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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MW Medical, Inc.
(Exact name of Registrant as specified in its charter)
NEVADA 86-0907471
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Jan Wallace
6955 E. Caballo Dr.
Paradise Valley, ARIZONA 85253
- ------------------------------ -----------------------
(Name and address of principal (Zip Code)
executive offices and agent for
service of process)
Registrant's telephone number, including
area code: (602) 483-8700
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box.
|X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. |__|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
|__|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
|__|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box.
|__|
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------
TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES OFFERING AGGREGATE AMOUNT OF
TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT (1) PRICE (2) FEE (2)
- ------------------------------------------------------------------
Common 4,546,010 $3.50 $15,911,035 $4,423.27
Stock shares
Warrants 600,000 shares $3.50 $ 2,100,000 $ 583.80
- ------------------------------------------------------------------
Total 5,146,010 $3.50 $18,011,035 $5,007.07
shares
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(1) Based on last sales price on September 1, 1999
(2) Estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457 under the Securities
Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF
1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
COPIES OF COMMUNICATIONS TO:
Michael A. Cane, Esq.
101 Convention Center Dr., Suite 1200
Las Vegas, NV 89109
(702) 312-6255
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SUBJECT TO COMPLETION, Dated September 1, 1999
PROSPECTUS
MW MEDICAL, INC.
5,146,010 SHARES
COMMON STOCK
($.001 PAR VALUE)
----------------
The Selling Stockholders named in this prospectus may sell up to
5,146,010 shares of common stock of MW Medical, Inc. See the
section entitled "Selling Stockholders." The Company will not
receive any part of the proceeds from the sales of the common
stock. All expenses of registration incurred in connection with
this Prospectus are being paid by the Company, but all selling and
other expenses incurred by the Selling Stockholders will be borne
by the Selling Stockholders.
The Selling Stockholders have not advised the Company of any
specific plans for the distribution of the Common Stock covered by
this Prospectus, but it is anticipated that the Common Stock will
be sold from time to time primarily in transactions (which may
include block transactions) on the National Association of
Securities Dealer's Over-The-Counter Bulletin Board System at the
market price then prevailing or at prices related to prevailing
prices, although sales may also be made in negotiated transactions
at negotiated prices or otherwise. See the section entitled "Plan
of Distribution."
The Company's Common Stock is traded and quoted on the National
Association of Securities Dealer's Over-The-Counter Bulletin Board
System under the symbol MWMD. On September 1, 1999, the closing
sale price of the Common Stock was $3.50 per share.
----------------
THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. SEE SECTION ENTITLED "RISK
FACTORS" ON PAGES 5 -10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS: SEPTEMBER 1, 1999
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No dealer, salesperson or other person has been authorized to give
any information or to make any representations, other than those
contained or incorporated by reference in this Prospectus, in
connection with the offering contained herein and, if given or
made, such information must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy to any person, in any jurisdiction, to whom it
is unlawful to make such an offer. In addition, investors should
take note that the information contained in this document is only
offered to be accurate as of September 1, 1999. Neither the
delivery of this Prospectus nor any sale made through it shall,
under any circumstances, create the implication that there has
been no change in the affairs of the Company since that date.
The information contained in this Prospectus may at times
represent the Company's best estimates of its future financial and
technological performance, based upon assumptions believed to be
reasonable. No representation or warranty is made, however, as to
the accuracy or completeness of such assumptions, and investors
should not rely upon any representation as to any future
performance or events. See "RISK FACTORS."
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TABLE OF CONTENTS
PAGE
Summary.................................................... 4
Risk
Factors.................................................... 6
Use of Proceeds............................................ 12
Determination of Offering Price............................ 12
Dilution................................................... 12
Price Range Of Common Stock And Dividend Policy............ 13
Selected Consolidated Financial Data....................... 14
Selling Stockholders ...................................... 14
Plan of Distribution ...................................... 16
Description of Securities to Be Registered................. 17
Interests of Named Experts and Counsel..................... 18
The Company................................................ 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................. 24
Management................................................. 27
Security Ownership Of Certain Beneficial Owners and
Management................................................. 28
Certain Relationships and Related Transactions............. 30
Legal Matters.............................................. 31
Experts.................................................... 32
Available Information...................................... 32
Index to Financial Statements ............................. 33
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SUMMARY
The following summary is qualified in its entirety by the more
detailed information, exhibits and financial statements appearing
elsewhere in this Prospectus. Prospective investors are urged to
read this Prospectus in its entirety.
Investment in the Common Stock offered through this Prospectus is
highly speculative. Prospective investors should not construe the
contents of this Prospectus, or any other information furnished by
the Company, as legal or tax advice.
The Company
The Company is in the business of designing and developing
microwave technologies for dermatological applications through
MMC. 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 was incorporated in Nevada on December 4, 1997 as a
subsidiary of Dynamic Associates, Inc. Dynamic distributed all of
its outstanding shares of the Company (14,223,929 common shares),
to its shareholders of record on February 25, 1998, effective on
March 11, 1998. At the same time, Dynamic transferred ownership of
Microwave Medical Corporation and P&H Laboratories, Inc. to the
Company pursuant to a Contribution Agreement and Plan of
Reorganization dated February 25, 1998.
The Company has its principal executive offices at 6955 E. Caballo
Dr., Paradise Valley, AZ, 85253 (telephone no.: (602) 483-8700).
The Company entered into a Convertible Debenture and Warrants
Purchase Agreement dated July 14, 1999, in which it agreed to
sell to certain named investors a total of $3,500,000 worth of 8%
Convertible Debentures due on July 31, 2000. In addition to the
Convertible Debentures, each investor under the Debenture Purchase
Agreement was entitled to a Warrant to purchase one share of
Common Stock for each $10 of Convertible Debentures purchased.
The exercise price of the Warrants is $2.75 per share. Of the
$3,500,000 in Convertible Debentures, only $3,000,000 were sold
immediately. The remaining $500,000 were agreed to be purchased
by certain of the investors upon the registration of the Common
Stock as required by a Registration Rights Agreement signed at the
same time by all the parties .
The Convertible Debentures are convertible into Common Stock
of the Company under the following formula:
(a) the principal amount of the Debenture or any portion
thereof, together with accrued but unpaid interest;
(b) multiplied by a price for each share of Common Stock
equal to the lower of (1) 75% of the Market Price at
the Conversion Date, or (2) $2.75. The term "Market
Price" means the average of the three lowest closing
bid prices on the Principal
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Market (as reported by Bloomberg L.P.) of the Common
Stock on any Trading Day during the twenty-two (22)
Trading Day period ending on the Trading Day immediately
prior to the date upon which the Market Price is to be
determined; but -
(c) the Conversion Price may not be less than $0.75,
if all of the following conditions are satisfied: (1) a
Registration Statement is effective for the Common
Stock; (2) the Common Stock has been traded (since the
effective date of the Registration Statement) for
thirty (30) consecutive Trading Days with an average
daily volume of 140,000 shares at a volume-weighted
average price (as shown on the Bloomberg AQR function)
of at least 150% of the closing bid price on the first
Closing Date, and (3) the Company's microwave hair
removal product has received written FDA approval; and
(d) the minimum Conversion Price will be increased if the
foregoing conditions continue to be met and any or all
of the following conditions are met: (1) the Company's
most recent timely filed Form 10-Q or QSB shows net
revenues for the quarter of at least $10,000,000 (the
minimum Conversion Price would then be increased by
$0.25); (2) the Company's most recent timely filed
Form 10-K or KSB shows net revenues for the fiscal
year of at least $50,000,000 (the minimum Conversion
Price would then be increased by $0.35); (3) the
Common Stock has traded (since the effective date of
the Registration Statement) for thirty (30)
consecutive Trading Days with an average daily volume
of 250,000 shares (the minimum Conversion Price would
then be increased by $0.25).
On July 20, 1999, the Company also issued warrants to purchase
250,000 shares of common stock to JW Genesis Securities, Inc. as
part of its fee for arranging this Convertible Debenture
financing. These warrants are exercisable at a price of $3.3125
per share at any time prior to 5:00 pm New York City Time on July
20, 2004.
As part of the Debenture sale, the Company also signed and agreed
to a Registration Rights Agreement in which it is obligated to
register all the warrant shares it may issue, along with all the
shares that have been issued to parties exercising their right of
conversion as holders of the Convertible Debentures and 265% of
the shares that could be issued as a result of the conversion of
any, as yet, unconverted Convertible Debentures at the Conversion
Price in effect on the Closing Date. Under this Registration
Rights Agreement, a registration statement must be filed with the
SEC within 45 days of the Closing Date and such Registration
Statement must become effective within 105 days from the Closing
Date (or five (5) days of clearance by the Commission to request
effectiveness). Failure to meet these deadlines or to maintain
the registration statement as effective will create potentially
severe penalties for the Company, including the requirement to pay
liquidated damages to the purchasers of the Convertible Debentures
of three percent (3%) of the aggregate market value of the shares
of Common Stock purchased from the Company (including the
Conversion Shares which would be issuable upon conversion of the
Convertible Debentures on any date of determination), until such
Registration Statement has been declared effective.
The shares of Common Stock into which the Convertible Debentures
may be converted and the shares underlying such warrants are being
registered pursuant to the Registration Statement of which this
Prospectus is a part.
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Securities Being Offered Up to 5,146,010 shares of Common
Stock; See Section entitled
"DESCRIPTION OF SECURITIES TO BE
REGISTERED."
Securities Issued
And to be Issued As of the date of this Prospectus,
19,110,679 shares of common stock are
issued and outstanding. In addition,
there are approximately 2,759,260
shares represented by Convertible
Debentures and Warrants that may be
converted into Common Stock.
Therefore, upon conversion of the
Debentures and Warrants, there will
be approximately 21,869,939 shares
of common stock issued and outstanding.
All of the Common Stock to be sold
under this Prospectus will be sold by
existing shareholders. See Section
entitled "DESCRIPTION OF SECURITIES
TO BE REGISTERED".
Use of Proceeds The Company will not receive any
proceeds from the sale of the Common
Stock by the Selling Stockholders.
See "USE OF PROCEEDS."
Risk Factors The securities offered through this
Prospectus involve a high degree of
risk and should not be purchased by
anyone who cannot afford the loss of
his entire investment. Prospective
investors should carefully review and
consider the factors set forth in the
section of this Prospectus entitled
"RISK FACTORS," as well as the other
information set forth in this document,
before subscribing for any of the
Common Stock. See "RISK FACTORS."
RISK FACTORS
An investment in the securities offered through this Prospectus is
highly speculative and subject to a high degree of risk. Only
those who can bear the risk of loss of their entire investment
should participate. Prospective investors should carefully
consider the following factors, among others, prior to making an
investment in the Common Stock described in this document.
In addition, the information contained in this section and
elsewhere may at times represent the Company's best estimates of
its future financial and technological performance, based upon
assumptions believed to be reasonable. No representation or
warranty is made, however, as to the accuracy or completeness of
any of these assumptions, and nothing contained in this document
should be relied upon as a promise or representation as to any
future performance or events.
The Company is Likely to Need Additional Financing to Carry on its
Operations
While the Company has just completed a financing through the sale
of Convertible Debentures (See Section entitled "Description of
Securities to be Registered"), it will not be able to fully expand
its operations as planned without obtaining additional financing
in the near future. If this financing is
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not available or
obtainable, investors may lose a substantial portion or all of
their investment. The Company currently has no immediate means
for obtaining this additional financing. There can be no
assurance therefore that this additional financing, when
necessary, will be available to the Company on acceptable terms,
or at all.
