UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2006
[ ] 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 in Its Charter)
AZONIC CORPORATION
(Former Name of Corporation if Changed Since Last Report)
NEVADA 84-1517404
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
765 15TH SIDEROAD
KING CITY, ONTARIO, CANADA L7B 1K5
(Address of Principal Executive Offices)
(905) 773-1987
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.001
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The issuer's revenues for the fiscal year ended March 31, 2006 were $60,000.
Based on the closing price on June 30, 2006 of $0.07 per share of common stock,
as reported by the NASD's OTC Bulletin Board, the aggregate market value of the
voting and non-voting stock held by non-affiliates of the registrant was
approximately $11,628,857.
As of July 3, 2006, the number of shares outstanding of the registrant's Common
Stock was 33,417,654 shares.
Indicate by check mark whether the Company is an accelerated filer (as defined
in Rule 12b-2 of the Act): Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference into Part III of the Annual
Report on Form 10-KSB: The Definitive Proxy Statement for the issuer's 2006
Annual Meeting of Stockholders.
Transitional Small Business Disclosure Format (Check one): Yes [_] No [X].
2
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
BACKGROUND
Midland International Corporation 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 ("Azonic Colorado") on June 23, 1998. On
November 12, 1999, it 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 Company changed its name to Midland International Corporation
(referred to herein as "Midland International," the "Company," "Registrant" and
"Issuer").
CORPORATE OFFICES
The corporate offices are located at 765 15th Sideroad, King City, Ontario,
Canada L7B 1K5 at the offices of Simmonds Mercantile and Management Inc., a
company solely owned by an officer and director of the Company. The Company pays
no rent for the shared use of this facility.
BUSINESS PLAN
Midland International had planned to market low-cost, wireless devices including
cellular phones, but due to difficulties in assembling the necessary business
partners is evaluating other business opportunities. The Company disposed of all
of the analog handsets and intellectual property associated with the analog
business plan to a third party. The third party has not been successful in
advancing the analog low-cost opportunity. The Company therefore is considering
all available options including a complete change in business direction.
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash needs to
carry out its business plan. The Company will have to seek loans or equity
placements to cover such cash needs. Lack of its existing capital will be a
significant impediment in accomplishing the goal of completing its business
plan. There is no assurance, however, that without funds it will ultimately
allow the Company to compete.
The Company's audit opinion contains "going concern" language. There is
substantial doubt about the ability of the Company to continue as a "going
concern." The Company is a startup business with non-recurring revenues, a
working capital deficit of $791,380 and an accumulated deficit of $1,472,440.
The effect of such conditions could easily be to cause the Company's bankruptcy,
even when there are no assets to liquidate in Bankruptcy.
RECENT DEVELOPMENTS
Corporate name and stock symbol change
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.
ITEM 2 - DESCRIPTION OF PROPERTY
The executive offices of the Company are located at 765 15th Sideroad, King
City, Ontario, Canada L7B 1K5 (tel. 905-773-1987, fax 905-773-1241) at the
premises of Simmonds Mercantile and Management Inc., an entity solely owned by
an officer and director of the Company. The Company does not pay rent for the
use of these facilities.
3
ITEM 3 - LEGAL PROCEEDINGS
The Company is unaware of any material pending legal proceedings to which the
Company is a party or of which any of its property is subject. The Company's
management is not aware of any threatened proceedings by any person,
organization or governmental authority.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of fiscal 2006.
4
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
(a) During the fiscal year ended March 31, 2006, the Common Shares were
quoted under symbol "MLIC" on both the Pink Sheets operated by the National
Quotation Bureau and on the OTC Bulletin Board.
2005 FISCAL YEAR (4/1/04 TO 3/31/05)
High Low
1st Quarter (4/1/04-6/30/04) * *
2nd Quarter (7/1/04-9/30/04) * *
3rd Quarter (10/1/04-12/31/04) 1.45 0.75
4th Quarter (1/1/05-3/31/05) 0.90 0.50
2006 FISCAL YEAR (4/1/05 TO 3/31/06)
High Low
1st Quarter (4/1/05-6/30/05) 0.55 0.35
2nd Quarter (7/1/05-9/30/05) 0.55 0.07
3rd Quarter (10/1/05-12/31/05) 0.51 0.05
4th Quarter (1/1/06-3/31/06) 0.15 0.06
* No reliable quotes are available due to inactivity in the Pink Sheets and the
OTC Bulletin Board. During the portion of the 2nd Quarter from July 13, 2004
until September 30, 2004, the low was .25 and the high was 1.90.
There is currently only a limited public market for Midland
International's common stock on the OTC Bulletin Board, and no assurance can be
given that such a market will develop or that a stockholder will ever be able to
liquidate his investment without considerable delay, if at all. If such a market
should develop, the price may be highly volatile. Unless and until Midland
International's common shares are quoted on the NASDAQ system or listed on a
national securities exchange, it is likely that the common shares will be
defined as "penny stocks" under the Exchange Act and SEC rules thereunder. The
Exchange Act and penny stock rules generally impose additional sales practice
and disclosure requirements upon broker-dealers who sell penny stocks to persons
other than certain "accredited investors" (generally, institutions with assets
in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 jointly with spouse) or in
transactions not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must
make a suitability determination for each purchaser and receive the purchaser's
written agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, the compensation to
be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the SEC. So long as Midland International's
common shares are considered "penny stocks", many brokers will be reluctant or
will refuse to effect transactions in Midland International's shares, and many
lending institutions will not permit the use of penny stocks as collateral for
any loans.
(b) As of March 31, 2006, there were 93 stockholders of record of the
Registrant's common stock, including 48 beneficial holders.
(c) The Registrant has neither declared nor paid any cash dividends on its
common stock, and it is not anticipated that any such dividend will be declared
or paid in the foreseeable future.
(d) There are currently no securities authorized for issuance by the
Company under any equity compensation plans.
5
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Annual Report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve risks and uncertainties. These forward-looking
statements relate to, among other things, expectations of the business
environment in which the Company operates, projections of future performance,
perceived opportunities in the market and statements regarding the Company's
goals. The Company's actual results, performance, or achievements expressed or
implied in such forward-looking statements may differ.
RESULTS OF OPERATION
Overview
The Company had planned to market low-cost, wireless devices including cellular
phones, but due to difficulties in assembling the necessary business partners,
to be successful, is evaluating other business opportunities. During fiscal
2006, the Company disposed of all of the analog handsets and intellectual
property associated with the analog business plan to a distributor. The
distributor has not been successful in advancing the analog low-cost
opportunity. The Company therefore is considering all available options
including a complete change in business direction.
TWELVE MONTH PERIOD ENDED MARCH 31, 2006 AND 2005
The Company had revenues of $60,000 in the twelve month period ended March 31,
2006 and no revenues in the same twelve month period for 2005. The Company sold
the entire analog cell phone handset inventory in exchange for a $60,000
non-interest bearing promissory note due June 21, 2006. The gross profit earned
on the sale was $10,500. The Company also sold all capital assets and
intellectual property associated with the analog cell phone handset business for
$15,000 cash representing a loss on disposition of $10,003. The reason for the
sale was that the analog portion of the business was not central to the
development of the business plan.
The Company incurred office and general expenses of $112,438 in the twelve month
period ended March 31, 2006 compared to $111,654 in the same period ended March
31, 2005. 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 $456,000 in the twelve month period
ended March 31, 2006 compared to $268,000 in the same period ended March 31,
2005. Management fees consisted of $240,000 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 and Carrie
Weiler, the Company's Corporate Secretary, and other non executive personnel,
$180,000 paid to Wireless Age Communications, Inc. also a related party due to
certain common officers, directors and ownership, for the services of Gary
Hokkanen, the Company's CFO and other managerial level accounting and finance
personnel, and $36,000 paid to David Smardon, Chairman of the Board of
Directors, for strategic consulting services.
