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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the Quarterly Period Ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from ______________ to ________________
Commission File No. 0-28315
MIDLAND INTERNATIONAL CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 84-1517404
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
765 15th Sideroad
King City, Ontario, Canada L7B 1K5
(Address of Principal Executive Offices)
(905) 773-3529
(Issuer's Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 11, 2005, the number
of common stock outstanding was 30,828,000.
Transitional Small Business Disclosure format (Check one): Yes [ ] No [X]
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Midland International Corporation
(A Development Stage Company)
INDEX
PART I Financial Information
Item 1. Condensed Financial Statements (unaudited)
Condensed Balance Sheet.................................... 3
Condensed Statements of Operations......................... 4
Condensed Statements of Stockholders' Equity............... 5
Condensed Statements of Cash Flows......................... 6
Notes to Condensed Financial Statements.................... 7
Item 2. Management's Discussion and Analysis.............................. 13
Item 3. Controls and Procedures........................................... 19
PART II. Other Information
Item 1. Legal Proceedings................................................. 20
Item 2. Change in Securities and Use of Proceeds.......................... 20
Item 3. Defaults Upon Senior Securities................................... 20
Item 4. Submission of Matters to a Vote of Security Holders............... 20
Item 5. Other Information................................................. 20
Item 6. Exhibits.......................................................... 20
Signatures................................................................. 21
2
PART I. Financial Information
Item 1. Condensed Financial Statements
Midland International Corporation
(A Development Stage Company)
Condensed Balance Sheet
September 30, 2005
(UNAUDITED)
September 30, 2005
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 671
Inventory 49,500
Prepaid expenses 28,039
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Total current assets 78,210
Tools and molds, net of accumulated amortization of $0 25,000
Intangible assets (Note 5) 30,003
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TOTAL ASSETS $ 133,213
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued liabilities $ 92,695
Due to related parties (Note 4) 463,059
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Total current liabilities 555,754
Stockholders' equity (deficit)
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, No shares issued and outstanding --
Common stock, $0.001 par value, 100,000,000 shares
authorized, 30,828,000 shares issued and outstanding
at September 30, 2005 30,828
Additional paid-in capital 539,475
Accumulated deficit (992,844)
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Total stockholders' deficiency (422,541)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 133,213
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
3
Midland International Corporation
(A Development Stage Company)
Condensed Statements of Operations
(UNAUDITED)
Three Months Ended Six Months Ended May 1, 1996
September 30, September 30, (Inception)
to
September
30,
2005 2004 2005 2005 2004
---- ---- ---- ---- ----
Revenues $ -- $ -- $ -- $ -- $ --
Operating expenses:
Management fees 129,000 -- 258,000 -- 508,000
Office and general 7,376 57,752 11,617 76,506 142,407
Professional and consulting 74,704 -- 138,858 -- 335,608
Amortization -- -- -- -- 50
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Total operating expenses (211,080) 57,752 (408,475) 76,506 986,065
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Net loss before interest and income taxes (211,080) (57,752) (408,475) (76,506) (986,065)
--------------------------------------------------------------------------------------------------------------------------------
Interest expense 6,779 -- 6,779 -- 6,779
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Net loss before income taxes (217,859) (57,752) (415,254) (76,506) (992,844)
--------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes (Note 7) -- -- -- -- --
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Net loss $ (217,859) $ (57,752) $ (415,254) $ (76,506) $ (992,844)
================================================================================================================================
Weighted average number of common shares 30,512,239 24,000,000 30,249,311 24,000,000 17,489,977
outstanding - Basic and diluted
Loss per share of common stock - Basic $ (0.01) ($ 0.00) $ (0.01) ($ 0.00) ($ 0.06)
and diluted
See accompanying notes to financial statements.
