UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB _____________________________________________________________________________ (Mark one) [XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 For the transition period from _____ to ____ _____________________________________________________________________________ Commission File Number: 0-31619 MILLENNIUM QUEST, INC. ----------------------- (Exact Name of small business issuer as specified in its charter) Delaware 87-0445575 ----------------------- ------------------------ (State of Incorporation) (IRS Employer ID Number) 4089 Mount Olympus Way, Salt Lake City, Utah 84124 --------------------------------------------------- (Address of principal executive offices) (801) 278-6990 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [XX] NO [ ] State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 1,961,643 shares of its common stock, par value $0.001, as of the date of this report. Transitional Small Business Format: Yes [ ] No [ X ] MILLENNIUM QUEST, INC. Form 10-QSB for the Quarter ended June 30, 2003 Table of Contents Part I - Financial Information Page Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis or Plan of Operation 10 Item 3. Controls and Procedures 11 Part II - Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 12 2 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MILLENNIUM QUEST, INC. [A Development Stage Company] UNAUDITED CONDENSED BALANCE SHEETS ASSETS June 30, December 31, 2003 2002 ------------- ------------- CURRENT ASSETS: Cash $ 12,496 $ 15,406 ------------- ------------- Total Current Assets 12,496 15,406 ------------- ------------- $ 12,496 $ 15,406 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,738 $ 2,253 ------------- ------------- Total Current Liabilities 3,738 2,253 ------------- ------------- 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 1,962 Capital in excess of par value 161,088 161,088 Retained deficit (106,991) (106,991) Deficit accumulated during the development stage (47,301) (42,906) ------------- ------------- Total Stockholders' Equity 8,758 13,153 ------------- ------------- $ 12,496 $ 15,406 ============= ============= Note: The balance sheet at December 31, 2002 was taken from the audited financial statements at that date and condensed. The accompanying notes are an integral part of these unaudited condensed financial statements. 3 MILLENNIUM QUEST, INC. [A Development Stage Company] UNAUDITED CONDENSED STATEMENTS OF OPERATIONS From Re-entering For the Three For the Six of Development Months Ended Months Ended Stage on May 4, June 30, June 30, 1994, Through --------------------------- --------------------------- June 30, 2003 2002 2003 2002 2003 ------------- ------------- ------------- ------------- ------------- REVENUE $ - $ - $ - $ - $ - OPERATING EXPENSES: General and administrative 2,257 1,745 4,416 4,219 56,246 ------------- ------------- ------------- ------------- ------------- LOSS FROM OPERATIONS (2,257) (1,745) (4,416) (4,219) (56,246) ------------- ------------- ------------- ------------- ------------- OTHER INCOME: Interest and other income 8 38 21 93 8,945 ------------- ------------- ------------- ------------- ------------- Total Other Income 8 38 21 93 8,945 ------------- ------------- ------------- ------------- ------------- LOSS BEFORE INCOME TAXES (2,249) (1,707) (4,395) (4,126) (47,301) CURRENT TAX EXPENSE - - - - - DEFERRED TAX EXPENSE - - - - - ------------- ------------- ------------- ------------- ------------- NET LOSS $ (2,249) $ (1,707) $ (4,395) $ (4,126) $ (47,301) ============= ============= ============= ============= ============= LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00) $ (.03) ============= ============= ============= ============= ============= The accompanying notes are an integral part of these unaudited condensed financial statements. 4 MILLENNIUM QUEST, INC. [A Development Stage Company] UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS From Re-entering For the Six of Development Months Ended Stage on May 4, June 30, 1994, Through ---------------------------- June 30, 2003 2002 2003 ------------- -------------- -------------- Cash Flows from Operating Activities: Net Income (loss) $ (4,395) $ (4,126) $ (47,301) Adjustments to reconcile net loss to net cash used by operating activities: Non-cash expenses - - 10,000 Changes in assets and liabilities: Increase (decrease) in accounts payable 1,485 (9,247) 3,738 ------------- -------------- -------------- Net Cash Provided (Used) by Operating Activities (2,910) (13,373) (33,563) ------------- -------------- -------------- Cash Flows from Investing Activities - - - ------------- -------------- -------------- Net Cash Provided by Investing Activities - - - ------------- -------------- -------------- Cash Flows from Financing Activities - - - ------------- -------------- -------------- Net Cash Provided by Financing Activities - - - ------------- -------------- -------------- Net Increase (Decrease) in Cash (2,910) (13,373) (33,563) Cash at Beginning of Period 15,406 30,355 46,059 ------------- -------------- -------------- Cash at End of Period $ 12,496 $ 16,982 $ 12,496 ============= ============== ============= Supplemental Disclosures of Cash Flow information: Cash paid during the period for: Interest $ - $ - $ - Income taxes $ - $ - $ - Supplemental Schedule of Noncash Investing and Financing Activities: From the re-entering of development stage on May 4, 1994 through June 30, 2003: None The accompanying notes are an integral part of these unaudited condensed financial statements. 