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, 2003
[ ] 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
- ------ ----------
(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) 951-4366
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Issuer's telephone number, including area code
Check whether the issuer (1) 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 issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [ X ] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 99,822,443 Shares of Common Stock
outstanding as of May 22, 2003.
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' deficit 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, 2003, are not necessarily indicative of the results that
can be expected for the year ending December 31, 2003.
2
MW MEDICAL, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited) (Audited)
March 31, December 31,
2003 2002
---------------------------------
CURRENT ASSETS
Cash $ 907 $ 937
Accounts Receivable
Inventory -
---------------------------------
Other current assets
Total current assets 907 937
$ 907 937
=================================
LIABILITIES AND STOCKHOLDERSDEFICIT
CURRENT LIABILITIES
Accounts payable $ 50,715 $ 35,202
Accrued expenses 13,915 116,160
Note payable - related party 803,285 1,012,903
---------------------------------
Total current liabilities 867,915 1,164,265
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS (DEFICIT)
Common stock $.001 par value;
authorized - 100,000,000
shares issued and outstanding,
99,822,443 and 99,822 25,822
25,822,443 at 3-31-03 and
12-31-02 respectively
Additional paid-in capital 14,421,633 13,699,602
Note receivable from former parent
Accumulated deficit (15,388,463) (14,888,752)
---------------------------------
Total stockholders deficit (867,008) (1,163,328)
---------------------------------
$ 907 937
=================================
MW MEDICAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
-----------------------------
2003 2002
-----------------------------
Sales, net $ - $ -
Cost of sales - -
------------
- -
General and administrative expenses 99,092 117,007
Depreciation and amortization - 9,677
Research and development - 1,000
-----------------------------
Total operating expenses 99,092 127,684
-----------------------------
Net operating loss (99,092) (127,684)
-----------------------------
Interest expense (400,619) (15,542)
------------------------------
(400,619) (15,542)
------------
Loss from continuing operations
before income taxes (499,711) (143,226)
Income tax expense -
-----------------------------
NET LOSS $ (499,711) $ (143,226)
=============================
Net loss per weighted average share $ (0.017) $ (0.01)
=============================
Weighted average number of common shares used to
compute net loss per weighted average share 29,933,544 24,517,443
=============================
MW MEDICAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS.
For the Three Months ended March 31,
2003 2002
------------------------------------
Cash flows from operating activities
Net Loss $ (499,711) $ (143,226)
Adjustments to reconcile net
loss to cash used in
operating activities:
Depreciation and amortization - 9,677
Deferred salaries 83,490 88,037
Interest expense 400,619 15,542
Changes in assets and liabilities
Increase in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in restricted
cash -
Decrease (increase) in prepaid
expenses and other receivables
Increase in accounts payable
and accrued expenses 15,513 14,339
Increase in deposits -
---------------------------
Net cash used in
operating activities (89) (15,631)
---------------------------
Cash flows used in investing activities
Purchase of equipment -
For the Three Months ended March 31,
2003 2002
------------------------------------
Cash flows from financing activities
Proceeds from line of credit -
Proceeds from loans 59 15,550
Net cash provided by
financing activities 59 15,550
---------------------------
(Decrease) increase in cash
and cash equivalents -30 (81)
Cash and cash equivalents at
beginning of period 937 209
---------------------------
Cash and cash equivalents
at end of period 907 $ 128
===========================
Supplemental information
Cash paid for interest $ - $ -
Cash paid for income taxes - -
Supplemental Disclosure
During the quarter ended March 31, 2003, an officer forgave $46,031 of fees
due to her. This cancellation has been recorded as a capital contribution.
Also, an officer received 74,000,000 shares of common stock at $0.005 per
share to reduce loans to her by $375,000. Interest expense of $375,000 was
also recorded in this transaction since the stock was issued at less than
market value.
MW Medical, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003 (Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
- -----------------------
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 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting 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, 2002. 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, 2003 are not
necessarily indicative of the results that may be expected for the entire fiscal
year 2003.