4
Midland International Corporation
(A Development Stage Company)
Condensed Statement of Change in Stockholders' Deficiency
May 1, 1996 to September 30, 2005
(UNAUDITED)
Common Stock
---------------------------
Shares Amount Additional Accumulated Total
Paid-in Income Stockholders'
Capital (Deficit) Deficiency
------------ ------------ ------------ ------------ ------------
Balance, May 1, 1996 -- $ -- -- -- --
------------ ------------ ------------ ------------ ------------
Issuance of common stock 24,000,000 24,000 (23,700) -- 300
Net loss for the period from
inception to March 31, 2004 -- -- -- (19,186) (19,186)
------------ ------------ ------------ ------------ ------------
24,000,000 $ 24,000 (23,700) (19,186) (18,886)
Balance, March 31, 2004
------------ ------------ ------------ ------------ ------------
Exchange of debt for equity -- -- 30,500 -- 30,500
Shares issued as consideration for
assets purchased 3,000,000 3,000 71,503 -- 74,503
Common stock issued for services 78,000 78 59,922 -- 60,000
Issuance of common stock pursuant
to private placements 1,250,000 1,250 213,750 -- 215,000
Common stock issued for consulting
services provided 650,000 650 64,350 -- 65,000
Net loss for the year ended March
31, 2005 -- -- -- (558,404) (558,404)
------------ ------------ ------------ ------------ ------------
28,978,000 $ 28,978 416,325 (577,590) (132,287)
Balance, March 31, 2005
------------ ------------ ------------ ------------ ------------
Issuance of common stock pursuant
to cash received in prior period 900,000 900 (900) -- --
Issuance of common stock pursuant
to private placements 600,000 600 59,400 -- 60,000
Common stock issued for consulting
services provided 350,000 350 64,650 -- 65,000
Net loss for the period ended
September 30, 2005 -- -- -- (415,254) (415,524)
------------ ------------ ------------ ------------ ------------
Balance, September 30, 2005 30,828,000 $ 30,828 539,475 (992,844) (422,541)
============ ============ ============ ============ ============
See accompanying notes to financial statements.
5
Midland International Corporation
(A Development Stage Company)
Condensed Statements of Cash Flows
(UNAUDITED)
May 1,
Six Months Ended (Inception)
September 30, to
September
30,
2005 2004 2004
---- ---- ----
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Net cash used in operations
Net loss $(415,254) $ (76,506) $(992,844)
Adjustments to reconcile net loss
to net cash used in operating activities:
Amortization -- -- 50
Common stock for consulting services provided 80,000 -- 133,583
Changes in operating assets and liabilities:
Prepaid expenses (1,372) -- (1,372)
Accounts payable and accrued liabilities 22,564 23,969 92,695
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Net cash used in operating activities (314,062) (52,537) (767,888)
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Cash flows provided by financing activities:
Issuance of common shares 60,000 -- 275,000
Proceeds from related parties 206,451 45,037 493,559
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Net cash provided by financing activities: 266,451 45,037 768,559
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Increase in cash (47,611) (7,500) 671
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Cash, beginning of period 48,282 7,500 --
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Cash, end of period $ 671 $ -- $ 671
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Supplemental Cash Flow Information:
May 1,
Six Months Ended (Inception) to
September 30, September 30,
2005 2004 2005
---- ---- ----
-------------------------------------------------------------------------------------------------------
Income Taxes Paid $ -- $ -- $ --
Interest Paid $ -- $ -- $ --
Non-Cash Investing and Financing Activities
Exchange of debt for equity $ -- $ -- $ 30,500
Shares issued as consideration for assets purchased $ -- $ -- $ 74,503
Issuance of common stock for services $ -- $ -- $ 60,000
Common stock issued for consulting services provided $ 65,000 $ -- $ 130,000
See accompanying notes to financial statements.
6
Midland International Corporation
(A Development Stage Company)
Notes to the Condensed Financial Statements
September 30, 2005
(Unaudited)
Note 1 - Basis of Presentation and business operations
Basis of presentation - Going concern
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the liquidation of liabilities in the
ordinary course of business. As shown in the accompanying financial statements,
the Company had assets of $133,213, had a working capital deficit of $477,544
and a deficit of $992,844 at September 30, 2005. As a result, substantial doubt
exists about the Company's ability to continue to fund future operations using
its existing resources.
