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, 2002
[ ] 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
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MW Medical, Inc.
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(Exact name of Small Business Issuer as specified in its charter)
Nevada 86-0907471
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(State or other jurisdiction of (IRS Employer
incorporation ) Identification No.)
6929 E. Cheney Paradise Valley, Arizona 85253
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(Address of principal executive offices)
(480) 315-8600
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Issuer's telephone number, including area code
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date.
Class Outstanding as March 31, 2002
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$.001 par value Class A Common Stock 24,550,070 shares
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
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, 2002, are not necessarily indicative of the results that
can be expected for the year ending December 31, 2002
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MW Medical, Inc.
CONSOLIDATED BALANCE SHEETS
CURRENT ASSETS
Cash $ 128
Accounts Receivable
Inventory 300,000
Deposits -
Other current assets
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Total current assets 300,128
INVENTORY, long-term
PROPERTY AND EQUIPMENT, net 46,251
OTHER RECEIVABLES, net
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$ 346,379
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 255,956
Accrued expenses 614,446
Note payable - related party 631,421
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Total current liabilities 1,501,823
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY
Common stock $.001 par value; authorized - 100,000,000
shares issued and outstanding, 24,517,443 24,517
Additional paid-in capital 13,687,857
Note receivable from former parent
Accumulated deficit (14,867,818)
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Total stockholders' equity (1,155,444)
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$ 346,379
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MW Medical, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31,
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2002 2001
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Sales, net $ - $ 110,060
Cost of sales - 71,056
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- 39,004
General and administrative expenses 117,007 219,402
Depreciation and amortization 9,677 36,978
Research and development 1,000 126,934
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Total operating expenses 127,684 383,314
Net operating loss (127,684) (344,310)
Interest income (expense) (15,542) (214,068)
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NET LOSS $ (143,226) $ (558,378)
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Net loss per weighted average share $ (0.01) $ (0.03)
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Weighted average number of common shares used to
compute net loss per weighted average share 24,517,443 21,292,443
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MW Medical, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
ended March 31,
2002 2001
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Cash flows from operating activities
Net Loss $ (143,226) $ (558,378)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 9,677 36,638
Deferred salaries 88,037 78,624
Interest expense 15,542 214,068
Changes in assets and liabilities
Increase in accounts receivable (71,516)
Decrease (increase) in inventories 48,653
Decrease (increase) in restricted cash - -
Decrease (increase) in prepaid expenses
and other receivables - (89)
Increase in accounts payable and accrued
expenses 14,339 (45,479)
Increase in deposits - -
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Net cash used in operating activities (15,631) (297,479)
Cash flows used in investing activities
Purchase of equipment -
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MW Medical, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
For the Three Months
ended March 31,
2002 2001
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Cash flows from financing activities
Proceeds from line of credit - -
Proceeds from loans 15,550 289,100
Payments on loans - -
Proceeds from the exercise of stock options - -
Sale of common stock - -
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Net cash provided by financing activities 15,550 289,100
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(Decrease) increase in cash and cash
equivalents (81) (8,379)
Cash and cash equivalents at beginning of period 209 9,825
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Cash and cash equivalents at end of period $ 128 $ 1,446
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Supplemental information
Cash paid for interest $ -
Cash paid for income taxes $ 2,400
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MW Medical, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
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The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10QSB. Accordingly, they
do not include all of the information and footnotes required by generally
accepted auditing principles for complete financial statements. The unaudited
consolidated financial statements and notes should, therefore, be read in
conjunction with the financial statements and notes thereto in the Annual Report
on Form 10-KSB for the year ended December 31, 2001. In the opinion of
management, all adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation, have been included. The results
of operations for the three-month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the entire fiscal
year 2002.
NOTE B - REALIZATION OF ASSETS
The Company has suffered recurring losses from operations and will continue to
incur losses for the foreseeable future due to the significant costs anticipated
to be incurred in connection with manufacturing, marketing and distributing its
microwave products. In addition, the Company intends to continue to conduct
research and development activities, including regulatory submittals and
clinical trials to develop additional applications for its technology. The
Company operates in a highly competitive environment and is subject to all of
the risks inherent in a new business enterprise.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to meet its financing requirements on a
continuing basis, to maintain present financing, and to succeed in its future
operations. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
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MW Medical, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2002 (Unaudited)
NOTE B - REALIZATION OF ASSETS - Continued
Management has taken the following steps, which it believes are sufficient to
provide the Company with the ability to continue its operations over the near
term: The Company has reduced staffing to key personnel, specifically corporate
officers and technicians necessary to continue manufacturing operations.
Additionally, all officers are voluntarily participating in a salary deferral
program until additional funding is secured. The Company has also initiated
talks with several of its larger vendors to obtain extended payment terms.
