SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended December 31, 2005
Commission File Number: 0-31619
MILLENNIUM QUEST, INC.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 87-0430320
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4089 Mount Olympus Way, Salt Lake City, Utah 84124
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including Area Code: (801) 278-6990
(Not applicable)
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Former name, former address and former fiscal year,
if changed since last report.
Securities Registered Under Section 12(b) of the Exchange Act: None.
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock,
Par Value $0.001
Check whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]
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 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[ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
State issuer's revenues for its most recent fiscal year. $0.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act). The Company's stock has only recently been
listed on the OTC Bulletin Board since November, 2005. There has been,
therefore, neither quotations nor a market for the Company's common stock in
the over-the-counter market.
As of April 21, 2006, the Registrant had outstanding 2,261,643 shares of its
common stock, par value $0.001.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION
PART I Page No.
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Item 1. Description of Business ........................................1
Item 2. Description of Property.........................................8
Item 3. Legal Proceedings...............................................8
Item 4. Submission or Matters to a Vote of Security Holders.............8
PART II
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Item 5. Market for Common Equity and Related Stockholder Matters........8
Item 6. Management's Discussion and Analysis or Plan of Operation.......9
Item 7. Financial Statements...........................................10
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.......................................10
Item 8A. Controls and Procedures........................................11
Item 8B. Other Information..............................................11
PART III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act..............12
Item 10. Executive Compensation.........................................13
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.....................14
Item 12. Certain Relationships and Related Transactions.................14
Item 13. Exhibits.......................................................16
Item 14. Principal Accountant Fees and Services.........................16
The information contained in this Form 10-KSB for the fiscal year ended
December 31, 2005, is as of the latest practicable date except for financial
information, which relates to the fiscal year.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Millennium Quest, Inc. (the "Company"), a Delaware corporation, is a
"blank check" company which 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
$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 an offering registered by qualification in the State of
Utah, and offered pursuant to an exemption from registration under the
Securities Act of 1933, as amended, as set forth in Rule 504 of Regulation D,
as amended (the "offering"). In the offering, the Company sold a total of
806,750 shares of common stock at a sales price of $0.20 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
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-10 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 connection with the reorganization, the Company spent several weeks
reviewing the business and operating results of Dix Hills Equities Group, Inc.
("Dix Hills"). However, due to limited resources, the Company did not seek
the assistance of experts in evaluating or assessing the business and
financial condition of Dix Hills, or in verifying the information and
representations provided by Dix Hills and its representatives. The
reorganization was entered into in reliance upon numerous representations of
management of Dix Hills, including representations that (a) that the surviving
company would undertake a significant expansion
1
plan, and (b) the surviving company had commitments from third parties to
provide substantial additional capital to fund such expansion. Many of these
representations were contained in the reorganization agreement. Following the
reorganization, former management learned that management of the successor
company, despite their representations to the contrary, were unable or
unwilling to perform as represented. As a result, no expansion plan was
implemented, and new management failed to keep the shareholders apprized of
Company activities. This resulted in the lawsuit described below. Management
has concluded that a number of measures could have been undertaken to reduce
the possibility of similar mistakes in the future, including, a more thorough
"due diligence" review of the merger candidate, and, where appropriate, the
use of experts to assist in reviewing the proposed merger candidate;
continuing participation on the board of directors of the successor company;
penalty provisions and other safeguards in the merger or acquisition agreement
in the event management failed to perform as represented, and the like. At
the time of the transaction, management had relatively little business
experience. Since 1988, management has acquired extensive experience in
reviewing and evaluating companies, and in structuring transactions, which
should reduce the likelihood of similar errors in the future.
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 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 rescission, described above, and to reactivate the business
of the Company. In February, 2006, the Company issued a total of 300,000
shares to its officers (150,000 shares each) in consideration of services and
loan accommodations on behalf of the Company.
Business - General
As indicated, the Company is seeking a business enterprise for
acquisition, reorganization or merger, 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.
2
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.
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.
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 firm with existing financial
problems, it may be subjected to risk because the financial resources of the
Company may not be adequate to eliminate or reverse the circumstances leading
to such financial problems.