For the quarter ended September 30, 2005, the Company's operations were funded
by Wireless Age Communications, Inc. ("Wireless Age"), a shareholder of the
Company with common management. Although the amounts due to Wireless Age are
reflected as current liabilities, there are no specific repayment terms. In
order to ensure the success of the new business, the Company will have to raise
additional financing to satisfy existing liabilities and to provide the
necessary funding for future operations.
The accompanying condensed unaudited financial statements of Midland
International Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management of the Company, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended September 30, 2005 are not necessarily indicative of the results that may
be expected for the year ending March 31, 2006. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the year ended March 31, 2005.
Business operations
The Company was originally incorporated in the State of Colorado on May 1, 1996
as Grand Canyon Ventures Two, Incorporated. The Company changed its name to
Azonic Engineering Corporation on September 23, 1998. On November 12, 1999 is
was re-domiciled to the State of Nevada by merging into its wholly owned
subsidiary Azonic Corporation, a Nevada corporation. On July 21, 2005 the Azonic
Corporation changed its name to Midland International Corporation (referred to
herein as "Midland," the "Company," Registrant" and "Issuer").
Note 2 - Recent developments
Corporate name and stock symbol change
7
On July 21, 2005 the Company officially changed its name from Azonic Corporation
to Midland International Corporation. This was completed by submitting the
necessary filings with the United States Securities and Exchange Commission and
the State of Nevada. The stock symbol was changed to MLIC.OB effective July 21,
2005.
Note 3 - Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
The financial statements have, in management's opinion been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting polices summarized below.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the period. Actual results
could differ from those estimates, and such differences could be material.
Cash and cash equivalents
Cash and cash equivalents include time deposit, certificates of deposits, and
all highly liquid debt instruments with original maturities of three months or
less. The Company maintains cash and cash equivalents at financial institutions,
which periodically exceed federal insured amounts.
Tools and molds
Tools and molds are recorded at cost less accumulated depreciation. Depreciation
is provided over the estimated useful life of the assets using the following
annual rates:
Tools and molds $1 per use
Tools and molds are reviewed for impairment in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", which was adopted effective January 1, 2002.
Under SFAS No. 144, these assets are tested for recoverability whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable. An impairment is recognized for the amount, if any, which the
carrying value of the asset exceeds the fair value.
Inventory
Inventories are stated at the lower of cost (first-in, first-out) or market. The
Company evaluates the net realizable value of inventory on hand considering
deterioration, obsolescence, replacement costs and other pertinent factors, and
records adjustments as necessary. All inventories held by the Company at
September 30, 2005 were finished goods.
8
Intangible assets, goodwill and other assets
The Company follows SFAS No 142, "Goodwill and Other Intangible Assets". SFAS
No. 142 no longer permits the amortization of goodwill and indefinite-lived
intangible assets. Instead, these assets must be reviewed annually (or more
frequently under prescribed conditions) for impairment in accordance with this
statement. If the carrying amount of the reporting unit's goodwill or
indefinite-lived intangible assets exceeds the implied fair value, an impairment
loss is recognized for an amount equal to that excess. Intangible assets that do
not have indefinite lives are amortized over their useful lives. The adoption of
SFAS No. 142 did not impact the results of operations or financial position
because the Company had no goodwill or indefinite-lived intangible assets at the
date of adoption.
Research and development costs
Research and development costs, other than certain software development costs
disclosed below, are expensed as incurred.
Software development costs
Software development meeting revocability tests are capitalized, under SFAS No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," and amortized on a product-by-product basis over their
economic life, ranging from three to five years, or the ratio of current
revenues to current and anticipated revenues from such software, whichever
provides greater amortization in a particular period. The Company capitalized
$30,000 of development costs in the year ended March 31, 2005 and to date no
portion of this has been expensed as amortization. The Company periodically
reviews the carrying value of capitalized software development costs and
impairments are recognized in the results of operations when the expected future
undiscounted operating cash flow derived from the capitalized software is less
then its carrying value. No charges for impairment were required in the current
period.