The Company also incurred professional and consulting fees of $288,370 in the
twelve month period ended March 31, 2006 compared to $178,750 in the same period
ended March 31, 2005. 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, $40,000 of which has been expensed in the current
twelve month period, technology development costs associated with a new
application of the low-cost cell phone in the gaming marketplace, paid with
1,000,000 shares of the Company's common stock, valued at $130,000 of which
$66,667 has been expensed in the current twelve month period.
The loss on operations was ($894,850) in the twelve month period ended March 31,
2006 compared to ($558,404) in the same period ended March 31, 2005. Loss per
share was ($0.03) in 2006 compared to ($0.02) in 2005.
Management expects the operating losses to continue until all necessary business
partners are assembled and commercially reasonable terms have been negotiated.
6
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of results of operations and financial condition are
based upon the financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP).
The preparation of these 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 2 of
the "Notes to Financial Statements" includes a summary of the significant
accounting policies and methods used in the preparation of the financial
statements. The following is a brief description of the more significant
accounting policies and methods the Company uses.
Intangibles, Goodwill and Other Assets
The Company regularly reviews all of its long-lived assets, including goodwill
and other 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, 2005, 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 $0 at
March 31, 2006. The decrease in total assets during the year ended March 31,
2006 is primarily the result of the disposition of all assets.
Capital assets, net of accumulated depreciation decreased from $25,000 at March
31, 2005 to $0 at March 31, 2006. The decrease is the result of the disposition
of all capital assets.
7
Intangible assets totaling $30,003 acquired during the previous year were
disposed of leaving a balance of $0 on the balance sheet at March 31, 2006.
Total liabilities of the Company increased from $326,739 at March 31, 2005 to
$791,380 at March 31, 2006. The increase is the result of 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' deficiency increased from ($132,287) at March 31, 2005 to
($791,380) at March 31, 2006. The increase is attributable to a net increase in
common stock, additional paid-in capital and other comprehensive income offset
by the loss for the year. Common stock, common stock subscribed and additional
paid-in capital increased by $235,757. (See Statement of Stockholders' Equity
contained in the financial statements).
The Company's accumulated deficit increased from ($577,590) at March 31, 2005 to
($1,472,440) at March 31, 2006 as a result of the ($894,850) loss for the year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2006, the Company had a working capital deficit of $791,380. The
Company had no cash balances at March 31, 2006 and 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 $108,102 the Company also owes related
companies $683,174. Its only source for capital could be 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, 2006.
Plan of Operations and Need for Additional Funding
The current cash resources are insufficient support the business over the next
12 months and the Company is 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.
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.
The business plan of the Company does call on the Company to not make any large
capital expenditures in the coming year.
Going concern qualification: The Company has incurred significant losses from
operations for the year ended March 31, 2006, and such losses are expected to
continue. In addition, the Company has a working capital deficit of $791,380 and
an accumulated deficit of $1,472,440. 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. 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 financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
8
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 $20,000
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 Simmonds Mercantile and Management Inc. an entity owned by
a director, officer and stockholder of the Company. The Company pays no rent for
the premises.
ITEM 7 - FINANCIAL STATEMENTS
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders
Midland International Corporation
(Formerly Azonic Corporation)
(A Development Stage Company)
Nevada
We have audited the accompanying balance sheets of Midland International
Corporation (a development stage company) as of March 31, 2006, and the related
statements of operations, changes in stockholders' deficiency, and cash flows
for each of the two years in the period ended March 31, 2006. 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. The financial statements of Midland International Corporation (a
development stage company) for the period from May 1, 1996 (Date of Inception)
to March 31, 2004 were audited by other auditors whose report dated May 3, 2004,
expressed an unqualified opinion on those statements.
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 also 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 financial position of the Company as of March 31,
2006, and the results of its operations and its cash flows for each of the two
years in the period ended March 31, 2006, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming Midland
International Corporation will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has incurred losses that have
resulted in an accumulated deficit. This condition raises substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding this matter are described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Rotenberg & Co., LLP
Rotenberg & Co., LLP
Rochester, New York
July 10, 2006
F-1
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
March 31, 2006
(Stated in US dollars)
--------------------------------------------------------------------------------
ASSETS
2006
----
TOTAL ASSETS $ --
===========
LIABILITIES
CURRENT LIABILITIES
Bank overdraft $ 104
Accounts payable and accrued liabilities 108,102
Due to related parties (Note 4) 683,174
-----------
TOTAL CURRENT LIABILITIES 791,380
-----------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value; 5,000,000
shares authorized, no shares issued and outstanding --
Common stock, $.001 par value; 100,000,000 shares
authorized, 33,228,000 shares issued and outstanding (Note 5) 33,228
Additional paid-in capital 647,832
Accumulated deficit (1,472,440)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (791,380)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ --
===========
The accompanying notes are an integral part of these financial statements
F-2
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the years ended March 31, 2006 and 2005 and the period
from May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
Year May 1, 1996
Year Ended Ended (Inception) to
March 31, March 31, March 31,
2006 2005 2006
------------ ------------ ------------
REVENUES $ 60,000 $ -- $ 60,000
COST OF SALES 49,500 -- 49,500
------------ ------------ ------------
GROSS PROFIT 10,500 -- 10,500
SELLING AND ADMINISTRATIVE COSTS
Management fees 456,000 268,000 724,000
Office and general 112,438 111,654 243,228
Professional and consulting fees 288,370 178,750 467,120
Amortization -- -- 50
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 856,808 558,404 1,434,398
------------ ------------ ------------
NET LOSS FROM OPERATIONS (846,308) (558,404) (1,423,898)
Other expenses:
Interest 8,539 -- 8,539
Realized loss on disposal of assets 10,003 -- 10,003
Write off of intangible assets 30,000 -- 30,000
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (894,850) (558,404) (1,472,440)
Provision for income taxes (Note 3) -- -- --
------------ ------------ ------------
NET LOSS $ (894,850) $ (558,404) $ (1,472,440)
============ ============ ============
Loss per share of common stock - Basic and
Diluted $ (0.03) $ (0.02) $ (0.08)
============ ============ ============
Weighted average number of common
shares outstanding - Basic and Diluted 31,027,176 25,081,967 18,200,950
============ ============ ============
The accompanying notes are an integral part of these financial statements
F-3
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Changes in Stockholders' Deficiency
Period from May 1, 1996 to March 31, 2005
Common stock
----------------------------
Par Additional Accumulated
Value Paid - In (Deficit) from
Shares Amount Capital Inception Total
---------- ---------- ---------- ---------- ----------
BALANCE, MAY 1, 1996 -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
Issuance of common stock 24,000,000 24,000 (23,700) -- 300
Net loss from inception to
March 31, 2003 -- -- -- (300) (300)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2003 24,000,000 $ 24,000 $ (23,700) $ (300) $ --
Net loss for year ended March
31, 2004 -- -- -- (18,886) (18,886)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2004 24,000,000 $ 24,000 $ (23,700) $ (19,186) $ (18,886)
Exchange of debt for equity -- -- 30,500 -- 30,500
Issuance of common stock to
purchase assets 3,000,000 3,000 71,503 -- 74,503
Issuance of common stock for
consulting 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 year ended March
31, 2005 -- -- -- (558,404) (558,404)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2005 28,978,000 $ 28,978 $ 416,325 $ (577,590) $ (132,287)
========== ========== ========== ========== ==========
F-4
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Changes in Stockholders' Deficiency
For the year ended March 31, 2006
Common stock
------------------------------
Par Additional Accumulated
Value Paid - In (Deficit) from
Shares Amount Capital Inception Total
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 2005 28,978,000 $ 28,978 $ 416,325 $ (577,590) $ (132,287)
Issuance of common stock for
cash received prior to March
31, 2006 900,000 900 (900) -- --
Issuance of common stock
pursuant to private placements 600,000 600 59,400 -- 60,000
