** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

**FORM 10-QSB**

**x        Quarterly Report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

**Forthe quarterly period ended June 30, 2006**

**o        Transition Report pursuant to 13 or 15(d) of the SecuritiesExchange Act of 1934**

**Forthe transition period**        to        

**CommissionFile Number*: *001-14297**

**Davi Skin, Inc**

(Exact name ofsmall business issuer as specified in its charter)

| **Nevada**                                                      |   | **86-0907471**                     |
|-----------------------------------------------------------------|--------|------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (IRS Employer  Identification No.) |

 

| **4223 Glencoe Avenue, Suite B130 Marina Del Rey, CA  90292** |
|--------------------------------------------------------------------|
| (Address of principal  executive offices)                          |

 
| **310-827-0800**                  |
|-----------------------------------|
| (Issuer’s telephone  number) |

 

 
| **301  North Canon Drive, Suite 207,**

**Beverly  Hills, California 90210**        |
|-------------------------------------------------------------------------------------|
| (Former name, former  address and former fiscal year, if changed since last report) |

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the issuer was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days x Yes    o No

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).o  Yes   x  No

State the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date:  12,115,820 common shares as of May 1, 2006.

Transitional Small Business Disclosure Format (check one): Yes oNo x

 

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TABLE OF CONTENTS
|                                      |   |                                                         |   | **Page** |
|--------------------------------------|--------|--------------------------------------------------------------|--------|----------|
| PART  I – FINANCIAL INFORMATION |
|                                 |   |                                                         |   |     |
| Item  1:                             |   | Financial  Statements                                        |   | 3        |
|                                 |   |                                                         |   |     |
| Item  2:                             |   | Plan of Operation                                            |   | 12       |
|                                 |   |                                                         |   |     |
| Item 3:                              |   | Controls and Procedures                                      |   | 22       |
|                                 |   |                                                         |   |     |
| PART  II – OTHER INFORMATION    |
|                                 |   |                                                         |   |     |
| Item  1:                             |   | Legal  Proceedings                                           |   | 23       |
|                                 |   |                                                         |   |     |
| Item 2:                              |   | Unregistered Sales of Equity Securities and Use of  Proceeds |   | 24       |
|                                 |   |                                                         |   |     |
| Item 3:                              |   | Defaults Upon Senior Securities                              |   | 24       |
|                                 |   |                                                         |   |     |
| Item 4:                              |   | Submission of Matters to a Vote of Security Holders          |   | 24       |
|                                 |   |                                                         |   |     |
| Item  5:                             |   | Other  Information                                           |   | 24       |
|                                 |   |                                                         |   |     |
| Item 6:                              |   | Exhibits                                                     |   | 25       |

 

2

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** PART I -FINANCIAL INFORMATION**

**Item 1.         FinancialStatements**

Our unauditedconsolidated financial statements included in this Form 10-QSB are as follows:

(a)          Balance Sheet as of June30, 2006 and December 31, 2005.

(b)         Statements of Operationsfor the three and six month periods ended June 30, 2006 and 2005, and frominception;

(c)          Statements of Cash Flowsfor six month periods ended June 30, 2006 and 2005, and from inception;

(d)         Notes to FinancialStatements.

These unauditedconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and the SEC instructions to Form 10-QSB.  In the opinion of management, all normallyrecurring adjustments considered necessary for a fair presentation have beenincluded.  Operating results for theinterim period ended June 30, 2006 are not necessarily indicative of theresults that can be expected for the full year.

3

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**Item1.     Financial Statements**

**BalanceSheet as of June 30, 2006 and December 31, 2005**

**DAVI SKIN, Inc.**

**(formerly MW Medical, Inc.)**

**(A Developmental Stage Company)**

**BALANCESHEET**
|                                                  | ** ** | **(Unaudited)**                | ** ** | ** **                     | ** ** |
|--------------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **Jun 30, ‘06** | ** ** | **Dec 31, ‘05** | ** ** |
| **ASSETS**                                       | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Current Assets**                               | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Cash                                             |       | 17,238                         |       | 3,616                          |       |
| Certificate of  Deposit                          |       | 2,534,369                      |       | 1,698,956                      |       |
| Accounts  Receivable                             |       | —                         |       | 6,000                          |       |
| Prepaid Expenses                                 |       | 2,025                          |       | 7,025                          |       |
|                                             |       |                           |       |                           |       |
| **TOTAL  CURRENT ASSETS**                        | ** ** | **2,553,632**                  | ** ** | **1,715,597**                  | ** ** |
|                                             |       |                           |       |                           |       |
| Fixed Assets net  of Depreciation                |       | 16,477                         |       | 48,119                         |       |
|                                             |       |                           |       |                           |       |
| **Other Assets**                                 | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Deposits                                         |       | 44,530                         |       | 11,505                         |       |
|                                             |       |                           |       |                           |       |
| **TOTAL  ASSETS**                                | ** ** | **2,614,639**                  | ** ** | **1,775,221**                  | ** ** |
|                                             |       |                           |       |                           |       |
| **LIABILITIES AND STOCKHOLDERS  EQUITY**         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Current Liabilities**                          | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Accounts Payable                                 |       | 89,833                         |       | 67,802                         |       |
| Notes payable -  related parties                 |       | 240,000                        |       | 230,000                        |       |
| Leasehold Improvement  Allowance                 |       | 10,000                         |       | —                         |       |
|                                             |       |                           |       |                           |       |
| **TOTAL  CURRENT LIABILITIES**                   | ** ** | **339,833**                    | ** ** | **297,802**                    | ** ** |
|                                             |       |                           |       |                           |       |
| **Stockholders Equity**                          | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Preferred Stock                                  |       |                           |       |                           |       |
| Common Stock                                     |       | 12,100                         |       | 11,533                         |       |
| APIC                                             |       | 10,295,095                     |       | 6,699,713                      |       |
| Prepaid  Consulting Expense                      |       | (45,834                        | )          | (68,750                        | )          |
| Retained Earnings                                |       | (7,986,555                     | )          | (5,165,077                     | )          |
|                                             |       |                           |       |                           |       |
| **TOTAL  STOCKHOLDERS  EQUITY**                  | ** ** | **2,274,806**                  | ** ** | **1,477,419**                  | ** ** |
|                                             |       |                           |       |                           |       |
| **TOTAL LIABILITIES &  STOCKHOLDERS EQUITY** | ** ** | **2,614,639**                  | ** ** | **1,775,221**                  | ** ** |

4

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**Statementof Operations**

**DAVI SKIN, Inc.**

**(formerly MW Medical, Inc.)**

**(A Developmental Stage Company)**

**STATEMENTOF OPERATIONS**

**(Unaudited)**

 
|                                              | ** ** | ** **                   | ** ** | ** **                   | ** ** | **From Date**           | ** ** |
|----------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                   | ** ** | ** **                   | ** ** | ** **                   | ** ** | **of Inception**        | ** ** |
| ** **                                   | ** ** | **6 Months Ended** | ** ** | **6 Months Ended** | ** ** | **March 24, 2004** | ** ** |
| ** **                                   | ** ** | **June, 2006**          | ** ** | **June, 2005**          | ** ** | **through June 30, 2006**    | ** ** |
| ** **                                   | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** **                   | ** ** |
| Revenues                                     |       | 25,000                       |       | —                       |       | 25,000                       |       |
| Cost of Revenues                             |       |                         |       |                         |       |                         |       |
| Gross Profit  (Loss)                         |       | 25,000                       |       | —                       |       | 25,000                       |       |
| Operating  Expenses                          |       |                         |       |                         |       |                         |       |
| Selling, Admin &  General                |       | 436,072                      |       | 269,221                      |       | 1,914,073                    |       |
| Depreciation                                 |       | 10,969                       |       | 6,015                        |       | 29,703                       |       |
| Consulting Fees                              |       | 122,277                      |       | 227,102                      |       | 122,277                      |       |
| Employee Option  Expenses                    |       | 2,099,949                    |       | —                       |       | 5,403,553                    |       |
| Professional Fees                            |       | 166,817                      |       | 74,077                       |       | 383,267                      |       |
| Total Operating  Expenses                    |       | 2,836,085                    |       | 576,415                      |       | 7,852,874                    |       |
|                                         |       |                         |       |                         |       |                         |       |
| (Loss) from  Operations                      |       | (2,811,083                   | )          | (576,415                     | )          | (7,827,874                   | )          |
|                                         |       |                         |       |                         |       |                         |       |
| Other Income  (Expense)                      |       |                         |       |                         |       |                         |       |
| Interest Expense                             |       | (10,000                      | )          | (10,005                      | )          | (5                           | )          |
| Interest Income                              |       | 37,678                       |       | 10,326                       |       | 77,446                       |       |
| Loss on  Sale/Disposition of Assets          |       | (38,075                      | )          | —                       |       | (38,075                      | )          |
| Total other  income (Expense)                |       | (10,397                      | )          | 321                          |       | 39,371                       |       |
|                                         |       |                         |       |                         |       |                         |       |
| Net (Loss)                                   |       | (2,821,480                   | )          | (576,094                     | )          | (7,788,503                   | )          |
|                                         |       |                         |       |                         |       |                         |       |
| Basic &  Diluted (loss) per common share |       | (0.24                        | )          | (0.05                        | )          |                         |       |
|                                         |       |                         |       |                         |       |                         |       |
| Basic and  diluted weighted average          |       | 11,841,931                   |       | 10,969,483                   |       |                         |       |
| common shares  outstanding                   |       |                         |       |                         |       |                         |       |