The Company is a New Venture with Little Experience in the
Operation of its Business and No Experience in the Sale of its
Products
The Company was only recently incorporated, and, to date, has been
involved primarily in organization and product development. Its
only active subsidiary, MMC, has been conducted as a division of
Dynamic for approximately 2 years and, accordingly, also does not
have any independent operating history. Moreover, the Management
of the Company has historically relied upon Dynamic and is now
responsible for maintaining its own administrative functions. In
addition, MMC has no prior operating history or experience in
manufacturing, developing, and bringing to market the products of
the Company. Potential investors should be aware that there is a
substantial risk of failure associated with new businesses as a
result of problems encountered in connection with their formation
and operation. These include, but are not limited to,
unanticipated problems relating to the marketing and sale of a new
product in the marketplace, the entry of new competition and
unknown or unexpected additional costs and expenses that may
exceed current estimates. There is only a limited operating
history upon which to base any projection as to the likelihood
that the Company will prove successful, and thus there can be no
assurance that the Company will achieve profitable operations or
even generate any operating revenues.
The Company's Products are New and Untested in the Market Place
Any time a new product is introduced into a market, as in the case
of the products being developed by the Company, there is a
substantial risk that sales will not meet expectations or even
cover the cost of operations. General market conditions might be
such that sales will be slow or even non-existent, and/or the
product itself might not fit the needs of buyers enough to induce
sales. While the Company anticipates the ability to sell the
products it develops, there is no way to predict the volume of
sales that will occur or even if sales will be sufficient to
support the future operations of the Company. Numerous factors
beyond the control of the Company may affect the marketability of
the products offered and developed. These factors include consumer
demand, market fluctuations, the proximity and capacity of
suppliers and government regulations, including regulations
relating to prices, taxes, royalties, importing and exporting of
products and environmental controls. The exact effect of these
factors cannot be accurately predicted, but it's possible they may
result in the Company not receiving an adequate return on its
invested capital.
There is a Potential for Liability and Losses as a Result of
Defective Products
Whenever a new product is created and introduced into a market, as
in the case of the products being offered by the Company, there is
the possibility that the product will operate defectively and/or
cause injury to persons or property (even when operated as
designed). This is particularly true of products that are used in
the treatment of health or cosmetic problems directly on
individuals, such as the products being designed by the Company.
If the Company is unable to repair any such defect, they may be
required to refund purchase money and/or be held responsible for
losses incurred as a result of the defect, including direct and
consequential damages to persons
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or property. Moreover, even if
the Company is able to repair the defect, it may be held liable
for losses or injuries caused by the defect before it is fixed. In
such a case, the Company may experience losses, or, in severe
cases, be unable to continue operations.
The Company has No Plans to Issue Dividends
The payment of dividends on common stock is within the discretion
of the Board of Directors of the Company and will depend upon the
Company's future earnings, its capital requirements, financial
condition and other relevant factors. It should be noted that the
Company currently has no plan to declare any dividends in the
foreseeable future and has not declared any dividends in the past.
The Company has Not Been Profitable in the Past
The Company has been in its development stage, and, as such, has
not made any income or profit in the past. Because of the
difficulties involved in bringing a new product to market as well
as the difficulties encountered by any new business, there can be
no assurance that the company will be able to market and sell its
products as planned or generate income sufficient enough to
support the business expenses.
The Medical Equipment Industry is Extremely Competitive
Competition in the sale of medical equipment used for
dermatological and related medical applications is intense and
expected to increase. Furthermore, the Company will face
competition from numerous companies that currently market, or are
developing, products similar to those being developed by the
Company. Many of these companies have significantly greater
marketing, financial and managerial resources than the Company.
There can be no assurance that competitors of the Company will not
succeed in developing and distributing products that will render
the Company's products obsolete or noncompetitive. Generally,
this will have a significant negative effect on any bottom line
profits as well as the ultimate viability of the Company.
Investors Should Not Rely on Forward Looking Assessments Contained
in this Document
The ability of the Company to accomplish its objectives, and
whether or not the Company will be financially successful is
dependent upon numerous factors, each of which could have a
material effect on the results obtained. Some of these factors
are within the discretion and control of management and others are
beyond management's control. The assumptions and hypothesis used
in preparing any forward-looking assessments of profitability
contained in this document are considered reasonable by
management. There can be no assurance, however, that any
projections or assessments contained herein or otherwise made by
management will be realized or achieved at any level. Prospective
investors should have this Memorandum reviewed by their personal
investment advisors, legal counsel and/or accountants to properly
evaluate the risks and contingencies of this offering.
The Company is Subject to Potential Losses Due to Changes in the
Law or Regulations
The Company and its subsidiary are subject to United States and
international laws and regulations regarding the development,
production, transportation and sale of the products it sells.
The
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Company may, with regard to governmental and/or regulatory
agencies, be required to comply with certain regulations, and/or
potential future regulations, rules, and/or directives. Due to the
nature of the medical equipment industry, there is no guarantee
that certain regulations may not, in the future, be imposed.
Moreover, potential regulatory conditions and/or compliance
therewith, may have a materially adverse affect upon the Company,
its business operations, prospects and/or financial condition.
The Company may be Subject to Potential Medical Malpractice
Liability Claims
Although the Company only sells products used in the practice of
medicine and is not engaged in the practice of medicine, the use
of the Company's equipment in the treatment of spider veins and
hair removal entails the risk of professional liability claims.
Consequently, the Company may be named as a co-defendant in
medical malpractice claims. The Company's exposure to such
liability is
reduced because purchasing Physicians will be required to buy and
carry their own medical malpractice insurance. While the Company
currently plans to maintain insurance for its business in amounts
deemed adequate by management to cover potential claims when its
product comes to market, it does not currently have any such
insurance. Adverse determinations against the Company with respect
to all such claims or the filing of malpractice claims against the
Company in the future could have a material adverse effect on the
Company's financial condition, results of operations and cash
flow.
The Company may be Harmed if it loses its Market Standing on the
Over-The-Counter Bulletin Board
There can be no assurance that in the future the Common Stock will
meet the continued listing qualifications of the NASD Over-The-
Counter Bulletin Board Market or other market upon which the
Company's common stock may trade at some later date. De-listing
from the Bulletin Board or other market could cause, among other
things, a decline in the market price of the Common Stock and
difficulty in the ability of the Company in obtaining future
equity financing, or in using its Common Stock as consideration
for acquisitions.
The Price of the Company's Stock is Very Volatile
The market price of the Company's common stock has been and may
continue to be very volatile. Recently, the stock market in
general and the shares of bio-tech companies in particular have
experienced significant price fluctuations. These broad market and
industry fluctuations may adversely affect the market price of the
Common Stock. Factors such as quarterly fluctuations in results of
operations, the timing and terms of future acquisitions and
general conditions in the healthcare industry may have a
significant impact on the market price of the stock.
Sales of Stock By the Selling Stockholders may Negatively Effect
the Market Price of the Company's Stock
All of the Common Stock being offered through this Prospectus are
offered solely by the Selling Stockholders who are not restricted
as to the prices at which they may sell the Common Stock. Shares
sold below the current level at which the shares of Common Stock
are trading may adversely affect the market price of the Common
Stock. The outstanding shares of Common Stock covered
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by this Prospectus and the shares of Common Stock covered by this
Prospectus which are issuable upon the conversion or exercise of
the Company's Convertible Debentures and Warrants represent 26.93%
of the Company's outstanding shares as of September 1, 1999. This
large amount of Stock, if sold all at once or in blocks, would
have a negative effect on the market price of the Company's Stock.
Exercise of Conversion and Warrant Rights By Selling Stockholders
carry a Potential For Dilution of Shareholder Ownership
The Company has issued $380,000 worth of Convertible Debentures,
convertible into Common Stock, and entered into an agreement to
issue another $500,000 worth of Convertible Debentures
(convertible under the same terms) following the Registration of
the Common Stock with the Securities and Exchange Commission.
Depending on market conditions, the number of shares issuable upon
conversion of these Debentures vary dramatically. The lower the
stock price goes, the more common stock the Debenture holder
receives as a result of conversion. This will have the effect of
diluting the interest of existing shareholders in the Company.
The following table illustrates the number of shares that the
Company would be required to issue at various assumed prices upon
conversion of these Debentures, subject to the limitations
described in the text following the table. This table is for
illustrative purposes only, and you should not assume that it
represents the Company's best guess of the range of future stock
prices.
Additional Ownership of
MW Medical Shares Issuable Selling Stockholders as a
Stock Price Under the Debenture Result of Share Issuance(1)(3)
Agreement
$0.875 1,005,714 5.26%
$1.75 502,857 2.63%
$2.62 335,878 1.76%
$3.50 (2) 320,000 1.67%
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(1) Based on 19,110,679 shares outstanding on September 1, 1999.
(2) Last sale price on September 1, 1999, but note that the
Debenture Agreement provides a Conversion Price cap of $2.75.
(3) This is the additional ownership percentage as a result of the
conversion of the remaining $880,000 Debentures by the Selling
Shareholders.
Purchasers of Common Stock could therefore experience substantial
dilution upon conversion of the convertible debentures. A similar
effect could be experienced upon the exercise of the 600,000
currently outstanding warrants as well as the exercise of the
1,365,000 outstanding stock options.
In addition, it should be noted that the current conversion price
of these Debentures ($2.75) as well as the exercise price of the
Warrants ($2.75 and $3.312) and Options ($1) is below the market
price
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of the Common Shares. The exercise of such a large amount
of stock, especially if close in time may have a substantial
negative effect on the market price of the common stock.
The Company is Subject to Potential Penalties for Failure to
Register its Common Stock
The Company is subject to a Registration Rights Agreement that
requires it to register certain of its Common Stock with the
Commission within 45 days of the closing of the sale of the
Convertible Debentures (July 20, 1999), and, generally, for the
registration to be effective within 105 days of that date.
There can be no assurance that the Company will be able to comply
with these deadline or that it will be able to pay the penalty if
required.
The Company is Dependent on Key Personnel and Management
Due to the highly technical nature of the Company's business,
having certain key personnel is essential to the manufacture and
production process and thus to the entire business itself.
Consequently, the loss of any of those individuals may have a
substantial effect on the Company's future success or failure.
Moreover, the Company is dependent on the principal members of its
management staff, the loss of any of whom could impair the
development of the Company's products and projects. The Company's
success will be largely dependent on the decisions made by members
of management. Furthermore, the Company may depend on its ability
to attract and retain additional qualified personnel to manage
certain business interests. The Company may have to recruit
qualified personnel with competitive compensation packages, equity
participation and other benefits which may affect the working
capital available for the Company's operation(s). Management may
seek to obtain outside independent professionals to assist them in
assessing the merits and risks of any business proposals as well
as assisting in the development and operation of any projects. No
assurance can be made that the Company will be able to obtain this
needed assistance on reasonable terms.
The Company has Limited Assets
As of the date of this Prospectus, the Company has limited assets
and will require significant capital to develop its business and
sell its products.
