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 September 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 November 3, 1998
- ------------------------------------ ------------------------------------
$.001 par value Class A Common Stock 15,723,929 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 nine
months ended September 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 September 30, 1998, the Company had $1,242,172 in cash and cash
equivalents. During the quarter, the Company received cash of $1,125,000 and
incurred capital raising costs of $112,500 in connection with the sale of
1,500,000 shares of the Company's restricted common stock. The shares were
issued in November, 1998. The Company generated a net profit of $.07 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 $.05.
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 P&H for the first quarter. The financial statements for 1997
present the activities of MMC and P&H.
During the nine months ended September 30, 1998, the management of the Company
received $66,000. The President received $30,000, the Secretary received $16,000
and another consultant received $20,000.
Net operating loss for the nine months ended September 30, 1998 was $753,650
compared to a loss of $616,964 for the same period in 1997. The sale of the net
assets 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. Although there was a lack of
revenue in 1998, we also did not have the expense incurred by P&H.
Selling and general and administrative expenses for the nine months ended
September 30, 1998 were $241,550 compared to $0 for the same period in 1997.
Research and development expenses were $440,424 for the nine months ended
September 30, 1998 compared to $588,888 for the same period in 1997.
Depreciation and amortization expenses for the nine months ended September 30,
1998 were $71,676 compared to $28,076 for the same period in 1997. Due to the
nature of research test equipment, the equipment is depreciated at a faster
rate.
Loss from operations of P&H were $193,468 for the nine months ended September
30, 1998 compared with income of $42,504 for the same period in 1997.
Net loss for the three months ended September 30, 1998 was $261,651 compared to
a loss of $166,724 for the same period in 1997.
Selling and general and administrative expenses for the three months ended
September 30, 1998 were $157,762 compared to $0 for the same period in 1997.
Research and development expenses incurred by MMC and GmBH were $88,484 for the
three months ended September 30, 1998 compared to $155,783 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 September 30,
1998 were $21,112 compared to $12,060 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 September 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: November 13, 1998
Grace Sim, Secretary/Treasurer and Director
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30,
1998
-----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,242,172
Receivable - former parent 200,000
Receivable - P & H sale 243,125
Other receivables 2,153
Prepaid expense and other current assets 122,017
-----------------
TOTAL CURRENT ASSETS 1,809,467
PROPERTY, PLANT, & EQUIPMENT 86,679
OTHER ASSETS
Organization costs 1,254
-----------------
$ 1,897,400
=================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 75,651
Accrued expenses 4,775
Payable - related party 100,000
-----------------
TOTAL CURRENT LIABILITIES 180,426
-----------------
TOTAL LIABILITIES 180,426
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 14,223,929 shares 14,224
Additional paid in capital 1,058,984
Retained earnings 643,766
-----------------
TOTAL STOCKHOLDERS' EQUITY 1,716,974
-----------------
$ 1,897,400
=================
F - 1
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
Selling and General & administrative expenses $ 157,762 $ 0 $ 241,550 $ 0
Depreciation and amortization 21,112 12,060 71,676 28,076
Research and development 88,484 155,783 440,424 588,888
------------- ------------- ------------- -------------
267,358 167,843 753,650 616,964
------------- ------------- ------------- -------------
NET OPERATING (LOSS) (267,358) (167,843) (753,650) (616,964)
OTHER INCOME (EXPENSE)
Interest income 5,707 529 6,334 4,960
Interest expense 0 0 0 0
Debt cancellation - former parent 0 0 2,169,806 0
Fee - former parent 0 0 200,000 0
Sale of net assets of subsidiary 0 0 (477,862) 0
Miscellaneous income (expense) 0 0 0 0
------------- ------------- ------------- -------------
5,707 529 1,898,278 4,960
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (261,651) (167,314) 1,144,628 (612,004)
Discontinued operations:
Operations of subsidiary sold 4/1/98 0 590 (193,468) 42,504
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (261,651) (166,724) 951,160 (569,500)
INCOME TAX EXPENSE 0 0 800 800
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (261,651) $ (166,724) $ 950,360 (570,300)
============= ============= ============= =============
Net income (loss) per weighted average share $ (.02) $ (.01) $ .07 $ (.04)
============= ============= ============= =============
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)
Nine months ended
September 30,
1998 1997
------------------ ------------------
OPERATING ACTIVITIES
Net income (loss) $ 950,360 $ (570,300)
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 110,433 65,503
Net value of subsidiary sold 1,371,521 0
Debt cancelled (2,169,806) 0
Deferred taxes 0 5,000
Changes in assets and liabilities:
Accounts receivable (433,519) (142,229)
Inventories 80,636 46,492
Prepaid expenses and other (106,791) (16,093)
Accounts payable and accrued expenses (450) 164,559
Deposits 37,000 20,000
Income taxes payable 0 (32,572)
------------------ ------------------
NET CASH USED BY OPERATING ACTIVITIES (160,616) (459,640)
INVESTING ACTIVITIES
Loan - other (4,068) (3,516)
Loan - related party 0 30,300
Purchase of equipment (8,348) (421,244)
Deposits (2,225) (900)
------------------ ------------------
NET CASH USED BY INVESTING ACTIVITIES (14,641) (395,360)
FINANCING ACTIVITIES
Borrowings - former parent 170,000 684,975
Loans 0 132,021
Loans - related party 100,000 0
Sale of common stock 1,012,500 0
Cash remaining with former subsidiary (243,102) 0
Principal payments on debt (9,951) (89,845)
------------------ ------------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 1,029,447 727,151
------------------ ------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 854,190 (127,849)
Cash and cash equivalents at beginning of period 387,982 874,858
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,242,172 $ 747,009
================== ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 9,824 $ 9,681
Cash paid for income taxes 800 40,172
F - 3