 

5

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**Statementof Cash Flows**

 

**DAVI SKIN, Inc.**

**(formerly MW Medical, Inc.)**

**(A Developmental Stage Company)**

**STATEMENTOF CASH FLOWS**

**(Unaudited)**

 
|                                                  | ** ** | ** **         | ** ** | ** **         | ** ** | **From date of inception** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|--------------------|------------|----------------------------|------------|
| ** **                                       | ** ** | ** **         | ** ** | ** **         | ** ** | **21-Mar-04**              | ** ** |
| ** **                                       | ** ** | **6 months ended** | ** ** | **6 months ended** | ** ** | **through**                | ** ** |
| ** **                                       | ** ** | **June, 30 2006**  | ** ** | **June, 30 2005**  | ** ** | **June, 30 2006**          | ** ** |
| ** **                                       | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| **Operating Activities**                         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
|                                             |       |               |       |               |       |                       |       |
| Net (Loss)                                       |       | (2,821,480         | )          | (576,415           | )          | (7,788,507                 | )          |
| Adjustments to  reconcile net (loss) to          |       |               |       |               |       |                       |       |
| net cash used in  operating activities :         |       |               |       |               |       | —                     |       |
|                                             |       |               |       |               |       |                       |       |
| **Cash used in operating  activities**           | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| Prepaid consulting  expense                      |       |               |       | 22,916             |       | 45,834                     |       |
| Stock based compensation  & expenses         |       | 2,122,865          |       | 8,595              |       | 5,348,955                  |       |
| Depreciation and  amortization                   |       | 10,969             |       | 6,015              |       | 29,702                     |       |
| Accrued Interest                                 |       | 10,000             |       | 10,000             |       | 40,000                     |       |
| Loss from disposition  of fixed assets           |       |               |       | 38,075             |       | 38,609                     |       |
|                                             |       |               |       |               |       |                       |       |
| **Changes in Operating Assets and  Liabilities** | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| Prepaid Expenses                                 |       | 5,000              |       | 9,375              |       | (2,025                     | )          |
| Deposits                                         |       | (33,025            | )          |               |       | (44,530                    | )          |
| Accounts Payable                                 |       | 22,031             |       | 32,170             |       | 89,834                     |       |
| Accounts Receivable                              |       | 6,000              |       |               |       | —                     |       |
|                                             |       |               |       |               |       |                       |       |
| **Net Cash used by Operating  Activities**       | ** ** | **(639,565**       | **)**      | **(487,344**       | **)**      | **(2,242,128**             | **)**      |
| ** **                                       | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| **Investing Activities**                         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
|                                             |       |               |       |               |       |                       |       |
| **Cash flow from investing  activities**         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| Change in certificate  of deposit                |       | (835,413           | )          | (1,724,760         | )          | (2,534,369                 | )          |
| Purchase of Fixed  Assets                        |       | (7,401             | )          | (14,800            | )          | (87,899                    | )          |
| sale of fixed assets                             |       | —             |       | —             |       | 1,739                      |       |
|                                             |       |               |       |               |       |                       |       |
| **Net cash used by Investing  activities**       | ** ** | **(842,814**       | **)**      | **(1,739,560**     | **)**      | **(2,620,529**             | **)**      |
|                                             |       |               |       |               |       |                       |       |
| **Financing Activities**                         |       | —             |       |               |       |                       |       |
|                                             |       |               |       |               |       |                       |       |
| Cash flows from  financing activities            |       |               |       |               |       |                       |       |
| Proceeds from stock  transactions                |       | 1,496,000          |       | 1,859,504          |       | 4,679,890                  |       |
| notes payable related  party                     |       | —             |       | —             |       | 200,000                    |       |
| Short term note payable                          |       | —             |       | (10,500            | )          | —                     |       |
|                                             |       |               |       |               |       |                       |       |
| **Net cash provided by investing  activities**   | ** ** | **1,496,000**      | ** ** | **1,849,004**      | ** ** | **4,879,890**              | ** ** |
| ** **                                       | ** ** | ** **         | ** ** | ** **         | ** ** | ** **                 | ** ** |
| **Net change in cash and cash  equivalents**     |       | 13,621             |       | (377,900           | )          | 17,238                     |       |
| **Cash at beginning of period**                  |       | 3,617              |       | 506,131            |       | —                     |       |
| **Cash at end of period**                        | ** ** | **17,238**         | ** ** | **128,231**        | ** ** | **17,238**                 | ** ** |

6

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**Notes toFinancial Statements**

**NOTES TOFINANCIAL STATEMENTS (Unaudited)**

1.             BASIS OF PRESENTATION

The accompanyingunaudited consolidated financial statements of DaviSkin, Inc. (“Company”) havebeen prepared in accordance with Securities and Exchange Commissionrequirements for interim financial statements. Therefore, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements. Thefinancial statements should be read in conjunction with the Form 10-KSB of theCompany for the year ended December 31, 2005.

The interim financialstatements present the balance sheet, statements of operations, cash flows ofthe Company. The financial statements have been prepared in accordance withaccounting principles generally accepted in the United States.

In the opinion ofmanagement, all normally recurring adjustments necessary to present fairly thefinancial position as of June 30, 2006 and the results of operations, cashflows presented herein have been included in the financial statements. Interimresults are not necessarily indicative of results of operations for the fullyear.

2.             DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OFSIGNIFICANT POLICIES

Description of business.Davi Skin, Inc., (referred to as the “Company”) is involved in theestablishment and development of an all natural grape-based skin care line.

History. On June 21,2004, the Company completed and closed a Plan of Merger and ReorganizationAgreement (“Merger Transaction”) with DaviSkin, Inc. (“Davi”), a privatelyowned company, whereby both parties agreed that a subsidiary of the Companywould merge into and with Davi and become a wholly owned subsidiary of theCompany. As consideration for this merger transaction, the Company issued9,768,327 shares of its common stock in exchange for all the outstanding commonstock of Davi on a one-for-one share exchange basis. The Agreement furtherprovided for Company’s officers and directors were to resign and the board ofdirectors of Davi would become the board of directors for the Company. Thistransaction has been accounted for as a recapitalization or reverse mergerwhereby Davi would be considered the accounting acquirer, and the accountinghistory of the acquirer would be carried forward as the history for the Companyand no goodwill would be recorded. Accordingly, the accompanying financialstatements reflect the history of Davi from its date incorporation of March 21,2004 (incorporated in the State of Nevada). Prior to the merger transaction,the Company had 645,033 shares of its common stock outstanding, $1,922 inaccounts payable, $200,000 in a note payable to a related party and no assets.

Development StageCompany. The accompanying financial statements have been prepared in accordancewith the Statement of Financial Accounting Standards No. 7 “Accounting andReporting by Development-Stage Enterprises”. A development-stage enterprise isone in which planned principal operations have not commenced or if itsoperations have commenced, there has been no significant revenue there from.

Going concern. Theaccompanying financial statements have been prepared on a going concern basis,which contemplates the realization of assets and the satisfaction ofliabilities in the normal course of business. The Company has incurredcumulative net losses of $7,986,557 since its inception and may

7

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require additionalcapital for its operational activities. The Company’s ability to raiseadditional capital through the future issuances of the common stock isunknown.  Obtaining additional financingand attaining profitable operations are necessary for the Company to continueoperations. The ability to successfully resolve these factors raise substantialdoubt about the Company’s ability to continue as a going concern. Theconsolidated financial statements of the Company do not include any adjustmentsthat may result from the outcome of these aforementioned uncertainties.

