Item 6. Managements Discussion and Analysis or Plan of Operation
General
We were originally incorporated in 1966 under the name Dixie National
Corporation. On August 13, 1996, we changed our name to Ethika Corporation, and
on April 2, 2001, we changed our name to Tradequest International, Inc.
Until the sale on October 2, 1995 of our 99.3% owned subsidiary, Dixie National
Life Insurance Company, a Mississippi corporation organized in 1965, we were an
insurance holding company primarily engaged in the life insurance business. From
1996 through 1998, through our wholly-owned subsidiaries, Compass Data Systems,
Inc., a Utah corporation acquired on August 17, 1996, Legislative Information
Systems, Inc., a Virginia corporation acquired on June 10, 1997, and Text
Retrieval Systems, Inc., a Florida corporation acquired on April 2, 1996, we
were primarily engaged in publishing electronic reference libraries that link
related data sources for convenient access by personal computers. In 1998, we
divest ourselves of our electronic publishing business unit which was comprised
of Text Retrieval Systems, Inc., Compass Data Systems, Inc., and Legislative
Information Systems, Inc., and these businesses were either sold or closed.
On April 2, 2001, we closed an Agreement and Plan of Reorganization with
Tradequest, Inc., a Utah corporation headquartered in Salt Lake City, Utah.
Tradequest was a developmental stage company engaged in the business of
providing barter exchange services for consumers and businesses. As a result of
the reorganization, we changed our name to Tradequest International, Inc. A
reverse split of our outstanding common stock on a fifty to one basis with
fractional shares being rounded up to the next multiple of fifty shares was
effective on April 12, 2001 and the shares began to trade under the new symbol
of TQST on the split basis on April 16, 2001. New management was also appointed
with Dean Casutt as the new President and Chairman. Mr. Casutt was the president
and principal shareholder of Tradequest, Inc., purportedly operating the barter
exchange business which was to be the new business of the registrant. However
due to legal proceedings against Mr. Casutt, initially unrelated to us, Mr.
Casutt never began operations of the barter exchange services as our subsidiary.
On September 19, 2002, we entered into a settlement agreement with Randall K.
Read, Dean Casutt, Dennis Neilsen and Dennis Brovarone. The settlement agreement
provided for the following:
· Dismissal of a legal action by Mr. Read against us, Mr. Casutt, Mr. Neilsen
and Mr. Brovarone;
· The rescission of the April 2001 reorganization agreement between us and
Tradequest, Inc.;
· The resignation of Mr. Casutt, Catherine Casutt and Larry Casutt from our
board of directors;
· The appointment of Mr. Read, Karleen Read and Ashley Jorgensen to our board of
directors;
· The cancellation of 4,486,425 shares of common stock issued to Dean Casutt,
Larry Casutt and Choice Holdings Inc.; and
· The issuance of 2,335,000 shares to Randall K. Read.
On August 31, 2004, we entered into a Stock Purchase Agreement with Loyola
Holdings, Inc., a Nevada corporation, Margot Hutchinson, an individual, and
Randall K. Read, an individual and our former controlling stockholder. Pursuant
to the terms of the agreement, we issued an aggregate of 40,278,490 shares of
our common stock to Loyola Holdings, Inc. and Margot Hutchinson for a purchase
price of U.S. $0.002731 per share, or an aggregate of $110,000.00. We issued
20,139,245 shares to Loyola Holdings, Inc. and 20,139,245 shares to Margot
Hutchinson.
As of the date of the agreement, we were authorized to issue 50,000,000 shares
of Common Stock of which, 5,414,954 shares were issued and outstanding. The
40,278,490 shares constitute approximately eighty percent (80%) of the issued
and outstanding shares of our common stock. Accordingly, with the closing of the
agreement, a change in control of our company had occurred.
