SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 25, 1998
DYNAMIC ASSOCIATES, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 33-55254-03 87-0473323
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(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification Number)
7373 NORTH SCOTTSDALE ROAD
SUITE B-169
SCOTTSDALE, ARIZONA 85253
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(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (602) 483-8700
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6609 NORTH SCOTTSDALE ROAD
SUITE B-150
SCOTTSDALE, ARIZONA 85251
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(Former name or former address, (Zip Code)
if changed since last report.)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
None
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
None
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
None
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None
ITEM 5. OTHER EVENTS
Dynamic is engaged in (i) the development and acquisition of microwave
technologies for medical purposes through Microwave Medical Corporation, a
California corporation, a wholly owned subsidiary, (ii) managing the operations
of psychiatric/geriatric units for various hospitals through Genesis, a wholly
owned subsidiary, and Geriatric Care Centers of America, Inc. ("GCCA") and (iii)
the manufacturing of highly technologically advanced microwave components and
subsystems for the communications and aerospace industries through P&H
Laboratories, Inc., a California corporation, a wholly owned subsidiary.
On February 10th, 199 the Board of Directors of Dynamic approved the
"spin-off" of its subsidiaries, Microwave Medical Corporation and P&H
Laboratories, Inc. The Company plans to proceed with the spin-off in an
expedited manner. On December 4, 1997 Dynamic formed MW Medical, Inc. as a
Nevada corporation ("MW Medical") with a capital structure similar to Dynamic
to provide for a one for one stock issuance upon the spin off of MW Medical. On
February 25, 1998 the board of directors of MW Medical approved the issuance of
shares of stock to Dynamic in anticipation of the spinoff March 11, 1998. A
plan of funding was also approved to provide a procedure for MW Medical to go
forward and is attached as Exhibit A (Contribution Agreement, Plan and Agreement
of Reorganization and Distribution, ("Contribution Agreement")). An Information
Statement was prepared and distributed to the shareholders of Dynamic, attached
as Exhibit B. Shareholder approval was not required and was not sought in the
spinoff.
On February 25, 1998, the Company entered into the Contribution Agreement,
with its wholly owned subsidiary, MW Medical, Inc. ("MW"), a Nevada corporation,
and MW's wholly owned subsidiaries, Microwave Medical, Inc. ("MMC"), a
California corporation and P&H Laboratories, Inc. ("P&H"), a California
corporation. According to this Agreement, the Company agreed to issue a pro
rata number of shares of MW based upon the holdings of shareholders of Dynamic
stock. At that time shares were issued to Dynamic in anticipation of the
spinoff.
This Distribution will result in a taxable disposition by Dynamic of its
shares in the MW Medical. For federal income tax purposes, Dynamic will
recognize a gain if the fair market value of MW Medical's shares exceeds
Dynamic's tax basis in MW Medical's Common Stock, and Dynamic will recognize a
loss if Dynamic's tax basis in MW Medical's Common Stock exceeds the fair market
value of the Dynamic shares. The Distribution will be taxed as a dividend to
the shareholders of Dynamic in an amount equal to the lesser of (i) the fair
market value of the Company's Common Stock received by a shareholder, and (ii)
the current or accumulated earnings and profits of Dynamic. If the aggregate
fair market value of MW Medical's Common Stock exceeds the current or
accumulated earnings and profits of Dynamic, such excess shall first be treated
as return of basis to each shareholder, and, if such excess exceeds a
shareholder's basis in his
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or her Dynamic stock, it shall be taxed as a capital gain. Such capital gain
shall be long- or short-term, based on the shareholder's holding period in its
Dynamic stock. The shareholder's holding period for MW Medical's Common Stock
received shall begin on the date of the Distribution.
For Dynamic shareholders that are foreign corporations or non-resident
aliens, the U.S. imposes a tax of thirty percent (30%) (or such lesser rate as
may apply under an applicable income tax treaty) on the amount of the
Distribution if it is classified as a dividend. This tax is to be withheld by
the payee from the gross amount of the dividend. Current U.S. income tax
regulations require that tax on the Distribution be paid to the Internal Revenue
Service as if the entire Distribution is a dividend, and if some or all of the
Distribution is not a dividend, the excess amounts withheld are to be refunded
by the Internal Revenue Service.
Dynamic has valued the Company's Common Stock at $14,223,929, which is
based upn the number of shares outstanding on the Record Date multiplied by the
bid price at the closing on this date, which was $1.00. This amount is less
than Dynamic's tax basis in the spunoff entities. Accordingly, Dynamic should
not recognize any gain on the Distribution. Dynamic has internally determined
that it does not have any accumulated earnings and profits as of December 31,
1997. The spunoff entity cannot know whether or not it will have earnings and
profits in 1998 which would cause all or a portion of the Distribution to be a
dividend to the shareholders of Dynamic. This information will not be available
to Dynamic or its shareholders until January of 1999. Accordingly, the tax
consequences of the Distribution to the shareholders of Dynamic are not known at
this time.
To the extent of the earnings and profits of Dynamic in 1998, the
Distribution will be a dividend to the shareholders of Dynamic. To the extent
Dynamic has no earnings and profits in 1998, or the fair market value of MW
Medical's Common Stock exceeds the amount of such earnings and profits, the
Distribution will be treated as a return of capital to the shareholders of
Dynamic. Each shareholder's tax basis in his or her Dynamic shares will be
reduced to such extent. If the amount a shareholder receives as a return of
capital exceeds his or her tax basis in Dynamic shares, such excess will be
recognized as a capital gain. The capital gain will be short- or long-term
on the period the shareholder has held his or her Dynamic shares.
In connection with the Distribution, MW Medical and Dynamic have entered
into the Contribution Agreement for the purpose of giving effect to the
Distribution and defining their ongoing relationships. This agreement was
negotiated while MW Medical was wholly-owned by Dynamic and therefore will not
be the result of arms-length negotiations between independent parties, although
MW Medical believes the various pricing terms to be comparable to what could
be achieved through arms-length negotiations. Certain provisions contained in
this agreement relating to a change in control, merger or acquisition of MW
Medical may have the effect of discouraging third parties from making proposals
involving an acquisition or change in control prior to the termination of such
agreements.
Following the Distribution, additional or modified agreements, arrangements
and transactions may be entered into among MW Medical, Dynamic and their
respective subsidiaries. Any such future agreements, arrangements and
transactions will be determined through arms-length negotiations between the
parties in the ordinary course of business.
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ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
None
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Information is not required to be provided as detailed in Item 601 of
Regulation S-B. This spinoff does not exceed 10% of the total consolidated
assets of registrant and as such does not involve a significant amount of
assets.
Exhibit Number Description
A Contribution Agreement, Plan and Agreement or Reorganization
and Distribution
B Information Statement
ITEM 8. CHANGE IN FISCAL YEAR
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
(Registrant) DYNAMIC ASSOCIATES, INC.
(Signature) * /s/ Jan Wallace
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Jan Wallace, President
Date February 26, 1998
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*Print name and title of the signing officer under his/her signature.
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