3
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 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
4
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 does
not anticipate obtaining 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.
However, the Company has adopted a resolution for the purpose of addressing
potential conflicts of interest between controlling shareholders and/or
management and the other shareholders. Under this policy, management and
controlling shareholders are prohibited from entering into any transaction
which would be in their interests but be contrary to the best interests of the
minority shareholders. While this policy does not prohibit transactions which
would result in a personal benefit to management or controlling shareholders,
the policy does require management to more carefully evaluate a proposed
transaction to determine that the transaction is in the best interest of the
Company.
The officers and directors of the Company intend to conduct their
business in the best interests of all the shareholders.
Under Delaware Law, the officers and directors of a corporation have a
fiduciary duty to a corporation and the stockholders of the corporation. In
general, management of a Delaware corporation are held to two duties as
fiduciaries: (a) the duty of remaining loyal to the interests of the
corporation, and (b) the duty of exercising due care. The duty of loyalty is
the obligation of an officer or director to give primacy to the interests of
the corporation rather than personal concerns - to avoid self-dealing at the
corporation's expense. An officer and director can be held personally liable
if it is found that he breached this duty by using his corporate position to
make a personal profit or for other personal gain. The duty of care is the
obligation of an officer and director to exercise reasonable prudence - to
investigate and to deliberate adequately - in making business judgments for
the corporation or its stockholders. These duties are owed personally by the
officers and directors of the Company, and the officers and directors, or each
of them, can be personally liable for any damages to the Company resulting
from a breach of such fiduciary duties.
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
5
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.
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.
6
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.
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. The officers have
received no cash compensation, but each were issued 350,000 shares of common
stock in February, 1999, for services rendered on behalf of the Company, and
an additional 150,000 shares of common stock each in February, 2006.
Recent Developments
Over the past year, the Company and its management have initiated
efforts to locate an attractive enterprise with which the Company may acquire
or become engaged in, or with which it may merge, or reorganize. These
efforts include, but are not limited to, contacts with various professionals,
including professional advisors, securities broker-dealers, lawyers and
accountants, and other members of the financial community; and a preliminary
review of certain business opportunities, all of which have been declined by
the Company.
7
To date, as indicated above, the Company has not entered into any
transaction, and does not have any specific commitments or business
opportunities under review.
Management believes it has been unsuccessful to date in locating a
suitable business enterprise for acquisition, merger or reorganization due to
a number of factors, including the absence of a trading market for the
Company's securities; the very limited resources of the Company; a perceived
decline in "reverse acquisition" transactions in recent years; an increase in
regulatory requirements, and the attendant cost, in connection with becoming a
publicly-owned company; and general economic and market conditions.
Management is hopeful that this situation will change at such time as it
obtains a pink sheet listing and market conditions improve; however, there is
no assurance that will occur.
ITEM 2. DESCRIPTION OF PROPERTY
The Company does not own any 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.
ITEM 3. 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 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fiscal year covered by this
report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
As of November, 2005, quotations for the Company's common stock appear
on the OTC Bulletin Board ("MLQT"); however, there were no quotations of the
Company's common stock as of December 31, 2005. There is no established
trading market for the common stock. Transactions in the common stock can only
be described as sporadic. As of April 21, 2006, the common stock was at $0.30
bid, $10.00 ask. Consequently, the Company is of the opinion that any
published prices cannot be attributed to a liquid and active trading market
and, therefore, are not indicative of any meaningful market value.
All shares of common stock outstanding may be sold without restriction
under Rule 144(k) promulgated under the Securities Act of 1933, except
1,212,381 shares, which are held by officers and directors ("Control Shares").
Control Shares may be sold subject to complying with all of the terms and
conditions of Rule 144, except the one-year holding period, which has been
satisfied, with respect to all but 300,000 of the shares held by the officers
(acquired in February, 2006).
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.
8
At April 20, 2006, there were approximately 166 holders of record of the
Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
As of December 31, 2005, the Company had cash of $1,083, liabilities of
$15,338, and no other liquid assets or resources.