While the Company has been successful in negotiating payment terms with a few
vendors, formal agreements have not been established with all of the vendors and
there can be no guarantee such agreements will ever be reached. Sales of the MW
2000 are expected to at least partially offset the cash requirements of the
business. The Company is pursuing opportunities to establish a strategic
alliance with an established entity or to possibly be acquired or merged with
another entity. However, there can be no assurance that the Company will be
able to complete any contemplated alliance, merger or sale transaction within
the required time frame.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
As of January 22, 2002, we have filed a Petition for relief under Chapter 11 of
the Bankruptcy Code. An automatic stay is now in place. We will use this
bankruptcy to protect the business from our creditors while we reorganize and
try to work out a plan to pay our debts. The Petition was filed in United
States Bankruptcy Court, District of Arizona, In Re: MW MEDICAL, INC., a Nevada
Corporation, Case No. 02-0108-90-PHX-RTB, and In Re: MICROWAVE MEDICAL
CORPORATION, a California Corporation, Case No. 02-01298-PHX-GBN. The location
of the United States Trustee is 2929 N. Central Avenue, Suite 700, P.O. Box
36170, Phoenix, Arizona 85067-6170, (602) 640-2100.
In the past year, sales have been slower than anticipated. Our small revenues
have been greatly outpaced by our operating expenses, and we are now insolvent.
With the economic downturn, our unproven ability to generate revenues and the
economic fallout from the events of September 11, 2001, we have been unable to
raise additional capital. Our secured creditor has determined that the value of
the collateral and the growing unsecured debt made it unlikely that we could
raise additional capital. Without any further loans available, and with no
prospect of raising additional capital in the face of our current balance sheet,
we are unable to continue in business without the aid of Chapter 11 protection.
Even with the protection afforded by the bankruptcy petition, we cannot provide
investors with any assurance we will emerge from bankruptcy as a viable
business.
There are no assets to be distributed to creditors or shareholders as the
secured creditor has a lien on all assets and is undersecured. The primary
objective of this reorganization is to allow us to go forward as a public
company free of all debt and with a reduced secured debt. The plan also
provides for payment to unsecured creditors of more than they would receive in a
liquidation. We can then seek business opportunities for a reverse merger that
will allow creditors and shareholders to realize value not otherwise available
to them. In the event of an inability to raise capital and the loss of its
assets, we will still have the capacity to seek a reverse merger partner but we
cannot assure investors a reverse merger partner will be found.
Since the filing of the Bankruptcy, the company has not been actively selling
any machines. A plan of organization has been filed with the court and all
ballots from creditors are expected to be counted on May 22, 2002.
Assets
Total assets decreased to $ 346,379 on March 31, 2002 from $356,137 from
December 31, 2001, a decrease of $9,758 or 2.7%. The net change resulted
primarily from a decrease in value of ourequipment.
Liabilities And Stockholders' Equity
Our liabilities increased by $133,468, or 9.8% to $ 1,501,823 as of March 31,
2002. The increase in liabilities was caused by unpaid salary and notes payable
- - related party. All cost involved in the filing of the bankruptcy and the
continued operations of the Company is still being funded by Ms. Wallace, our
president and chief executive officer. These amounts are
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reflected in notes payable - related party. The officers of the company have
elected to defer all of their salaries. Stockholders' equity decreased to a
deficit of $1,155,444 from $1,01,218 as of December 31, 2001. The decrease in
stockholders' equity resulted from the net loss from operations.
Results of Operations
Due to the lack of funding and the filing of Chapter 11, Bankruptcy code, the
operations of the Company have consisted of planning for the reorganization of
the Company
Net loss for the three months ended March 31, 2002 was $143,226 compared to
$558,378 on March 31, 2001. This decrease in the net loss was caused by our
scaling back of operations, including a reduction in employees, closing of
certain clinical sites, and a slow down in research and development work.
General and administrative expenses for the three months ended March 31, 2002
was $117,007 compared to $219,402 for the same period in 2001. This reflects a
decrease of $102,395 or 46.7%. This decrease was primarily due to significant
reductions in staff and all operating expenses.
Research and development expenses were $1,000 for the three months ended March
31, 2002 compared to $126,934 for the same period in 2001. The decrease of
reflects the cessation of all clinical sites,
Depreciation and amortization expenses for the three months ended March 31, 2002
were $9,677 compared to $36,978 for the same period in 2001. In 2001, the
Company wrote down the value of its inventory. We also wrote off the value of
all machines used in the clinical sites for research and development.
Liquidity and Capital Resources
We have extremely limited cash resources to sustain operations. While limited
funds have been generated from revenues, it is unlikely cash generated from
operations will be sufficient to continue operations.
For the first quarter of 2002, we have relied upon Ms. Wallace to providing
funding. In fact, Ms. Wallace funded all operations since November 2000. We
have not yet identified new sources for financing and we are currently in
default on our notes to Ms. Wallace.
As of March 31, 2002, the Company had $128 in cash.
We used cash of $15,631 in our operating activities during the three months
ending March 31, 2002 compared to $297,479 for the same period in 2001. In the
first quarter of 2002, we were primarily involved in procedures for the
bankruptcy. The Company did not have any funds for operations.
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Forward-Looking Statements
Many statements made in this report are forward-looking statements that are not
based on historical facts. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements. The forward-looking statements made in this report
relate only to events as of the date on which the statements are made.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities and Use of Proceeds:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
None
(b) Reports on Form 8-K
A form 8-K was filed on January 11, 2002 to announce the Company's
intent to file for bankruptcy. The 8-K also announced the resignation
of three members of the Board of Directors, Elliot Smith, Nigel Parker
and Neil Marcus, who had resigned on December 30, 2001.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MW Medical, Inc.
DATED: May 20, 2002 /s/ Grace Sim
____________________________________
Grace Sim, Chief Financial Officer
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