Definition of fiscalyear. The Company’s fiscal year end is December 31.

Use of estimates. Thepreparation of consolidated financial statements in conformity with accountingprinciples generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amounts of revenue andexpenses during the reporting period. Actual results could differ from thoseestimates.

Revenue recognition.Revenues are recognized when services are rendered and/or delivered. Costs andexpenses are recognized during the period in which they are incurred.

Cash and CashEquivalents. The Company considers all highly liquid short-term investments,with original maturities of three months or less, to be cash equivalents. Suchcash equivalents generally are part of the Company’s cash management activitiesrather than part of its operating, investing, and financing activities. Changesin the market value of cash equivalents result in gains or losses that arerecognized in the income statement in the period in which they occur.

The Company periodicallyevaluates whether events and circumstances have occurred that may warrantrevision of the estimated useful life of fixed assets or whether the remainingbalance of fixed assets should be evaluated for possible impairment. TheCompany uses an estimate of the related un-discounted cash flows over theremaining life of the fixed assets in measuring their recoverability.

Fair value of financialinstruments. Statement of Financial Accounting Standards (“SFAS”) No. 107, “DisclosureAbout Fair Value of Financial Instruments”, requires the Company to disclose,when reasonably attainable, the fair market values of its assets andliabilities which are deemed to be financial instruments. The carrying amountsand estimated fair values of the Company’s financial instruments approximatetheir fair value due to their short-term nature.

Earnings (loss) per share- Basic earnings (loss) per share exclude any dilutive effects of options,warrants and convertible securities. Basic earnings (loss) per share is computed using the weighted-averagenumber of outstanding common shares during the applicable period. Dilutedearnings (loss) per share is computed using the weighted-average number ofcommon and common stock equivalent shares outstanding during the period. Commonstock equivalent shares are excluded from the computation if their effect isanti-dilutive. Stock option are anti-dilutive when the results from operationsare a net loss, as is the case for the for the period ended June 30, 2006 orwhen the exercise price of the options is greater than the average market priceof the common stock for the period.

Income taxes. The Companyaccounts for its income taxes in accordance with Statement of FinancialAccounting Standards No. 109 “Accounting for Income Taxes”, which requiresrecognition of deferred tax assets and liabilities for future tax consequencesattributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases and tax creditcarry-forwards. Deferred tax assets and liabilities are measured using enactedtax rates expected to apply to taxable income in the years in which thosetemporary differences are expected to be recovered or settled. The effect ondeferred tax assets and liabilities of a change in tax rates is recognized in

8

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income in the period thatincludes the enactment date.

As of June 30, 2006, theCompany has available net operating loss carryovers of approximately $7,986,557that will expire in various periods through 2024. Such losses may not be fullydeductible due to the significant amounts of non-cash service costs. TheCompany has established a valuation allowance for the full tax benefit of theoperating loss carryovers due to the uncertainty regarding realization.

Advertising costs.Advertising costs incurred in the normal course of operations are expensed asincurred. No advertising costs have been incurred from March 21, 2004 (date ofinception) through June 30, 2006.

Stock-based compensation- The Company applies Financial Accounting Standard 123R, “Accounting for StockBased Compensation,”, which requires the recognition of compensation cost basedupon the fair value of stock options at the grant date using the Black-Scholesoption pricing model.

The Board of Directorsadministers the Company’s stock option plan which provides for the granting ofrights to purchase shares to the Company’s directors (including non-employeedirectors), executive officers, key employees, and outside consultants. TheBoard of Directors sets the vesting period and exercise price per issuancebasis as determined by the purpose of the individual issuance.

On November 1, 2005, weentered into an employment agreement (“Agreement”) with our President. The termof the Agreement is for two years with an annual salary of $120,000. TheAgreement provides for bonuses to our President based upon our financialperformance to be determined at the sole discretion of our Board of Directorsafter consultation with our President. The Agreement also provides for equitybased compensation to purchase up to 1,250,000 shares of our common stock (“StockOptions”) at a purchase price of $0.25 per share. The Stock Options will vestas follows: 250,000 shares upon execution of the Agreement; 500,000 shares onMarch 1, 2006; and 250,000 shares on each March 1, and June 1, 2006. Theestimated fair value of the Stock Options have been determined usingBlack-Scholes option pricing model using the following assumptions:

| exercise price of                                |   | $0.25               |   |
|--------------------------------------------------|--------|---------------------|--------|
| closing stock price on  date of the Agreement of |   | $3.50               |   |
| historical stock price  volatility of            |   | 77%                 |   |
| risk free interest rate  of                      |   | 3.50%               |   |
| dividend yield of                                |   | 0% and 3 year term. |   |

The estimated fair value of the Stock Options totaled$4,102,537, which will be expensed over the vesting period. Through the periodended June 30, 2006, we recorded an expense related to the Stock Optionstotaling $4,102,537.

On June 8, 2006, weentered into an employment agreement (“Agreement”) with our Chief FinancialOfficer. The term of the Agreement is for two years with an annual salary of$120,000. The Agreement provides for bonuses to our Chief Financial Officerbased upon our financial performance to be determined at the sole discretion ofour Board of Directors, and quarterly bonuses tied to the accurate and timelyfiling of all required SEC filings. The Agreement also provides for equitybased compensation to purchase up to 370,000 shares of our common stock (“StockOptions”) at a purchase price of $1.00 per share. The Stock Options will vestas follows: 10,000 shares upon execution of the Agreement; 30,000 shares at theend of each quarter during the term that the Executive remains employed.Certain conditions, for example the raising of capital, could triggeracceleration of vesting in the future. None of these conditions were met at June 30, 2006. The estimated fairvalue of the Stock

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Options have beendetermined using Black-Scholes option pricing model using the followingassumptions:

| exercise price of                                |   | $1.00               |   |
|--------------------------------------------------|--------|---------------------|--------|
| closing stock price on  date of the Agreement of |   | $1.01               |   |
| historical stock price  volatility of            |   | 59%                 |   |
| risk free interest rate  of                      |   | 5.0%                |   |
| dividend yield of                                |   | 0% and 3 year term. |   |

The estimated fair value of the Stock Options totaled$272,824, which will be expensed over the vesting period. Through the periodended June 30, 2006, we recorded an expense related to the Stock Optionstotaling $7,374.

In order to determinecompensation on options issued to consultants, as well as fair valuedisclosures for employees options, the fair value of each option granted isestimated on the date of grant using the Black-Scholes option-pricing model.The Company estimates the requisite service period used in the Black-Scholescalculation based on an analysis of vesting and exercisability conditions,explicit, implicit, and/or derived service periods, and the probability of thesatisfaction of any performance or service conditions. The Company alsoconsiders whether the requisite service has been rendered when recognizingcompensation costs. The Company does not consider market conditions to bevesting conditions and an award is not deemed to be forfeited solely because amarket condition is not satisfied.

3.             RELATED PARTY TRANSACTIONS

The Company allegedlyowes $200,000 to the former President of MW Medical.  The note allegedly evidencing this obligationwas originally due December 31, 2004 and carries an interest rate of 10% perannum.  Accordingly, interest of $40,000has been recorded.  The maturity date ofthe note was originally extended to December 31, 2005, but the obligationspurportedly evidenced by the note have not been paid by the Company.  Therefore, if valid, the note is currently indefault.  The ownership of the note isthe subject of a lawsuit filed in federal court; however, the Company is notnamed as a party to the lawsuit.  Whilethe Company does report the liability on its balance sheet, it should be notedthat the Company does not possess and has not received documentation establishingthe note’s validity.  The company reservesits rights to cancel the note and any obligations that may exist thereunder,including principal and any accrued interest if it cannot be established thatthe note survived the bankruptcy proceeding of MW Medical.

4.             STOCK ACTIVITY

On March 27, 2006, TheCompany closed a Stock Purchase Agreement with Artist House Holdings, Inc.Under the Stock Purchase Agreement, Artist House has agreed to purchase 283,333of our “Securities Units,” consisting of 566,667 shares of common stock and awarrant to purchase an additional 283,333 shares of common stock at $4.50 pershare exercisable in 24 months, in exchange for $1,700,000 less $204,000 infees for a net of 1,496,000 in cash; an effective price of $3.00 per share.Under the terms of the agreement, The Company filed a registration statementfor the 566,667 shares of common stock within the requisite 45-day windowrequired under the Stock Purchase Agreement.