Issuance of common stock for
consulting services provided 350,000 350 64,650 -- 65,000
Issuance of common stock
pursuant to private placements 2,400,000 2,400 100,297 -- 102,697
Cash received for shares issued
after year end -- -- 8,060 -- 8,060
Net loss for year ended March
31, 2006 -- -- -- (894,850) (894,850)
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 2006 33,228,000 $ 33,228 $ 647,832 $(1,472,440) $ (791,380)
=========== =========== =========== =========== ===========
F-5
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW For the
years ended March 31, 2006 and 2005 and from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR MAY 1, 1996
ENDED ENDED (INCEPTION)
MARCH 31, MARCH 31, TO MARCH 31,
2006 2005 2006
----------- ----------- -----------
OPERATING ACTIVITIES
Net (loss) (894,850) (558,404) $(1,472,440)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET
CASH(USED) BY OPERATING ACTIVITIES:
Amortization -- -- 50
Write down of intangible assets 30,000 -- 30,000
Bad debt expense 60,000 -- 60,000
Loss on disposal of capital assets 10,003 -- 10,003
Issuance of common stock for services 106,667 53,333 160,250
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (increase) in accounts receivable (60,000) -- (60,000)
Decrease (increase) in inventory 49,500 -- 49,500
Increase (decrease) in accounts payable 37,971 68,847 108,102
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (660,709) (436,224) (1,114,535)
----------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from disposal of capital assets 15,000 -- 15,000
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 15,000 -- 15,000
----------- ----------- -----------
FINANCING ACTIVITIES
Increase in bank indebtedness 104 -- 104
Proceeds from private placements 170,757 215,000 385,757
Increase in due to related parties 426,566 262,006 713,674
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 597,427 477,006 1,099,535
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (48,282) 40,782 --
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 48,282 7,500 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ -- 48,282 $ --
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
F-6
MIDLAND INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW For the
years ended March 31, 2006 and 2005 and from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
FOR THE YEAR FOR THE YEAR MAY 1, 1996
ENDED ENDED (INCEPTION)
MARCH 31, MARCH 31, TO MARCH 31,
2006 2005 2006
------ -------- --------
Cash paid during the year for:
Interest -- -- $ --
Income taxes -- -- --
------ -------- --------
Non-cash investing activities:
Stock issued in exchange for consulting services -- 60,000 $ 60,000
Stock issued in exchange for asset acquisition -- 74,503 74,503
Stock issued in exchange for technology development -- 65,000 65,000
------ -------- --------
Total non-cash investing activities -- 199,503 $199,503
The accompanying notes are an integral part of these financial statements
F-7
MIDLAND INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2006 and 2005 and the period from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
GOING CONCERN BASIS OF PRESENTATION
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 has no assets, has a working capital deficit of $791,380 and an
accumulated deficit of $1,472,440 at March 31, 2006. As a result, substantial
doubt exists about the Company's ability to continue to fund future operations
using its existing resources.
For the year ended March 31, 2006, the Company's operations were partially
funded by related parties and partially through the issuance of equity private
placements. 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.
DESCRIPTION OF BUSINESS
The financial statements presented are those of Midland International
Corporation (the "Company"). The Company is a development stage company since
planned business operations have not commenced. As of January 1, 2005, the
Company adopted a new business plan. The Company's plan is to become a retailer
of a line of low-cost "pay as you go" cellular phones. The Company is also
evaluating other business opportunities.
The Company was initially 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 June 23, 1998. On November 12, 1999, it was
re-domiciled in the State of Nevada by merging into its wholly owned subsidiary,
Midland International Corporation, which now is the name of the Company. As a
result of the merger, the Company has changed the par value of its common stock
to $.001. The accompanying financial statements have been restated to reflect
this change.
NOTE 2 - 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 policies 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
MIDLAND INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2006 and 2005 and the period from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
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 may exceed federal insured amounts.
SOFTWARE DEVELOPMENT COSTS
Software development costs 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 2005 and $0 of development costs in 2006. The
Company amortized $0 of development costs in 2006 and 2005. 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 than its carrying value. It was determined by the management of
the Company that the software development costs no longer had any value and were
written off at March 31, 2006.
RESEARCH AND DEVELOPMENT
The Company did not engage in any material research and development activities
during the past two years.
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.
The Company had revenues of $60,000 in the twelve month period ended March 31,
2006. The Company sold the entire analog cell phone handset inventory to a
single customer in exchange for a $60,000 non-interest bearing promissory note
due June 21, 2006. The gross profit earned on the sale was $10,500. The Company
also sold all capital assets and intellectual property associated with the
analog cell phone handset business to the same customer for $15,000 cash
resulting in the loss on disposal of capital assets of $10,003. The Company
remains a development stage enterprise as this stream of revenue is
non-recurring.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts payable and accrued liabilities approximates fair
value because of the short maturity of these instruments. The carrying value of
notes payable and due to 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.
F-9
MIDLAND INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2006 and 2005 and the period from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
INCOME TAXES
The Company provides for income taxes using the asset and liability method as
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amount 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.
LOSS PER COMMON SHARE
The Company reports loss per share in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic 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. Diluted loss per share is not presented as results would be
"anti-dilutive".
RECENTLY 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 3 - INCOME TAXES
The provision for income taxes has the following components.
2006 2005
---- ----
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:
2006 2005
---- ----
Deferred tax assets (liabilities)
Net operating loss carryforwards 530,000 202,000
Valuation allowance (530,000) (202,000)
--------------------------
Net deferred tax assets (liability) -- --
F-10
MIDLAND INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2006 and 2005 and the period from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
At March 31, 2006 the Company has net operating loss carryforwards of
$1,473,000. If not used, the carryforwards will expire as follows:
2024 19,000
2025 558,000
2026 896,000
--------------
1,473,000
==============
NOTE 4 - RELATED PARTY TRANSACTIONS
Periodically expenses of the Company are paid by related parties on behalf of
the Company. These transactions result in non-interest bearing payables to
related parties with no specific terms of repayment. At March 31, 2006, payables
to related parties amounted to $683,174. Related parties of the Company include
entities under common management.
The Company was obligated to pay $20,000 per month to December 2005 for
management services of certain executives to Wireless Age Communications Inc.
("Wireless Age"). On December 31, 2005, the Company terminated the management
services agreement and provided Wireless Age an 8% promissory note in the amount
of $424,734, pursuant to which the Company agreed to repay the note over a one
year period with an initial payment of $100,000 on March 15, 2006, followed by
three payments of $108,244.66 on June 30, 2006, September 30, 2006 and December
31, 2006. The Company also agreed to enter into a General Security Agreement
providing a first charge security position on all of the assets of the Company
to Wireless Age. According to the terms of the promissory note, Wireless Age has
the option, but not the obligation, to convert the outstanding principal and
interest payment due on each of June 30, 2006, September 30, 2006 and December
31, 2006 into shares of the Company's common stock at $0.035 per share. At March
31, 2006, the Company was in default under the terms of the promissory note. The
Company received and additional cash advance of $4,380 since December and
interest of $8,539 was accrued on the note based on the terms of the promissory
note.
The Company is obligated to pay Simmonds Mercantile and Management Inc.
("Simmonds Mercantile") $20,000 per month for certain executive level management
services. The Company's head office was also located at the offices of Simmonds
Mercantile. Simmonds Mercantile is solely owned by the Company's CEO John
Simmonds. At March 31, 2006, Simmonds Mercantile was owed $145,217 for unpaid
management services. In addition, King Stables an entity also owned by John
Simmonds was owed $64,304 by the Company.
Pursuant to the terms of consulting services agreement with David Smardon, a
shareholder and director the Company, the Company is obligated to pay $3,000 per
month for his strategic consulting services. At March 31, 2006 the Company owed
$36,000 for consulting services provided.