Development stage
The Company has operated as a development stage enterprise since its inception
by devoting substantially all of its efforts to financial planning, raising
capital, research and development, and developing markets for its products.
Accordingly, the financial statements of the Company have been prepared in
accordance with the accounting and reporting principles prescribed by SFAS No.
7, "Accounting and Reporting by Development Stage Enterprises," issued by FASB.
The Company was substantially inactive from May 1, 1996 through September 30,
2004. Activities began on or about October 1, 2004.
Fair value of financial instruments
The carrying value of receivables, bank indebtedness, accounts payable and
accrued liabilities, income taxes payable, and customer deposits approximates
fair value because of the short maturity of these instruments. The carrying
value of long-term debt and due to and from related parties also approximates
fair value. Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risk arising from
these financial instruments.
9
Income taxes
The Company provides for income taxes using the asset and liability method as
prescribed by Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under the assets and liability method, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Additionally, a valuation allowance is established when
necessary to reduce deferred income tax assets to the amounts expected to be
realized. Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
Basic and diluted earnings (loss) per share
The Company reports basic earnings (loss) per share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings
(loss) per share is computed using the weighted average number of shares
outstanding during the year. Diluted earnings per share includes the potentially
dilutive effect of outstanding common stock options and warrants which are
convertible to common shares.
Foreign Currency Translation
The functional currency of the Company is the United States dollars. However,
some of the transactions occurred in Canadian dollars which has been translated
into US dollars, the reporting currency, in accordance with Statement of
Financial Accounting Standards No. 52 "Foreign Currency Translation". Assets and
liabilities are translated at the exchange rate at the balance sheet date and
revenue and expenses are translated at the exchange rate at the date those
elements are recognized. Any translation adjustments resulting are not included
in determining net income but are included in other comprehensive income.
Recent issued accounting standards
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS 154"). SFAS 154 replaces APB No. 20, "Accounting Changes"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements"
and establishes retrospective application as the required method for reporting a
change in accounting principle. SFAS 154 provides guidance for determining
whether retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective application is
impracticable. The reporting of a correction of an error by restating previously
issued financial statements is also addressed. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The Company does not anticipate that the adoption of
SFAS 154 will have a material impact on its consolidated balance sheets and
statements of operations, shareholders' equity, and cash flows.
Note 4 - Related Party Transactions
Periodically, the Company advances funds and pays expenses on behalf of related
parties, and funds are advanced and expenses are paid by related parties on
behalf of the Company. The notes are unsecured and contain no formal repayment
terms; however interest amounting to $6,779 has been imputed at prime + 2% on
the average balances for the current quarter. At September 30, 2005, net
payables to related parties amounted to $463,059. Related parties of the Company
include shareholders and entities under common management.
10
The Company's corporate offices have been relocated to the offices of Wireless
Age, a shareholder of the Company and a company with common officers and common
management. The Company is obligated to pay $120,000 ($20,000 per month) for
management services to Wireless Age and $120,000 ($20,000 per month) to Simmonds
Mercantile and Management Inc. ("Simmonds Mercantile") for executive level
management services. Certain shareholders of Simmonds Mercantile are also
shareholders of the Company.
During the period ended September 30, 2005, the Company paid $9,000 ($3,000 per
month) for consulting services provided by David Smardon, a shareholder and
Chairman of the Company's board of directors.
At September 30, 2005, the amounts due to related parties were:
Wireless Age Communications, Inc. including
wholly owned subsidiaries $ 370,154
Simmonds Management Mercantile Inc. 92,905
----------
$ 463,059
----------
Note 5 - Intangible Assets
At September 30, 2005, intangible assets consisted of:
--------------------------------------
Accumulated
Cost Amortization Net
Patents $ 1 $ -- $ 1
FCC License 1 -- 1
Software license 1 -- 1
Software development costs 30,000 -- 30,000
---------- ---------- ----------
$ 30,003 $ -- $ 30,003
========== ========== ==========
During October 2004 the Company acquired the above intangible assets along with
other assets in exchange for three million common shares. The value of the
intangible assets was nominal based on management's expectation of their
usefulness going forward.