The Company's Success will Depend on its Patent and Protection of
its Proprietary Technology
The Company's success will depend, in part, on its ability to
obtain and enforce intellectual property protection for its
technology in both the United States and other countries. To date,
the Company has filed patent applications in the United States
Patent and Trademark Office and international counterparts of
applications in the United States Receiving Office pursuant to the
Patent Cooperation Treaty. No assurance can be given that patents
will issue from these applications or that, with respect to any
patents, issued or pending, the claims allowed are or will be
sufficiently broad to protect the key aspects of the Company's
technology or that the patent laws will provide effective legal or
injunctive remedies to stop any infringement of the Company's
patents. In addition, no assurance can be given that any patent
rights owned by the Company will not be
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challenged, invalidated or circumvented, that the rights granted
under patents will provide competitive advantages to the Company,
or that the Company's competitors will not independently develop
or patent technologies that are substantially equivalent or
superior to the Company's technology. The Company's business plan
assumes that they will obtain comprehensive patent protection of
its technologies. There can be no assurance that such protection
will be obtained, or that, if obtained, it will withstand challenge.
Furthermore, the possibility exists that the Company could be found
to infringe on patents held by others. The Company may have to go
to court to defend its patents, to prosecute infringements, or to
defend itself from infringement claims by others.
Patent litigation is expensive and time-consuming, and can be used
by well-funded adversaries as a strategy for depleting the
resources of a small company such as the Company. There is no
assurance that the Company will have sufficient resources to
successfully prosecute its interests in any litigation which may
be brought.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET-FORTH AND NOT SET-
FORTH HEREIN, THE SHARES OFFERED INVOLVE A CERTAIN DEGREE OF RISK.
ANY PERSON CONSIDERING THE PURCHASE OF THESE SHARES SHOULD BE
AWARE OF THESE AND OTHER FACTORS SET-FORTH IN THIS MEMORANDUM AND
SHOULD CONSULT WITH HIS OR HER LEGAL, TAX AND FINANCIAL ADVISORS
PRIOR TO MAKING AN INVESTMENT IN THE COMPANY. THE COMPANY'S
COMMON STOCK SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO
LOSE ALL OF THEIR INVESTMENT.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Common Stock offered through this Prospectus by the Selling
Stockholders.
DETERMINATION OF OFFERING PRICE
The offering price of the Common Stock will not be determined by
the Company but by market factors and the independent decisions of
the Selling Shareholders.
DILUTION
The outstanding shares covered by this Prospectus and the shares
of Common Stock covered by this Prospectus which are issuable upon
the conversion or exercise of the Company's Convertible Debentures
and warrants represent 26.93% of the Company's outstanding shares
of common stock as of September 1, 1999.
As of September 1, 1999, 19,110,679 shares of the Company's Common
Stock were issued and outstanding. The Company has also issued
$380,000 worth of Convertible Debentures, convertible into Common
Stock, and entered into an agreement to issue another $500,000
worth of Convertible Debentures (convertible under the same terms)
following the Registration of the Common Stock with the Securities
and Exchange Commission.
12
<Page >
In addition, the Company has issued out Warrants to purchase
600,000 shares of Common Stock, 350,000 at a price of $2.75 per
share and 250,000 at a price of $3.312 per share. The Company has
also issued out Options to purchase 1,365,000 of the Company's
common stock at a price of $1.00 per share under the Company's
Incentive Stock Option Plan dated March 23, 1999.
Depending on market conditions at the time of conversion, the
number of shares issuable to the holders of the Convertible
debenture could prove to be significantly greater in the event of
a decrease in the trading price of the Common Stock. This will
have the effect of diluting the interest of existing shareholders
in the Company.
In addition, the exercise of the outstanding warrants and options
would have the effect of diluting the interest of the existing
shareholders of the Company's Common Stock.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock has been traded on the National
Association of Securities Dealers Over the Counter Bulletin Board
system, under the symbol MWMD, since April 5, 1999. There can be
no assurance that in the future the Common Stock will meet the
continued listing qualifications of the Bulletin Board.
The following table sets forth for the periods indicated below the
high and low sales prices per share of the Common Stock as
reported by Bulletin Board since the stock began trading:
HIGH LOW
---- ----
1999
First Quarter Not Trading*
Second Quarter $2.00 $1.00
Third Quarter (through August 30, 1999) $3.93 $1.75
*Trading of the Company's stock did not begin until Second Quarter
1999.
As of the close of business on September 1, 1999, the last
reported sales price per share of the Company's Common Stock was
$3.50.
There were 441 holders of record of the Company's Common Stock at
the close of business on September 1, 1999. Such number does not
include persons, whose shares are held by a bank, brokerage house
or clearing company, but does include such banks, brokerage houses
and clearing companies.
No cash dividends have been paid on the Company's Common Stock
since the organization of the Company and the Company does not
anticipate paying dividends in the foreseeable future. The Company
currently intends to retain earnings for future growth and
expansion opportunities.
13
<Page >
SELECTED CONSOLIDATED FINANCIAL DATA
The following table provides certain comparative financial data
for the Company for the years 1996, 1997 and 1998 as well as the
first six months of 1999. The information provided in this table
is qualified by the more complete information contained in the
Audited and Un-audited Consolidated Financial Statements provided
later in this document.
All amounts shown below unless otherwise noted are in $1000s
increments.
6/99 1998 1997 1996
---- ---- ---- ----
Total Revenue 0 0 0 0
Operating Income
(loss) (789) (1221) (1134) (605)
Income (loss)
before Income
Tax Expense (775) 1106 (1127) (595)
Net Income
(loss) (776) 433 (1252) (467)
Income (loss)
per share $(.05) $.03 $(.09) $(.03)
Total assets 2189 1404 2539 2609
Current
portion of
notes Payable
and L/T debt 425 0 90 48
Notes payable
and L/T debt.
Less Current
portion 0 0 2330 1556
Total
Shareholder
Equity
(deficit) 1097 1198 (256) 996
Dividends
declared and 0 0 0 0
Paid
SELLING STOCKHOLDERS
The Common Stock offered hereby consist of (i) 2,386,750
outstanding shares of Common Stock which were issued upon
conversion of Convertible Debentures sold by the Company in July
1999 through a private placement exempt under Rule 506 of
Regulation D, (ii) approximately 2,159,260 shares issuable upon
the conversion of the $880,000 in aggregate principal amount of
convertible debentures, issued and contracted for by the Company
(based upon the conversion price calculation as described in the
Section on "Dilution" above, multiplied by 2.65 as required by the
Registration Rights Agreement), and (iii) 600,000 shares of Common
Stock issuable pursuant to the exercise of warrants issued or
issuable to certain Selling Stockholders.
14
<Page >
The following table sets forth as of September 1, 1999,
information regarding the beneficial ownership of the Company's
Common Stock held by each of the Selling Stockholders who may sell
the Common Stock pursuant to this Prospectus as of such date, the
number of Shares pursuant to this Prospectus as of such date, the
number of Shares offered hereunder by each such Selling
Stockholder and the net ownership of shares of Common Stock, if
all such Shares so offered are sold by each Selling Stockholder.
TOTAL NUMBER TOTAL SHARES TO
OF SHARES TO BE OWNED UPON
BE OFFERED FOR COMPLETION
NAME OF SELLING SHARES OWNED SELLING OF THIS
STOCKHOLDER PRIOR TO THIS SHAREHOLDERS OFFERING PERCENT
OFFERING(1) ACCOUNT(2) OWNED(3)
- --------------- ------------- -------------- ---------- --------
Austost Anstalt
Schaan
Landstrasse 163
9494 Furstenweg,
Vaduz
Leichtenstein 986,634 986,634 0 5.16%
Balmore Funds SA
Trident Chambers
Road Town
Tortola, BVI 986,634 986,634 0 5.16%
Roseworth
Group, Ltd
C/o Dr. Batliner
& Partners
Aeulestrasse 74,
FI - 9490
Vaduz
Leichtenstein 1,404,034 1,404,034 0 7.35%
Markham Holdings
Limited
Suite 7B & 8B
50 Town Range
Gibraltar 242,694 242,694 0 1.27%
High Octane
Fund Ltd
HWR Services
Craigmuir
Chamber
PO Box 71
Road Town,
Tortola BVI 1,065,608 765,608 0 5.58%
Strategic
Group Ltd
Suite 41/42
Victoria
House
26 Main Street
PO Box 743
Gibraltar 255,203 255,203 0 1.34%
15
<Page >
Mark Hubbard
Suite 41/42
Victoria House
26 Main Street
PO Box 743
Gibraltar 255,203 255,203 0 1.34%
JW Genesis
Financial
Services
Corp.
599 Lexington
Avenue,
27th Floor
New York,
NY 10022 250,000 250,000 0 1.30%
- ------------------------------------------------------------------
(1) Except as otherwise noted, all shares or rights to these
shares are beneficially owned and sole voting and investment power
is held by the party named.
(2) Assumes that none of the Selling Stockholders sells shares of
Common Stock not being offered hereunder or purchases additional
shares of Common Stock.
(3) Based on 19,110,679 shares outstanding on September 1, 1999.
None of the Selling Shareholders have had a material relationship
with the Company other than as a shareholder as noted above at any
time within the past three years.
PLAN OF DISTRIBUTION
The Selling Stockholders, or their respective pledgees, donees,
transferees or other successors in interest, may sell some or all
of the Common Stock in one or more transactions (which may involve
block transactions) on the NASD Over-the-Counter Bulletin Board or
on such other market on which the Common Stock may from time to
time be trading, in privately negotiated transactions, through the
writing of options on the Common Stock, short sales or any
combination thereof. The sale price to the public may be the
market price prevailing at the time of sale, a price related to
such prevailing market price or such other price as the Selling
Stockholders determine from time to time. The Common Stock may
also be sold pursuant to Rule 144.
The Selling Stockholders, or their respective pledgees, donees,
tranferees or other successors in interest, may also sell the
Common Stock directly to market makers acting as principals and/or
broker/dealers, who may act as agent or acquire the Common Stock
as principal. Any broker/dealer participating in such transactions
as agent may receive a commission from the Selling Stockholders
(and, if they act as agent for the purchaser of such Common Stock,
from such purchaser). Usual and customary brokerage fees will be
paid by the Selling Stockholders. Broker/dealers may agree with
the Selling Stockholders to sell a specified number of shares at a
stipulated price per Share and, to the extent such broker/dealer
is unable to do so acting as agent for the Selling Stockholders,
to purchase, as principal, any unsold shares at the price required
to fulfill the respective broker/dealer's commitment to the
Selling Stockholders. Broker/dealers who acquire shares as
principals may thereafter resell such shares from time to time in
transactions (which may involve cross and block transactions and
which may involve sales to and through other broker/dealers,
including transactions of the nature described above) in the over-
the-counter market, in negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated
prices, and in connection with such resales may pay or receive
commissions to or from the purchasers of such shares. If
applicable, the Selling Stockholders also may have distributed, or
may distribute, shares to
16
<Page >
one or more of their limited partners which are unaffiliated with
the Company; such limited partners may, in turn, distribute such
shares as described above. There can be no assurance that all or
any of the Common Stock offered hereby will be sold by the Selling
Stockholders.
The Company is bearing all costs relating to the registration of
the Common Stock, provided that any commissions or other fees
payable to broker/dealers in connection with any sale of the
Common Stock will be borne by the Selling Stockholders or other
party selling such Common Stock. The Company has agreed to
indemnify certain of the Selling Stockholders, or their
transferees or assignees, against certain liabilities, including
liabilities under the Act, or to contribute to payments the
Selling Stockholders, or their transferees or assignees, may be
required to make in respect thereof.