At March 31, 2006, the amounts due to related parties were:
Wireless Age Communications, Inc. Secured
Promissory Note $437,653
Simmonds Mercantile and related entities 209,521
David Smardon 36,000
--------
$683,174
--------
F-11
MIDLAND INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2006 and 2005 and the period from
May 1, 1996 (Date of Inception) to March 31, 2006
(Stated in US Dollars)
--------------------------------------------------------------------------------
NOTE 5 - SHAREHOLDERS' EQUITY
PREFERRED STOCK
No shares of the Company's preferred stock have been issued as of March 31,
2006. Dividends, voting rights and other terms, rights and preferences have not
been designated. The Company's board of directors may establish these provisions
at a date in the future.
COMMON STOCK
The Company has the authority to issue 100,000,000 shares of common stock, par
value $.001 per share. The holders of shares of common stock are entitled to
receive notice of, attend and vote at all meetings of the stockholders. Each
share of common stock carries one vote at such meetings.
As of March 31, 2006, there were 33,228,000 shares of common stock issued and
outstanding.
During fiscal 2006, the Company issued 900,000 shares of its common stock in
exchange for cash of $90,000 ($0.10 per share) received in the previous period.
Also during 2006, the Company raised $60,000 by issuing 600,000 shares of its
common stock for $0.10 per share.
Also during 2006, the Company issued the remaining 350,000 shares of its common
stock valued at $65,000 in accordance with the contract to development of
certain technology and the 12 month service contract entered into during 2005.
At March 31, 2006, $100,000 of the 12 month support and service contract has
been expensed and $0 remained.
Also during 2006, the Company raised $102,697 by issuing 2,400,000 shares of its
common stock for $0.0425 per share.
During March the Company received $8,060 under a private placement of 189,654
shares of its common stock ($0.0425 per share). Such share certificates were not
issued as at March 31, 2006 and accordingly the amount was recorded as
additional paid in capital.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has no lease commitments.
Consulting and Management Services Agreements:
On October 1, 2004, the Company entered into a 2 year consulting agreement with
David Smardon, a director and shareholder the Company, pursuant to which he
would provide consulting services to the Company for a monthly fee of $3,000. On
October 1, 2004, the Company also entered into a 2 year management services
agreement with Wireless Age under which general management, financial accounting
and technical management services would be provided to the Company by Wireless
Age for a monthly fee of $20,000 per month. This contract was terminated by
Wireless Age on December 31, 2005. Lastly, (also on October 1, 2004), the
Company contracted with Simmonds Mercantile for executive management services to
be provided to the Company over a 2 year term for a monthly fee of $20,000 per
month.
F-12
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective on May 22, 2003, the Company engaged Larry O'Donnell, CPA, PC to audit
the Company's financial statements. Prior to its engagement, the Company had not
consulted with Larry O'Donnell, CPA, PC with respect to: (i) the application of
accounting principles to a specified transaction, either completed or proposed;
(ii) the type of audit opinion that might be rendered on the Company's financial
statements; or (iii) any matter that was either the subject or disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Item 304(a)(1)(iv) of Regulation S-K.
Effective May 9, 2005, the Company dismissed Larry O'Donnell, CPA, PC as auditor
of record.
Effective on May 9, 2005, the Company engaged Rotenberg & Co. LLP to audit the
Company's financial statements. Prior to its engagement, the Company had not
consulted with Rotenberg & Co LLP with respect to: (i) the application of
accounting principles to a specified transaction, either completed or proposed;
(ii) the type of audit opinion that might be rendered on the Company's financial
statements; or (iii) any matter that was either the subject or disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Item 304(a)(1)(iv) of Regulation S-K.
The Board of Directors of the Company approved the change in accountants
described herein.
ITEM 8A - CONTROLS AND PROCEDURES 3.
The Company maintains a system of disclosure controls and procedures that is
designed to provide reasonable assurance that information, which is required to
be disclosed, is accumulated and communicated to management in a timely manner.
Management has concluded that the disclosure controls and procedures are
effective at the reasonable assurance level as of the date of this report and
that the system is operating in an effective way to ensure appropriate and
timely disclosure.
The term "disclosure controls and procedures" means controls and other
procedures of this Company that are designed to ensure that information required
to be disclosed by this Company in the reports that it files or submits under
the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a et seq.) (the
"Act") is recorded, processed, summarized and reported, within the time periods
specified in the U.S. Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by this
Company in the reports that it files or submits under the Act is accumulated and
communicated to the Company's management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
10
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Company's current directors are John G. Simmonds, Kenneth Adelberg, David
Smardon, Gregory Laborde, Ralph V. Hadley III and Italo Cerra. Their terms
expire upon the election and qualification of their successors.
The following table sets forth the names, ages and positions of the directors of
the Company:
NAME AGE POSITION
---- --- --------
David Smardon 52 Chairman of the Board
John G. Simmonds 55 Director
Kenneth Adelberg 53 Director
Ralph V. Hadley, III 63 Director
Gregory Laborde 41 Director
Italo Cerra 53 Director
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS
DAVID SMARDON, CHAIRMAN OF THE BOARD. Mr. Smardon, is a seasoned executive with
a background in establishing, growing, and financing technology-based companies.
Mr. Smardon is currently CEO and Managing Partner of Nibiru Capital Management
Limited, which owns 4,460,000 shares of the Registrant's common stock. Since
1991, Mr. Smardon has been involved in several turnarounds and re-financings of
Canadian technology companies where he has raised additional capital and
assisted in operational restructuring. In 1997, he was chosen to spearhead the
establishment of a government sponsored Internet portal called Innovator's
Alliance. As interim CEO, Mr. Smardon attracted over $2 million in corporate
sponsors for the non-profit organization and helped recruit a membership base of
125 CEOs before turning the reigns over to a full-time Managing Director.
Through the 1990s, Mr. Smardon established and expanded the Nibiru group of
companies including Nibiru Tactical Corporation, Nibiru Investments and Nibiru
Capital Management Limited. These entities provide investment capital and
hands-on operational management to high growth technology companies. In addition
they provide advisory, due diligence and investment syndication services to the
institutional investment communities. In 1993, he orchestrated the creation and
became CEO of Commcorp Technologies Inc., a private spin-off company, providing
technology outsourcing, servicing the financial and banking communities. After
building a profitable enterprise with over $9 million in annual revenues, the
company was sold to a strategic customer. From 1986 through 1990 Mr. Smardon
headed up the Canadian arm of Apple Computer's venture capital group, as Vice
President, Strategic Investments, where he invested in 35 Canadian companies,
including some of Canada's premier technology start-ups. In 1984, Mr. Smardon
began a career as an entrepreneur establishing and becoming President of
Learning Connections, an educational software company. He built the company to
$7 million in annual revenues before selling it to a strategic corporate
partner. Mr. Smardon has been an active member of the following associations:
Canadian Advanced Technology Alliance, Turnaround Management Association, the
Toronto Venture Group, Golden Horseshoe Venture Forum and Canadian Venture
Capital Association. Mr. Smardon was integral in the establishment and
management of the Renaissance Community Investments Program, a not-for-profit
investment agency.. Mr. Smardon currently sits on the boards of a number of
private technology companies including Companion Technologies, Objective Edge
Inc., Astrokeys Inc., Nibiru Capital Management Ltd., Nibiru Tactical Corp. and
Nibiru Investments Inc. Mr. Smardon graduated from the University of Toronto, in
1976 with a Bachelor of Arts degree in Economics.
JOHN G. SIMMONDS, DIRECTOR AND CEO Mr. Simmonds has served as a Director and
Chief Executive Officer of the Company since September 2004. Mr. Simmonds is
Chairman of the Board and Director of TrackPower, Inc. He served as Chief
Executive Officer of TrackPower, Inc. from January 29, 1998 to May 1, 2005,
concurrent with the appointment of Mr. Tracy as CEO. Mr. Simmonds was the CEO of
Wireless Age Communications, Inc. for the period March 2003 to October 2005. Mr.