5 MILLENNIUM QUEST, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - Millennium Quest, Inc. ("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. As a result of a class action lawsuit and settlement agreement a rescission of the acquisition was completed during 1994. During April 2000, the name of the Company was changed to Millennium Quest, Inc. The Company currently has no on-going operations but is seeking potential business opportunities. As a result of the rescission agreement the Company is considered to have re-entered into the development stage on May 4, 1994 and is currently considered a development stage company as defined in Statement of Financial Accounting Standards No. 7. 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, 2003 and 2002 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 in the United States of America 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, 2002 audited financial statements. The results of operations for the periods ended June 30, 2003 and 2002 are not necessarily indicative of the operating results for the full year. Cash and Cash Equivalents - The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. 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 4]. Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" [See Note 6]. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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. 6 MILLENNIUM QUEST, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued] Recently Enacted Accounting Standards - Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", SFAS No. 147, "Acquisitions of Certain Financial Institutions - an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", and SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", were recently issued. SFAS No. 146, 147, 148, 149 and 150 have no current applicability to the Company or their effect on the financial statements would not have been significant. NOTE 2 - CAPITAL STOCK 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, 2003 and December 31, 2002. Common Stock - On May 4, 1994, shareholders returned 4,778,360 shares of common stock for cancellation due to the rescission of an acquisition that had occurred in 1988. This resulted in a change in control of the Company and the Company entered into a new development stage. In February 1999, the Company issued 1,000,000 shares of its previously authorized but unissued common stock for services rendered valued at $10,000 (or $.01 per share). Reduction of Authorized Shares - In March 2000, the Company amended its Certificate of Incorporation to reduce its number of authorized common shares by 180,000,000 shares and its authorized preferred shares by 5,000,000. After the amendment there were 20,000,000 common and 5,000,000 preferred shares authorized. NOTE 3 - RELATED PARTY TRANSACTIONS Management Compensation - During the six months ended June 30, 2003 and 2002, 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. 7 MILLENNIUM QUEST, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 4 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS No. 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, 2003, the Company has available unused operating loss carryforwards of approximately $133,700, which may be applied against future taxable income and which expire in various years through 2023. 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 $20,100 and $19,400 as of June 30, 2003 and December 31, 2002, respectively, with an offsetting valuation allowance of the same amount, resulting in a change in the valuation allowance of approximately $700 during the six months ended June 30, 2003. NOTE 5 - GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has incurred losses since its inception and has no on-going operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise additional funds through loans or through additional sales of its common stock or through the acquisition of other companies. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. These financial statements do not include any adjustments that might result from the outcome of these uncertainties. 8 MILLENNIUM QUEST, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 6 - LOSS PER SHARE The following data show the amounts used in computing loss per share for the periods presented: From Re-entering For the Three For the Six of Development Months Ended Months Ended Stage on May 4, June 30, June 30, 1994, Through --------------------------- --------------------------- June 30, 2003 2002 2003 2002 2003 ------------- ------------- ------------- ------------- ------------- Loss from continuing operations available to common shareholders (numerator) $ (2,249) $ (1,707) $ (4,395) $ (4,126) $ (47,301) ------------- ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding used in loss per share for the period (denominator) 1,961,643 1,961,643 1,961,643 1,961,643 1,436,224 ------------- ------------- ------------- ------------- ------------- Dilutive loss per share was not presented, as the Company had no common stock equivalent shares for all periods presented that would affect the computation of diluted loss per share. 