The Selling Stockholders must comply with the requirements of the
Act and the Exchange Act and the rules and regulations thereunder
in the offer and sale of the Common Stock. In particular, during
such times as the Selling Stockholders may be deemed to be engaged
in a distribution of the Common Stock, and therefore be deemed to
be an underwriter under the Act, it must comply with the Exchange
Act, as amended, and will, among other things:
(a) not engage in any stabilization activities in connection with
the Company's securities;
(b) furnish each broker/dealer through which Common Stock may be
offered such copies of this Prospectus, as amended from time to
time, as may be required by such broker/dealer; and
(c) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the
Company other than as permitted under the Exchange Act.
DESCRIPTION OF SECURITIES TO BE REGISTERED
The Company has 100,000,000 authorized common shares with a par
value of $0.001 per share of Common Stock, of which 19,110,679 are
currently outstanding. In addition, there are approximately
2,159,260 common shares issuable upon the conversion of $880,000
in aggregate principal amount of convertible debentures, issued
and contracted for (based upon the conversion price calculation as
required in the Registration Rights Agreement), 600,000 shares of
Common Stock issuable pursuant to the exercise of warrants issued
to the Selling Stockholders, and 1,365,000 shares issuable upon
the exercise of Employee Incentive Stock Option Agreements.
Holders of Common Stock have the right to cast one vote for each
share held of record on all matters submitted to a vote of holders
of Common Stock, including the election of directors. There is no
right to cumulative voting in the election of directors.
Stockholders holding a majority of the voting power of the capital
stock issued and outstanding and entitled to vote, represented in
person or by proxy, are necessary to constitute a quorum at any
meeting of the Company's stockholders, and the vote by the holders
of a majority of such outstanding shares is required to effect
certain fundamental corporate changes such as liquidation, merger
or amendment of the Company's Certificate of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by
the Board of Directors, from funds legally available therefore,
subject to the rights of holders of any outstanding preferred
stock. In the event of the liquidation,
17
<Page >
dissolution or winding up of the affairs of the Company, all assets
and funds of the Company remaining after the payment of all debts
and other liabilities, subject to the rights of the holders of any
outstanding preferred stock, shall be distributed, pro rata, among
the holders of the Common Stock. Holders of Common Stock are not
entitled to pre-emptive or subscription or conversion rights, and
there are no redemption or sinking fund provisions applicable to
the Common Stock All outstanding shares of Common Stock are, and
the shares of Common Stock offered hereby will be when issued,
fully paid and non-assessable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Prospectus as having prepared
or certified any part of it or having given an opinion upon the
validity of the securities being registered or upon other legal
matters in connection with the registration or offering of the
Common Stock was employed on a contingency basis, or had, or is to
receive, in connection with the offering, a substantial interest,
direct or indirect, in the registrant or any of its parents or
subsidiaries or was connected with the registrant or any of its
parents or subsidiaries as a promoter, managing or principal
underwriter, voting trustee, director, officer, or employee.
The validity of the shares of the Company's Common Stock offered
hereby will be passed upon for the Company by Michael A. Cane of
Cane & Company, Independent Counsel to the Company.
THE COMPANY
Investors are cautioned that forward-looking statements made
herein are inherently uncertain. Actual performance and results
may differ materially from those that are projected or suggested.
Additional information concerning certain risks and uncertainties
that could cause actual results to differ materially from those
projected or suggested may be identified from time to time in the
Company's Securities and Exchange Commission filings and the
Company's public announcements.
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, a California Corporation ("MMC"). The
Company's products are in the developmental stage. The Company
plans to market and sell its microwave technology products upon
completion of this developmental stage.
Principal Services and Products
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. Studies have shown effectiveness in
destroying follicles while maintaining the integrity of the skin
surface. MMC completed Phase II clinical trials in June, 1998 on
its microwave system for hair removal. Phase II clinical trials
consisted of a dose titration to establish safety and initial
indications of efficacy. A total of 21 subjects were tested
starting at a low dose in
18
<Page >
the first group of three subjects and gradually applying an
increasing dose in each group of three subjects until the maximum
tolerable dose was reached. Effectiveness was evaluated by
following hair counts in the treated areas.
Phase III clinical trials for hair removal were completed in April
1999 to prove safety and efficacy in the use of the product. The
Company then submitted the results to the FDA on Form 510-K on
April 22, 1999. A determination of the Company's FDA application
has not yet been made, and no assurance can be given that the FDA
will approve the Company's application at any time in the future.
MMC's objective is to obtain FDA approval and complete its
development of a microwave therapy system that incorporates the
technology in the patent for the following applications:
(A) The removal of unwanted hair for cosmetic purposes
Unwanted hair is a common dermatological and cosmetic
problem. There is an increasing demand for hair
removal, which thus far has not been well addressed by
current technologies. MMC has been able to demonstrate
that microwave technology is a safe, effective and
feasible solution for hair removal in its Phase II and
III clinical trials.
(B) The treatment of Telangiectasia, or, spider veins
Spider veins are thread-like red to purplish veins that
stem from a network of small veins just below the
surface of the skin. Spider veins develop more
predominantly on the legs and faces of women. These are
usually caused by the female hormone estrogen. At this
time, injection (sclerotherapy) and lasers are the
predominant treatments for this condition.
Research and Development
MMC began its research and development program in April 1996 while
a subsidiary of Dynamic. The research and development program
included computer modeling, laboratory studies and pre-clinical
studies which led to the development of the prototype microwave
system that is now in clinical trials for hair removal, and will
soon be in clinical trials for spider veins. P&H supported the
technical development of MMC's prototype system. With the sale of
the business of P&H to Microwave Communications Corp.
("Microwave") on May 6, 1998, Microwave agreed to provide the
technical, management and office support related to microwave
services to MMC through April 1, 1999. This agreement was
arranged by the Company as part of the sale of the business of P&H
in order to ensure that there would be no interruption to the
development of the prototype machines for MMC.
MMC currently plans to launch its microwave system(s) for hair
removal by the end of the fourth quarter of 1999 (subject to
obtaining FDA approval). The Company has three working prototype
systems that are currently being used in clinical trials in the
U.S. Regulatory approval is not anticipated prior to the fourth
Quarter of 1999. MMC has an arrangement with ETM Industries, Inc.
whereby ETM will develop a microwave power amplifier to deliver
microwave pulses
19
<Page >
according to MMC's specifications. The industrial design of
the clinical prototypes was completed by Sonos, Inc. of Huntington
Beach, California. The Company will also use Sonos, Inc. for design
and limited production of the final unit. MMC intends to contract
with outside vendors for the microwave generator, the wave guide
transmission line, the components of the applicator, the
micro-controller and other components of MMC's microwave system.
MMC or a designated GMP (Good Manufacturing Practice) facility
will be responsible for the final assembly and quality control.
Competition and Marketing
The Company intends to market its proprietary microwave
technology in the cosmetic dermatology market. In recent years,
there has been a substantial upsurge in the demand for non
surgical cosmetic procedures in the treatment of spider veins and
removal of hair. Market interest has been largely fostered by the
introduction of laser technology for use in cosmetic dermatology.
MMC plans to compete primarily with laser devices in North America
and the European Community. MMC's competitive advantage is
expected to be based on price, safety and effectiveness. The end
user price is expected to be in the range of $95,000 to 100,000,
which is 25 to 35 percent below the current cost of the equivalent
laser systems. In addition, laser technology cannot be applied
well in individuals with dark skin (for either spider veins or
hair removal) and does not effectively cause hair removal in
individuals with light colored hair. These limitations are the
result of absorption of laser energy by specific pigments in the
skin and hair. In addition, the efficacy of laser systems for
spider veins is sub-optimal, in most cases requiring 3 to 5
treatments to achieve an acceptable clinical response. Based upon
the Company's clinical studies to date, microwave technology is
not expected to have these limitations.
The Company's principal competitors are Candela Corporation and
ESC Medical Systems Ltd. Both Companies sell, among other things,
laser systems used for hair removal and the treatment of spider
veins.
The market strategy will be specific to the geographic area in
which the product is being introduced. MMC will focus on two
marketing strategies: (1) selling or leasing the product to
physicians and other health-care practitioners, and (3) fee
sharing in which MMC will pre-finance the product and take some
percentage of the revenue generated through the use of the
product. MMC plans to use distributors in each major geographic
area who will take over the sales and service of the product. The
Company has not yet entered into any formal agreements with any
distributors, but expects to complete distribution agreements
before the end of the fourth quarter of 1999.
The primary customer will be physicians and other healthcare
practitioners specializing in cosmetic surgery and dermatology.
In the U.S. alone, it is estimated that there are approximately
25,000 cosmetic surgeons and dermatologists. In addition, other
physician specialists such as family practitioners, gynecologists,
and surgeons have incorporated cosmetic dermatology into their
practices.
The world wide market for the treatment of spider veins and hair
removal is estimated to be $5 billion. New technologies will make
up 25% of this market through the year 2002.
20
<Page >
MMC concentrates marketing and sales efforts in the United States,
Canada and the European Community. The Company will apply to the
appropriate regulators for all three markets. The commencement of
the product shipments in the United States is conditional on FDA
approval. In all markets, MMC will apply for approval with regard
to hair removal and spider veins.
Depending on end user and region, MMC is preparing three kinds of
marketing strategies. The strategy for the market launch is
determined by the possibility of rapid growth and cash flow.
Sales in MMC will depend on the respective marketing strategy.
FDA Approval Process
The Process of obtaining and maintaining FDA approval for the
marketing and sale of a product like the one designed by the
Company has two aspects: (1) obtaining approval for the products
use; and (2) complying with Good Manufacturing Practices by
establishing quality controls, operating procedures and technical
documentation, among other aspects of the manufacturing process.
Step by step, the process of obtaining FDA approval occurs
generally as follows:
1. The applicant goes through laboratory and pre-clinical studies
and testing;
2. The applicant submits an application to conduct human clinical
trials with an Institutional Review Board ("IRB"). The IRB
reviews the application and can grant the applicant the right to
start human clinical trials. Alternatively, the IRB can require
the applicant to apply to the FDA and obtain an exemption to do
trials if it determines that the planned device creates a
significant risk to human subjects.
3. If the applicant is granted the right to begin human clinical
trials, it does so in phases. The first phase usually involves a
safety study on normal individuals. Data is obtained and
submitted to the IRB with other documentation to get approval to
do Phase II studies. Phase II studies involve small groups of
patients who are treated. The device/system is tested for safety
and effectiveness. The data that is collected is again submitted
to the IRB with a request to go to Phase III clinical studies. If
the application is approved, Phase III clinical studies are begun
on a larger group of patients. Safety and efficacy are tested
more extensively and over multiple centers for more detailed
analysis.
4. If the results of these clinical studies justify, the
applicant can file an application with the FDA. The FDA has two
basic means of making an application. A Pre-Market Approval
Process and the Substantial Equivalence Application ("510(k)
Filing"). A Pre-Market Approval Process is a full application
process, while a 510(k) filing is a relatively short application
process in which the applicant attempts to show that the device
for which it seeks approval is substantially equivalent to an
existing device already approved by the FDA. This application is
given to a reviewer who has the opportunity to request
clarification as to issues in the application and eventually
provide formal clearance for the use and sale of the devise (or a
rejection of the application). As noted above, even after
clearance of a devise, the manufacturer must still satisfy the GMP
requirements.