At present, the Company does not have adequate capital to conduct any
significant operations. The Company is engaged in the search for potential
business opportunities for acquisition or involvement with the Company, which
activities are severely limited by the Company's lack of resources.
Management believes that any business venture in which the Company becomes
involved will be made by issuing shares of the Company's authorized but
unissued common stock. It is anticipated that the Company's liquidity,
capital resources and financial statements will be significantly different
subsequent to the consummation of any such transaction.
The Company has liabilities exceeding its assets, and therefore will
have difficulty meeting its operating needs over the next twelve months,
unless the Company raises capital. If additional funds should become
necessary for operations, the Company may be required to seek funds privately
from shareholders and officers and directors. However, there is no legal
obligation on the part of the officers, directors, or principal shareholders
to advance or supply funds to the Company. Accordingly, the preservation of
the corporate entity cannot be assured.
On or about February 1, 2006, C&C Investment Partnership, a partnership
owned by Messrs. Cocorinis and Cononelos, loaned the Company the sum of
$20,000, to cover business operations and outstanding payables. The loan is
repayable, with interest at 7% per annum, on or before August 1, 2006 or the
date on which the Company enters into a merger, reorganization or acquisition
transaction, whichever occurs first. The Company does not have the funds to
repay the loan, and does not anticipate that funds will be available until
such time as the Company enters into a merger or acquisition transaction. The
board of directors of the Company consists of Messrs. Cocorinis and Cononelos,
so this transaction cannot be considered the result of arms' length
negotiations.
In addition, the Company anticipates that if it enters into an
acquisition transaction in the next twelve months, the surviving company may
need additional capital for operations and expansion efforts. The Company
will seek to enter into a business transaction with a company which either has
sufficient operating capital for a period of at least one year, or which is
capable of raising capital on terms favorable to the successor company. There
is no assurance that the Company, or its successor, will be able to raise
private capital when needed, or on favorable terms. The Company has no
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
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
9
able to effectively manage the business opportunity the Company acquires or
becomes engaged in.
The Company is dependent upon management and/or its principal
shareholders to provide sufficient working capital to preserve the integrity
of the corporate entity during this phase, and until the Company is in a
position to enter into a business transaction, of which there can be no
assurance. It is the intent of management and its principal shareholders to
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity. However, if the Company is in need of
additional capital to enter into a business opportunity, the Company may not
have sufficient capital, or be able to obtain sufficient capital from
management or its principal shareholders for such purpose.
RESULTS OF OPERATIONS
The Company had essentially no operations during the fiscal year ended
December 31, 2005.
The Company has had no revenue from continuing operations and incurred
expenses during the year ended December 31, 2005, of $11,174, in accounting,
legal and other general and administrative expenses in connection with the
Company's continuing efforts to file necessary periodic reports and to
reactivate its business operations, and in reviewing a number of possible
business opportunities during the fiscal year. For the years ended December
31, 2005 and 2004, the Company has incurred net losses of $11,160 and $9,170,
respectively.
As indicated, the Company will be dependent on management and its
principal shareholders to provide sufficient capital to preserve the integrity
of the corporate entity until the Company enters into a business enterprise.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company appear at the end of this report
beginning with the Index to Financial Statements on page 18.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 16, 2005, the Company filed a Current Report on Form 8-K
reporting a change in accountants, which is incorporated herein by reference.
On November 14, 2005, Pritchett, Siler & Hardy, P.C. ("PSH"), notified
Millennium Quest, Inc. (the "Company") of its resignation as the auditors of
the Company due to the partner rotation rules of the U.S. Securities and
Exchange Commission. On November 14, 2005, the Board of Directors, acting in
the capacity of the Audit Committee, of the Company approved a change in
auditors to audit its financial statements. The Company appointed Michael J.
Larsen, LLC ("Larsen") to serve as the Company's independent certified public
accountants, effective November 14, 2005. Larsen replaced PSH. The reports
of PSH for each of the fiscal years ending December 31, 2004 and December 31,
2003, did not contain an adverse opinion or disclaimer of opinion and were not
qualified or modified as to the audit scope or accounting principles.