9 Item 2 - Management's Discussion and Analysis or Plan of Operation (1) Caution Regarding Forward-Looking Information and Risk Factors When used in this report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company's future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. These risks and uncertainties, many of which are beyond our control, include (i) the sufficiency of existing capital resources and the Company's ability to raise additional capital to fund cash requirements for future operations; (ii) volatility of the stock market; and (iii) general economic conditions. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, such expectations may prove to be incorrect. (2) Plan of Operation 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 or merger. 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 or 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. (3) Results of Operations For the past several 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. The Company is not aware of any trends that have or are reasonably likely to have a material impact on its liquidity, net sales, revenues, or income from continuing operations. There have been no events which have caused material changes from period to period in one or more line items of the financial statements or any seasonal aspects that have had a material effect on the financial condition or results of operation. Three and Six Months Periods Ended June 30, 2003 and 2002 The Company had no revenue from continuing operations for the three and six months periods ended June 30, 2003 and 2002. 10 During the preceding year, the Company has been inactive except for compliance with its reporting obligations and related activities, and, therefore, it has not experienced any material changes in results of operation. General and administrative expenses for the three-month periods ended June 30, 2003 and 2002 were $2,257 and $1,745, respectively. For the six-month periods ended June 30, 2003 and 2002, general and administrative expenses were $4,416 and $4,219, respectively. These expenses consisted of general corporate administration, legal and professional expenses, and accounting and auditing costs. The Company's cash is invested in short-term, liquid cash equivalents. As a result, the Company had interest income of $8 for the three-months ended June 30, 2003, as compared to interest income of $38 for the same period in 2002. Due to the foregoing factors, the Company has realized a net loss of $2,249 for the three months ended June 30, 2003, as compared to a net loss of $1,707 for the three months ended June 30, 2002. The Company has had a net loss from the reentering of development stage on May 4, 1994 through June 30, 2003, of $47,301. (4) Liquidity and Capital Resources The Company has not experienced a material change in financial condition over the past year. At June 30, 2003, the Company had working capital of approximately $8,758, as compared to $13,153, at December 31, 2002. Working capital as of both dates consists of cash less accounts payable. The Company is dependent upon management and/or significant shareholders to provide sufficient working capital to preserve the integrity of the corporate entity during this phase. It is the intent of management and significant shareholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. Although the Company's assets consist 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. Item 3 - Controls and Procedures As of the end of the period covered by this report, based on an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) each of the chief executive officer and the chief financial officer of the Company has concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC's rules and forms. There were no significant changes in the Company's internal controls or in any other factors which could significantly affect those controls subsequent to the date of the most recent evaluation of the Company's internal controls by the Company, including any corrective actions with regard to any significant deficiencies or material weaknesses. 11 PART II OTHER INFORMATION Item 1 - Legal Proceedings None. Item 2 - Changes in Securities None. Item 3 - Defaults on Senior Securities None. Item 4 - Submission of Matters to a Vote of Security Holders During the quarter ended June 30, 2003, the Company held no regularly scheduled, called or special meetings of shareholders during the reporting period, nor were any matters submitted to a vote of this Company's security holders. Item 5 - Other Information None. Item 6 - Exhibits and Reports on Form 8-K Exhibit Description 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** * Included herein pursuant to Item 601(b) 31 of Regulation SB. ** Included herein pursuant to Item 601(b) 32 of Regulation SB. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MILLENNIUM QUEST, INC. August 12, 2003 /s/ Dimitri Cocorinis ------------------------------------------ Dimitri Cocorinis, Chief Executive Officer MILLENNIUM QUEST, INC. August 12, 2003 /s/ Terry Cononelos ------------------------------------------ Terry Cononelos, Chief Financial Officer 12