The Company has completed all three Phases of clinical trials and
has applied to the FDA with a 510(k) application. This
application is in the process of being reviewed. No final
determination,
21
<Page >
however, has been made by the examiner, and no assurance can be
given that once his investigation is completed the examiner will
approve this application.
In addition, even if clearance is obtained, the devise must
satisfy electronic safety and emissions requirements as set by IEC
60601-1 to be sold in the US and Europe. As the Company has not
yet built its production device, no testing has been, as yet, done
to determine if the machine meets this standard. Upon completion
of the device, the Company will submit it to a certified testing
laboratory for a determination that it meets these requirements.
The test data obtained from this will be incorporated into a
technical file and submitted to a "Notified Body" in the European
Market to review and issue a CE mark designating approval
(assuming the device has passed the test). Once obtained the
Company will be able to market and sell its machine as planned.
Note that no assurance can be given that such approval will be
obtained upon this application.
Employees
The Company's six employees consist of its President, Vice
President of Sales, Director of Sales, N.A., and a
Secretary/Financial Officer, an electrical/microwave engineer and
a microwave technician. By the end of 1999, the research and
development division of MMC is expected to increase to four full-
time employees. Expansion will coincide with the Company's
product rollout. Manufacturing and assembly will be conducted by
third parties under the supervision of MMC. Sales, marketing and
administration is anticipated to add approximately 5 new employees
by the end of Fourth Quarter 1999 to coincide with the Company's
product release and anticipated regulatory approval. None of the
employees of the Company or its subsidiaries are subject to
collective bargaining agreements, nor have they been on strike, or
threatened to strike, within the past three years. The Company
and its subsidiaries have no supplemental benefit or incentive
arrangements with their employees other than health insurance
coverage.
Patents and Trademarks
The success of the Company substantially depends upon its
proprietary microwave technology for use in cosmetic dermatology.
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 Company has no other patent,
trademark or intangible property.
Research and Development Expenditures
During the 1997 and 1998 fiscal years, the following amounts were
spent by MMC on research and development activities:
Year Ended Year Ended
December 31, 1997 December 31, 1998
MMC $ 1,057,759 $ 569,738
22
<Page >
Note that part of these expenditures were expended while MMC was a
subsidiary of Dynamic. The Research and Development costs for P&H
is incorporated into the discontinued operations category in the
Financial Statements.
Subsidiaries
Because the Company acts only as a holding company for P&H and
MMC, all of the information for each of these entities is listed
throughout this Prospectus. The subsidiaries' financial
information is included in the consolidated financial statements
attached hereto. The Company did not come into existence until
December 1997, while the subsidiaries were in existence for all of
1997. P&H and MMC have maintained separate operations and
financial reporting, both prior and subsequent to the spin-off of
the shares of the Company by Dynamic.
Description of Property
The Company leases space on a rent-free basis at 6955 E. Caballo
Dr., Paradise Valley, AZ 85253., and MMC's offices are located at
65 W. Easy St., Suite 104, Simi Valley, CA 93063.
Corporate Organization
The Company is a Nevada corporation and was incorporated as a
subsidiary of Dynamic Associates, Inc. ("Dynamic") on December 4,
1997. On February 26, 1998, the Company entered into a
Contribution Agreement (the "Contribution Agreement") with Dynamic
in which the Company issued 14,223,929 of its common shares to
Dynamic in consideration for:
(a) all of the issued and outstanding shares of P&H Laboratories,
Inc., a California corporation ("P&H");
(b) all of the issued and outstanding shares of MMC and
shareholders loans to MMC in the amount of $2,169,806; and
(c) the agreement of Dynamic to pay to the Company a total of
$200,000. The obligation of Dynamic to pay the sum of $200,000 is
evidenced by a promissory note dated February 26, 1998 (the
"Promissory Note"). Dynamic made a payment of $50,000 toward this
obligation in March of 1999, making the current principal amount
of the debt $150,000.
Dynamic then spun-off all shares of the Company issued pursuant to
the Contribution Agreement to the shareholders of Dynamic by a
distribution completed on March 11, 1998 (the "Distribution").
Each shareholder of Dynamic received one common share of the
Company for each common share of Dynamic held by the shareholder.
The shares of the Company distributed by Dynamic constituted all
of the issued and outstanding shares of the Company at the time.
As subsidiaries of Dynamic, each of MMC and P&H had been in the
microwave technologies business for approximately 2 years. MMC
commenced its business as a subsidiary of Dynamic in September,
1995. Dynamic acquired a 50% interest in P&H in January, 1996.
Dynamic acquired the remaining 50% of P&H in September, 1997.
23
<Page >
The Company sold the business of P&H pursuant to an asset purchase
and sale agreement dated March 9, 1998 (the "P&H Sale Agreement")
between P&H and Microwave Communication Corporation, a California
corporation ("Microwave"). Under the P&H Sale Agreement, the
Company, through P&H agreed to sell to Microwave all of the assets
of the business of P&H as a going concern. 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 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 this 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 a bank financing arranged by
MCC/Ferro to pay-out P&H's bank financing and pay the amounts
under the MCC/Ferro Promissory Note.
Prior to disposition of its business, P&H was involved in the
business of manufacturing microwave components and subsystems for
the communications and aerospace industries. The devices included
isolators, circulators, power monitor devices, filters, diplexers,
switching diplexers, multi-junction circulators, microwave
subsystems and integrated packages and subsystems. P&H is
currently inactive as a result of the sale of the assets
comprising its business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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.
Default on Note Payment by Purchaser of P&H
As noted above, the Company has sold the business of P&H pursuant
to an asset purchase and sale agreement dated March 9, 1998. As
part of the consideration for this sale, the Company took back a
promissory note from MCC/ Ferro Systems, Inc. to pay to P&H the
sum of $250,000 on August 1, 1998 and the sum of $243,125 on March
31, 1999. P&H has assigned the note to the Company.
The payment on this note was not received on March 31, 1999 as
promised. 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
24
<Page >
balance of $243,125. MCC is currently in default of it's July
and August payments under this revised agreement and the Company
currently plans to aggressively pursue collection of this debt.
Liquidity And Capital Resources
As a subsidiary of Dynamic, MMC had net losses equal to $595,318
for the year ended December 31, 1996 and $1,127,675 for the year
ended December 31, 1997. The losses were funded by Dynamic. The
Company is now responsible for financing MMC independently of
Dynamic. The Company does not, however, have any debt owing to
Dynamic as a result of the spin-off.
The Company has applied and will apply the proceeds from the
disposition of the microwave technologies business owned by P&H to
fund MMC. The Company will also apply funds realized from the
promissory note executed by Dynamic in favor of the Company to
fund MMC. The Company began an offering of 2,500,000 shares of
stock in June, 1998 which was completed in parts with the sale of
1,500,000 common shares in October, 1998 at a price of $0.75 per
share for gross proceeds of $1,125,000, the sale of 300,000 shares
in March of 1999 at a price of $0.75 per share for gross proceeds
of $225,000 and the sale of the remaining 700,000 shares in June
of 1999 at a price of $0.75 per share for gross proceeds of
$525,000. The Company has paid a commission of 10% of the gross
proceeds in connection with completion of this financing.
As of June 30, 1999, the Company had $918,002 in cash and cash
equivalents. During the six months ended June 30, 1999, the
Company received cash of $750,000 and incurred capital raising
costs of $75,000 in connection with the sale of 1,000,000 shares
of the Company's common stock. These shares were sold pursuant to
an exemption from registration under Rule 506 of Regulation D of
the Securities Act of 1933. Loss per share from research
operations, general and administrative expenses and depreciation
and amortization was $.05.
Subsequent to June 30, the Company raised $3 million from the sale
of 8% convertible debentures due July 31, 2000 to a number of
investor/purchasers sold pursuant to an exemption from
registration under Rule 506 of Regulation D of the Securities Act
of 1933. Under the Purchase Agreement for these convertible
debentures, the purchasers obtained warrants for the purchase of
350,000 shares of the Company's common stock at a price of $2.75
per share, and certain registration rights. Certain of the
purchasers also agreed to purchase an additional $500,000 of the
convertible debentures following registration of the securities.
A large number of the purchasers exercised their option to convert
their debentures into common stock shortly after purchase.
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 only).
First Six Months Fiscal 1999 Compared With First Six Months Fiscal
1998
During the six months ended June 30, 1999, the management of the
Company received $210,000. The President received $72,000, the
Chairman received $90,000 and the Secretary/Treasurer received
$48,000.
25
<Page >
Net loss for the six months ended June 30, 1999 was $775,975
compared to income of $1,185,495 for the same period in 1998. The
income generated in 1998 was due to the cancellation of its $2
million debt from MMC's former parent company, Dynamic.
General and administrative expenses for the six months ended June
30, 1999 were $477,320 compared to $87,304 for the same period in
1998. In 1999, the Company has been assembling key executives for
growth.
Research and development expenses were $262,151 for the six months
ended June 30, 1999 compared to $351,940 for the same period in
1998. R&D cost were higher in 1998 due to the additional testing
site of the Company's German subsidiary.
Depreciation and amortization expenses for the six months ended
June 30, 1999 were $49,344 compared to $50,564 for the same period
in 1998.
Fiscal 1998 Compared to Fiscal 1997
The Company experienced an operating loss of $1,221,065 for the
year ending December 31, 1998. This is a slight increase over the
loss experience by the Company of $1,133,549 in 1997. The Gross
Profit for 1998 and 1997 was $0, however, in 1998 the Company had
net income before taxes of $1,106,167 versus a loss of $1,126,875
for the previous year. This income was the result of the spin-off
from Dynamic, the forgiveness of the debt owed to Dynamic, the
contribution agreement and other miscellaneous interest income.
Research and development costs shown on the statements of
operations relate to costs incurred by Microwave Medical Corp. and
MMC GmBH. In 1998, Research and Development was $569,738 compared
to $1,057,759 in 1997. These R&D expenses declined as a result of
closing the German testing facility and concentrating all of these
operations at the US facility. In 1998, the majority of the
research was in the clinical trials and less on the development of
the product.
The sales, general and administrative expenses increased to
$554,979 in 1998 from $0 in 1997. This increase is attributed to
the addition of administrative personnel made necessary after the
sale of P&H.
The Company reported net interest/expense income, bad debts,
miscellaneous income of $2,327,232 for 1998, compared to $6,674
for 1997. This is due primarily to the forgiveness of the Dynamic
Debt in the amount of $2,169,807.
Working capital was $969,072 at December 31, 1998 compared to
$1,329,692 at December 31, 1997. The decrease is mainly from the
sale of the net assets of P&H.
Comparison of Fiscal 1997 with Fiscal 1996
Depreciation and amortization expense was $75,790 for 1997
compared to $15,941 for 1996. The increase is due to the fact
that the Company had more equipment in service in 1997.
26
<Page >
Research and development expense was $1,057,759 in 1997 compared
with $588,915. The increase is due to the fact that the Company
was conducting research in Germany as well as in the U.S. in 1997
and greatly expanded its research activities in 1997.
The loss from operations of P & H was $124,803 in 1997 compared
with income from those operations in 1996 of $128,409. The
decline in operations in 1997 was a major factor in the Company's
decision to sell the operations of P & H in early 1998.
Note that MW Medical did not have any operations until 1998 and
that the information provided above is therefore a reflection of
the operations of its subsidiaries under their former parent,
Dynamic Associates, Inc.
