10QSB 1 form10qsb.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 OR [ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934 From the transition period from ___________ to ____________. Commission File Number 000-31735 MICROSIGNAL CORPORATION (Exact name of small business issuer as specified in its charter) Nevada 91-1997729 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 345 Southpointe Boulevard, Canonsburg, PA 15317 ----------------------------------------------- (Address of principal executive offices) (724) 746-9476 -------------------------------------------------------------------------------- (Issuer's telephone number) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes: [X] No [ ] As of November 18, 2003 there were 95,323,714 shares of Common Stock of the issuer outstanding. TABLE OF CONTENTS PART I FINANCIAL STATEMENTS Item 1 Financial Statements 3 Item 2 Management's Discussion and Analysis or Plan of Operation 8 Item 3. Controls and Procedures 10 PART II OTHER INFORMATION Item 1 Legal Proceedings 11 Item 2 Changes in Securities 11 Item 3 Default upon Senior Securities 11 Item 4 Submission of Matters to a Vote of Security Holders 11 Item 5 Other Information 11 Item 6 Exhibits and Reports on Form 8-K 11 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MICROSIGNAL CORPORATION BALANCE SHEET September 30, 2003 (Unaudited) ASSETS Current assets
Cash $ 4,650 Prepaid expenses 5,742 ----------- Total current assets 10,392 Property and equipment, net of accumulated depreciation of $594,420 13,351 Other assets 22,036 ----------- $ 45,779 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 68,503 Accrued expenses 169,610 Lease payable 38,650 Accrued interest payable 877,571 Notes payable 774,339 Notes payable - shareholders 1,367,650 Deposits 40,000 ----------- Total current liabilities 3,336,323 Commitments STOCKHOLDERS' DEFICIT: Common stock, $.001 par value, 200,000,000 shares authorized, 54,239,180 shares issued and outstanding 54,239 Additional paid in capital 2,228,312 Accumulated deficit (5,647,782) ----------- (3,290,544) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 45,779 ===========
MICROSIGNAL CORPORATION STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ -- $ -- $ -- $ -- Cost of revenues -- -- -- -- ------------ ------------ ------------ ------------ Gross margin -- -- -- -- Cost and Expenses: General and administrative 204,321 -- 641,665 2,656 ------------ ------------ ------------ ------------ Loss from operations (204,321) -- (641,665) (2,656) Interest expense 45,000 40,000 121,671 116,671 ------------ ------------ ------------ ------------ Net loss $ (249,321) $ (40,000) $ (763,336) $ (119,327) ============ ============ ============ ============ Net loss per share: Net loss basic and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.03) ============ ============ ============ ============ Weighted average shares outstanding: Basic and diluted 54,022,792 4,396,339 43,131,099 4,396,339 ============ ============ ============ ============
MICROSIGNAL CORPORATION STATEMENTS OF CASHFLOWS
Nine Nine Months Months Ended Ended September 30, September 30, ----------------- ------------------ 2003 2002 --------- --------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(763,366) $(119,327) Adjustments to reconcile net loss to cash used by operating activities: Common stock for services 419,750 -- Net change in: Prepaid expenses (5,742) -- Accounts payable and accrued expenses 88,821 -- Accrued interest payable 121,671 116,671 --------- --------- CASH FLOWS USED IN OPERATING ACTIVITIES (148,866) (2,656) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (13,351) -- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from shareholder notes payable 164,900 -- --------- --------- NET INCREASE (DECREASE) IN CASH 2,683 (2,656) Cash, beg. of period 1,967 2,709 --------- --------- Cash, end of period $ 4,650 $ 53 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ -- $ -- Income taxes paid $ -- $ -- NON-CASH TRANSACTIONS: Issuance of common stock for assets $ 12,490 $ --
NOTES TO FINANCIAL STATEMENTS September 30, 2003 (Unaudited) 1. GENERAL The balance sheet of MicroSignal as of September 30, 2003, the related statements of operations for the three and nine months ended September 30, 2003 and 2002 and the statements of cash flows for the nine months ended September 30, 2003 and 2002 included in the financial statements have been prepared by MicroSignal without audit. In the opinion of management, the accompanying condensed financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly MicroSignal's financial position and results of operations. The results of operations for the three and nine months ended September 30, 2003 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this Form 10-QSB should be read in conjunction with Management's Discussion and Analysis and Financial Statements and notes thereto included in MicroSignal's December 31, 2002 Form 10-KSB. NOTE 2 - OTHER ASSETS Other assets include a patent designed to improve the quality and efficiency of magnetic resonance imaging ("MRI") systems and barcode technology acquired in April 2003. NOTE 3 - COMMON STOCK On April 1, 2003, MicroSignal acquired 100% of the issued and outstanding shares of Exxcode, Inc. for 25,000,000 shares of common stock valued at $12,490. Exxcode has a proprietary bar code technology, which is used for tracking medical records, x-rays and MRI's. The bar code can track MicroSignal's technology. The barcode technology was recorded at the sellers' historical cost. During the nine months ending September 30, 2003, MicroSignal issued 4,950,000 shares of common stock for services valued at $409,750. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements When used in this Form 10QSB and in future filings by MicroSignal Corporation with the Securities and Exchange Commission, the words or phrases "will likely result," "management expects," or we expect," "will continue," "is anticipated," "estimated," or similar expression or use of the future tense, are intended to identify forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. These statements are subject to risks and uncertainties, some of which are described below and others are described in other parts of this Form 10QSB. Actual results may differ materially from historical earnings and those presently anticipated or projected. We have no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements. Business MicroSignal Corporation (the "Company) was incorporated on August 21, 1987 as "Ragen Corporation" under the laws of the State of Nevada. On October 21, 1999, the Company entered into a reverse merger pursuant to Rule 368(a)(1)(B)if the Internal Revenue Code of 1986 as amended. Pursuant to this reverse merger, the Company acquired 100% of the common stock of Pro Glass Technologies, Inc., a Canadian corporation with three wholly owned subsidiaries in exchange for the issuance of 17,714,000 shares of the Company's common stock. The Company changed its name to "Pro Glass Technologies, Inc." and increased the number of authorized common shares to 50,000,000 at that time. Pro Glass Technologies, Inc. is the predecessor due to the reverse merger and Ragen was the legal survivor. Pro Glass Technologies, Inc. was a holding company. Upon completion of the merger, the Company began engaging in the auto glass repair and replacement business under "Windshield Superstores, Ltd." in Calgary, Alberta. Fran Aiello became the President and CEO of the Company at that time. On September 10, 2002, the Company entered into an Agreement and Plan of reorganization with MicroSignal Corporation, a Pennsylvania corporation, and exchanged 100% of the MicroSignal common stock in exchange for the issuance of 17,051,344 shares of the Company's common stock, or 94% of the Company. At that time, the Company changed its name to "MicroSignal Corporation". At the same time, the Company sold its auto glass repair and replacement business to its former president, Frank Aiello, in change for the return of 150,000 shares of the Company's common stock owned by him. Mr. Aiello assumed responsibility for all the debts and liabilities of the auto glass repair and replacement business. For accounting purposes, this transaction was treated as an acquisition of Pro Glass and a recapitalization of MicroSignal, MicroSignal is the accounting acquirer and the results of its operations carry over. Accordingly, the operations of the Company while Pro Glass are not carried over and are adjusted to $0. As part of this transaction, the Company's fiscal year end changed from September 30 to December 31. The Company has developed a product designed to improve the quality and efficiency of magnetic resonance imaging ("MRI") systems. The product consists of a combination of hardware and software compatible with all MR machines, designed to improve the image quality as well as the display of the final MRI exam. At the core of the system is a totally novel method of reconstructing the MR information obtained by the machine (the raw data), developed by Dr. Jeffery Taft. The Company's product uses a unique algorithm, exchange analytic computation technique (EXACT), which decouples the size of the raw data from the image matrix size and overcomes a lot of the inherent limitations of the Fourier transformations. The technology allows tremendous flexibility once the MRI data has been acquired; it is possible using SLICES(TM) to obtain sharply magnified images, up to ten times the original magnification, without creating pixel artifacts inherent to the optical zoom provided by all manufacturers. The major benefits of MSC's SLICES technology are: Increased information extraction o Helps with the elimination of some artifacts o Improves the radiologist's productivity o Reduces patient re-scan and call back o Reduces patient scan time o Reduces film costs The Company intends to proceed with marketing and sales of the Company's proprietary product. Significant opportunities exist for follow-on product both in MRI and in other computed medical imaging applications such as CAT scan and nuclear medicine. Exciting opportunities exist to apply new proprietary MicroSignal Corporation technology to stroke prediction, breast cancer detection and cardiac evaluation, thus expanding MRI