UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
Commission File Number 001-14297
MW Medical, Inc.
(Exact name of Small Business Issuer as specified in its charter)
Nevada 86-0907471
(State or other jurisdiction of (IRS Employer
incorporation ) Identification No.)
7373 North Scottsdale Road, Suite B-169
Scottsdale, Arizona 85253
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 483-8700
Indicate by a check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 30, 1998
- ------------------------------------ --------------------------------------
$.001 par value Class A Common Stock 14,223,929 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BASIS OF PRESENTATION
General
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and, therefore, do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders' equity in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the six
months ended June 30, 1998, are not necessarily indicative of the results that
can be expected for the year ending December 31, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
MW Medical, Inc. (the "Company") is in the business of designing and
developing microwave technologies for dermatological applications through its
wholly owned subsidiary, Microwave Medical Corporation ("MMC"). MMC established
an office in Germany in late 1997, called Microwave Medical GmBH ("GmBH").
Testing in Germany was concluded in July 1998. GmBH's President will continue to
oversee the European market. The Company's products are in the development
stage. The Company plans to market and sell its microwave technology products
upon completion of the development stage.
The Company is a Nevada corporation and was incorporated on December 4, 1997.
The Company was originally the owner of two wholly owned subsidiaries:
(A) Microwave Medical Corporation, a California corporation ("MMC");
(B) P&H Laboratories, Inc., a California corporation ("P&H").
Sale of the Business of P&H
The Company has sold the business of P&H pursuant to an asset purchase and sale
agreement dated March 9, 1998 between P&H and Microwave Communication
Corporation, a California corporation ("Microwave"), whereby P&H agreed to sell
to Microwave all of the assets of the business of P&H as a going concern (the
"P&H Sale Agreement"). The sale of assets by P&H to Microwave was completed on
May 6, 1998. The following consideration was received by the Company on closing:
(A) cash consideration of $160,943;
(B) a promissory note issued by MCC/ Ferro Systems, Inc., a subsidiary of
Microwave, whereby MCC/Ferro has agreed to pay to P&H the sum of
$250,000 on August 1, 1998 and the sum of $243,125 on March 31, 1999
(the "MCC/Ferro Promissory Note"); P&H has assigned the note to the
Company;
(C) the agreement of Microwave to provide to MMC 1200 hours of microwave
related services for the period to April 1, 1999, subject to a maximum
of 100 hours per month;
(D) office space for the business of MMC at MCC/Ferro's facility in Simi
Valley, California until February 28, 1999.
The obligations of MCC/Ferro under the MCC/ Ferro Promissory Note are secured by
a general security agreement against the assets of MCC/Ferro and the guarantee
of Microwave. The general security agreement is subordinated to bank financing
arranged by MCC/Ferro to pay-out P&H's bank financing and pay the amounts under
the MCC/Ferro Promissory Note.
All payments to date from MCC have been made on schedule.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had $57,111 in cash and cash equivalents. The
Company generated a net profit of $.08 per share as a result of the cancellation
of the debt and the initial start up fee from its former parent company, Dynamic
Associates, Inc. Loss per share from research operations, general and
administrative expenses and depreciation and amortization was $.03.
Item 5. Other Information.
Microwave Medical Corporation (MMC)
The Company's wholly owned subsidiary, MMC, is engaged in the development of
proprietary technology relating to the use of microwave energy for medical
applications. MMC has a patent pending entitled, "Method and Apparatus for
Treating Subcutaneous Histological Features", which focuses on the application
of microwave energy to the treatment of spider veins and for use in hair
removal. The use of microwave for hair removal is based upon the selective
heating of hair follicles while cooling the surface of the skin to protect the
epidermis. MMC has used computer modeling and laboratory studies to optimize the
system for hair removal. Preclinical studies have shown effectiveness in
destroying follicles while maintaining the integrity of the skin surface.
MMC's microwave system for hair removal has just concluded Phase II and is now
entering its final Phase III clinical trials.
RESULTS OF OPERATIONS
The financial statements for 1998 present the combined activities of the
Company, MMC and GmBH. The comparisons made with 1997, is based on income and
expenses generated by P&H and MMC.
During the six months ended June 30, 1998, the management of the Company
received no fees.
Net operating loss for the six months ended June 30, 1998 was $489,808 compared
to a loss of $403,556 for the same period in 1997. Although there was a lack of
revenue in 1998, we also did not have the expense incurred by P&H.
Net sales for the six months ended June 30, 1998 were $0, compared to $1,767,803
for the same period in 1997. All sales in 1997 were generated by P & H. In 1998,
MMC has not yet generated any revenue as it is still developing its technology.
Cost of sales for the six months ended June 30, 1998 was $0, compared to
$1,313,464 for the same period in 1997. Cost of sales relate to P & H.
Selling and general and administrative expenses for the six months ended June
30, 1998 were $87,304 compared to $378,729 for the same period in 1997.
Research and development expenses were $351,940 for the six months ended June
30, 1998 compared to $433,105 for the same period in 1997.
Depreciation and amortization expenses for the six months ended June 30, 1998
were $50,564 compared to $46,061 for the same period in 1997. Due to the nature
of research test equipment, the equipment is depreciated at a faster rate.
Interest expense for the six months ended June 30, 1998 was $0 compared with
$5,711 for the same period in 1997. MMC does not have any interest expense. All
interest expense for 1997 was generated by P&H.