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. The Company is presently
identifying and assessing the year 2000 readiness of its key
suppliers that we believed to be significant to the Company's
business operations. At this point in time, the Company one
possible worst case scenario would be that certain of the
Company's material suppliers or vendors experience business
disruptions due to the year 2000 issue and are unable to provide
materials and services to the Company on time.
MANAGEMENT
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company
and its subsidiaries, and some brief information about their
background.
MW Medical, Inc. and Microwave Medical Corporation
Name Age Office(s) Held
Jan Wallace 43 Director, President
Grace Sim 38 Secretary, Treasurer, Director
Jan Wallace was President, Chief Executive Officer and Director of
the Company at its inception in December, 1997. Ms. Wallace
resigned as President and Chief Executive Officer effective
October 1, 1998 and then was re-appointed on July 9, 1999 after
the resignation of former President Paul Banko. Ms. Wallace has
been employed by Dynamic since April 1995, when she was elected to
the Board of Directors and accepted the position of Chief
Operating Officer. She is currently a director and the President
of Dynamic. Ms. Wallace was previously Vice President of Active
Systems, Inc. a Canadian Company specializing in SGML Software, an
ISO standard, in Ottawa, Ontario for the period from 1993 to 1994.
Prior to that she was President and Owner of Mailhouse Plus, Ltd.,
an office equipment distribution company which was sold to Ascom
Corporation. She
27
<Page >
has also been in management with Pitney
Bowes-Canada and Bell Canada where she received its highest award
in Sales and Marketing. Ms. Wallace was educated at Queens
University in Kingston, Ontario and Carleton University, Ottawa,
Ontario in Political Science with a minor in Economics.
Grace Sim has been the Secretary/Treasurer of Dynamic Associates,
Inc. since October 10, 1997 and of MW Medical, Inc. since its
inception in December 1997. Ms. Sim joined Dynamic in January
1997. Prior to joining Dynamic, Ms. Sim owned Sim Accounting, an
accounting consulting company in Ottawa, Ontario, Canada. Between
1993 and 1994, she worked as the controller with Fulline, an
office equipment company and with Mailhouse Plus Ltd. between 1990
and 1992. Ms. Sim received her Bachelor of Mathematics with
honors from the University of Waterloo in Waterloo, Ontario.
On July 9, 1999, Paul Banko resigned as President, director and
CEO of the Company and on August 31, 1999, Robert Spertell,
resigned as the Company's Chief Scientist. Mr. Spertell was
subsequently retained by the company as a consultant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of August 31, 1999, the
beneficial ownership of the Company's Common Stock by each person
known by the Company to beneficially own more than 5% of the
Company's Common Stock outstanding as of such date and by the
officers and directors of the Company as a group. Except as
otherwise indicated, all shares are owned directly.
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class*
- -------------- ------------------- -------------------- ---------
Common Stock Jan Wallace 500,000(1) 2.62%
(Chairman)
6955 E. Caballo Dr.
Paradise Valley,
AZ 85253
Common Stock Grace Sim 50,000(2) 0.26%
(Secretary/
Treasurer)
6955 E. Caballo Dr.
Paradise Valley,
AZ 85253
Common Stock All Officers and
Directors 550,000 2.88%
as a Group
(2 persons)
- ------------------------------------------------------------------
* Based on 19,110,679 shares of Common Stock outstanding as of
September 1, 1999.
(1) Ms. Wallace also holds stock options to purchase 400,000
shares at a price of $1.00.
(2) Ms. Sim also holds stock options to purchase 200,000 shares at
a price of $1.00.
Warrants
There are 600,000 warrants to purchase securities of the Company
outstanding. 350,000 of these warrants are exercisable at a price
of $2.75 per share on or prior to the close of business on July
30,
28
<Page >
2002. The remaining 250,000 warrants are exercisable at a
price of $3.312 per share at any time prior to 5:00 pm New York
City Time on July 20, 2004.
Options
The Board has adopted an Incentive Stock Option Plan providing for
the issuance of up to 2,500,000 shares of the Company's common
stock to its directors, officers, consultants, and employees, and
is in the process of obtaining the necessary shareholder approval
to initiate the Plan. Currently there are options issued to
purchase 1,365,000 shares of the Company's stock through this
Stock Option Plan.
Convertible Debentures
On July 20, 1999, the Company sold $3,000,000 worth of convertible
debentures. $2,620,000 of these debentures were converted between
July 21, 1999 and July 23, 1999, leaving $380,000 in debentures
still outstanding. These remaining debentures are convertible by
their holders (the Selling Shareholders) at a price determined by
the following formula:
(a) the principal amount of the Debenture or any portion
thereof, together with accrued but unpaid interest;
(b) multiplied by a price for each share of Common Stock
equal to the lower of (1) 75% of the Market Price at
the Conversion Date, or (2) $2.75. The term "Market
Price" means the average of the three lowest closing
bid prices on the Principal Market (as reported by
Bloomberg L.P.) of the Common Stock on any Trading Day
during the twenty-two (22) Trading Day period ending
on the Trading Day immediately prior to the date upon
which the Market Price is to be determined; but -
(c) the Conversion Price may not be less than $0.75, if all
of the following conditions are satisfied: (1) a
Registration Statement is effective for the Common
Stock; (2) the Common Stock has been traded (since the
effective date of the Registration Statement) for
thirty (30) consecutive Trading Days with an average
daily volume of 140,000 shares at a volume-weighted
average price (as shown on the Bloomberg AQR function)
of at least 150% of the closing bid price on the first
Closing Date, and (3) the Company's microwave hair
removal product has received written FDA approval; and
(d) the minimum Conversion Price will be increased if the
foregoing conditions continue to be met and any or all
of the following conditions are met: (1) the Company's
most recent timely filed Form 10-Q or QSB shows net
revenues for the quarter of at least $10,000,000 (the
minimum Conversion Price would then be increased by
$0.25); (2) the Company's most recent timely filed
Form 10-K or KSB shows net revenues for the fiscal
year of at least $50,000,000 (the minimum Conversion
Price would then be increased by $0.35); (3) the
Common Stock has traded (since the effective date of
the Registration Statement) for thirty (30)
consecutive Trading Days with an average daily volume
of 250,000 shares (the minimum Conversion Price would
then be increased by $0.25).
29
<Page >
In addition, there are $500,000 worth of Convertible Debentures
under an agreement of sale to two investors. These Debentures,
once issued, will be convertible under the same formula as
described above.
Public Market
The Company's shares are currently trading on the OTC Bulletin
Board under the stock symbol MWMD.
Registration Rights
The holders of the Company's common stock, warrants and
convertible debentures have the right to require the Company to
register their common shares pursuant to the Securities Act of
1933. These rights are evidenced by a registration rights
agreement and is the sole reason for the Company's filing of this
S-1 registration statement on behalf of the Selling Shareholders.
The Registration Rights Agreement, attached hereto, provides in
part, that the Company is obligated to register all the warrant
shares it has issued to investors, along with all the shares that
have been issued to parties exercising their right of conversion
as holders of the Convertible Debentures and 265% of the shares
that could be issued as a result of the conversion of any as yet
unconverted Convertible Debentures at the Conversion Price in
effect on the Closing Date. Under this Registration Rights
Agreement, a registration statement must be filed with the SEC
within 45 days of the Closing Date and such Registration Statement
must become effective within 105 days from the Closing Date (or
five (5) days of clearance by the Commission to request
effectiveness). Failure to meet these deadlines or to maintain
the registration statement as effective will create potentially
severe penalties for the Company, including the requirement to pay
liquidated damages to the purchasers of the Convertible Debentures
of three percent (3%) of the aggregate market value of shares of
Common Stock purchased from the Company (including the Conversion
Shares which would be issuable upon conversion of the Convertible
Debentures on any date of determination, until such Registration
Statement has been declared effective. For full details regarding
the rights and obligations of the Company and the Purchasers of
the Convertible Debentures, please see the Registration Rights
Agreement and Convertible Debenture and Warrants Purchase
Agreement, attached hereto and made part hereof by this reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None of the directors or officers of the Company, nor any proposed
nominee for election as a director of the Company, nor any person
who beneficially owns, directly or indirectly, shares carrying more
than 10% of the voting rights attached to all outstanding shares of
the Company, nor any promoter of the Company, nor any relative or
spouse of any of the foregoing persons has any material interest,
direct or indirect, in any transaction since the date of the Company's
incorporation or in any presently proposed transaction which, in
either case, has or will materially affect the Company, except as
provided herein.
During 1998 $36,000 was paid to the Company's President, and $150,000
was paid or accrued to the Chairman and $80,000 was paid or accrued to
the Secretary/Treasurer.
In 1999, the Company's Former President received $12,000 monthly, the
Chairman $15,000 monthly, and the Secretary $8,000 monthly.
30
Annual Compensation Table
Annual Compensation Long Term Compensation
Other Restricted All
Annual Stock Options/* LTIP Other
Name Title Year Salary Bonus Comp. Awarded SARs (#)payouts($)Comp
Jan Wallace Chairman 1998 $150,000(1) $ 0 0 0 0 0 0
Director
Paul E. President1998 $ 36,000(2) $ 0 0 0 0 0 0
Banko,CEO
Grace Sim Director 1998 $ 80,000(3) $ 0 0 0 0 0 0
Secretary/Treasurer
(1)Includes $86,393 accrued at 12/31/98.
(2)for October 1, 1998 to December 31, 1998
(3)Includes $45,569 accrued at 12/31/98.
In March 1999, the Company granted 400,000 options to Paul E. Banko,
400,000 to Jan Wallace, and 200,000 to Grace Sim. The options allow
the holders to purchase common shares of the Company for $1.00 per share.
50% of the options are exercisable immediately and 50% require a one year
waiting period. A number of other employees were granted options on the
same terms. Subsequently, Paul Banko resigned and an agreement was reached
in which he retained only 200,000 of his original 400,000 options.
The Company's policy regarding related transactions requires that any
director or officer who has an interest in any transaction to be approved
by the board of directors of the Company disclose the presence and the nature
of the interest to the board of directors prior to any approval of the
transaction by the board of directors. The transaction may then be approved
by a majority of the disinterested directors, provided that an interested
director may be counted in the determining the presence of a quorum at the
meeting of the board of directors to approve the transaction. The Company's
policy regarding compensation for directors and officers is that the board of
directors may, without regard to personal interest, establish the compensation
of directors for services in any capacity.
LEGAL MATTERS
The Company is not a party to any material legal proceedings and
to the Company's knowledge no such proceedings are threatened or
contemplated. The Company is, however, a party in a legal
proceeding in Northern California based on a breach of certain
promissory notes by and against Microthermia Corporation.
Settlement discussions in that matter are currently in process and
a settlement agreement has been drafted by the parties.
Management believes that such litigation will not have a material
impact on the business of the Company.
31
<Page >
EXPERTS
The consolidated balance sheet of MW Medical, Inc. as of December
31, 1998 and the consolidated statements of operations,
stockholders' equity, and cash flows and the financial statement
schedule for the years ended December 31, 1998, appearing in this
Prospectus and Registration Statement, have been audited by Smith
and Company, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts
in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements
filed by the Company may be inspected and copied at the
Public Reference Section of the Commission at 450 Fifth Street,
N.W. Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material
can also be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information
statements and other information regarding the Company; the
address of such site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement
on Form S-1 (the "Registration Statement"), under the Securities
Act of 1933, as amended (the "Act"), with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations
of the Commission. Copies of the Registration Statement, including
all exhibits thereto, may be obtained from the Commission's
principal office in Washington D.C. upon payment of the fees
prescribed by the Commission or may be examined without charge at
the offices of the Commission as described above.
