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 March 31, 1999
[ ] 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.)
6955 East Caballo Drive
Paradise Valley, 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 March 31, 1999
- ------------------------------------ -----------------------------------
$.001 par value Class A Common Stock 15,873,929 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 three
months ended March 31, 1999, are not necessarily indicative of the results that
can be expected for the year ending December 31, 1999.
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. 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.
The payment was not received on March 31, 1999. The Company has recorded an
allowance for doubtful accounts of $60,000 and extended the repayment terms. MCC
is to make monthly payments of $15,000 including interest at 8% beginning in
July on the principal balance of $243,125.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had $736,407 in cash and cash
equivalents. During the quarter, the Company received cash of $101,250 and
incurred capital raising costs of $11,250 in connection with the sale of 150,000
shares of the Company's restricted common stock. Loss per share from research
operations, general and administrative expenses and depreciation and
amortization was $.02.
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 completed Phase III clinical
trials and the Company has sufficient data to submit for FDA approval. In April
1999, the Company filed the first in a series of FDA 510(k) submissions for its
proprietary microwave technology for minimally invasive cosmetic surgery. The
510(k) will focus on the use of the Company's microwave device for hair removal.
It typically takes 90 to 120 days for the FDA to review the application.
RESULTS OF OPERATIONS
The financial statements for 1999 present the combined activities of the
Company and MMC.
The financial statements for 1998 present the combined activities of the
Company, MMC, and P&H for the first quarter.
During the three months ended March 31, 1999, the management of the Company
received $105,000. The President received $36,000, the Chairman received $45,000
and the Secretary received $24,000.
Net loss for the three months ended March 31, 1999 was $389,566 compared to
income of $1,957,091 for the same period in 1998. The Company expects to
generate revenue in late 1999.
General and administrative expenses for the three months ended March 31,
1999 were $254,535 compared to $1,055 for the same period in 1998.
Research and development expenses were $117,515 for the three months ended
March 31, 1999 compared to $192,157 for the same period in 1998.
Depreciation and amortization expenses for the three months ended March 31,
1999 were $24,672 compared to $25,282 for the same period in 1998.
Impact of the Year 2000 Issue
The "Year 2000 problem" arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results. The extent of the potential impact of the Year 2000 problem
is not yet known, and if not timely corrected, it could affect the global
economy. The Company believes that its computer programs are Y2K compliant and
does not expect to be adversely affected by the issue.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99-1 Financial Statements as of March 31, 1999.
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: May 24, 1999
Grace Sim, Secretary/Treasurer and Director
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
(Unaudited) (Audited)
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 736,407 $ 890,283
Receivable - former parent 150,000 200,000
Receivable - P & H sale 63,674 21,625
Other receivables 1,800 2,000
Prepaid expense and other current assets 7,298 61,282
----------------- ------------------
TOTAL CURRENT ASSETS 959,179 1,175,190
PROPERTY, PLANT, & EQUIPMENT 42,780 67,392
OTHER ASSETS
Receivable - P&H sale 119,451 161,500
Organization costs 340 400
----------------- ------------------
119,791 161,900
----------------- ------------------
$ 1,121,750 $ 1,404,482
================= ==================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 73,674 $ 70,766
Income taxes payable 800 1,600
Accrued expenses 1,490 1,038
Accrued expenses - related party 135,738 132,714
----------------- ------------------
TOTAL CURRENT LIABILITIES 211,702 206,118
----------------- ------------------
TOTAL LIABILITIES 211,702 206,118
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 15,873,929 shares (15,723,929 in 1998) 15,874 15,724
Additional paid in capital 1,157,097 1,055,997
Retained earnings (deficit) (262,923) 126,643
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 910,048 1,198,364
----------------- ------------------
$ 1,121,750 $ 1,404,482
================= ==================
F - 1
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1999 1998
------------- -------------
General & administrative expenses $ 254,535 $ 1,055
Depreciation and amortization 24,672 25,282
Research and development 117,515 192,157
------------- -------------
396,722 218,494
------------- -------------
NET OPERATING (LOSS) (396,722) (218,494)
OTHER INCOME (EXPENSE)
Interest income 7,956 47
Debt cancellation - former parent 0 2,169,806
Fee - former parent 0 200,000
------------- -------------
7,956 2,369,853
Income (loss) from continuing operations before
income taxes (388,766) 2,151,359
Income tax expense 800 800
------------- -------------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (389,566) 2,150,559
Discontinued operations:
Operations of subsidiary sold 4/1/98 0 (193,468)
------------- -------------
NET INCOME (LOSS) $ (389,566) $ 1,957,091
============= =============
Net income (loss) per weighted average share $ (.02) $ .14
============= =============
Weighted average number of common shares used
to compute net income (loss) per weighted
average share 15,788,929 14,223,929
============= =============
F - 2
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1999 1998
------------------ ------------------
OPERATING ACTIVITIES
Net income (loss) $ (389,566) $ 1,957,091
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 24,672 63,859
Debt cancelled 0 (2,169,806)
Changes in assets and liabilities:
Accounts receivable 50,200 (188,097)
Inventories 0 80,636
Prepaid expenses and other 53,984 13,053
Accounts payable and accrued expenses 6,384 (30,019)
Income taxes payable (800) 0
------------------ ------------------
NET CASH USED BY OPERATING ACTIVITIES (255,126) (273,283)
INVESTING ACTIVITIES
Loan - other 0 1,488
Loan - related party 0 0
Purchase of equipment 0 (1,796)
Deposits 0 (2,243)
------------------ ------------------
NET CASH USED BY INVESTING ACTIVITIES 0 (2,551)
FINANCING ACTIVITIES
Borrowings - former parent 0 170,000
Sale of common stock 101,250 0
Deposits 0 37,000
Principal payments on debt 0 (9,951)
------------------ ------------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 101,250 197,049
------------------ ------------------
(DECREASE) IN CASH
AND CASH EQUIVALENTS (153,876) (78,785)
Cash and cash equivalents at beginning of period 890,283 387,982
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 736,407 $ 309,197
================== ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 0 $ 9,824
Cash paid for income taxes 1,600 800
F - 3