next phase, Sales and Marketing,
continue. Key elements of the sales and marketing plan are to: (i) alert the
media of the product rollout via direct contact and press releases, (ii) promote
MegaChain on search engines and banner advertising, and (iii) identify and
capture those companies most likely to benefit from Multi Level Marketing sales
force and a direct E-mail campaign. On March 31, 2000 the Company had $255,497
cash and $8136 of liabilities. At present the Company is expending approximately
$50,000 per month in the further development of its operations. The Company
currently contracts four individuals on a full time basis. The Company's cash
reserve is sufficient to finance the operating expenses until September 1, 2000.
The Company continues to seek second tier financing of approximately $2,000,000
to launch a national marketing campaign and to expand its operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best knowledge of the Officers and Directors of the Company, neither
the Company nor any of its Officers or Directors is a party to any material
legal proceeding or litigation and such persons know of no material legal
proceeding or litigation contemplated or threatened. There are no judgements
against the Company or its Officers and Directors.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE> 10
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEGACHAIN.COM, LTD.
/s/ Tom Lavin
----------------------------
Date: May 11, 2000 Tom Lavin, President
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 255,497
<SECURITIES> 0
<RECEIVABLES> 8,042
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 264,570
<PP&E> 47,756
<DEPRECIATION> 2,967
<TOTAL-ASSETS> 541,859
<CURRENT-LIABILITIES> 8,136
<BONDS> 0
0
0
<COMMON> 1,615
<OTHER-SE> 532,108
<TOTAL-LIABILITY-AND-EQUITY> 541,859
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 594,452
<OTHER-EXPENSES> (14,299)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (580,153)
<INCOME-TAX> 0
<INCOME-CONTINUING> (580,153)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (580,153)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