32
<Page >
INDEX TO FINANCIAL STATEMENTS
(a) The following financial statements, financial statement
schedules and supplementary date are included:
F-1 Independent Auditor's Report
F-2 Consolidated Balance Sheets - December 31, 1998 and 1997
F-3 Consolidated Statements of Operations - Years Ended
December 31, 1998, 1997, and 1996.
F-4 Consolidated Statements of Changes in Stockholders' Equity -
Years Ended December 31, 1998, 1997 and 1996.
F-5 Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997, and 1996.
F-6 Notes to Consolidated Financial Statements
31
<Page >
(b) Un-audited Consolidated Financials Prepared by Management for
the first six months of 1999:
F-14 Consolidated Balance Sheets - June 1999
F-15 Consolidated Statements of Operations -- June 1999
F-16 Consolidated Statements of Cash Flows -- June 1999.
33
<Page >
SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: smith&co@smithandcocpa.com
- ----------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
MW Medical, Inc.
We have audited the accompanying consolidated balance sheets of MW Medical, Inc.
and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended December 31, 1998, 1997, and 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MW Medical, Inc. and
Subsidiaries as of December 31, 1998 and 1997, and the results of their
operations, changes in stockholders' equity, and their cash flows for the years
ended December 31, 1998, 1997, and 1996, in conformity with generally accepted
accounting principles.
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 12, 1999
F-1
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 890,283 $ 387,982
Accounts receivable (less allowance for doubtful accounts of
$0 in 1998 and $20,000 in 1997) 0 559,783
Receivable - former parent 200,000 0
Receivable - P&H sale (less allowance for doubtful accounts of
$60,000) (Note 15) 21,625 0
Other receivables 2,000 19,824
Inventories (Note 2) 0 809,977
Prepaid expense and other current assets 61,282 17,829
Deferred tax benefit (Note 8) 0 0
----------------- ------------------
TOTAL CURRENT ASSETS 1,175,190 1,795,395
PROPERTY, PLANT, & EQUIPMENT (Note 4) 67,392 693,283
OTHER ASSETS
Deposits 0 21,705
Receivable - P&H sale (Note 15) 161,500 0
Organization Costs (Note 2) 400 28,440
----------------- ------------------
161,900 50,145
----------------- ------------------
$ 1,404,482 $ 2,538,823
================= ==================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 70,766 $ 227,587
Accrued expenses 1,038 147,667
Accrued expenses - related parties (Note 13) 132,714 0
Current portion of long-term debt (Note 7) 0 90,449
Income taxes payable (Note 8) 1,600 0
----------------- ------------------
TOTAL CURRENT LIABILITIES 206,118 465,703
Payable - former parent (Note 6) 0 1,999,806
Long-term debt (Note 7) 0 329,808
Deferred income tax (Notes 2 and 8) 0 0
----------------- ------------------
0 2,329,614
----------------- ------------------
TOTAL LIABILITIES 206,118 2,795,317
Commitments and contingencies (Note 9) 0 0
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 15,723,929 shares (14,223,929 in 1997) 15,724 14,224
Additional paid-in capital 1,055,997 35,876
Retained earnings (deficit) 126,643 (306,594)
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,198,364 (256,494)
----------------- ------------------
$ 1,404,482 $ 2,538,823
================= ==================
F-2
See Notes to Financial Statements.
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1998 1997 1996
----------------- ----------------- ------------------
Net sales $ 0 $ 0 $ 0
Cost of sales 0 0 0
----------------- ----------------- ------------------
GROSS PROFIT 0 0 0
Selling and General & administrative expenses 554,979 0 0
Depreciation and amortization 96,348 75,790 15,941
Research and development (Note 2) 569,738 1,057,759 588,915
----------------- ----------------- ------------------
1,221,065 1,133,549 604,856
----------------- ----------------- ------------------
NET OPERATING (LOSS) (1,221,065) (1,133,549) (604,856)
OTHER INCOME (EXPENSE)
Interest income 17,425 6,674 10,338
Debt cancellation - former parent (Note 6) 2,169,807 0 0
Bad debts (60,000) 0 0
Fee - former parent 200,000 0 0
----------------- ----------------- ------------------
2,327,232 6,674 10,338
----------------- ----------------- ------------------
Income (loss) from continuing operations before income taxes 1,106,167 (1,126,875) (594,518)
INCOME TAX EXPENSE (Note 8) 800 800 800
----------------- ----------------- ------------------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS 1,105,367 (1,127,675) (595,318)
DISCONTINUED OPERATIONS
Operations of subsidiary sold 4/1/98 (194,268) (124,803) 128,409
Sale of net assets of subsidiary (477,862) 0 0
----------------- ----------------- ------------------
Loss from discontinued operations (672,130) (124,803) 128,409
----------------- ----------------- ------------------
NET INCOME (LOSS) $ 433,237 $ (1,252,478) $ (466,909)
================= ================= ==================
Net income (loss) per weighted average share - continuing operations $ .08 $ (.08) $ (.04)
Net income (loss) per weighted average share - discontinued operations (.05) (.01) .01
----------------- ----------------- ------------------
$ .03 $ (.09) $ (.03)
================= ================= ==================
Weighted average number of common shares used to
compute net income (loss) per weighted
average share 14,462,285 14,223,929 14,223,929
================= ================= ==================
F-3
See Notes to Financial Statements.
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Additional
Par Value $.001 Paid-in Retained
Shares Amount Capital Earnings
------------- --------------- --------------- ---------------
Balances at 12/31/95 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted) at $.1028
per share for subsidiaries * 14,223,929 14,224 35,876 1,412,793
Net loss for year (466,909)
------------- --------------- --------------- ---------------
Balances at 12/31/96 14,223,929 14,224 35,876 945,884
Net loss for year (1,252,478)
------------- --------------- --------------- ---------------
Balances at 12/31/97 14,223,929 14,224 35,876 (306,594)
Stock sold for cash 1,500,000 1,500 1,009,513
Subsidiary adjustment 10,608
Net income for year 433,237
------------- --------------- --------------- ---------------
Balances at 12/31/98 15,723,929 $ 15,724 $ 1,055,997 $ 126,643
============= =============== =============== ===============
* Transaction actually occurred on March 11, 1998, but is reflected earlier
under pooling-of-interests method of accounting.
F-4
See Notes to Financial Statements.
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1998 1997 1996
----------------- ----------------- ------------------
OPERATING ACTIVITIES
Net income (loss) $ 433,237 $ (1,252,478) $ (466,909)
Adjustments to reconcile net income (loss) to cash
used by operating activities:
Depreciation and amortization 134,925 139,062 60,897
Bad debts 60,000 0 0
Net value of subsidiary's assets sold 1,128,419 0 0
Debt cancelled (2,169,806) 0 0
Book value of assets sold/disposed 0 47,405 0
Deferred taxes 0 10,500 (11,500)
Changes in assets and liabilities:
Accounts receivable (433,519) (34,609) 285,651
Inventories 80,636 (92,150) (129,024)
Prepaid expenses and other (46,056) (18,146) (9,196)
Accounts payable and accrued expenses 124,436 120,116 21,922
Deposits 37,000 0 0
Income taxes payable 1,600 (45,415) (83,590)
----------------- ----------------- ------------------
NET CASH USED BY OPERATING ACTIVITIES (649,128) (1,125,715) (331,749)
INVESTING ACTIVITIES
Loan - other (3,915) 92,330 (98,120)
Loan - related party 0 30,300 0
Organization costs 0 (27,800) 0
Purchase of equipment (13,493) (618,780) (150,680)
Deposits (2,225) 922 (1,312)
----------------- ----------------- ------------------
NET CASH USED BY INVESTING ACTIVITIES (19,633) (523,028) (250,112)
FINANCING ACTIVITIES
Borrowings - former parent 170,000 914,360 548,500
Cash from subsidiaries 0 0 986,944
Principal payments on debt (9,951) (99,796) (78,206)
Principal payments on capital lease obligation 0 0 (519)
Loan proceeds 0 347,303 0
Loans - related party 100,000 0 0
Loan repayment - related party (100,000) 0 0
Sale of common stock 1,011,013 0 0
----------------- ----------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,171,062 1,161,867 1,456,719
----------------- ----------------- ------------------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 502,301 (486,876) 874,858
Cash and cash equivalents at beginning of year 387,982 874,858 0
----------------- ----------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 890,283 $ 387,982 $ 874,858
================= ================= ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 9,824 $ 14,232 $ 17,356
Cash paid for income taxes 800 65,715 167,790
F-5
See Notes to Financial Statements.
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, and 1996
NOTE 1: BUSINESS ACTIVITY
The Company was incorporated under the laws of the state of Nevada on
December 4, 1997. The Company is now engaged in the acquisition of
microwave technologies for medical purposes through Microwave Medical Corp.
("MMC"), and prior to April 1, 1998 was engaged in the manufacturing of
highly technologically advanced components and subsystems for the
communications and aerospace industries through P & H Laboratories ("P &
H").
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principals of Consolidation
The consolidated financial statements for 1998, 1997, and 1996 include the
accounts of the Company; its wholly owned subsidiaries, MMC and MMC's
Germany based subsidiary Microwave Medical GmBH ("GmBH"), which was formed
in late 1997, and P & H.
All significant intercompany balances and transactions have been eliminated
in consolidation.
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. At December 31, 1997, inventories were comprised of the following:
1997
Raw materials $ 344,909
Work in progress 465,068
-------------
$ 809,977
Research and Development Costs
Research and development costs were $569,738 in 1998 and were all incurred
by MMC and GmBH ($1,057,759 in 1997 and all incurred by MMC and GmBH, and
$588,915 in 1996 and all incurred by MMC).
Warranty Costs
The Company provides, by a current charge to income, an amount it estimates
will be needed to cover future warranty obligations for products sold
during the year. The accrued liability for warranty costs is included in
accrued expenses in the accompanying balance sheets.
Dividend Policy
The Company has not yet adopted any policy regarding payment of dividends.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its future employee stock options rather
than adopting the alternative fair value accounting provided for under
Financial Accounting Standards Board ("FASB") FASB Statement No. 123,
Accounting for Stock Based Compensation (SFAS 123).
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Allowance for Uncollectible Accounts
The Company provides an allowance for uncollectible accounts based upon
prior experience and management's assessment of the collectability of
existing specific accounts.
F-6
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997, and 1996
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of risk, consist of cash and investments. The Company places
its investments in highly rated commercial paper obligations which limits
the amount of credit exposure. Historically, the Company has not
experienced any losses related to investments.
Property, Plant, and Equipment
Property, plant, and equipment is recorded at cost and is being depreciated
over a useful life of seventeen months to eight years using the
straight-line and accelerated methods.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly liquid
investments with an original maturity of three months or less when
purchased to be cash equivalents.
Organization Costs
Organization costs of MMC and GmBH are being amortized over sixty months.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, and operating
loss carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion of all
of the deferred tax assets will not be realized. The valuation allowance at
December 1998 was $0 and at December 31, 1997 was $73,000 and at December
31, 1996 it was $0. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment. As
of December 31, 1998, temporary differences arose primarily from
differences in the timing of recognizing expenses for financial reporting
and income tax purposes. Such differences include depreciation, bad debt
allowance, and various accrued operating expenses.