Pursuant to the agreement, we also entered into a Release and Indemnity
Agreement with Randall K. Read whereby Mr. Read agreed to release and indemnify
us against all claims Mr. Read may have against us. Mr. Read further agreed to
indemnify us and hold us and the purchasers harmless in respect of any and all
claims, demands, actions, causes of action, damages, losses, costs, liabilities
or expenses that existed, or is based on any action or inaction that occurred,
prior to August 31, 2004. In consideration for Mr. Reads release and
indemnification, we agreed to (1) pay Mr. Read cash in the amount of
$102,500.00, (2) assign to Mr. Read all right, title, and interest and royalty
income from Text Retrieval Systems, Inc., pursuant to the sale of our former
subsidiary in February, 1998, and (3) issue 4,305,566 shares of our common stock
to Mr. Read. The royalty payment is on each subscription of Text Retrieval
Systems, Inc.s HR Comply product and will continue until such time as a total
royalty of $1,500,000 has been paid.
Also pursuant to the agreement, Ash Mascarenhas was appointed as a director and
Randall K. Read, Karleen Reed, and Ashley R. Jorgensen resigned as directors.
None of the director resignations were because of any disagreements with us on
matters relating to our operations, policies or practices. In addition, Randall
K. Read resigned from his position as an officer and Ash Mascarenhas was
appointed as our President, Chief Financial Officer and Secretary. Mr.
Mascarenhas is the controlling shareholder of Loyola Holdings, Inc.
On January 5, 2005, Margot Hutchinson, an individual, sold 20,139,245 shares of
our common stock to Lalita Janke for $50,000. The 20,139,245 shares constitute
approximately forty percent (40%) of the issued and outstanding shares of our
common stock, and accordingly, a change in control of our company had occurred.
Ms. Janke is the mother of Ash Mascarenhas, our President, Chief Financial
Officer and Secretary, and the controlling shareholder of Loyola Holdings, Inc.,
the other controlling stockholder of our company.
We had nominal revenues from operations during the fiscal years ended December
31, 2004 and December 31, 2003 from royalty income under a royalty stream from
Text Retrieval Systems, Inc. We assigned this royalty stream to Mr. Read on
August 31, 2004. The accompanying financial statements have been prepared
assuming that we will continue as a going concern.
Plan of Operations
We are currently seeking potential acquisition targets. To date, we have
reviewed and evaluated a number of business ventures for possible acquisition.
However, we do not have any commitment or understanding to enter into or become
engaged in a transaction as of the date of this filing. We continue to
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. We anticipate that our majority
stockholders, affiliates, and consultants will provide us with sufficient
capital to continue operations until the end of the year 2005, but there can be
no assurance that this expectation will be fully realized.
We currently do not have any plans for the purchase or sale of any plant or
equipment. We also do not have any plans to hire any additional employees.
Liquidity and Capital Resources
We have financed our capital requirements through debt financing and issuance of
equity securities. Our working capital deficit at December 31, 2004 was $54,846.
We had no cash as of December 31, 2004.
We used $123,281 of net cash in operating activities for the year ended December
31, 2004 compared to using $9 in the year ended December 31, 2003. Cash used in
operating activities for the year ended December 31, 2004 was mainly due to a
net loss of $125,996, gain on forgiveness of debt of $11,523, decreases in
payables to related parties of $28,598, decreases in accrued liabilities of
$9,323, and decreases in accrued compensation of $22,500. These were offset by
non-cash charges of $29,000 of contributed services by officers and directors,
$11,840 in common stock issued for services rendered, and $31,819 in increases
in accounts payable.
Net cash flows provided by financing activities were $123,259 for the year ended
December 31, 2004, compared to no net cash used in financing activities in the
year ended December 31, 2003. This increase in net cash provided by financing
activities is due to proceeds from stock issuances of $110,000 and proceeds on
notes payable of $13,259.
We currently have limited working capital with which to satisfy our cash
requirements, and we will require additional capital in order to conduct
operations. We anticipate that we will require at least $500,000 in additional
working capital in order to sustain operations for the next 12 months. This
requirement may increase substantially, depending on the nature and capital
requirements of the business opportunities we elect to pursue. In order to
obtain the necessary working capital, we intend to continue to seek private
equity financing, debt financing, or loans from our affiliates in 2005. Such
financing may not be available to us, when and if needed, on acceptable terms or
at all. In the event that we are unable to obtain such financing, management may
provide additional financing for us. We intend to retain any future earnings to
finance the expansion of its business and any necessary capital expenditures,
and for general corporate purposes.
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