Simmonds also served as Chairman of Wireless Age Communications, Inc. until
April 2006. Mr. Simmonds has been CEO of Newlook Industries Corp since September
11
21, 2005 and K-Tronic International Corporation since June 13, 2006. In
addition, Mr. Simmonds has served as a director and chief operating officer of
Eiger Technology Inc. since September 21, 2005. For more than the past five
years, Mr. Simmonds has been involved in the management and ownership of King
Stables, a horse breeding operation in Canada. Mr. Simmonds has also served as
Chairman of the Board of Directors of Phantom Fiber Corporation, for the period
October, 1999 to June 2004 and as Chief Executive Officer for the period
February, 2002 to June, 2004.
KENNETH J. ADELBERG, DIRECTOR. Mr. Adelberg has been a Director of the Company
since January 2005. Mr. Adelberg was also a director of Wireless Age
Communications, Inc. for the period March 2003 to April 2006 and has been a
director of TrackPower, Inc. since April 1996. Mr. Adelberg's principal
occupation is President and Chief Executive Officer of HiFi House Group of
Companies, a privately-held company based in Broomall, Pennsylvania, since 1978.
Mr. Adelberg was a founding stockholder of US Wats, Inc., a publicly-traded
company specializing in business telecommunications services, located in Bala
Cynwyd, Pennsylvania, which was established in 1989. Mr. Adelberg was also a
founding stockholder and director of Republic First Bank Corp, from 1989 to
2005, First Bank of Delaware from 1998 to 2005 and GSI Commerce, Inc. from 1995
to 2005, all publicly traded (NASDAQ) corporations, Mr. Adelberg serves as a
member of the Board of Directors' Audit and Compensation Committees of the
Company.
RALPH V. (TERRY) HADLEY, III, DIRECTOR. Mr. Hadley is currently and has been the
Managing Partner of Swan & Hadley, P.A., a law firm based in Winter Park,
Florida, since prior to 1994. Mr. Hadley is the nominee of the Filippo Guani
Revocable Trust, which is entitled to nominate one member of the Registrant's
Board of Directors pursuant to an Asset Sale Agreement with the Registrant dated
August 26, 2004. The Trust currently owns 3.000,000 shares of the Regiatrant's
common stock and is eligible to receive up to an additional 1,500,000 shares of
the Registrant's common stock and an earn out payment of up to $3,000,000 as
disclosed under Item 2.01 of this From 8-K. Mr. Hadley received his Bachelor of
Science degree from the University of Florida in 1965 and his law degree from
the University of Florida College of Law in 1968.
GREGORY LABORDE, DIRECTOR. Mr. Laborde has over 18 years experience on Wall
Street in the areas of investment banking, trading, sales and financial
consulting. From 1986 to 1997, Mr. Laborde worked in corporate finance at a
number of prestigious NYC based investment banks, including: Drexel Burnham
Lambert, Lehman Brothers, Gruntal & Co., and Whale Securities. During his Wall
Street tenure, Mr. Laborde was involved in over 20 public and private financing
transactions totaling in excess of 100 million dollars. In 1999 he founded and
took public Origin Investment Group., a business development company that was
involved in investing in IT related businesses. While serving as Chairman & CEO,
Mr. Laborde was responsible for providing approximately 3 million in direct
equity investments, a 10 million equity credit line, as well as successfully
negotiating definitive agreements to acquire several private businesses. Mr.
Laborde is currently the Chairman of GHL Group, Ltd., a firm that provides
capital formation and mergers and acquisition services to select publicly traded
companies or rapidly expanding private businesses seeking to go public. Mr.
Laborde currently serves as the President & CEO of Satellite Organizing
Solutions, Inc. (SOZG: Pink Sheets), and is the former President & CEO of Azonic
Corporation (AZOI:OTCBB), a manufacturer of low cost disposable wireless
devices, and has been President, CEO and Director of Infinity Capital Group
since inception. Mr. Laborde holds a Bachelor of Science degree in Engineering
from Lafayette College.
ITALO CERRA, DIRECTOR. Mr. Cerra is a seasoned financial executive with diverse
experience in public and private sector companies. Mr. Cerra brings over 25
years experience in working with technology enterprises. His years in the
technology sector have provided particular financial expertise in R & D
financing programs, transitions from private to public company status, debt and
equity financing, and operational reporting and controls. After qualifying as a
Chartered Accountant, Mr. Cerra spent 10 years with Deloitte and Touche in their
audit practice. He then joined the telecommunications industry, as VP Finance
with Teltone Limited, a large North American telecommunications corporation.
Since that time Mr. Cerra has held executive level responsibilities including
Controller, VP Finance, Director of Finance and CFO at a variety
technology-based enterprises. In 1995, Mr. Cerra orchestrated the Management
Buy-Out and became the CFO and Partner in a leading service provider company.
After five years of profitability, he subsequently arranged for the company to
be acquired. Mr. Cerra is currently involved in raising investment capital for
emerging high-growth businesses and in providing advice and counsel to
high-net-worth investors
12
BOARD AND COMMITTEE MEETINGS
Information concerning the two Committees maintained by the Board of
Directors is set forth below.
The Board held eight meetings during the 2006 fiscal year. No director
attended less than 100% of the Board meetings while serving as such director, or
less than 100% of all committee meetings on which he served as a committee
member.
The audit and compensation committees are the standing committees of the
Board. The fiscal year 2006 and 2007 committees are comprised as follows:
2006 AUDIT COMMITTEE 2006 COMPENSATION COMMITTEE
David Smardon (Chair) Kenneth Adelberg (Chair)
Kenneth Adelberg David Smardon
Ralph V. Hadley, III Ralph V. Hadley, III
Gregory Laborde Gregory Laborde
Italo Cerra
The current committees are comprised as follows:
2007 AUDIT COMMITTEE 2007 COMPENSATION COMMITTEE
David Smardon (Chair) Kenneth Adelberg (Chair)
Kenneth Adelberg David Smardon
Ralph V. Hadley, III Ralph V. Hadley, III
Gregory Laborde Gregory Laborde
Italo Cerra
The audit committee of the Board (the "Audit Committee") held four
meetings during fiscal 2006. The Audit Committee, among other things, recommends
the Company's independent auditors, reviews the Company's financial statements,
reports and recommendations regarding the adequacy of internal accounting
controls made by the independent auditors and considers such other matters with
respect to the accounting, auditing and financial reporting procedures as it may
deem appropriate or as may be brought to its attention. The Audit Committee acts
under a written charter adopted and approved by the Board. The Audit Committee
is composed of outside directors who are not officers or employees of the
Company or its subsidiaries. In the opinion of the Board and as "independent" is
defined under current standards of the American Stock Exchange (including the
heightened independence requirements of audit committee members), these
directors are independent of management and free of any relationship that would
interfere with their exercise of independent judgment as member of this
committee.
The compensation committee of the Board (the "Compensation Committee")
held no meetings during the 2006 fiscal year. The Compensation Committee is
responsible for allocating cash compensation and stock options to senior
executive officers of the Company.
BOARD OF DIRECTORS INDEPENDENCE
The Board of Directors reviews the relationships that each director has
with us and other parties. Only those directors who do not have any of the
categorical relationships that preclude them from being independent within the
meaning of American Stock Exchange Company Guide, Part I Section 121, and who
the Board of Directors affirmatively determines have no relationships that would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director, are considered to be Independent Directors. The
Board of Directors has reviewed a number of factors to evaluate the independence
of each of its members. These factors include its members' current and historic
relationships with us and our subsidiaries; their relationships with management
and other directors; the relationships their current and former employers have
with us and our subsidiaries; and the relationships between us and other
companies on which our board members are directors or executive officers. After
evaluating these factors, the Board of Directors has determined that five of its
current six members are "independent" as defined by American Stock Exchange
Company Guide, Part I Section 121, all applicable rules and regulations of the
SEC, and for purposes of Rule 162(m) of the Internal Revenue Code of 1986, as
amended. These directors are Messrs. David Smardon, Kenneth Adelberg, Ralph V.