However, the reports of PSH did contain an explanatory paragraph with respect
to uncertainty as to the Company's ability to continue as a going concern.
10
ITEM 8A. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Company does not maintain
a formal or written set of disclosure controls and procedures designed to
ensure that information required to be disclosed by the Company in reports
that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. The Company is in the
process of establishing disclosure controls and procedures. However, the
Company's current informal disclosure controls and procedures would not
constitute effective internal control over financial reporting as of December
31, 2005.
(b) Internal Control Over Financial Reporting. During the course of
the Company's preparation of its 2005 financial statements, including the
audit of those financial statements by the Company's independent public
accounting firm, certain material weaknesses in the Company's internal control
over financial reporting were identified. These material weaknesses were (1)
the delay in recording financial transactions, which could result in
inadvertent errors or omissions, (2) the lack of an organized system of
document review, signing, retaining copies, and orderly filing, (3) the lack
of a significant segregation of duties or review of financial transactions and
(4) the lack of documentation of controls and accounting procedures.
The material weaknesses described above are the direct result of a lack
of resources and accounting personnel. Currently, the Company's chief
executive officer has primary responsibility for receipts and disbursements,
and for the preparation of financial statements and filing of periodic reports
and other filings. Because of limited resources, the Company has been
impaired in its ability to segregate duties and to ensure consistently
complete and accurate financial reporting. Notwithstanding these limitations,
management plans to institute systems that require the involvement of both
officers in reviewing, recording, authorizing, processing and monitoring
transactions, and to engage accounting assistance and implement such
additional accounting controls and systems as may be appropriate.
(c) Changes in Internal Control Over Financial Reporting. There were
no changes in the Company's disclosure controls and procedures that occurred
during the most recent fiscal year that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting. Subsequent to the date of the evaluation, there have
been no significant changes in the Company's disclosure controls and
procedures that could significantly affect the Company's internal control over
financial reporting, other than the planned corrective actions discussed
above.
ITEM 8B. OTHER INFORMATION
None.
11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
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 51 President and Director 1994
Terry Cononelos 52 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 nine 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.
Audit Committee Financial Expert
Because we have had minimal operations, we do not have an audit
committee serving at this time. Accordingly, we do not have an audit
committee financial expert serving on an audit committee or any other
committee of the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and persons who own more than ten percent of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of our common stock. To the best knowledge of the Company, there are
no required reports that have not been filed or have been filed untimely
during the most recent fiscal year ended December 31, 2005.
12
Code of Ethics
Due to the fact that we have minimal operations, we have not adopted a
code of ethics for our principal executive and financial officers. Our board
of directors will revisit this issue in the future to determine if adoption of
a code of ethics is appropriate. In the meantime, our management intends to
promote honest and ethical conduct, full and fair disclosure in our reports to
the SEC, and compliance with applicable governmental laws and regulations.
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.
ITEM 10. 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. In February, 2006, the Company granted to its offers and
directors a total of 300,000 shares of restricted common stock, for services
rendered and other consideration on behalf of the Company over the preceding
years, as reported in a Current Report on Form 8-K dated February 17, 2006,
and incorporated herein by reference. (See "ITEM 12. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS.")
13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth as of the date 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 Percent
Name and Address Shares Of Class(1)
----------------- --------- -----------
Officers and Directors:
Dimitri Cocorinis(2)(3)
1200 South Bonneville Drive
Salt Lake City, Utah 84108 586,925 25.95
Terry Cononelos(2)(3)
4089 Mount Olympus Way
Salt Lake City, Utah 84124 625,456 27.65
All Executive officers and
Directors as a Group (2 persons) 1,212,381 53.61
Greater than 5% Beneficial Owners:
Jack Coombs(2)
2581 East 1300 South
Salt Lake City, Utah 84108 295,000 13.04
(1) All shares are held of record and beneficially.