The Company hasregistered the shares, and no late fees have been accrued for in the financialstatements.  Management does not believethat any late fees are due.

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The warrants issued inthe above mentioned investment were valued at $275,737 using the Black-Scholesoption pricing model and is described as “Additional paid in capital — warrants”in the stockholders’ equity section of the balance sheet. The following tablesummarizes the assumptions used in arriving at the valuation:
| Number of warrants issued            |   | 283,333                   |   |
|--------------------------------------|--------|---------------------------|--------|
| Stock price at  grant date           |   | $1.50                     |   |
| Exercise price                       |   | $4.50                     |   |
| Term                                 |   | 24  months                |   |
| Volatility                           |   | 283,333 warrants at  173% |   |
| Annual rate of  quarterly dividends  |   | 0.00%                     |   |
| Discount Rate-Bond  Equivalent Yield |   | 3.50%                     |   |

5.             EQUITYSECURITIES OFFERINGS

There are currently noactive equity offerings from The Company.

6.             LEGAL PROCEEDINGS

Other than as describedbelow, we are not aware of any pending or threatened legal proceeding to whichany of our officers, directors, or any beneficial holders of 5% or more of ourvoting securities are adverse to us or have a material interest adverse to us.

On May 4, 2006, wereceived a letter from Mr. Jeremy T. Glantz, then-legal counsel representingArtist House Holdings, Inc. (“Artist House”) in which Artist House purportedlyterminated that certain Stock Purchase Agreement, dated as of March 27, 2006,to which we and Artist House are parties (the “SPA”) and demanded unconditionalreturn of $1.7 million, representing Artist House’s purchase price under theSPA for 566,667 shares of our common stock plus warrants exercisable into283,333 shares of our common stock.  In this demand letter, Artist Housealleged that we have failed to timely perform certain conditions andobligations under the SPA, including (a) appointing certain individualsaffiliated with Artist House to our board of directors, (b) obtaining directorsand officers liability insurance, (c) modifying rights related to stock optionsissued to our CEO, Joe Spellman, (d) appointing Artist House as our licensingagent in Japan, and (e) requiring board approval for any salary increases to ourofficers.  On July 6, 2006, counsel for the Company received writtennotice from Mr. David G. LeGrand, newly-engaged counsel representing ArtistHouse, demanding rescission of the SPA, based on the following claims andallegations:  (a) breach of warranty thatofficers’ salaries had not been increased since January 1, 2006, or breach ofcovenant not to increase officers’ salaries following the date of the SPA; (b)breach of covenant to expand the Board of Directors of the Company to includethe Artist House Candidates (as defined below); (c) breach of covenant todesignate Artist House as the Company’s licensing agent in Japan; (d) breach ofcovenant to modify the stock option agreement of the Company’s chief executiveofficer, Joseph Spellman; (e) breach of covenant to discontinue and terminatethe Company’ credit card; (f) breach of covenant to hold $1,700,000 ininvestment proceeds of Artist House in a separate account; (g) breach ofcovenant to obtain directors and officers liability insurance; (h) breach ofcovenant by shareholders Carlo Mondavi and Josh LeVine to execute and deliver ashareholders agreement; (i) breach of covenant by Timothy Mondavi to join theBoard of Directors of the Company; (j) use by the Company of an unlicensedbroker to raise investment proceeds that were the subject of the SPA; and (k)breach of agreement regarding deferral of officers’ salaries.   On August 2, 2006, a lawsuit entitled ArtistHouse Holdings, Inc. vs. Davi Skin, Inc. et. al., United States District Court,District of Nevada, Case No. 2:06-CV-893-RLH-LRL, was filed in federal districtcourt in Nevada in connection with this matter. Although notified of the filing, the Company has yet to be served.  The company intends to defend itselfvigorously.

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An action entitled TohidNaeem vs. Carlo Mondavi, Timothy Mondavi, Davi Skin, Inc. et. al., Los AngelesSuperior Court Case No. BC355913 was filed on July 25, 2006, and to ourknowledge has not yet been served on the Company or the individual defendants. Our counsel learned of this filing from published reports of case filingsand has reviewed the complaint.  The complaint alleges that sometimebefore the formation of Davi Skin, Inc., Carlo Mondavi and his father TimothyMondavi orally agreed with plaintiff to form a joint venture and that, inconsideration for plaintiff’s providing certain undefined services to the jointventure, plaintiff would own 48% of a company to be formed by the jointventure, which was ultimately Davi Skin, Inc.  Plaintiff pleads damages ofnot less than One Million Dollars ($1,000,000) and, in a claim for “accountstated”, further contends that he is owed $125,000 as the balance due forefforts undertaken prior to the incorporation of Davi Skin, Inc.  Sincethere are no written documents or agreements that have been submitted tosupport the contract claims asserted, we cannot fully evaluate the claimswithout further formal discovery.  We do not believe, however, that theclaims are meritorious and dispute the underlying facts alleged.

During April, 2006, wereceived a letter from a third party requesting the exercise of a conversionright attached to a $200,000 note originally due to Ms. Jan Wallace, the formerCEO of MW Medical.  At this time,management does not believe that the note and its rights were assigned underproper conditions and until this matter is resolved, management does notbelieve it is obligated to grant the conversion. The matter remains underinvestigation.

The financial statementsdo not reflect any adjustments that could result from an unfavorableoutcome.  The likelihood of anunfavorable outcome and the range of loss. If any, could not be determined bymanagement.

**Item2.      Plan of Operation**

**Forward-LookingStatements**

Historicalresults and trends should not be taken as indicative of future operations.Management’s statements contained in this report that are not historical factsare forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities andExchange Act of 1934 (the “Exchange Act”), as amended. Actual results maydiffer materially from those included in the forward-looking statements. Weintend such forward-looking statements to be covered by the safe-harborprovisions for forward-looking statements contained in the Private SecuritiesLitigation Reform Act of 1995, and are including this statement for purposes ofcomplying with those safe-harbor provisions. Forward-looking statements, whichare based on certain assumptions and describe our future plans, strategies andexpectations, are generally identifiable by use of the words ”believe,” “expect,”“intend,” “anticipate,” “estimate,” “project,” “prospects,” or similarexpressions. Our ability to predict results or the actual effect of future plansor strategies is inherently uncertain. Factors which could have a materialadverse affect on the operations and our future prospects on a consolidatedbasis include, but are not limited to: changes in economic conditions,legislative/regulatory changes, availability of capital, interest rates,competition, and generally accepted accounting principles. These risks anduncertainties should be considered in evaluating forward-looking statements andundue reliance should not be placed on such statements. Further informationconcerning our business, including additional factors that could materiallyaffect our financial results, are included in this discussion and in our otherfilings with the Securities and Exchange Commission.

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**Plan of Operation**

We were incorporated onDecember 4, 1997, as MW Medical, originally a wholly owned subsidiary ofDynamic Associates, Inc.  On June 21,2004, we completed and closed a Plan of Merger and Reorganization Agreement (“Merger”)with Davi Skin, Inc., an unrelated, privately-held Nevada corporation.  That business was founded by the chairman ofour board of directors, Mr. Carlo Mondavi, in March of 2003 with his vision ofcreating an all-natural grape-based luxury skin care line.

As a result of themerger, our primary business has been the establishment and development of anatural grape-based skin care line.  Ourplan has been to develop, manufacture and market a line of skin care productsin the luxury segment of the skin care product market.  The development of the product line and itsrelated packaging is now complete.  TheCompany will initially be selling nine (9) different products, four (4)products in the women’s line and five (5) products in the men’s line, which aredescribed in more detail below.  All theproducts will be available for our retail launch which is currently scheduledto take place in October 2006.

The Company has engagedPaul Wilmot Communications (“Wilmot”) to handle our marketing, promotional andpublic relations activities.  Therelationship with Wilmot and the Company’s ability to leverage our BoardChairman’s visible and respected Mondavi name, have generated significant publicrelations and marketing exposure and events for the Company and the Davibrand.  Davi is scheduled to be prominentlyfeatured this fall in the Conde Nast publication *Men’s Vogue*and potentially other nationally recognized beauty magazines.  All of these events and activities shall coincidewith our upcoming product launch.