Hadley, III, Gregory Laborde and Italo Cerra. Independent members of our Board
of Directors meet in executive session without management present, and are
scheduled to do so at least two times per year. The Board of Directors has
designated Mr. Smardon as the presiding director for these meetings.
13
SHAREHOLDER COMMUNICATIONS
The Board of Directors believes that it is important for our shareholders
to have a process to send confidential communications directly to the board as a
whole and to the Independent Directors in particular. Accordingly, shareholders
desiring to send a communication to the Board of Directors, or to a specific
director, may do so by delivering a letter to the Secretary of the Company at
the Company' principal offices as set forth on the cover page to this Amendment
to the Annual Report on Form 10-KSB. The mailing envelope must contain a clear
notation indicating that the enclosed letter is a "stockholder-board
communication" or "stockholder director-specific" communication." All such
letters must identify the author and clearly state whether the intended
recipients of the letter are all members of our Board of Directors or certain
specified individual directors. To the extent indicated as addressed, the
Secretary will observe any requests for confidentiality and forward such
correspondence unopened directly to a specific director. With respect to
correspondence addressed to the Board as a whole or to a group of directors or a
specific committee, the Secretary will open such communications and make copies,
and then circulate them to the appropriate director or directors.
Notwithstanding the foregoing, the Company shall reserve the right to open all
correspondence as it believes reasonably necessary to assure the safety and
personal privacy of all directors.
REPORT OF AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee assists the Board in fulfilling its responsibility for
oversight of the internal control, accounting, auditing and financial reporting
practices of the Company. Specific responsibilities of the Audit Committee
include:
o reviewing and discussing the audited financial statements with
management;
o discussing with the Company's independent auditors information
relating to the auditors' judgments about the quality of the
Company's accounting policies and financial reporting practices; o
recommending to the Board that the Company include the audited
financials in its Annual Report on Form 10-KSB; and
o overseeing compliance with the Securities and Exchange Commission
requirements for disclosure of auditors' services and activities.
The Committee regularly meets with management to consider the adequacy of
the Company's internal controls and the integrity of it financial reporting. The
Committee discusses these matters with the Company's independent auditors and
with appropriate Company financial personnel and internal auditors.
The Committee regularly meets privately with management, the independent
auditors and the internal auditors. Each of the independent auditors has
unrestricted access to the Committee.
The Committee retains and, if circumstances warrant, replaces the
independent auditors and regularly reviews their performance and independence
from management. The Committee also pre-approves all audit and permitted
non-audit services and related fees.
The Board of Directors has adopted a written charter setting out the roles
and responsibilities the Committee is to perform. The Board has determined that
David Smardon, an independent director serving on the Audit Committee, is an
"audit committee financial expert," as such term is defined under the
regulations promulgated by the Securities and Exchange Commission. Under such
regulations, the designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations or
liability that are greater than the duties, obligations and liability imposed on
such person as a member of the audit committee and the Board of Directors in the
absence of such designation or identification nor does the designation or
identification of a person as an audit committee financial expert affect the
duties, obligations or liability of any other member of the audit committee or
Board of Directors.
14
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls.
REVIEW OF AUDITED FINANCIAL STATEMENTS
The Audit Committee has reviewed the Company's financial statements for
the fiscal year ended March 31, 2006, as audited by Rotenberg & Co. LLP, the
Company's independent auditors, and has discussed these financial statements
with management. In addition, the Audit Committee has discussed with Rotenberg &
Co. the matters required to be discussed by Statement of Auditing Standards No.
61, as amended, regarding the codification of statements on auditing standards.
Furthermore, the Audit Committee has received the written disclosures and the
letter from Rotenberg & Co. required by the Independence Standards Board
Standard No. 1 and has discussed with Rotenberg & Co. its independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements for the
fiscal year ended March 31, 2006 be included in the Company's Annual Report on
Form 10-KSB, for filing with the Securities and Exchange Commission.
The members of the Audit Committee are not currently professionally
engaged in the practice of auditing or accounting. Members of the Audit
Committee rely, without independent verification, on the information provided to
them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained procedures
designed to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not assure that the audit of the Company's financial
statements has been carried out in accordance with generally accepted auditing
standards, that the financial statements are presented in accordance with
generally accepted accounting principles and that the Company's independent
accountants are in fact "independent."
AUDIT COMMITTEE
David Smardon
Kenneth Adelberg
Ralph V. Hadley, III
Gregory Laborde
Italo Cerra
EXECUTIVE OFFICERS
The following table presents information with respect to our executive officers,
as of July 3, 2006.
NAME AGE POSITION
---- --- --------
John G. Simmonds 55 Director and CEO
Gary Hokkanen 50 Chief Financial Officer
Carrie Weiler 47 Corporate Secretary
JOHN G. SIMMONDS, DIRECTOR AND CEO OF THE COMPANY. See "Biographical Information
Regarding Directors" above for information regarding Mr. Simmonds.
GARY N. HOKKANEN, CHIEF FINANCIAL OFFICER. Mr. Hokkanen has served as the
Company's CFO since October 2004. Mr. Hokkanen is an executive level financial
manager with over 8 years experience in public company financial management. Mr.
Hokkanen holds a Bachelor of Arts degree from the University of Toronto and is a
CMA (Certified Management Accountant) and a member of the Society of Management
Accountants, Ontario. From January 2001 to April 2003 Mr. Hokkanen was CFO of
IRMG Inc., a Toronto based financial management consulting firm. Mr. Hokkanen
served as CFO of Simmonds Capital Limited from July 1998 to January 2001 and
served as CFO of Trackpower Inc. from February 1998 to June 2001. For the period
April 1996 to July 1998, Mr. Hokkanen served as Treasurer of Simmonds Capital
Limited. Mr. Hokkanen is currently CFO of Wireless Age Communications, Inc. a
shareholder of the Company.
15
CARRIE J. WEILER, CORPORATE SECRETARY. Ms. Weiler was appointed Secretary of the
Company in October 2004. Ms. Weiler also provides services to the Simmonds
Capital Limited group of companies which she joined in 1979. She has served as
Vice President of Corporate Development for Simmonds Capital Limited and its
divisions since 1994 and she has served as Corporate Secretary of TrackPower,
Inc. since 1998.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, as well as persons beneficially
owning more than 10% of the outstanding Common Stock, to file certain reports of
ownership with the Securities and Exchange Commission within specified time
periods. Such officers, directors and shareholders are also required by
Securities and Exchange Commission rules to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of such forms, all requirements received by the
Company, or written representations from certain reporting persons, the Company
believes that between April 1, 2005 and March 31, 2006, all Section 16(a) filing
requirements applicable to its officers, directors and 10% shareholders were
met, except for the following late filings: Mr. Paul Marsiglio, an affiliate of
the Company, has not timely filed SEC Form 3 or 13D.
CODE OF ETHICS
The Board of Directors adopted a Code of Ethics in fiscal 2005, which
applies to the Company's executive officers, as well as the executive officers
of the Company's subsidiaries.