NOTE B - REALIZATION OF ASSETS
The Company was in the business of manufacturing and selling our primary
product, the MW 2000. It was also in the business of designing and developing
microwave technologies for dermatological applications. Due to our financial
condition and filing for bankruptcy, it has written off our entire inventory and
currently has no business activities.
The Company had been suffering recurring losses from operations for the past
three years and was unable to continue in its present state and filed for
bankruptcy protection in January 2002. In November 2002, the courts approved
the plan of reorganization and the bankruptcy was closed.
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.
4
MW Medical, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2003 (Unaudited)
NOTE B - REALIZATION OF ASSETS - Continued
The Company is in the process of evaluating business opportunities for a reverse
merger or to obtain financing that will allow creditors and shareholders to
realize value not otherwise available to them at this time. We, however, can
provide no assurance that we will be successful in completing a reverse merger
or obtaining financing.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
We were incorporated under the laws of the state of Nevada on December 4, 1997
as a subsidiary of Dynamic Associates, Inc. ("Dynamic")
We were in the business of manufacturing and selling our primary product, the MW
2000. We also were in the business of designing and developing microwave
technologies for dermatological applications. Due to our financial condition and
filing for bankruptcy, we wrote off our entire inventory and currently have no
business activities.
Chapter 11 Bankruptcy Petition
On January 22, 2002, we filed a Petition for relief under Chapter 11 of the
Bankruptcy Code. 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 purpose of the bankruptcy was to
protect the business from our creditors while we reorganized and tried to work
out a plan to pay our debts.
A plan of reorganization was filed with the court, and amended on May 29, 2002.
On October 23, 2002 we requested that the court approve the report, close the
estate and enter a final decree. The final decree was approved on November 19,
2002 and the court closed the Petition for relief under Chapter 11 of the
Bankruptcy Code.
Settlement of Secured Claim
The sixth class of claims and interests in the bankruptcy were the secured
claims and therefore not discharged. Jan Wallace, our president and chief
executive officer, was the only secured creditor. From November 2000 to the
filing for bankruptcy, Ms. Jan Wallace had financed our operations in exchange
for a promissory note and security interest in all of our assets. Ms. Wallace's
claim approved in the bankruptcy was $1,189,939.70 of which $50,000 was
considered unsecured and placed under a different class. As a result of the
reorganization, Ms. Wallace received a new promissory note from the company in
the amount of $1,139,939.70 to be payable on or before September 30, 2002.
As we were unable to pay this amount when due, or after, we entered into a loan
agreement with Ms. Wallace that restructured this debt. In accordance with this
agreement, dated March 15, 2003, Ms. Wallace agreed to provide further financial
support for a period of up to 90 days in an amount of no more than $50,000 and
to accept a new promissory note for a reduced amount of $945,775.30. This new
note extended our payment due date to June 15, 2003. In consideration, we
assigned and transferred all of our patents, trademarks, and other intellectual
property to Ms. Wallace in exchange for the $326,897 reduction of the promissory
note based on the former book value of these assets prior to their write off at
year end 2002. In addition, a $375,000 portion of this revised note was
converted into 74,000,000 shares on March 26, 2003, leaving a balance owing of
$570,775.30. This exchange was consistent with the bankruptcy order which
recognized Ms.
6
Wallace's security interest in the assets transferred and allowed for a
conversion of the debt into our common stock at a price of one half of the then
current market price.
Following this, Ms. Wallace entered into negotiations with the Pacific
Commercial Group, LLC whereby it was contemplated that the Pacific Commercial
Group would be assigned the promissory note and stock. The deal was never
consummated.