(2) These individuals were issued a total of 950,000 shares of restricted
common stock in February, 1999, in consideration of services rendered to the
Company. (See "ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
(3) These individuals were issued a total of 300,000 shares of restricted
common stock in February, 2006, in consideration of services rendered to the
Company. (See "ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
ITEM 12. 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 rescission 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.
14
On February 17, 2006, the board of directors approved the issuance of a
total of 150,000 shares of restricted common stock each to Dimitri Cocorinis
and Terry Cononelos, the Company's officers, or a total of 300,000 shares of
restricted common stock. The issuance of this stock was authorized in
consideration of services rendered by Messrs. Cocorinis and Cononelos to the
Company over the past several months, and in facilitating a loan to the
Company through an affiliate of the officers.
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.
On or about February 1, 2006, C&C Investment Partnership, a partnership
owned by Messrs. Cocorinis and Cononelos, loaned the Company the sum of
$20,000, to cover business operations and outstanding payables. The loan is
repayable, with interest at 7% per annum, on or before August 1, 2006 or the
date on which the Company enters into a merger, reorganization or acquisition
transaction, whichever occurs first. The Company does not have the funds to
repay the loan, and does not anticipate that funds will be available until
such time as the Company enters into a merger or acquisition transaction. The
board authorized the issuance of the common stock described above, as a means
of compensating the officers for services to the Company, and for the risks
attendant to the loan described above. The board of directors of the Company
consists of Messrs. Cocorinis and Cononelos, so this transaction cannot be
considered the result of arms' length negotiations.
The shares of common stock issued in the transactions described above,
are "restricted securities" within the meaning of the Securities Act of 1933,
as amended, and were issued in reliance upon the exemption set forth under
Section 4(2) of the Securities Act of 1933, as amended, for "transactions not
involving a public offering," as well as similar state securities exemptions.
Each of the officers, who are also principal shareholders of the Company, have
acknowledged that the shares of common stock issued in this transaction are
"restricted securities" under the Securities Act of 1933, as amended; his
intention that the purchase was for investment purposes; and that the shares
cannot be resold in the absence of a registration or an applicable exemption
from registration.
Except for the transactions 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.
15
ITEM 13. EXHIBITS
Exhibits. Copies of the following documents are included as exhibits to
this report pursuant to Item 601 of Regulation S-B.
3.1* Articles of Incorporation, as amended
3.2* Bylaws
31.1** Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2** Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1** Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
* Filed as Exhibit with corresponding number on Form 10-SB dated October 19,
2001.
** Filed as exhibits to this annual report on Form 10-KSB.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fee. The aggregate fees billed for each of the last two fiscal
years for professional services rendered by the principal account for the
audit of the Company's annual financial statement and review of financial
statements included in the Company's 10-QSB reports and services normally
provided by the accountant in connection with statutory and regulatory filings
or engagements were $2,900 for fiscal year ended 2004 and $4,452 for fiscal
year ended 2005.
Audit-Related Fees. The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant
that are reasonably related to the performance of the audit or review of the
Company's financial statements that are not reported above were $0 for fiscal
year ended 2004, and $0 for fiscal year ended 2005.
Tax Fees. The aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant for tax
compliance, tax advise, and tax planning were $250 for fiscal year ended 2004
and consisted of tax return preparation and $450 for fiscal year ended 2005
and consisted of tax return preparation.
All Other Fees. The aggregate fees billed in each of the last two
fiscal years for products and services provided by the principal accountant,
other than the services reported above were $0 for fiscal year ended 2004, and
$0 for fiscal year ended 2005.
We do not have an audit committee currently serving and as a result our
board of directors performs the duties of an audit committee. Our board of
directors will evaluate and approve in advance, the scope and cost of the
engagement of an auditor before the auditor renders audit and non-audit
services. We do not rely on pre-approval policies and procedures.
16
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MILLENNIUM QUEST, INC.