You can obtain copies of our current committee charters and Code of Ethics
by writing to our Corporate Secretary at 765 15th Sideroad, King City, Ontario,
Canada, L7B 1K5, who shall provide copies without charge to any person.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth compensation for each of the past three
fiscal years with respect to each person who served as Chief Executive Officer
of the Company and each of the four most highly-compensated executive officers
of the Company who earned a total annual salary and bonuses that exceeded
$100,000 in any of the three preceding three fiscal years.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
------------------------------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
------------------------------------------------------------------------------------------------------------------------
NAME AND YEAR SALARY ($) BONUS ($) OTHER ANNUAL RESTRICTED SECURITIES LTIP ALL
PRINCIPAL POSITION COMPENSATION STOCK UNDERLYING PAYOUTS OTHER
($) AWARD(S) OPTIONS/SARS ($) COMPENSATION
($) (#) ($)
------------------------------------------------------------------------------------------------------------------------
John G. Simmonds 2006 $223,600 ------- -------
Chief Executive 2005 $232,404 -------
Officer (1)(2) 2004 $------- -------
------------------------------------------------------------------------------------------------------------------------
Gary N. Hokkanen 2006 $141,604 ------- -------
Chief Financial 2005 $116,215 -------
Officer (1)(3) 2004 $------- -------
------------------------------------------------------------------------------------------------------------------------
(1) Mr. Simmonds joined the Company in August 2004 and Mr. Hokkanen joined the
Company in October 2004.
(2) Mr. Simmonds was compensated in 2006 pursuant to the terms of a Management
Services Agreement between Simmonds Mercantile and Management Inc.
("SMMI") and the Company. Management fees paid for his executive
management services under the Management Services Agreement totaled
$240,000 during Fiscal Year 2006. SMMI provides services to entities other
than the Company, and Mr. Simmonds currently devotes, or may devote in the
future, some portion of their working time to the management of other
entities. The amounts shown on the chart above reflect the total amounts
paid by SMMI to Mr. Simmonds in the calendar 2005.
16
(3) The SMMI Management Services Agreement, as originally struck, included the
executive management services of Mr. Hokkanen up to and including
September 30, 2005. On October 1, 2005 the services of Mr. Hokkanen became
part of a Management Services Agreement with Wireless Age Communications,
Inc. ("Wireless Age"). Mr. Hokkanen was paid a total of $141,604 in
calendar 2005 by SMMI and Wireless Age. Amounts paid by SMMI were for the
period January 1 to September 30, 2005 and amounts paid by Wireless Age
were for the period October 1 to December 31, 2005. On December 31, 2005,
Wireless Age and the Company agreed to terminate the Wireless Age
Management Services Agreement. Subsequent to December 31, 2005, Wireless
Age is to be paid CAD$250 per hour for the services of Mr. Hokkanen.
OPTION GRANTS IN 2006 FISCAL YEAR
The Company made no option grants in 2006.
COMPENSATION OF DIRECTORS
FEES
The following fees were paid to Directors who were not employees of the
Company during fiscal 2006. During 2006, all non-employee directors received
fees for services rendered on the Board of Directors. Directors who are
full-time employees of the Company receive no additional compensation for
serving as directors. Board members are also reimbursed for all expenses
associated with attending Board or Committee meetings. Non-employee directors
are paid meeting fees as follows:
Fee for each Board meeting $500
Fee for each telephone meeting $500
Fee for each Committee meeting $500
EMPLOYMENT ARRANGEMENTS
The Company's Chief Executive Officer and Director, Mr. John Simmonds was
compensated in 2006 pursuant to the terms of a Management Services Agreement
between Simmonds Mercantile and Management Inc. and the Company. Mr. Hokkanen,
the Company's Chief Financial Officer was compensated pursuant to the terms of
the SMMI Management Services Agreement up to and including September 30, 2005.
For the period October 1 to December 31, 2005, Mr. Hokkanen was compensated
pursuant to the terms of a management services agreement with Wireless Age
Communications Inc. Management fees paid for the executive management services
of such officers of the Company under the Management Services Agreement totaled
$240,000 during Fiscal Year 2006. On October 1, 2004, the Company entered into
the management services agreement with SMMI pursuant to which SMMI would provide
executive, accounting and financial reporting, human resources, information
technology and other general management and administrative services to the
Company. The initial term of the agreement was two years. The agreement would
automatically renew for a one year period after the two years, unless either
party provided written notice of cancellation prior to 60 days of expiration of
the initial term. Under the terms of the agreement the Company agreed to pay
$20,000 per month for services rendered. Simmonds Mercantile and Management Inc.
is a private Canadian corporation owned by John Simmonds.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of four non-employee directors,
Messrs. Adelberg, Smardon, Hadley and Laborde. The Compensation Committee has
the responsibility for allocation of cash compensation and stock options to
senior executive officers of the Company.
The entire Board regularly reviews the Compensation Committee decisions
relating to executive compensation. The Company's executive compensation
policies, as endorsed by the Compensation Committee, have been designed to
provide a balanced compensation program that will assist the Company in its
efforts to attract, motivate and retain talented executives who the Compensation
Committee and senior management believe are important to the long-term financial
success of the Company.
17
Compensation Committee
Kenneth Adelberg
David Smardon
Ralph V. Hadley, III
Gregory Laborde
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In 2006, the Company had no securities compensation plan for the officers
and directors of the Company.
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of July 3, 2006 by (i) each director of
the Company, (ii) each of the Company's officers named in the Summary
Compensation Table (collectively, the "Named Executive Officers"), (iii) each
person who is known by the Company to be the beneficial owner of more than five
percent of the Company's outstanding Common Stock, and (iv) all directors and
executive officers as a group. Except as otherwise indicated below, each person
named has sole voting and investment power with respect to the shares indicated.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF OPTIONS/
BENEFICIAL OWNER SHARES WARRANTS (1) TOTAL (1) PERCENT (1)
------------------- --------- ------------ --------- -----------
Filippo Guani
Revocable Trust 3,000,000 0 3,000,000 9.0%
Infinity Capital
Group (2) 4,210,000 0 4,210,000 12.6%
Wireless Age
Communications, 4,860,000 14.6%
Inc. (4) 4,860,000 0
Kenneth Adelberg 50,000 0 50,000 *
David Smardon (5) 1,010,000 0 1,010,000 3.0%
Gary Hokkanen (4) 0 0 0 0%
Ralph V. Hadley, III 0 0 0 0%
Italo Cerra 75,000 0 75,000 *
John Simmonds (4) 230,000 0 230,000 *
Gregory Laborde (2) 4,210,000 0 4,210,000 12.6%
Carrie Weiler (3)(4) 1,000,000 0 1,000,000 3.0%
Paul Marsiglio (6) 2,370,000 0 2,370,000 7.1%
All executive
officers
and directors as a
group (8 persons)(7) 6,575,000 0 6,575,000 19.7%
(1) Includes options and warrants exercisable as of the date hereof or within
60 days hereafter. Holdings of less than 1% are indicated by "*". Based
upon 33,417,654 shares issued and outstanding as July 3, 2006, (excluding
any shares issuable under options or warrants,).
(2) Mr. Laborde, a Director of the Company, is the controlling stockholder of
Infinity Capital Group, Inc. ("Infinity Capital"), as well as the
President, CEO and Chairman of the Board of Infinity Capital. He is
therefore listed as the beneficial owner of 4,210,000 shares owned
directly by Infinity Capital.
(3) Ms. Weiler beneficially owns such shares through Jancar Investments Corp.,
a corporation controlled by her.
18
(4) Gary Hokkanen and Carrie Weiler are each officers of Wireless Age
Communications, Inc. ("WLSA"). Mr. Hokkanen is the Chief Financial Officer
of WLSA, and Ms. Weiler is WLSA's Corporate Secretary. However, none of
Mr. Hokkanen or Ms. Weiler individually or as a group controls the voting
of the shares of the Company owned by WLSA or controls the power of
disposition over such shares, and therefore Mr. Hokkanen and Ms. Weiler
disclaim beneficial ownership of the 4,860,000 shares owned by WLSA.
(5) Mr. Smardon owns 860,000 shares of the Company directly. Nibiru Capital
Management Ltd. ("Nibiru") owns 150,000 shares. As Chief Executive Officer
and majority shareholder of Nibiru, Mr. Smardon is deemed to beneficially
own Nibiru's 150,000 shares.