***SkinCare Line***

Planting techniques atselect vineyards that we utilize exclusively, produce deeper vines with a loweryield of grapes per vine. After processing, these grapes yield higherconcentrations of minerals, vitamins, and nutrients than grapes from othervineyards.  Many of the minerals,vitamins and nutrients are found in a by-product of the wine making processcalled the pomace.  Additionally, theuniquely long maceration process to which these grapes are subjected yieldpolyphenols in relatively high quantity. Polyphenols are the free radical scavengers that, among other things,help to protect collagen and elastin fibers and prevent the destruction ofhyaluronic acid in the skin.  Managementbelieves that the use of this pomace among other unique ingredients will allowfor the creation of a skincare line that can help fight the visible signs ofpremature aging.

**a.             The Skin Care Market**

The skin care market canbe divided into four distinct segments: (a) Luxury; (b) Prestige; (c) Masstige;and (d) Mass.  The following is a briefdiscussion of each of these segments.

Luxury

The luxury segment of theskin care market involves high-end products, sold in department stores such asBergdorf-Goodman, Neiman Marcus, Barneys and Saks Fifth Avenue. Skin crèmeproducts in this market segment will generally be priced over $150.  Examples of product lines sold in thesemarkets, include La Prairie, Sisley, Crème de la Mer and Aqua di parma. We areplanning to position our products in this market.

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Prestige

The prestige segment ofthe skin care market involves quality products, sold in wide distributionthrough department stores, brand stores and specialty stores such as Sephoraand Ultra.   Examples of product linessold in these markets include Lancôme, Estee Lauder, L’Occitane and Caudalie.

Masstige

The masstige segment ofthe skin care market involves discounted products sold primarily in drugstores, high-end discount stores such as Target and Kohl’s and selectdepartment stores. Direct sales distributions are also often considered to involvemasstige product sales. Skin crème products in this market segment aregenerally priced below the prestige segment, but higher than the masssegment.  This market segment isidentified by a higher perceived brand image based on quality, effectivenessand style, and includes product lines such as Neutrogena, L’Oreal and Olay.

Mass

The mass segment of theskin care market involves products sold in grocery and drug stores.  These products are generally priced at thelower end of market and this segment of the market includes product lines suchas Dove, Herbal Essence, and Aveeno.

**b.             Development of Skin Care Products**

Product

We have completeddevelopment of and have a contract with a manufacturer of skin care products toproduce a series of skin crème products, including the following:

**Women’s Line**

**Face Cream (Le Grand Cru)**- An ultra-luxurious cream designed forwomen to provide a unique, long lasting, slow released infusion ofanti-oxidants and moisture to the skin in order to make it smoother, softer andmore supple;

**SPF 30Lotion** - Oil free everyday moisturizer with UVB/UVAprotection of a SPF 30.  Formulated as alight, non-greasy formula, which is perfect for any type skin to moisturize andprotect against oxidative damage such as pollution and stress;

**Skin Cleanser** –A gentle, luxurious creamy productdesigned to cleanse and condition at the same time;

**Misting / Toning Spray** - A superhydrating mist, formulated to tone, hydrate and refresh dull complexion.

**Men’s Line**

**Face Cream (Le Grand Cru)**- An ultra-luxurious cream designed formen to provide a unique, long lasting, slow released infusion of anti-oxidantsand moisture to the skin in order to make it smoother, softer and more supple;

**SPF 15 Lotion** -Oil free everyday moisturizer with UVB/UVA protection of a SPF 15.  Formulated as a light, non-greasy formula,which is perfect for any type skin to moisturize and protect against oxidativedamage such as pollution and stress;

**ShaveCream** - A luxurious shave cream designed to provide anextraordinarily close yet comfortable shave;

**AfterShave Tonic** - An aftershave elixir /tonic used to soothefreshly shaved skin, reduce irritation and provide moisturizing properties;

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**Exfoliating Cleanser**—Infused with crushed grape seeds thisproduct is designed to cleanse, exfoliate and condition in the same time.

We have developedformulations for our products using a proprietary bio complex blend of 10different raw materials, which are consistent across the entire productline.  The key items are the materialscontaining the anti-oxidant properties that are believed to help fight freeradical damage caused by sunlight, stress and other environmental factors.Other key ingredients used in these formulas have been selected for theirefficacy in helping to correct existing damage and thereby also supporting ouranti-aging goals.

We consider theseformulations as they have been developed and tested to be proprietary, and thushave been and will remain vigilant in protecting the details of our developingproduct mix.

As the products areexpected to be sold over the counter, we do not anticipate needing or obtainingany Federal Food and Drug Administration approvals and we do not plan on doingany clinical testing of any kind.  Theproducts containing SPF or any other over the counter ingredients, however,will need to meet FDA testing regulations and the global standards for sales incountries other than the United States.

Manufacture

Initial production hasbegun, and we have received a commercial batch of each product, bottle andpackage for final approval. Additionally, the Company has completed the process of choosing all theperipheral items involved in the manufacturing and marketing process,including:

i.                  the shape andsize of the product containers;

ii.               the types of caps;

iii.            the packaging;

iv.           the logo and labeldesigns; and

v.              unit cartons.

**c.             Marketing and Distribution**

The Company has recentlyconducted detailed discussions with a major retailer regarding distribution ofDavi products.  We are in the process ofdefining the launch schedule and the promotional events that will surroundit.  We expect our products to beavailable over the counter in Fall, 2006, although a definitive launch date hasyet to be determined.

**d.             Competition**

Among all the brandsfound in this industry, we consider our closest competitor to be Caudalie.Caudalie is a French spa and skincare line that reflects our product conceptand closely resembles our proposed product line. The creators behind Caudalieare wine makers with a family vineyard located in the wine region of France.The concept of the Caudalie product line, like ours, is an extrapolation on thebenefits of the antioxidants and polyphenols found mainly in grape seeds. Theadvantage of Caudalie over our proposed product in the marketplace at this timeis two fold: (a) they have been on the market for over a decade and have grownto be a global brand with distribution outlets all over the world; and (b) theyserve a larger target audience with a lower price point than we anticipate.

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The prime differencebetween Caudalie and our proposed product line is expected to be based on themarket segment and quality of ingredients that will be included in ourproducts. Unlike Caudalie, who is segmented in the *prestige*market, we expect our product line to be sold in the *luxury*market. Further, our brand will use only the highest quality ingredientsavailable, including wine extract, producing a highly concentrated preparationof antioxidant polyphenols. We have also created our own proprietary bio-deliverycomplex that encapsulates a variety of selected antioxidant ingredients to beeffectively delivered directly to the skin without compromising theirintegrity.  We are also using our ownuniquely innovative raw materials derived from the wine making process asopposed to only using commercially available raw materials. Our product linewill also be packaged in high quality containers with inviting labels, versusthe lesser quality plastic tubes and bottles used by Caudalie.

Other brands with similarlifestyle stories include SKII, Creme de la Mer and L’Occitane.  These brands share the theme of being derivedfrom nature and generally having a named or unnamed individual who was inspiredby the benefits of certain raw materials. For example, the secret formulabehind SKII is their “Pitera”, a yeast extract discovered by a monk who noticedthe wonderfully youthful hands of workers who make Sake.  These brands have revealed their stories andtheir inspirations by creating product lines where customers are invited toshare in their innovations.

***Licensing Agent***

In order to further our success and to leverage ourBoard Chairman’s highly visible and well-respected Mondavi name into othermarket categories, we entered into an agreement with Constellation Brands Group(“CBG”), the parent entity of The Robert Mondavi Corporation (“RMC”).  RMC has retained us to act as their licensingagent in agreements with Waterford Wedgewood USA, Inc. (“Waterford”) on thedevelopment of a Robert Mondavi stemware line. CBG owns certain intellectual property rights held in RMC, including thevalued Robert-Mondavi licensed marks (the “Intellectual Property”), and we havebeen engaged to: (1) negotiate opportunities with Waterford to license theIntellectual Property with Waterford’s stemware products, (2) develop andimplement strategic plans for branding Waterford’s products, and (3) facilitatethe terms and conditions of any agreements with Waterford.  In exchange, CBG has agreed to compensate uswith a revenue share of one-third (33 -1/3%) of the gross revenues collected inany agreement we establish with Waterford. Gross revenues means the gross receipts actually received from anyagreement with Waterford, including without limitation advance payments,minimum guarantees, royalty payments and other license fees.

We received a one-time $25,000 signing bonus for thesuccessful negotiation and execution of the Constellation licensingarrangement.  Per the terms of the agreement, we do not expect significantrevenues from this agreement to begin until the first quarter of 2007.