into use for the top three disease conditions in the U.S. Sales opportunities for these additional products are in the billions of dollars. Additional opportunities exist to make use of the Internet to perform high-end teleradiology and Picture Archiving and Control. MicroSignal Corporation can become the preferred channel not only for computing and displaying medical images, but also for transporting them. The transport, if done properly, can result in an ongoing revenue stream valued in the hundreds of millions of dollars per year within five years. There can be no assurances that the Company will see these results. Future revenues are dependent upon the Company being able to secure outside financing and raising additional capital to enable it to commence operations in a meaningful manner, neither of which the Company has commitments to receive. Until such time as the Company is able to secure additional financing through loans or capital raising, the Company's efforts to commence revenue-producing operations will have to be scaled back. Financial Condition and Changes in Financial Condition Overall Operating Results: The Company plans to seek financing and capital to allow it to exploit this technology as well as to enhance and improve on this technology. During 2003, the Company intends to seek the necessary financing to allow it to implement its business plan and to commence operations in a meaningful way. We have had no revenues for the three and nine months ended September 30, 2003 and 2002, respectively. Our operating expenses for the quarter ended September 30, 2003 were $204,321 and were primarily incurred for salaries, consulting, rent and other services rendered in connection with our financial reporting obligations with the Securities and Exchange Commission as well as stock transfer agent fees and financial consulting. Operating expenses for the prior year quarter ended September 30, 2002 totaled $0. Our operating expenses for the nine months ended September 30, 2003 were $641,665 and were primarily incurred for salaries, consulting, rent and other services rendered in connection with our financial reporting obligations with the Securities and Exchange Commission as well as stock transfer agent fees. Operating expenses for the nine months ended September 30, 2002 totaled $2,656 for general expenses. Liquidity and Capital Resources: The Company has approximately $10,000 in current assets compared to current assets of approximately $2,000 for the year ended December 31, 2002. The Company's current liabilities for the period ended September 30, 2003 are approximately $3,336,000 compared to current liabilities of approximately $2,960,000 for the year ended December 31, 2002. The current assets for the period ended September 30, 2003 consisted of cash of $4,650. Total assets were approximately $12,000 for the year ended December 31, 2002 composed of the Company's patent of approximately $9,500 and its cash. At September 30, 2003, the Company had negative working capital of approximately $3,326,000 which consisted of current assets of approximately $10,000 and current liabilities of approximately $3,336,000. At December 31, 2002, the Company had negative working capital of approximately $2,961,000 which consisted of current assets of approximately $2,000 assets and current liabilities of approximately $2,963,000. The current liabilities of the Company at September 30, 2003 are composed primarily of notes payable to shareholders of $1,367,650, notes payable of $774,339, accrued interest payable of $877,571, accrued expenses of $169,610, lease payable of $38,650, deposits of $40,000 and accounts payable of $68,503. The Company will attempt to carry out its business plan as discussed above. The Company cannot predict to what extent its lack of liquidity and capital resources will hinder its business plan prior to commencement of its proposed operations. Need for Additional Financing The Company's existing capital is not be sufficient to meet the Company's cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any funds will be available to the Company to allow it to cover its expenses. The Company might seek to compensate providers of services by issuances of stock in lieu of cash. Employees As of September 30, 2003, the Company had three employees. Description of Properties The Company presently leases office space on a three-year lease, which ends in September 2005. The monthly lease payment is $1,854. The Company anticipates that this space is sufficient for the near future. Inflation The Company's results of operations have not been affected by inflation and management does not expect inflation to have a significant effect on its operations in the future. ITEM 3. CONROLS AND PROCEDURES Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the 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 in company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer (the "Certifying Officers"), as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying Officers carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 30, 2003. Their evaluation was carried out with the participation of other