Reverse Stock Split
Currently our operations are at a standstill and we wrote off our entire
inventory. In addition, we have issued a total of 99,822,443 out of 100,000,000
authorized common shares and are therefore unable to issue additional shares
without increasing the authorized shares or reducing the total issued shares
through a reverse stock split. Management has determined that it must seek
additional funding or other business relationships such as a merger or reverse
acquisition in order to proceed with an active business operation. While no such
relationships or funding have been identified as of yet, management believes
that the currently large number of issued and outstanding shares will effect the
consummation of any such relationship and that a smaller number of issued and
outstanding shares will assist in management's attracting of funding sources and
merger partners on terms that will be more beneficial to us.
We filed a Schedule 14A and called a shareholders meeting for December 2, 2002,
in part, to seek shareholder approval for a reverse split on a basis of one
share for every 25 presently outstanding. As a result of insufficient votes,
the meeting was cancelled and no approval was obtained.
The board is now proposing that the Company's common stock undergo a reverse
split on a basis of one share for every 500 shares presently outstanding in
order to make the corporation more attractive as a target for a merger or
reverse acquisition and to allow the company to offer its stock to investors.
Shareholder approval of this reverse stock split will effectively reduce the
number of shares held by each shareholder as well as the total number
of shares outstanding. The percentage of outstanding shares owned by each
shareholder prior to the proposed split will remain the same. We have filed a
new preliminary Schedule 14A in contemplation of this reverse split, and are
planning on having a new shareholders meeting in the second or third quarter of
2003 to decide this action.
Plan of Operations
We currently have no business activities. Unless we can secure financing, we
will not be able to restart our operations. With the economic downturn, we have
been unable to raise additional capital from outside sources and management is
unaware of any reasonable prospects for financing. We are in process of
evaluating other business interests.
Assets
Our total assets as of March 31, 2003 were $907, compared to total assets in the
amount of $937 on December 31, 2002. Our only asset is cash in the amount of
$907.
7
Liabilities And Stockholders Equity
Our total liabilities as of March 31, 2003 were $872 ,915, compared to total
liabilities in the amount of $1,164,265 as of December 31, 2002. Our total
current liabilities consisted of: (a)$867,915 in accounts payable; (b) accrued
expenses of $13,915; and (c) notes payable in the amount of $803,285. The
decrease in total liabilities is due to the settlement of the creditor's claims
under the approved reorganization plan in the Chapter 11 Bankruptcy. In
addition, on March 15, 2003, we entered into a loan agreement with Ms. Wallace.
In accordance with this agreement, Ms. Wallace agreed to provide further
financial support for a period of 90 days in an amount of no more than $50,000
and to accept a new promissory note for a reduced amount of $945,775.30, which
extended the due date for payment to June 15, 2003. The balance owing on this
promissory note is $570,775.30.
On March 31, 2003, we had a working capital deficit of $867,008, compared to a
working capital deficit of $1,163,328 on December 31, 2002.
Results of Operations
Due to our financial condition and the filing of bankruptcy, we had no business
operations in the three month period ended March 31, 2003. Therefore, we had no
revenue for the three month period ended March 31, 2003.
Our operating expenses were $99,092 for the three month period ended March 31,
2003, compared to operating expenses of $127,684 for the same three month period
in the prior year. Our only operating expense in the three month period ended
March 31, 2003 consisted of only general and administrative expenses. We did
incur $400,619 in interest expense in the three month period ended March 31,
2003, compared to interest expense of 15,542 for the same three month period of
the prior year.
We incurred a net loss of $499,711 for the three month period ended March 31,
2003, compared to a net loss of $143,226 for the same three month period in the
prior year.
Liquidity and Capital Resources
On March 31, 2003 we had cash in the amount of $907, compared to $937 in cash on
December 31, 2002. We wrote off our inventory and assigned it to Ms. Wallace to
repay a portion of the secured debt owed to her. Therefore, our only asset is
cash.
Unless we can secure financing, we will not be able to restart our operations.
With the economic downturn, the Company has been unable to raise additional
capital from outside sources and management is unaware of any reasonable
prospects for financing.
8
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.
ITEM 3. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures within the 90 days prior
to the filing date of this report. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer, Ms. Jan
Wallace and Chief Financial Officer, Ms. Grace Sim. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting management
to material information relating to us that is required to be included in our
periodic SEC filings. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal controls
subsequent to the date we carried out our evaluation.