Net loss for the three months ended June 30, 1998 was $771,596 compared to a
loss of $223,058 for the same period in 1997. The sale of P&H created a loss due
to the book value of its Property, Plant and Equipment and other assets being
greater than its liabilities and the amount received from the sale.
Net sales for the three months ended June 30, 1998 were $0 compared to $867,570
for the same period in 1997. Cost of sales for the three months ended June 30,
1998 was $0 compared to $655,317 for the same period in 1997.
MMC is still developing its technology in 1998.
Selling and general and administrative expenses for the three months ended June
30, 1998 were $86,249 compared to $184,873 for the same period in 1997. Expenses
for 1998 relates only to MMC.
Research and development expenses incurred by MMC were $159,783 for the three
months ended June 30, 1998 compared to $234,235 for the same period in 1997. The
expenses incurred have decreased in 1998 because we are in the testing phase of
the project and the cost of development has decreased significantly.
Depreciation and amortization expenses for the three months ended June 30, 1998
were $25,282 compared to $19,523 for the same period in 1997.
Interest expense for the three months ended June 30, 1998 was $0 compared with
$2,726 for the same period in 1997.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99-1 Financial Statements as of June 30, 1998
Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: 14 August 1998 /s/
Grace Sim, Secretary/Treasurer and Director
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30,
1998
----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 57,111
Receivable - former parent 200,000
Receivable - P & H sale 493,125
Other receivables 4,316
Prepaid expense and other current assets 182,017
----------------
TOTAL CURRENT ASSETS 936,569
PROPERTY, PLANT, & EQUIPMENT 104,139
OTHER ASSETS
Organization costs 25,540
----------------
$ 1,066,248
================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 90,546
Accrued expenses 9,580
----------------
TOTAL CURRENT LIABILITIES 100,126
----------------
TOTAL LIABILITIES 100,126
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 14,223,929 shares 14,224
Retained earnings 951,898
----------------
TOTAL STOCKHOLDERS' EQUITY 966,122
----------------
$ 1,066,248
================
F - 1
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---------- --------------- ---------- -------------
Net sales $ 0 $ 867,570 $ 0 $ 1,767,803
Cost of sales 0 655,317 0 1,313,464
---------- --------------- ---------- -------------
GROSS PROFIT 0 212,253 0 454,339
Selling and General & administrative
expenses 86,249 184,873 87,304 378,729
Depreciation and amortization 25,282 19,523 50,564 46,061
Research and development 159,783 234,235 351,940 433,105
---------- --------------- ---------- -------------
271,314 438,631 489,808 857,895
---------- --------------- ---------- -------------
NET OPERATING (LOSS) (271,314) (226,378) (489,808) (403,556)
OTHER INCOME (EXPENSE)
Interest income 580 7,742 627 16,045
Interest expense 0 (2,726) 0 (5,711)
Debt cancellation - former parent 0 0 2,169,806 0
Fee - former parent 0 0 200,000 0
Sale of subsidiary (500,862) 0 (500,862) 0
Miscellaneous income (expense) 0 (1,696) 0 4,046
---------- --------------- ---------- -------------
(500,282) 3,320 1,869,571 14,380
---------- --------------- ---------- -------------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (771,596) (223,058) 1,379,763 (389,176)
Discontinued operations:
Operations of subsidiary sold 4/1/98 0 0 (193,468) 0
---------- --------------- ---------- -------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (771,596) (223,058) 1,186,295 (389,176)
INCOME TAX EXPENSE 0 450 800 14,400
---------- --------------- ---------- -------------
NET INCOME (LOSS) $ (771,596) $ (223,508) $1,185,495 $ (403,576)
========== =============== ========== =============
Net income (loss) per weighted
average share $ (.05) $ (.02) $ .08 $ (.03)
========== =============== ========== =============
Weighted average number of common shares
used to compute net income (loss) per
weighted average share 14,223,929 14,223,929 14,223,929 14,223,929
========== =============== ========== =============
F - 2
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
1998 1997
----------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ 1,185,495 $ (403,576)
Adjustments to reconcile net income (loss)
to cash used by operating activities:
Depreciation and amortization 89,141 46,061
Net value of subsidiary sold 1,398,034 0
Debt cancelled (2,169,806) 0
Deferred taxes 0 (500)
Changes in assets and liabilities:
Accounts receivable (683,519) (72,627)
Inventories 80,636 (27,345)
Prepaid expenses and other (166,791) (11,453)
Accounts payable and accrued expenses (7,756) 61,672
Deposits 37,000 20,000
Income taxes payable 0 (25,272)
----------------- ---------------
NET CASH USED BY OPERATING ACTIVITIES (237,566) (413,040)
INVESTING ACTIVITIES
Loan - other (6,231) (10,627)
Loan - related party 0 30,300
Purchase of equipment (1,796) (228,349)
Deposits (2,225) (100)
----------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES (10,252) (208,776)
FINANCING ACTIVITIES
Borrowings - former parent 170,000 400,000
Cash remaining with former subsidiary (243,102) 0
Principal payments on debt (9,951) (79,894)
----------------- ---------------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (83,053) 320,106
----------------- ---------------
(DECREASE) IN CASH
AND CASH EQUIVALENTS (330,871) (301,710)
Cash and cash equivalents at beginning of period 387,982 874,858
----------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,111 $ 573,148
================= ===============
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 9,824 $ 6,611
Cash paid for income taxes 800 40,172
F - 3