Note 6 - Forward Looking Statements
This report contains certain forward-looking statements and information relating
to Midland that are based on the beliefs of its management as well as
assumptions made by and information currently available to its management. When
used in this report, the words "anticipate," "believe," "estimate," "expect,"
"intend," "plan" and similar expressions, as they relate to Midland or its
management, are intended to identify forward-looking statements. These
statements reflect management's current view of Midland concerning future events
and are subject to certain risks, uncertainties and assumptions, including among
many others: a general economic downturn; a downturn in the securities markets;
a general lack of interest for any reason in going public by means of
transactions involving public blank check companies; federal or state laws or
regulations having an adverse effect on blank check companies, Securities and
Exchange Commission regulations which affect trading in the securities of "penny
stocks," and other risks and uncertainties. Should any of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this report as
anticipated, estimated or expected. Readers should realize that Midland is in
the development stage, with virtually no assets, and that for Midland to succeed
requires that it either originate a successful business (for which it lacks the
funds) or acquire a successful business. Midland's realization of its business
aims as stated herein will depend in the near future principally on the
successful completion of its acquisition of a business, as discussed below.
11
Note 7 - Income taxes
The provision for income taxes has the following components:
2005 2004
---- ----
Current income taxes - -
Deferred income taxes - -
---------------------------------
- -
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
September 30, September 30,
2005 2004
---- ----
Deferred tax assets (liabilities)
Net operating loss carryforwards 300,000 30,000
Valuation allowance (300,000) (30,000)
--------------------------------
Net deferred tax assets (liability) - -
At September 30, 2005 the Company has net operating loss carryforwards of
$986,000. If not used, the carryforwards will expire as follows:
2024 19,000
2025 558,000
2026 409,000
--------------
986,000
==============
12
Item 2. Management's Discussion and Analysis or Plan of Operation.
Disclosure Regarding Forward Looking Statements
This quarterly report contains certain forward-looking statements that are based
on current expectations, estimates and projections about the industries in which
we operate and management's beliefs and assumptions. Forward-looking statements
are generally accompanied by words, such as "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" or similar expressions. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions, which we refer to as "future factors," which are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in such forward-looking statements. Future factors
that could cause our results to differ materially from the results discussed in
such forward-looking statements are discussed below. We undertake no obligation
to update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Background
The Company was incorporated in the State of Colorado on May 1, 1996 as Grand
Canyon Ventures Two, Incorporated. The Company changed its name to Azonic
Engineering Corporation on September 23, 1998. On November 12, 1999, it was
re-domiciled to the State of Nevada by merging into its wholly owned subsidiary
Azonic Corporation ("Company"), a Nevada corporation. On July 21, 2005 the
Company officially changed its name to Midland International Corporation
("Midland").
The Company is in the development stage in accordance with Financial Accounting
Standards Board Standard No. 7. The Company has not been operational, other than
described below, nor has earned revenue other than interest income since its
inception.
Plan of Operations
The current cash resources are insufficient to support the business over the
next 12 months and the Company will be unable to carry out any plan of business
without funding. The Company cannot predict to what extent its current lack of
liquidity and capital resources will impair the business operations whether it
will incur further operating losses. There is no assurance that the Company can
continue as a going concern without substantial funding. Management has taken
steps to begin sourcing the necessary funding to begin to execute the business
plan.
The Company estimates it will require approximately $500,000 to cover legal,
accounting, transfer, consulting, management fees and the miscellaneous costs of
being a reporting company in the next fiscal year. In addition, management
estimates that approximately $2,500,000 will be required for manufacturing of
the cell phone and deposits required with air time service providers.