Date: April 21, 2006 /s/ Dimitri Cocorinis
----------------------------------------
By: Dimitri Cocorinis
Its: President, Chief Executive Officer
and Director
Date: April 21, 2006 /s/ Terry Cononelos
----------------------------------------
By: Terry Cononelos
Its: Chief Financial Officer,
Secretary/Treasurer and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: April 21, 2006 /s/ Dimitri Cocorinis
----------------------------------------
By: Dimitri Cocorinis
Its: President, Chief Executive Officer
and Director
Date: April 21, 2006 /s/ Terry Cononelos
----------------------------------------
By: Terry Cononelos
Its: Chief Financial Officer,
Secretary/Treasurer and Director
17
MILLENNIUM QUEST, INC.
[A Development Stage Company]
CONTENTS
PAGE
- Reports of Independent Registered Public
Accounting Firms 19
- Balance Sheet, December 31, 2005 21
- Statements of Operations, for the years
ended December 31, 2005 and 2004
and for the period from the re-entering
of development stage on May 4, 1994
through December 31, 2005 22
- Statement of Stockholders' Equity (Deficit),
from the re-entering of development stage
on May 4, 1994 through December 31, 2005 23
- Statements of Cash Flows, for the years
ended December 31, 2005 and 2004
and for the period from the re-entering
of development stage on May 4, 1994
through December 31, 2005 25
- Notes to Financial Statements 26
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Millennium Quest, Inc.
I have audited the accompanying balance sheet of Millennium Quest, Inc. (a
development stage company) as of December 31, 2005, and the related statements
of operations, stockholders' equity (deficit), and cash flows for the year
ended December 31, 2005. These financial statements are the responsibility of
the company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor was I engaged to perform, an audit of its internal
control over financial reporting. My audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, I express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Millennium Quest, Inc. as of
December 31, 2005, and the results of its operations and its cash flows for
the year ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has incurred losses since re-entering
development stage, has no on-going operations, and has current liabilities in
excess of current assets, which raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are
also described in Note 5. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Michael J. Larsen LLC
Michael J. Larsen, LLC
Sandy, Utah
April 14, 2006
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
MILLENNIUM QUEST, INC.
Salt Lake City, Utah
We have audited the accompanying statements of operations, stockholders'
equity (deficit) and cash flows of Millennium Quest, Inc. [a development stage
company] for the year ended December 31, 2004 and for the period from the
re-entering of development stage on May 4, 1994 through December 31, 2004.
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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits 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 opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Millennium
Quest, Inc. [a development stage company] for the year ended December 31, 2004
and for the period from the re-entering of development stage on May 4, 1994
through December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company has incurred losses since re-entering development
stage and has no on-going operations. Further, the Company has current
liabilities in excess of current assets. These factors raise substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans in regards to these matters are also described in Note 5.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
March 18, 2005
20
MILLENNIUM QUEST, INC.
[A Development Stage Company]
BALANCE SHEET
ASSETS
December 31,
2005
------------
CURRENT ASSETS:
Cash $ 1,083
------------
Total Current Assets 1,083
------------
$ 1,083
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 15,338
------------
Total Current Liabilities 15,338
------------
STOCKHOLDERS' EQUITY (DEFICIT):
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
Retained earnings (deficit) (106,991)
Deficit accumulated during the development stage (70,314)
-------------
Total Stockholders' Equity (Deficit) (14,255)
-------------
$ 1,083
=============
The accompanying notes are an integral part of this financial statement.
21
MILLENNIUM QUEST, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From the
For the re-entering
Year Ended of Development
December 31, Stage on May 4,
-------------------------- 1994 Through
2005 2004 December 31, 2005
------------- ------------ -----------------
REVENUE $ - $ - $ -
------------- ------------ -------------
OPERATING EXPENSES:
General and administrative 11,174 9,199 79,317
------------- ------------ -------------
LOSS BEFORE OTHER INCOME (11,174) (9,199) (79,317)
------------- ------------ -------------
OTHER INCOME:
Interest and other income 14 29 9,003
------------- ------------ -------------
Total Other Income 14 29 9,003
------------- ------------ -------------
LOSS BEFORE INCOME TAXES (11,160) (9,170) (70,314)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
------------- ------------ -------------
NET LOSS $ (11,160) $ (9,170) $ (70,314)
============= ============ =============
LOSS PER COMMON SHARE $ (.01) $ (.00)
============= ============
The accompanying notes are an integral part of these financial statements.