members of the Company's management. Based upon their evaluation, the Certifying Officers concluded that the Company's disclosure controls and procedures were effective. The Company's internal control over financial reporting is a process designed by, or under the supervision of, the Certifying Officers and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of the Company's financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Company's financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with the authorization of the Company's Board of Directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements. There has been no change in the Company's internal control over financial reporting that occurred in the quarter ended September 30, 2003, that has materially affected, or is reasonably likely to affect, the Company's internal control over financial reporting. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 1. MicroSignal Corp. v. George Parks (03-A-468548-B)(District Ct. NV). On June 2, 2003, the Company filed a verified complaint against George Parks in Las Vegas, NV. The lawsuit is captioned MicroSignal Corp. v. George Parks (03-A-468548-B)(District Ct. NV). The complaint sought injunctive relief against Mr. Parks to (a) compel him to produce the necessary books and records of the company wrongfully withheld by him and (b) to enjoin him from libeling the company. Mr. Parks moved to dismiss on long jurisdiction claims. The Nevada court denied the motion to dismiss. Management is confident that it will prevail on the lawsuit against Mr. Parks. 2. MicroSignal Corp. v. Matthew McConaghy et al. (03-A-472656B)(District Ct. NV). On August 25, 2003, the company filed a verified complaint against Matthew McConaghy and others in the Eighth judicial district in Las Vegas, NV. A preliminary injunction has been issued against Mr. McConaghy enjoining him from acting as President of the company. The lawsuit was filed as the result of the company firing Mr. McConaghy as President for cause. The other named defendants were dismissed after they resigned as directors of the company having been illegally appointed by Mr. McConaghy. On November 17, 2003, the court ruled against Mr. McConaghy's motion to quash service of process. Mr. McConanghy has been ordered to file his responsive pleading. 3. MicroSignal Corp., a Pennsylvania corporation, and George Parks v. MicroSignal Corp. (formerly Pro Glass Technologies, a Nevada corporation, Matthew McConaghy, Chris Puleo, Sherri Yavelak and Nathan Blumberg, M.D. (No. G.D. 03-20299)(Ct. Common Pleas Allegheny Cty, PA). 4. MicroSignal Corp., a Pennsylvania corporation, and George Parks v. MicroSignal Corp. (formerly Pro Glass Technologies, a Nevada corporation, Matthew McConaghy, Chris Puleo, Sherri Yavelak and Nathan Blumberg, M.D. (No. 03-A-472656B)(U.S. Dist. Ct. W. Penn) On October 16, 2003, the company was given telefax notice of the filing of a lawsuit against it in Pittsburgh, PA by George Parks individually and purportedly acting on behalf of MicroSignal Corp. the private Pennsylvania company. On October 17, 2003, the company appeared in court to oppose Mr. Parks. The lawsuit is captioned MicroSignal Corp., a Pennsylvania corporation, and George Parks v. MicroSignal Corp. (formerly Pro Glass Technologies, a Nevada corporation, Matthew McConaghy, Chris Puleo, Sherri Yavelak and Nathan Blumberg, M.D. (No. G.D. 03-20299)(Ct. Common Pleas Allegheny Cty, PA). The lawsuit was removed to federal court on the motion of MicroSignal Corp. who filed a counterclaim against Mr. Parks to stop him from interfering with the business of MicroSignal. The matter is now set for an expedited hearing in December 2003 (Case No. 03-1589) (U.S. Dist. Ct. W.D. of Penn). The parties are currently in discovery. ITEM 2. CHANGES IN SECURITIES On February 7, 2003 MicroSignal entered into a Collateral Loan Agreement and Promissory Note for up to $1,500,000 which would be secured by 93,750,000 shares of common stock. The loan has not yet been funded but the shares have been issued and are being held pending funding of the loan. In April 2003, MicroSignal issued Matthew G. McConaghy 1,370,000 shares of common stock for services rendered. At the same time, MicroSignal issued an additional 1,200,000 shares to Robert Taulli for services to be provided to MicroSignal. These shares were registered on a Form S-8 Registration Statement. In April 2003, MicroSignal issued 25,000,000 shares of its common stock in restricted form to the shareholders of Exxcode, Inc., a Nevada corporation, in connection with the Company's acquisition of Exxcode. In April 2003, MicroSignal issued 325,000 shares of its common stock for services rendered. In May 2003, MicroSignal issued 1,055,000 shares of its common stock for services rendered. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit Number Name of Exhibit ------ --------------- 31.1 Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K None. Signatures In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MICROSIGNAL CORPORATION (Registrant) By /s/ Mr. Wayne Norris ------------------------------------- Mr. Wayne Norris, CEO Date November 18, 2003