The Company does not intend to pursue or fund any research or development
activities during the coming year.
The Company does not intend to add any additional part-time or full-time
employees until the activities of the Company can support it. It may become
necessary for the Company to hire a sales person or sales staff in the near
future.
13
The Company obtained certain business assets during the third quarter of fiscal
2005 associated with a low cost cellular phone. Since that point in time
management has been in the process of assembling the necessary business partners
to launch the business. The necessary business partners include manufacturing,
air time providers, marketing, financing and distribution entities. Management
believes that the process of targeting the partners is largely complete.
However, at this stage definitive terms and conditions to all necessary
partnerships are not yet complete. There can be no assurance that management
will in fact be successful in negotiating favorable business terms and
conditions.
Going Concern Qualification
The Company has incurred significant losses from operations for the quarter
ended September 30, 2005, and such losses are expected to continue. In addition,
the Company has no working capital. The foregoing raises substantial doubt about
the Company's ability to continue as a going concern. Management's plans include
seeking additional capital and/or debt financing or the possible sale of the
Company. There is no guarantee that additional capital and/or debt financing
will be available when and to the extent required, or that if available, it will
be on terms acceptable to the Company. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Results of Operations
RESULTS OF OPERATIONS FOR QUARTER ENDED SEPTEMBER 30, 2005 AS COMPARED TO THE
SIMILAR PERIOD ENDED SEPTEMBER 30, 2004
The Company had no revenues in the three month periods ended September 30, 2005
and 2004.
The Company incurred office and general expenses of $7,376 in the three month
period ended September 30, 2005 compared to $57,752 in the same period ended
September 30, 2004. Office and general expenses include travel, communications
and other similar costs associated with operating the business in its current
state of evolution.
The Company incurred management fees of $129,000 in the three month period ended
September 30, 2005 compared to $0 in the same period ended September 30, 2004.
Management fees consisted of $60,000 paid to Simmonds Mercantile and Management
Inc. (a related party due to certain common directors and stockholders) for the
services of John Simmonds, the Company's CEO, Gary Hokkanen, the Company's CFO
and Carrie Weiler, the Company's Corporate Secretary, and other non executive
personnel, $60,000 paid to Wireless Age Communications, Inc. also a related
party due to certain common officers, directors and ownership, and other
managerial level accounting and finance personnel, and $9,000 paid to David
Smardon, Chairman of the Board of Directors, for strategic consulting services.
The Company also incurred professional and consulting fees of $74,704 in the
three month period ended September 30, 2005 compared to $0 in the same period
ended September 30, 2004. Professional and consulting fees consisted of services
provided for investor relations paid with 78,000 shares of the Company's common
stock valued at $60,000, $15,000 of which has been expensed in the current
quarter, technology development costs associated with a new application of the
low-cost cell phone in the gaming marketplace, paid with 650,000 shares of the
Company's common stock, valued at $130,000 of which $25,000 has been expensed in
the current quarter, legal and accounting fees totaling $26,106 and consulting
fees of $8,598.
14
The loss on operations was ($217,859) in the three month period ended September
30, 2005 compared to ($57,752) the same period ended September 30, 2004. Loss
per share was ($0.01) in 2005 compared to ($0.00) in 2004.
Management expects the operating losses to continue until all necessary business
partners are assembled and commercially reasonable terms have been negotiated.
RESULTS OF OPERATIONS FOR SIX MONTH PERIOD ENDED SEPTEMBER 30, 2005 AS COMPARED
TO THE SIMILAR PERIOD ENDED SEPTEMBER 30, 2004
The Company had no revenues in the six month periods ended September 30, 2005
and 2004.
The Company incurred office and general expenses of $11,617 in the six month
period ended September 30, 2005 compared to $76,506 in the same period ended
September 30, 2004. Office and general expenses include travel, communications
and other similar costs associated with operating the business in its current
state of evolution.
The Company incurred management fees of $258,000 in the six month period ended
September 30, 2005 compared to $0 in the same period ended September 30, 2004.