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 is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission'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 Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
Other than as follows, we are not a party to any material litigation and to our
knowledge, no such proceedings are threatened or contemplated.
On January 22, 2002, we filed a petition for relief under Chapter 11 of the
United States Bankruptcy Code. The petition was filed in the United States
Bankruptcy Court, District of Arizona, under Case Number 02-01090-PHX-RTB for MW
Medical Inc. and Case Number 02-01298-PHX-GBN for Microwave Medical Corp.
A plan of reorganization was filed with the court, and amended on May 29, 2002.
On October 23, 2002 we requested that the court approve the report, close the
bankruptcy and enter a final decree. The final decree was approved on November
19, 2002 by the court closing the Petition for relief under Chapter 11 of the
Bankruptcy Code.
On February 25, 2003, MW Medical Corporation a/k/a Microwave Medical Corporation
was named and served as a third-party defendant in an action in New York state
court. The original complaint was filed by Arylnn Willis against Steven A.
Victor, M.D. and Madison Avenue Dermatology Center. Our bankruptcy counsel
believes that this complaint will be dismissed as to us due to the bankruptcy
discharge.
Item 2. Changes in Securities and Use of Proceeds:
In Exchange for a reduction of $375,000 and the issuance of a revised note, on
March 26, 2003 we issued 74,000,000 shares to our President and sole director,
Jan Wallace. This exchange was consistent with the bankruptcy order which
recognized Ms. Wallace's security interest in all of our assets and allowed for
a conversion of her debt into our common stock at a price of one half of the
then current market price.
Item 3. Defaults Upon Senior Securities:
Up through the settlement of the secured promissory note held by our President
and sole director, Ms. Jan Wallace, we were in default on our obligation to
repay her $1,189,939.70 as required under our plan of reorganization in
bankruptcy.
Item 4. Submission of Matters to a Vote of Security Holders:
We scheduled a meeting of shareholders in January of this year, but a vote was
not taken due to an inadequate number of shares available to vote on the matters
submitted.
Item 5. Other Information:
None
10
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS REQUIRED BY ITEM 601 OF REGULATION SB
Exhibit Number Description of Exhibit
- --------------------------------------------------------------------------------
2.1 Bankruptcy Order Confirming Debtor's First Amended Joint
Plan of Reorganization
99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (1)
99.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (1)
- --------------------------------------------------------------------------------
(1) Filed as an Exhibit to this Quarterly Report on Form 10-QSB
- --------------------------------------------------------------------------------
REPORTS ON FORM 8-K
On March 31, 2003, we filed a Form 8-K to disclose a settlement agreement
entered into with Ms. Jan Wallace. This agreement, in part, facilitated the
transfer of our patents, trademarks and other intellectual property, inventory,
equipment and other property in exchange for Ms. Wallace reducing the amount of
debt due to Ms. Wallace. In addition, the Form 8-K also disclosed that we
entered into a settlement agreement with our CEO and CFO, Jan Wallace and Grace
Sim for payment of unpaid wages.
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 29, 2003
/s/ Jan Wallace
____________________________________
Jan Wallace, Chief Executive Officer
CERTIFICATIONS
I, Jan Wallace, Chief Executive Officer of MW Medical, Inc. (the "Registrant"),
certify that;
(1) I have reviewed this quarterly report on Form10-QSB of MW Medical, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
(4) The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
(6) The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other facts that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 29, 2003 /s/ Jan Wallace
___________________________________
Jan Wallace
Chief Executive Officer
CERTIFICATIONS
I, Grace Sim, Chief Financial Officer of MW Medical, Inc. (the "Registrant"),
certify that;
(1) I have reviewed this quarterly report on Form10-QSB of MW Medical, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
(4) The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
(6) The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other facts that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 29, 2003 /s/ Grace Sim
___________________________________
Grace Sim
Chief Financial Officer