Under the terms of theinvestment from Artist House, Artist House became a licensee of Davi to helpmarket and distribute our products in Japan. Under the terms of the agreement, Artist House is obligated tofacilitate the terms and conditions of any agreements with Davi.  In exchange, Davi would compensate ArtistHouse with a revenue share of one-third (33 -1/3%) of the gross revenuescollected in any agreement we establish with Artist House.  As has been previously disclosed, ArtistHouse has made demand upon us to rescind their investment in the Company,which, among other things, would terminate Artist House’s obligation to act asour licensee for marketing and distribution in Japan.  Failure to have a licensee in Japan couldhave an adverse impact on our ability to penetrate the Japanese consumer retailmarket and to promote our product in Japan.

Management has learned that certain parties haveapplied for our trademark in Japan, and believes those parties are obligated totransfer that trademark to us.  We havebegun that process.  Failure to recapturethis trademark could have a material impact on our financial performance.

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a.    Business Development

Aspart of our effort to generate revenue from licensing intellectual property, we are seeking opportunities to acquiresmall companies in related businesses. Any acquisition we enter into at this point is expected to bring newcapital and new opportunities with it; thereby offsetting our current corporateoverhead and maximizing our ability to pursue future opportunities.

b.    Sub-Agencies

We previously enteredinto a Stock Purchase Agreement with Artist House Holdings, Inc. in whichArtist House invested an additional $1,700,000 into our stock and we received anet amount of $1,496,000 after payment of a finder’s fee.   In that agreement, we have agreed thatArtist House Holdings, Inc. would be our licensing agent in Japan.  In this way we expect to create a more globalpresence and thereby generate additional revenues.  As has been previously disclosed, ArtistHouse has made demand upon us to rescind their investment in the Company,which, among other things, would terminate Artist House’s obligation to act asour licensee for marketing and distribution in Japan.  Failure to have a licensee in Japan couldhave an adverse impact on our ability to penetrate the Japanese consumer retailmarket and to promote our product in Japan.

c.    Competition

Competition for ourproposed new venture of housing various luxury brands under one parent companyare Louis Vuitton, Moet Hennessey and Gucci Group.  These competitors focus mainly on brands thattend to complement their already existing line of business, while we areintending to focus on luxury brands in all areas of daily living.  We feel that there are numerous companiesthat are available for acquisition or partnering who would ultimately beconsidered too small for our competition to acquire. We anticipate that suchacquisitions will complement our licensing efforts related to the Mondavi andDavi names.

**PlannedPurchases of Equipment**

We do not anticipate purchasing any real property or significantequipment during the next twelve (12) months.

**Employees**

On June 8, 2006,the Company appointed Theodore Lanes as our Chief Financial Officer.   Mr. Lanes had been acting in a consultingcapacity for the prior two (2) months. The final compensation package for Mr. Lanes was filed as an exhibit tothe Form 8-K that was filed by us to announce his appointment.

We currently have only one part-time administrative employee andfour officers on our payroll.  Themajority of our administrative requirements are handled by outsidesources.  Our employees are notrepresented by labor unions or collective bargaining agreements. Our keyemployees are Mr. Carlo Mondavi, founder and chairman of our board ofdirectors, Mr. Joshua LeVine, co-founder, executive vice president and creativedirector, Mr. Joe Spellman, our president and Chief Executive Officer, and Mr.Ted Lanes, our Chief Financial Officer.

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**ExecutiveAdvisory Board**

Our board of directorshas created a blue ribbon Executive Advisory Board, assembled to assist ourofficers in making certain high level planning decisions.  While the members of the Executive AdvisoryBoard have no authority over our business operations, the board anticipatesthat their input will provide great value to our executives in their decisionmaking process.  This advisory boardincludes the following persons along with a brief description of their businessbackground:

**RobertG. Mondavi** is the Founder and Chairman Emeritus of RobertMondavi Winery. At the age of 93, Mr. Mondavi is a global emissary of Americanfood and wine. He is also currently active as a major benefactor of culturaland educational institutions, including Copia, an American center for Wine Foodand the Arts; and the University of California at Davis, establishing theRobert Mondavi Institute for Wine and Food Science.

**TimothyJ. Mondavi** is the Vice Chairman and Winegrower for RobertMondavi Winery. In this role, Mr. Mondavi leads the winegrowing team at thewinery in setting the style and vision for every wine made. Mr. Mondavigraduated from the University of California at Davis in 1974.

**Jean-MarcBenet**grew up in the beauty industry. His father, AndreBenet, was the founder of Decleor, a Paris-based botanical professionalskincare company. The Benet Family acquired Darphin, which at the time has asmall skincare line based on aromatherapy and natural plant extracts. Over thelast decade, the Bene family has grown Darphin to a full professional andretail skincare line with over 90 products. Today we are dedicated to thedevelopment, manufacturing and marketing of prestige skin care and makeupproducts. Under the guidance of Jean-Marc Benet and his family, Darphin hasgrown from $500,000 in annual sales to in excess of $50,000,000 in annual salesand is currently sold in over 60 countries around the world. Estee Lauderacquired Darphin in 2003. Jean-Marc has remained on as General Manager forDarphin USA.

**Jerry LeVine** isa partner with Grobstein, Horwath & Company LLP. He is a Certified PublicAccountant with more than 30 years experience. Mr. LeVine specializes inproviding accounting and auditing services to both private and publicly held companies.Mr. LeVine is a graduate from California State University, Northridge and is amember of the AICPA and the California Society of Certified Public Accountants.

**R. Michael Mondavi**resignedfrom our Advisory board in June 2006 to pursue other interests.

**Assets**

Our total assetsas of June 30, 2006 were $2,614,637.  Ourassets largely consist of cash in the amount of $17,236 and certificates ofdeposit in the amount of $2,534,369.  Ourtotal assets as of June 30, 2005, were $2,214,132, including cash andcertificates of deposit in the combined amount of $2,165,943.  The increase in our assets for the periodending June 30, 2006, is a result of our sales of additional common stockthrough the private placements.

**Liabilities and StockholdersDeficit**

Our total liabilities asof June 30, 2006 were $339,833.  Ourliabilities consisted of (i) accounts payable in the amount of $89,833, and(ii) $240,000 in convertible notes payable to a related party, namely ourformer President.  The accrued intereston the note payable is $40,000, including $5,000 accrued in the 3 months endedJune 30, 2006.  The note was originallyissued in March of 2003. It came due, after extensions, on December 31, 2005and remains unpaid.

As previously noted, theCompany allegedly owes $200,000 to the former President of MW Medical.

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The note allegedlyevidencing this obligation was originally due December 31, 2004 and carries aninterest rate of 10% per annum. Accordingly, interest of $40,000 has been recorded.  The maturity date of the note was originallyextended to December 31, 2005, but the obligations purportedly evidenced by thenote have not been paid by the Company. Therefore, if valid, the note is currently in default.  The ownership of the note is the subject of alawsuit filed in federal court; however, the Company is not named as a party tothe lawsuit.  While the Company doesreport the liability on its balance sheet, it should be noted that the Companydoes not possess and has not received documentation establishing the note’svalidity.  The company reserves itsrights to cancel the note and any obligations that may exist thereunder,including principal and any accrued interest if it cannot be established thatthe note survived the bankruptcy proceeding of MW Medical.

**Liquidity and Capital Resources**

As of June 30,2006, we had total current assets consisting of cash and certificates ofdeposit in the combined amount of $2,614,637. The increase in our net cash position from the period endingDecember  31, 2005, is primarily attributableto the sales of common stock in our private equity offering.

We expect that ourcurrent cash on hand will be sufficient to fund our operations forapproximately the next twelve (12) months and meet our requirements forcompleting our product launch, promotion and advertising.

**Off Balance Sheet Arrangements**

As of June 30, 2006, there were no off balance sheetarrangements.

**Going Concern**

We may require additional capital for ouroperational activities and our ability to raise capital through future issuancesof common stock is unknown.  Obtainingadditional financing and attaining profitable operations are necessary for usto continue operations.  These factors,among others, raise substantial doubt about our ability to continue as a goingconcern.  The unaudited consolidatedfinancial statements do not include any adjustments that may result from theoutcome of these aforementioned uncertainties.