Management fees consisted of $120,000 paid to Simmonds Mercantile and Management
Inc. (a related party due to certain common directors and stockholders) for the
services of John Simmonds, the Company's CEO, Gary Hokkanen, the Company's CFO
and Carrie Weiler, the Company's Corporate Secretary, and other non executive
personnel, $120,000 paid to Wireless Age Communications, Inc. also a related
party due to certain common officers, directors and ownership, and other
managerial level accounting and finance personnel, and $18,000 paid to David
Smardon, Chairman of the Board of Directors, for strategic consulting services.
The Company also incurred professional and consulting fees of $138,858 in the
six month period ended September 30, 2005 compared to $0 in the same period
ended September 30, 2004. Professional and consulting fees consisted of services
provided for investor relations paid with 78,000 shares of the Company's common
stock valued at $60,000, $30,000 of which has been expensed in the current six
month period, technology development costs associated with a new application of
the low-cost cell phone in the gaming marketplace, paid with 650,000 shares of
the Company's common stock, valued at $130,000 of which $50,000 has been
expensed in the current six month period.
The loss on operations was ($415,254) in the six month period ended September
30, 2005 compared to ($76,506) the same period ended September 30, 2004. Loss
per share was ($0.01) in 2005 compared to ($0.00) in 2004.
Management expects the operating losses to continue until all necessary business
partners are assembled and commercially reasonable terms have been negotiated.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of results of operations and financial condition are
based upon the consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (GAAP). The preparation of these consolidated financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. Management evaluates the estimates on an
on-going basis, including those related to bad debts, inventories, investments,
customer accounts, intangible assets, income taxes, and contingencies and
litigation. Management bases its estimates on historical experience and on
various other assumptions that they believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. Note 3 of the "Notes to Condensed Financial
Statements" includes a summary of the significant accounting policies and
methods used in the preparation of the consolidated financial statements. The
following is a brief description of the more significant accounting policies and
methods the Company uses.
15
Intangible Assets
The Company regularly reviews all of its long-lived assets, including intangible
assets, for impairment whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. Factors the Company considers
important that could trigger an impairment review include, but are not limited
to, significant underperformance relative to historical or projected future
operating results, significant changes in the manner of use of the acquired
assets or the strategy for the Company's overall business, and significant
negative industry or economic trends. When management determines that an
impairment review is necessary based upon the existence of one or more of the
above indicators of impairment, the Company measures any impairment based on a
projected discounted cash flow method using a discount rate commensurate with
the risk inherent in our current business model. Significant judgment is
required in the development of projected cash flows for these purposes including
assumptions regarding the appropriate level of aggregation of cash flows, their
term and discount rate as well as the underlying forecasts of expected future
revenue and expense. To the extent that events or circumstances cause
assumptions to change, charges may be required which could be material.
Effective October 1, 2004, the Company adopted SFAS No 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 no longer permits the amortization of goodwill
and indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under prescribed conditions) for impairment in
accordance with this statement. If the carrying amount of the reporting unit's
goodwill or indefinite-lived intangible assets exceeds the implied fair value,
an impairment loss is recognized for an amount equal to that excess. Intangible
assets that do not have indefinite lives are amortized over their useful lives.
Fair Value of Financial Instruments
The carrying value of receivables, bank indebtedness, accounts payable and
accrued liabilities income taxes payable and customer deposits approximates fair
value because of the short maturity of these instruments. The carrying value of
long-term debt, obligations under capital lease and due to and from related
parties also approximates fair value. Unless otherwise noted, it is management's
opinion that the Company is not exposed to significant interest, currency or
credit risk arising from these financial instruments.
FINANCIAL CONDITION
Total assets of the Company decreased from $194,452 at March 31, 2005 to
$133,213 at September 30, 2005. The decrease in total assets during the quarter
ended September 30, 2005 is the result of a decrease in the cash and prepaid
expenses.