22
MILLENNIUM QUEST, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM THE RE-ENTERING OF DEVELOPMENT STAGE ON MAY 4, 1994
THROUGH DECEMBER 31, 2005
Deficit
Accumulated
Preferred Stock Common Stock Capital in Retained During the
--------------------- ------------------------ Excess of Earnings Development Total
Shares Amount Shares Amount Par Value (Deficit) Stage Equity
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, May 4, 1994 - $ - 5,740,000 $ 5,740 $ 147,310 $(106,991) $ - $ 46,059
Cancellation of shares for
rescission of previous
acquisition agreement at
$.001 per share, May 1994 - - (4,778,360) (4,778) 4,778 - - -
Other adjustments, rounding - - 3 - - - - -
Net loss for the period ended
December 31, 1994 - - - - - - (1,120) (1,120)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1994 - - 961,643 962 152,088 (106,991) (1,120) 44,939
Net loss for the year ended
December 31, 1995 - - - - - - (5,040) (5,040)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1995 - - 961,643 962 152,088 (106,991) (6,160) 39,899
Net income for the year ended
December 31, 1996 - - - - - - 991 991
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1996 - - 961,643 962 152,088 (106,991) (5,169) 40,890
Net loss for the year ended
December 31, 1997 - - - - - - (976) (976)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1997 - - 961,643 962 152,088 (106,991) (6,145) 39,914
Net loss for the year ended
December 31, 1998 - - - - - - (761) (761)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1998 - - 961,643 962 152,088 (106,991) (6,906) 39,153
Shares issued for services
rendered at $.01 per share,
February 1999 - - 1,000,000 1,000 9,000 - - 10,000
Net loss for the year ended
December 31, 1999 - - - - - - (15,932) (15,932)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 1999 - - 1,961,643 1,962 161,088 (106,991) (22,838) 33,221
Net loss for the year ended
December 31, 2000 - - - - - - (4,209) (4,209)
[Continued]
23
MILLENNIUM QUEST, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM THE RE-ENTERING OF DEVELOPMENT STAGE ON MAY 4, 1994
THROUGH DECEMBER 31, 2005
[CONTINUED]
Deficit
Accumulated
Preferred Stock Common Stock Capital in Retained During the
--------------------- ------------------------ Excess of Earnings Development Total
Shares Amount Shares Amount Par Value (Deficit) Stage Equity
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2000 - - 1,961,643 1,962 161,088 (106,991) (27,047) 29,012
Net loss for the year ended
December 31, 2001 - - - - - - (8,434) (8,434)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2001 - - 1,961,643 1,962 161,088 (106,991) (35,481) 20,578
Net loss for the year ended
December 31, 2002 - - - - - - (7,425) (7,425)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2002 - - 1,961,643 1,962 161,088 (106,991) (42,906) 13,153
Net loss for the year ended
December 31, 2003 - - - - - - (7,078) (7,078)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2003 - - 1,961,643 1,962 161,088 (106,991) (49,984) 6,075
Net loss for the year ended
December 31, 2004 - - - - - - (9,170) (9,170)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2004 - - 1,961,643 1,962 161,088 (106,991) (59,154) (3,095)
Net loss for the year ended
December 31, 2005 - - - - - - (11,160) (11,160)
---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
BALANCE, December 31, 2005 - $ - 1,961,643 $ 1,962 $ 161,088 $(106,991) $ (70,314) $ (14,255)
========== ========== ============= ========== ========== ========== =========== ==========
The accompanying notes are an integral part of this financial statement.