**Critical Accounting Policies**

In December 2001,the SEC requested that all registrants list their three to five most “criticalaccounting polices” in the Management Discussion and Analysis. The SECindicated that a “critical accounting policy” is one which is both important tothe portrayal of a company’s financial condition and results, and requiresmanagement’s most difficult, subjective or complex judgments, often as a resultof the need to make estimates about the effect of matters that are inherentlyuncertain. We believe that the following accounting policies fit thisdefinition:

Revenue recognition. Revenues are recognized when services are rendered and/ordelivered. Costs and expenses are recognized during the period in which theyare incurred.

Stock-based compensation – The Company applies Financial Accounting Standard 123R, “Accountingfor Stock Based Compensation,”, which requires the recognition of compensationcost based upon the fair value of stock options at the grant date using theBlack-Scholes option pricing model.

Our Board ofDirectors administers our stock option plan which provides for the granting ofrights to purchase shares to our directors (including non-employee directors),executive officers, key employees,

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and outsideconsultants. As of December 31, 2005, all options issued under this plan wereissued to non-employee outside consultants. No options have been issued toemployees. Our Board of Directors sets the vesting period and exercise priceper issuance basis as determined by the purpose of the individual issuance.

On November 1,2005, we entered into an employment agreement (“Agreement”) with our Presidentand Chief Executive Officer. The term of the Agreement is for two years with anannual salary of $120,000. The Agreement provides for bonuses to our Presidentbased upon our financial performance to be determined at the sole discretion ofour Board of Directors after consultation with our President. The Agreementalso provides for equity based compensation to purchase up to 1,250,000 sharesof our common stock (“Stock Options”) at a purchase price of $0.25 per share.The Stock Options will vest as follows: 250,000 shares upon execution of theAgreement; 500,000 shares on March 1, 2006; and 250,000 shares on each March 1,and June 1, 2006. The estimated fair value of the Stock Options have beendetermined using Black-Scholes option pricing model using the followingassumptions:

| exercise price of                               |   | $0.25                |   |
|-------------------------------------------------|--------|----------------------|--------|
| closing stock price on date of the Agreement of |   | $3.50                |   |
| historical stock price volatility of            |   | 77%                  |   |
| risk free interest rate of                      |   | 3.50%                |   |
| dividend yield of                               |   | 0% and 3 year  term. |   |

 

The estimated fairvalue of the Stock Options totaled $4,102,537, which through the period endedJune 30, 2006, has been completely expensed.

On June 8, 2006,we entered into an employment agreement (“Agreement”) with our Chief FinancialOfficer. The term of the Agreement is for two years with an annual salary of$120,000. The Agreement provides for bonuses to our Chief Financial Officerbased upon our financial performance to be determined at the sole discretion ofour Board of Directors, and quarterly bonuses tied to the accurate and timelyfiling of all required SEC filings. The Agreement also provides for equitybased compensation to purchase up to 370,000 shares of our common stock (“StockOptions”) at a purchase price of $1.00 per share. The Stock Options will vestas follows: 10,000 shares upon execution of the Agreement; 30,000 shares at theend of each quarter during the term that the Executive remains employed. .Certain conditions, for example the raising of capital, could triggeracceleration of vesting in the future. None of these conditions were met at June 30, 2006. The estimated fairvalue of the Stock Options have been determined using Black-Scholes optionpricing model using the following assumptions:

| exercise price of                               |   | $1.00                |   |
|-------------------------------------------------|--------|----------------------|--------|
| closing stock price on date of the Agreement of |   | $1.01                |   |
| historical stock price volatility of            |   | 59%                  |   |
| risk free interest rate of                      |   | 5.00%                |   |
| dividend yield of                               |   | 0% and 3 year  term. |   |

 

The estimated fairvalue of the Stock Options totaled $272,824, which will be expensed over thevesting period. Through the period ended June 30, 2006, we recorded an expenserelated to the Stock Options totaling $7,374.

In order to determine compensation on options issued toconsultants, as well as fair value disclosures for employees options, the fairvalue of each option granted is estimated on the date of grant using theBlack-Scholes option-pricing model. We estimate the requisite service periodused in the Black-Scholes calculation based on an analysis of vesting andexercisability conditions, explicit, implicit,

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and/or derived service periods, and the probability of thesatisfaction of any performance or service conditions. We also consider whetherthe requisite service has been rendered when recognizing compensation costs. Wedo not consider market conditions to be vesting conditions and an award is notdeemed to be forfeited solely because a market condition is not satisfied.

Use of estimates.The preparation of consolidated financial statements in conformity withaccounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the consolidated financial statements and the reported amountsof revenue and expenses during the reporting period. Actual results coulddiffer from those estimates.

Fixed assets.Fixed assets are stated at cost less accumulated depreciation. Depreciation isprovided principally on the straight-line method over the estimated usefullives of the assets, which are generally 3 to 10 years. The cost of repairs andmaintenance is charged to expense as incurred. Expenditures for propertybetterments and renewals are capitalized. Upon sale or other disposition of adepreciable asset, cost and accumulated depreciation are removed from theaccounts and any gain or loss is reflected in other income (expense).  We periodically evaluate whether events andcircumstances have occurred that may warrant revision of the estimated usefullife of fixed assets or whether the remaining balance of fixed assets should beevaluated for possible impairment. We use an estimate of the relatedun-discounted cash flows over the remaining life of the fixed assets inmeasuring their recoverability.

Fair value of financialinstruments .Statement of Financial Accounting Standards (“SFAS”)No. 107, “Disclosure About Fair Value of Financial Instruments”, requires us todisclose, when reasonably attainable, the fair market values of its assets andliabilities which are deemed to be financial instruments. The carrying amountsand estimated fair values of our financial instruments approximate their fairvalue due to their short-term nature.

**RecentlyIssued Accounting Pronouncements**

In May 2005, the FASBissued SFAS No. 154, “Accounting Changes and Error Corrections,” which replacesAPB Opinion No. 20 and FASB Statement No. 3. This pronouncement applies to allvoluntary changes in accounting principle, and revises the requirements foraccounting for and reporting a change in accounting principle. SFAS No. 154requires retrospective application to prior periods’ financial statements of avoluntary change in accounting principle, unless it is impracticable to do so.This pronouncement also requires that a change in the method of depreciation,amortization, or depletion for long-lived, non-financial assets be accountedfor as a change in accounting estimate that is affected by a change in accountingprinciple. SFAS No. 154 retains many provisions of APB Opinion 20 withoutchange, including those related to reporting a change in accounting estimate, achange in the reporting entity, and correction of an error. The pronouncementalso carries forward the provisions of SFAS No. 3 which govern reportingaccounting changes in interim financial statements. SFAS No. 154 is effectivefor accounting changes and corrections of errors made in fiscal years beginningafter December 15, 2005. The Statement does not change the transitionprovisions of any existing accounting pronouncements, including those that arein a transition phase as of the effective date of SFAS No. 154.

In February 2006, theFASB issued SFAS No. 155 entitled “*Accounting for CertainHybrid Financial Instruments*,” an amendment of SFAS No. 133 (“*Accounting for Derivative Instruments and Hedging Activities*”)and SFAS No. 140 (“*Accounting for Transfersand Servicing of Financial Assets and Extinguishments of Liabilities*”).  In this context, a hybrid financialinstrument refers to certain derivatives embedded in other financialinstruments.  SFAS No. 155 permits fairvalue re-measurement of any hybrid financial instrument which contains anembedded derivative that otherwise would require bifurcation under SFAS No.133.  SFAS No. 155 also establishes arequirement to evaluate interests in

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securitized financialassets in order to identify interests that are either freestanding derivativesor “hybrids” which contain an embedded derivative requiring bifurcation.  In addition, SFAS No. 155 clarifies whichinterest/principal strips are subject to SFAS No. 133, and provides thatconcentrations of credit risk in the form of subordination are not embeddedderivatives.  SFAS No. 155 amends SFASNo. 140 to eliminate the prohibition on a qualifying special-purpose entityfrom holding a derivative financial instrument that pertains to a beneficialinterest other than another derivative. When SFAS No. 155 is adopted, any difference between the total carryingamount of the components of a bifurcated hybrid financial instrument and thefair value of the combined “hybrid” must be recognized as a cumulative-effectadjustment of beginning deficit/retained earnings.

SFAS No. 155 is effectivefor all financial instruments acquired or issued after the beginning of anentity’s first fiscal year that begins after September 15, 2006.  Earlier adoption is permitted only as of thebeginning of a fiscal year, provided that the entity has not yet issued anyannual or interim financial statements for such year.  Restatement of prior periods is prohibited.