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Tools and molds, net of accumulated depreciation of $0 remained the same at
$25,000 as no depreciation was taken during the quarter ended September 30,
2005. Depreciation was not taken due to the Company not manufacturing any
products during the period.
Intangible assets totaling $30,003 that were acquired during the previous year
were still carried at cost on the balance sheet at September 30, 2005. These
intangible assets include software development costs, patents, licenses and
other assets. Amortization expense was not recorded on software development
costs because the software has not yet been fully developed.
Total liabilities of the Company increased from $326,739 at March 31, 2005 to
$555,754 at September 30, 2005. The increase is the result of an increase in
accounts payables and additional borrowings from related parties. Due to related
party amounts do not have specific repayment terms and it is expected that these
amounts will be repaid as the financial position of the Company improves.
The stockholders' deficit increased from ($132,287) at March 31, 2005 to
($422,541) at September 30, 2005. The increase is attributable to a net increase
in common stock, additional paid-in capital offset by the loss for the year.
Common stock and additional paid-in capital increased by $125,000. (See
Statement of Stockholders' Equity contained in the financial statements).
The Company's accumulated deficit increased from ($577,590) at March 31, 2005 to
($992,844) at September 30, 2005 as a result of the ($415,254) loss for the six
month period.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005, the Company had a working capital deficit of $477,544.
The Company had a bank balance of $671 at September 30, 2005 arising from
expenditures on operating expenses and equity private placements completed. The
Company also expects to rely on its current inventory to assist in the
settlement of liabilities as they come due. However the Company is largely
reliant upon the ability of the Company to arrange equity private placements or
alternatively advances from related parties to pay any expenses incurred. In
addition to normal accounts payable of $92,695 the Company also owes related
companies $463,059. Its only source for capital could be sale or licensing of
the patents held by the Company, loans, or private placements of common stock.
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no significant capital
resources now at March 31, 2005.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company does not have any contractual debt obligations and or any other
commercial commitments that represent prospective cash requirements in addition
to any capital expenditure programs. The Company is obligated to pay $40,000
monthly management fee to a related party for management services and $3,000 per
month to the Chairman of the Board for strategic consulting services. The
Company shares its premises located at 765 15th Sideroad, King City, Ontario,
Canada L7B 1K5, with Wireless Age Communications, Inc. a stockholder of the
Company and a company with common officers and management. The Company pays no
rent for the premises.
17
Off-Balance Sheet Arrangements
The Company does not have any material off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on its financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
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Item 3. Controls and Procedures
We have performed an evaluation under the supervision and with the participation
of our management, including our chief executive officer and chief financial
officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended, or the Exchange Act). Based on that evaluation, our
management, including our chief executive officer and chief financial officer,
concluded that, as of September 30, 2005, our disclosure controls and procedures
were effective in ensuring that all material information required to be
disclosed in reports filed or submitted by us under the Exchange Act is made
known to them in a timely fashion.
During the quarter ended September 30, 2005, there were no changes in our
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
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PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 22, 2005 the Company issued 350,000 shares of common stock to
Phantom Fibre Corporation, valued at a total of $65,000. These shares were
issued as the final instalment for services and assets received in a previous
quarter. The issuance of the foregoing securities by the Company was a private
transaction made in reliance on Section 4(2) of the Securities Act of 1933, as
amended.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
Exhibit 31.1 Rule 13a-14(a) Certification of Chief Executive Officer.
Exhibit 31.2 Rule 13a-14(a) Certification of Chief Financial Executive.
Exhibit 32 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Reports on Form 8-K.
On July 21, 2005, the Company filed a Form 8-K with the Commission in connection
with the change of the Company's name from Azonic Corporation to Midland
International Corporation, and the change of the Company's stock symbol to MLIC.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Midland International Corporation
Date: November 14, 2005 By: /s/ John G. Simmonds
----------------------------
Name: John G. Simmonds
Title: CEO/Director
Date: November 14, 2005 By: /s/ Gary N. Hokkanen
----------------------------
Name: Gary N. Hokkanen
Title: CFO
21