24
MILLENNIUM QUEST, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
From the
Re-entering of
For the Development
Year Ended Stage on May 4,
December 31, 1994 Through
--------------------------- December 31,
2005 2004 2005
------------- ------------- --------------
Cash Flows from Operating Activities:
Net loss $ (11,160) $ (9,170) $ (70,314)
Adjustments to reconcile net loss to net cash
used by operating activities:
Non-cash expenses - - 10,000
Changes in assets and liabilities:
Increase in accounts payable 2,307 6,990 15,338
------------- ------------- --------------
Net Cash (Used) by Operating Activities (8,853) (2,180) (44,976)
------------- ------------- --------------
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 (8,853) (2,180) (44,976)
Cash at Beginning of Period 9,936 12,116 46,059
------------- ------------- --------------
Cash at End of Period $ 1,083 $ 9,936 $ 1,083
============= ============= ==============
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental schedule of Non-cash Investing and Financing Activities:
For the year ended December 31, 2005:
None
For the year ended December 31, 2004:
None
The accompanying notes are an integral part of these financial statements.
25
MILLENNIUM QUEST, INC.
[A Development Stage Company]
NOTES TO 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 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.
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.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 151, "Inventory Costs - an amendment of ARB No. 43,
Chapter 4", SFAS No. 152, "Accounting for Real Estate Time-Sharing
Transactions - an amendment of FASB Statements No. 66 and 67", SFAS No. 153,
"Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29", SFAS
No. 123 (revised 2004), "Share-Based Payment", SFAS No. 154, "Accounting
Changes and Error Corrections a replacement of APB Opinion No. 20 and FASB
Statement No. 3", SFAS No. 155, "Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements No. 133 and 140", and SFAS No.
156, "Accounting for Servicing of Financial Assets an amendment of FASB
Statement No. 140," were recently issued. SFAS No. 151, 152, 153, 123
(revised 2004), 154, 155 and 156 have no current applicability to the Company
or their effect on the financial statements would not have been significant.
26
MILLENNIUM QUEST, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
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 December 31, 2005.
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 years ended December 31, 2005 and 2004,
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 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 December 31, 2005, the Company
has available unused federal operating loss carryforwards of approximately
$156,700 which may be applied against future taxable income and which expire
in various years through 2025 and has available unused Delaware operating loss
carryforwards of approximately $11,200 which may be applied against future
taxable income and which expire in 2025. However, if certain substantial
changes should occur in the Company's ownership, there could be an annual
limitation on the amount of net operating loss carryforwards which can be
utilized.
27
MILLENNIUM QUEST, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES [Continued]
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 $24,300 and $21,800 as of December 31, 2005 and 2004,
respectively, with an offsetting valuation allowance of the same amount,
resulting in a change in the valuation allowance of approximately $2,500
during the year ended December 31, 2005.
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 re-entering development stage and has no
on-going operations. Further, the Company has current liabilities in excess
of current assets. 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.
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for the
periods presented:
For the
Year Ended
December 31,
2005 2004
------------- -------------
Loss from continuing operations available
to common shareholders (numerator) $ (11,160) $ (9,170)
------------- -------------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 1,961,643 1,961,643
------------- -------------
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.
28
MILLENNIUM QUEST, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - SUBSEQUENT EVENTS
On February 17, 2006, the board of directors approved the issuance of a total
of 150,000 shares of restricted common stock each to Dimitri Cocorinis and
Terry Cononelos, the Company's officers, or a total of 300,000 shares of
restricted common stock. The issuance of this stock was authorized in
consideration of services rendered by Messrs. Cocorinis and Cononelos to the
Company over the past several months, and in facilitating a loan to the
Company through an affiliate of the officers.
On or about February 1, 2006, C&C Investment Partnership, a partnership owned
by Messrs. Cocorinis and Cononelos, loaned the Company the sum of $20,000, to
cover business operations and outstanding payables. The loan is repayable,
with interest at 7% per annum, on or before August 1, 2006 or the date on
which the Company enters into a merger, reorganization or acquisition
transaction, whichever occurs first. The Company does not have the funds to
repay the loan, and does not anticipate that funds will be available until
such time as the Company enters into a merger or acquisition transaction. The
board authorized the issuance of the common stock described above, as a means
of compensating the officers for services to the Company, and for the risks
attendant the loan described above. The board of directors of the Company
consists of Messrs. Cocorinis and Cononelos, so this transaction cannot be
considered the result of arms' length negotiations.
29