(6) Mr. Marsiglio owns 375,000 shares of the Company directly. Mr. Marsiglio's
spouse, Ms. Catherine Doncaster owns 375,000 shares and Marsiglio
Enterprises, an entity controlled by Mr. Marsiglio owns 1,620,000 shares
of the Company's common stock.
(7) Officers and Directors as a group include John Simmonds, Kenneth Adelberg,
David Smardon, Ralph V. Hadley, III, Gregory Laborde, Italo Cerra, Gary
Hokkanen and Carrie Weiler.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Chief Executive Officer and Director, Mr. John Simmonds was
compensated in 2006 pursuant to the terms of a Management Services Agreement
between Simmonds Mercantile and Management Inc. and the Company. Management fees
paid for the executive management services of such officers of the Company under
the Management Services Agreement totaled $240,000 during Fiscal Year 2006. On
October 1, 2004, the Company entered into the management services agreement with
SMMI pursuant to which SMMI would provide executive, accounting and financial
reporting, human resources, information technology and other general management
and administrative services to the Company. The initial term of the agreement
was two years. The agreement would automatically renew for a one year period
after the two years, unless either party provided written notice of cancellation
prior to 60 days of expiration of the initial term. Under the terms of the
agreement the Company agreed to pay $20,000 per month for services rendered.
Simmonds Mercantile and Management Inc. is a private Canadian corporation owned
by John Simmonds.
The Company's Chairman of the Board of Director, Mr. David Smardon was
compensated in 2006 pursuant to the terms of a Consulting Agreement between Mr.
Smardon and the Company. Fees paid for strategic consulting under the agreement
totaled $36,000 during Fiscal Year 2006. On October 1, 2004, the Company entered
into the consulting services agreement with Mr. Smardon pursuant to which Mr.
Smardon would provide strategic consulting services to the Company. The initial
term of the agreement was two years. The agreement would automatically renew for
a one year period after the two years, unless either party provided written
notice of cancellation prior to 60 days of expiration of the initial term. Under
the terms of the agreement the Company agreed to pay $3,000 per month for
services rendered.
Wireless Age Communications, Inc. a shareholder of the Company and an
entity in which the Company's CFO and Corporate Secretary are officers in, was
compensated in 2006 pursuant to Management Services Agreement between Wireless
Age Communications, Inc. and the Company. Management fees paid for the general
management services of Mr. David MacKinnon (the Company's CTO) and James Hardy
(the Company's COO) and Gary Hokkanen (the Company's CFO) under the Management
Services Agreement totaled $240,000 during Fiscal Year 2006. On October 1, 2004,
the Company entered into the management services agreement with Wireless Age
Communications, Inc. pursuant to which Wireless Age Communications, Inc. would
provide general management services to the Company. The initial term of the
agreement was two years. The agreement would automatically renew for a one year
period after the two years, unless either party provided written notice of
cancellation prior to 60 days of expiration of the initial term. Under the terms
of the agreement the Company agreed to pay $20,000 per month for services
rendered. On December 31, 2005, the Company and Wireless Age terminated the
management services agreement. The Company and Wireless Age agreed that Wireless
Age would be compensated CAD$250 per hour for the services of Mr. Hokkanen.
19
The Board believes that all of the foregoing related party transactions
were made on terms that were fair and reasonable to the Company. Directors
having an economic interest in the outcome of such transactions did not
participate in the deliberation or voting with respect to such actions on the
part of the Company.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
Exhibit No. Description
----------- -----------
Exhibit 3.1 Certificate of incorporation, incorporated by reference to the
exhibits of the Company's Form 10SB-12G filed with the
Commission on December 1, 1999.
Exhibit 3.2 Bylaws as currently in effect, incorporated by reference to
the exhibits of the Company's Form 10SB-12G filed with the
Commission on December 1, 1999.
Exhibit 10.1 Agreement with the Filippo Guani Revocable Trust dated August
26, 2004, incorporated by reference to the exhibits of the
Company's Form 8-K filed with the Commission on September 3,
2004.
Exhibit 10.2 Management Services Agreement by and between the Company and
Wireless Age Communications, Inc., incorporated by reference
to the exhibits of the Company's Form 8-K filed with the
Commission on October 15, 2004.
Exhibit 10.3 Management Services Agreement by and between the Company and
Simmonds Mercantile and Management Inc., incorporated by
reference to the exhibits of the Company's Form 8-K filed with
the Commission on October 15, 2004.
Exhibit 10.4 Consulting Agreement by and between the Company and David
Smardon, incorporated by reference to the exhibits of the
Company's Form 8-K filed with the Commission on October 15,
2004.
Exhibit 10.5 Product Strategic Alliance Agreement between the Company and
CustomQuest Inc.
Exhibit 16.1 Letter from Larry O'Donnell CPA, P.C. re resignation as
certifying accountant, incorporated by reference to the
exhibits of the Company's Form 8-K filed with the Commission
on May 9, 2005.
Exhibit 31.1 Section 302 Certification of the Chief Executive Officer.
Exhibit 31.2 Section 302 Certification of the Chief Financial Officer.
Exhibit 32.1 Certification of the Chief Executive Officer and the Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2003.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
On November 14, 2004, the Audit Committee adopted a Pre-approval Policy
("Policy") governing the approval of all audit and non-audit services performed
by the independent auditor in order to ensure that the performance of such
services does not impair the auditor's independence.
20
According to the Policy, the Audit Committee will annually review and
pre-approve the services and fees that may be provided by the independent
auditor during the following year. The Policy specifically describes the
services and fees related to the annual audit, other services that are
audit-related, preparation of tax returns and tax related compliance services
and all other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee specifically provides for a different
period.
Any service to be provided by the independent auditor that has not
received general pre-approval under the Policy is required to be submitted to
the Audit Committee for approval prior to the commencement of a substantial
portion of the engagement. Any proposed service exceeding pre-approved cost
levels is also required to be submitted to the Audit Committee for specific
approval.
The Audit Committee will revise the list of general pre-approved services
from time to time based on subsequent determinations. The Committee does not
delegate its responsibilities to pre-approve services performed by the
independent auditor to management.
FEES
The following table sets forth the aggregate fees billed by the Company's
independent auditors for fiscal years and 2005 and 2006:
------------------------------------------------------------------------------------------------------
YEAR AUDIT FEES AUDIT RELATED TAX FINANCIAL INFORMATION OTHER FEES TOTAL
SYSTEMS DESIGN AND
(NOTE 1) IMPLEMENTATION FEES
------------------------------------------------------------------------------------------------------
2005 $10,300 $ Nil $ Nil $ Nil $ Nil $10,300
------------------------------------------------------------------------------------------------------
2006 $10,000 $7,500 $ Nil $ Nil $ Nil $17,500
------------------------------------------------------------------------------------------------------
Note 1: Includes the review of quarterly Form 10QSBs.
21
SIGNATURES
In accordance with sections 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereto duly authorized individual.
Date: July 14, 2006
MIDLAND INTERNATIONAL CORPORATION
By: /s/ John Simmonds
-------------------------
JOHN G. SIMMONDS, CEO
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Name Title Date
/s/ John Simmonds July 14, 2006
-----------------------
JOHN G. SIMMONDS CEO/Director
(principal executive officer)
/s/ David Smardon July 14, 2006
-----------------------
DAVID SMARDON Chairman
/s/ Kenneth Adelberg July 14, 2006
-----------------------
KENNETH J. ADELBERG Director
/s/ Ralph Hadley July 14, 2006
-----------------------
RALPH V. HADLEY III Director
/s/ Gregory Laborde July 14, 2006
-----------------------
GREGORY LABORDE Director
/s/ Italo Cerra July 14, 2006
-----------------------
ITALO CERRA Director
/s/ Gary Hokkanen July 14, 2006
-----------------------
GARY N. HOKKANEN CFO
(principal accounting officer)
22