Management does not believethat SFAS No. 154 and No. 155 will have an impact on our consolidated financialstatements.

Other recent accountingpronouncements issued by the FASB (including its Emerging Issues Task Force),the American Institute of Certified Public Accountants, and the SEC did not orare not believed by management to have a material impact on our present orfuture consolidated financial statements included elsewhere herein.

**Item3.     Controls and Procedures**

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2006.  This evaluation was carried out under the supervision and with the participation of our President and Chief Executive Officer, Mr. Joseph Spellman, and our Chief Financial Officer, Mr. Theodore Lanes.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2006, our disclosure controls and procedures are effective.  There have been no significant changes in our internal controls over financial reporting during the quarter ended June 30, 2006 that have materially affected or are reasonably likely to materially affect such controls.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

****Limitations on the Effectiveness of Internal Controls****

Ourmanagement does not expect that our disclosurecontrols and procedures or our internal control over financial reporting willnecessarily prevent all fraud and material error. An internal control system,no matter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Further,the design of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within our operations have been

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detected. These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the internal control. The design ofany system of controls also is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving our stated goals under all potential future conditions.Over time, control may become inadequate because of changes in conditions, orthe degree of compliance with the policies or procedures may deteriorate.

**PART II — OTHER INFORMATION**

**Item1.     Legal Proceedings**

Other than as describedbelow, we are not aware of any pending or threatened legal proceeding to whichany of our officers, directors, or any beneficial holders of 5% or more of ourvoting securities are adverse to us or have a material interest adverse to us.

On May 4, 2006, wereceived a letter from Mr. Jeremy T. Glantz, then-legal counsel representingArtist House Holdings, Inc. (“Artist House”) in which Artist House purportedlyterminated that certain Stock Purchase Agreement, dated as of March 27, 2006,to which we and Artist House are parties (the “SPA”) and demanded unconditionalreturn of $1.7 million, representing Artist House’s purchase price under theSPA for 566,667 shares of our common stock plus warrants exercisable into283,333 shares of our common stock.  In this demand letter, Artist Housealleged that we have failed to timely perform certain conditions andobligations under the SPA, including (a) appointing certain individuals affiliatedwith Artist House to our board of directors, (b) obtaining directors andofficers liability insurance, (c) modifying rights related to stock optionsissued to our CEO, Joe Spellman, (d) appointing Artist House as our licensingagent in Japan, and (e) requiring board approval for any salary increases toour officers.  On July 6, 2006, counsel for the Company received writtennotice from Mr. David G. LeGrand, newly-engaged counsel representing ArtistHouse, demanding rescission of the SPA, based on the following claims andallegations:  (a) breach of warranty thatofficers’ salaries had not been increased since January 1, 2006, or breach ofcovenant not to increase officers’ salaries following the date of the SPA; (b)breach of covenant to expand the Board of Directors of the Company to includethe Artist House Candidates (as defined below); (c) breach of covenant todesignate Artist House as the Company’s licensing agent in Japan; (d) breach ofcovenant to modify the stock option agreement of the Company’s chief executiveofficer, Joseph Spellman; (e) breach of covenant to discontinue and terminatethe Company’ credit card; (f) breach of covenant to hold $1,700,000 ininvestment proceeds of Artist House in a separate account; (g) breach ofcovenant to obtain directors and officers liability insurance; (h) breach ofcovenant by shareholders Carlo Mondavi and Josh LeVine to execute and deliver ashareholders agreement; (i) breach of covenant by Timothy Mondavi to join theBoard of Directors of the Company; (j) use by the Company of an unlicensedbroker to raise investment proceeds that were the subject of the SPA; and (k)breach of agreement regarding deferral of officers’ salaries.   On August 2, 2006, a lawsuit entitled ArtistHouse Holdings, Inc. vs. Davi Skin, Inc. et. al., United States District Court,District of Nevada, Case No. 2:06-CV-893-RLH-LRL, was filed in federal districtcourt in Nevada in connection with this matter. Although notified of the filing, the Company has yet to be served.  The company intends to defend itselfvigorously.

An action entitledTohid Naeem vs. Carlo Mondavi, Timothy Mondavi, Davi Skin, Inc. et. al., LosAngeles Superior Court Case No. BC355913 was filed on July 25, 2006, and to ourknowledge has not yet been served on the Company or the individual defendants. Our counsel learned of this filing from published reports of case filingsand has reviewed the complaint.  The complaint alleges that sometimebefore the formation of Davi Skin, Inc., Carlo Mondavi and his father TimothyMondavi orally agreed

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with plaintiff toform a joint venture and that, in consideration for plaintiff’s providingcertain undefined services to the joint venture, plaintiff would own 48% of acompany to be formed by the joint venture, which was ultimately Davi Skin, Inc. Plaintiff pleads damages of not less than One Million Dollars($1,000,000) and, in a claim for “account stated”, further contends that he isowed $125,000 as the balance due for efforts undertaken prior to theincorporation of Davi Skin, Inc.  Since there are no written documents oragreements that have been submitted to support the contract claims asserted, wecannot fully evaluate the claims without further formal discovery.  We donot believe, however, that the claims are meritorious and dispute theunderlying facts alleged.

During April, 2006, we received a letter from a third partyrequesting the exercise of a conversion right attached to a $200,000 noteoriginally due to Ms. Jan Wallace, the former CEO of MW Medical.  At this time, management does not believethat the note and its rights were assigned under proper conditions and untilthis matter is resolved, management does not believe it is obligated to grantthe conversion. The matter remains under investigation.

The financial statements do not reflect any adjustments that couldresult from an unfavorable outcome.  Thelikelihood of an unfavorable outcome and the range of loss. If any, could notbe determined by management.

**Item2.     Unregistered Sales of Equity Securities and Useof Proceeds**

None

**Item3.     Defaults upon Senior Securities**

None

**Item4.     Submission of Matters to a Vote of SecurityHolders**

We provided notice to theshareholders of the Company regarding the annual meeting of the Company,scheduled for July 19, 2006, the purpose of which was to vote on the nominationof four individuals to the Board of Directors of the Company.  The candidates for the Board of Directorsincluded three Artist House nominees,Messrs. Taro Yamakawa, Takashi Kusube and Yuzuru Kawabata (the “Artist HouseCandidates”), whose nominations were required under the SPA.  According to Artist House’s counsel, theArtist House Candidates declined their nominations and will not stand forelection to the Board of Directors of the Company.  As a result of the decision of the ArtistHouse Candidates to withdraw as nominees to the Company’s Board of Directors,the Company cancelled the annual meeting of the shareholders and will providenotice as appropriate when the annual meeting of the shareholders is rescheduled.

**Item5.     Other Information**

During April, 2006, we received a letter from a third partyrequesting the exercise of a conversion right attached to a $200,000 noteoriginally due to Ms. Jan Wallace, the former CEO of MW Medical.  At this time, management does not believethat the note and its rights were assigned under proper conditions and untilthis matter is resolved, management does not believe it is obligated to grantthe conversion. The matter remains under investigation.

On April 18, 2006,Ms. Margaret Robley resigned as our Chief Financial Officer.  There was no known disagreement with Ms.Robley on any matter relating to our operations, policies or practices.  Effective as of June 8, 2006, Mr. TheodoreLanes was appointed our Chief Financial Officer.

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**Item6.      Exhibits**
| Exhibit Number | ** ** | **Description  of Exhibit**                                                                                                                                                     |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1           |       | Certification of Chief Executive Officer pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                             |
| 31.2           |       | Certification of Chief Financial Officer pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                             |
| 32.1           |       | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |

 

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**SIGNATURES**

In accordance with the requirements of the Securitiesand Exchange Act of 1934, the Registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|            | ** ** | **Joseph Spellman**  |
|------------|------------|----------------------|
| ** ** | ** ** | ** **           |
| Date:      |       | August  8, 2006 |   |
|       |       |                 |
|       |       |                 |
|       |       | By:                  | /s/ Joseph Spellman | ** ** |
|       |       |                 | **Joseph Spellman** |
|       |       | Title:               | **Chief Executive Officer** |
|            |            |                      |  |  |  |

 
|        |   | By:    | /s/ Theodore Lanes          | ** ** |
|--------|--------|--------|-----------------------------|------------|
|   |   |   | **Theodore Lanes**          |
|   |   | Title: | **Chief Financial Officer** |

 

 

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