Prior to October 1, 1997, P&H filed separate income tax returns. For the
period of October 1, 1997 to December 31, 1997, P&H filed a consolidated
tax return with Dynamic Associates, Inc. ("Dynamic"), its parent at that
time. MMC filed a consolidated tax return with Dynamic in 1996 and 1997.
Income (Loss) per Share
Income (loss) per common share is computed by dividing net income (loss) by
the weighted average shares outstanding during each period.
NOTE 3: CAPITALIZATION
The Company's authorized stock includes 100,000,000 shares of Class "A"
common stock at $.001 par value. March 11, 1998, the Company issued
14,223,929 shares of its restricted common stock to the shareholders of
Dynamic Associates, Inc. in exchange for the common stock of MMC and P&H
held by those shareholders. The financial statements of MMC and P&H have
been presented herein as if the entities had been together for all periods
presented. The acquisitions of MMC & P&H have been accounted for as reverse
acquisitions. The financial statements are presented on a consolidated
basis as if the entities were consolidated for all periods presented.
NOTE 4: PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of December 31, 1998 and 1997 are
summarized as follows:
Accumulated Net Book Value
Cost Depreciation 1998 1997
------------- ------------------ --------------- ------------------
Machinery & Equipment $ 243,055 $ 186,580 $ 56,475 $ 573,208
Furniture & Fixtures 11,697 780 10,917 79,278
Leasehold Improvements 0 0 0 40,797
------------- ------------------ --------------- ------------------
$ 254,752 $ 187,360 $ 67,392 $ 693,283
============= ================== =============== ==================
Depreciation expense is calculated under straight-line and accelerated
methods based on the estimated service lives of depreciable assets.
Depreciation expense for the year ended December 31, 1998 amounted to
$134,685, ($138,822 in 1997 and $60,657 in 1996).
Included in machinery and equipment at December 31, 1997 was $59,315 of
equipment under a capital lease. The related accumulated depreciation at
December 31, 1997 was $51,397.
F-7
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997, and 1996
NOTE 5: RECLASSIFICATION OF CERTAIN ITEMS
The operations of P&H for 1997 and 1996 have been reclassified under the
caption "Operations of Subsidiary Sold 4/1/98" to conform to the 1998
presentation.
NOTE 6: PAYABLE - FORMER PARENT
At December 31, 1997, MMC/GmBH owed $1,999,806 to Dynamic, their former
parent. The amounts represent advances from Dynamic, which are non-interest
bearing and have no set repayment terms. During the quarter ended March 31,
1998, Dynamic charged the advances to bad debt expense and does not
anticipate being repaid. The Company recorded debt cancellation income of
$2,169,807 including an additional $170,000 received from Dynamic in 1998.
NOTE 7: LONG-TERM DEBT
1998 1997
----------------- -----------------
Notepayable - Bank. Payable in monthly installments
of $3,317 plus interest at prime plus 1% per
annum and secured by accounts receivable, other
rights to payment, general intangibles, inventory,
and equipment of P&H. Debt matures
in December, 1999. $ 0 $ 72,954
Notepayable - bank. Interest payments only until
May, 1998 at which time it is converted to 48
monthly installments of $7,235 plus interest
at prime (8.5% at December 31, 1997) plus 1% per
annum and secured by assets of P&H. Debt matures
in May 2002. The agreement contains certain
financial and restrictive covenants. As of December
31, 1997, P&H was not in compliance with certain
financial covenants. On March 2, 1998, the bank
waived such events of noncompliance as
of such date. 0 347,303
----------------- -----------------
0 420,257
Less current portion 0 (90,449)
----------------- -----------------
$ 0 $ 329,808
================= =================
NOTE 8: INCOME TAXES
Components of income tax (benefit) are as follows:
1998 1997 1996
------------- ------------- -------------
Current
Federal $ 0 $ 4,665 $ 63,500
State 1,600 1,600 22,300
------------- ------------- -------------
1,600 6,265 85,800
------------- ------------- -------------
Deferred
Federal 0 7,800 (9,000)
State 0 2,700 (2,500)
------------- ------------- -------------
0 10,500 (11,500)
------------- ------------- -------------
Income tax (benefit) $ 1,600 $ 16,765 $ 74,300
============= ============= =============
A reconciliation of the provision for income tax expense with the expected
income tax computed by applying the federal statutory income tax rate to
income before provision for income taxes is as follows:
1998 1997 1996
------------- ------------- -------------
Income tax computed at federal
statutory tax rate $ 147,573 $ (420,142) $ (133,487)
Tax due to not being able to file
Consolidated return and other 0 435,851 193,069
Debt forgiveness not taxable due to
Insolvency (147,573) 0 0
State taxes (net of federal benefit) 1,600 1,056 14,718
------------- ------------- -------------
$ 1,600 $ 16,765 $ 74,300
============= ============= =============
F-8
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997, and 1996
NOTE 8: INCOME TAXES (continued)
Significant components of the Company's deferred tax liabilities and assets
for income taxes consist of the following:
1998 1997 1996
------------- ------------- -------------
Current deferred tax assets
Net operating loss $ 0 $ 11,000 $ 0
Allowance for doubtful accounts 0 8,600 9,000
Capitalized inventory cost for tax 0 26,000 21,000
Vacation accrual 0 22,000 22,000
State income tax 0 1,000 9,000
Other accruals 0 4,400 6,000
Valuation allowance 0 (73,000) 0
------------- ------------- -------------
Net deferred current tax assets $ 0 $ 0 $ 67,000
============= ============= =============
Long-term deferred tax liabilities
Difference in fixed assets $ 0 $ 0 $ 56,500
============= ============= =============
There was a decrease of $73,000 in the valuation allowance for the year
ended December 31, 1998.
There was an increase of $73,000 in the valuation allowance for the year
ended December 31, 1997 ($0 change for the year ended December 31, 1996).
The deferred tax items relate to P&H. No deferred tax asset has been
recorded for the Company and MMC due to the fact they currently have no
operations to use their loss carryforward.
At December 31, 1998, the Company has a federal net operating loss
carryforward of approximately $234,000 which expires December 31, 2018.
NOTE 9: COMMITMENTS AND CONTINGENCIES
The Company is provided with office space and other management services at
no charge at the present time.
The Company has the following commitments:
One officer will receive $15,000 per month, one will receive
$12,000 and one will receive $8,000 per month.
Future scheduled payments under these employment related commitments are as
follows:
Year Ending
December 31, 1999 $ 384,000
December 31, 2000 46,000
----------------------
$ 430,000
======================
Rental expense for the year ended December 31, 1998 was $800 ($192,466 in
1997 and $189,088 in 1996) which includes $0 paid by MMC to P&H ($7,298 in
1997 and $7,120 in 1996). The contracts are renewable.
NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, loans, other receivables,
accounts payable, and accrued expenses approximate fair value due to the
short maturity periods of these instruments. The fair value of the
Company's long-term debt, based on the present value of the debt, assuming
interest rates as follows at December 31, 1997 was:
Note at 9.5% $ 60,375
Note at 9.5% 230,550
----------------------
$ 290,925
======================
NOTE 11: MAJOR CUSTOMERS
During 1997, P&H had sales to two customers representing 38.5% and 12.6% of
total sales. At December 31, 1997, accounts receivable from the two
customers was about $274,000. During 1996, P&H had sales to two customers
which represented 40.6% and 12.2% of total sales. At December 31, 1996,
accounts receivable from the two customers totaled $295,000.
F-9
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997, and 1996
NOTE 12: INDUSTRY SEGMENTS
The following narrative is before elimination of certain intercompany
items.
For 1998, the Company had general and administrative expenses of $554,979,
depreciation expense of $780, bad debt expense of $60,000 interest income
of $17,254, fee income from former parent of $200,000, and loss on the sale
of P&H assets of $477,862 for a net loss of $876,367.
MMC had depreciation and amortization expense of $95,568, research and
development expense of $569,738, interest income of $171, debt cancellation
of $2,169,807, and income tax expense of $800 for net income of $1,503,872.
P&H had a loss from discontinued operations of $194,268.
For 1997, all sales, cost of sales, and selling and general and
administrative expenses were incurred by P&H. P&H also had depreciation and
amortization expense of $63,272, interest income of $21,692, interest
expense of $16,667, other income of $6,675, and income tax expense of
$15,965, for a net loss of $124,803.
MMC had depreciation and amortization expense of $75,790, research and
development expense of $1,057,759, interest income of $6,674, and income
tax expense of $800, for a net loss of $1,127,675.
For 1996, all sales, cost of sales, and selling and general and
administrative expenses were incurred by P&H. P&H also had depreciation and
amortization expense of $44,956, interest income of $19,666, interest
expense of $16,988, other income of $8,162, and income tax expense of
$73,500, for a net income of $128,409.
MMC had depreciation and amortization expense of $15,941, research and
development expense of $588,915, interest income of $10,338, and income tax
expense of $800, for a net loss of $595,318.
Pre-consolidation net income (loss) is as follows:
1998 1997 1996
------------- ------------- -------------
MW Medical $ (701,367) $ 0 $ 0
MMC/GmBH 1,503,872 (1,127,675) (595,318)
P & H (194,268) (124,803) 128,409
------------- ------------- -------------
Adjusted Net Income (Loss) $ 608,237 $ (1,252,478) $ (466,909)
============= ============= =============
NOTE 13: RELATED PARTY TRANSACTIONS
During 1998, a total of $416,000 in management fees was paid or accrued to
current or former officers of the Company and its subsidiaries. $266,000
was paid or accrued to three individuals who remain with the Company and
$150,000 was paid or accrued to a former officer. At December 31, 1998,
$132,714 is due to two officers for management fees and other expenses.
NOTE 14: GOING CONCERN
The financial statements are presented on the basis that the Company is a
going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable length of time. At December 31, 1998, the Company had a loss
from operations for 1998 of $1,221,065.
Management feels that collection of its receivables and revenue from
operations in the third quarter of 1999 will provide sufficient working
capital to allow the Company to continue as a going concern.
NOTE 15: SALE OF P&H OPERATIONS
Effective April 1, 1998, a management team was brought in to run P&H. This
entity then began negotiations to purchase the net assets of P&H from the
Company for a total of $653,659 in cash and management services valued at
$240,000, of which $410,534 cash has been received. The $243,125 is due as
follows:
$243,125 on March 31, 1999 - secured by P&H assets
Interest at 8% also accrues on $493,125 and is due March 31, 1999.
During March of 1999, the Company agreed to restructure the receivable.
Monthly payments of $15,000 including interest of 8% will be due beginning
in July of 1999.
F-10
MW MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997, and 1996
NOTE 15: SALE OF P&H OPERATIONS (continued)
Future expected principal receipts are as follows:
Year ending December 31, 1999 $ 81,625
Year ending December 31, 2000 158,365
Year ending December 31, 2001 3,135
-------------
$ 243,125
At December 31, 1998, an allowance for doubtful accounts in the amount of
$60,000 has been established.
If the sale had occurred on December 31, 1997, P&H assets in the amount of
$2,274,732 and liabilities in the amount of $720,348 would not be included
in the financial statements. The Company would have recorded a receivable
in the amount of $653,659 for the sale, prepaid expense of $240,000, and
the amount of $660,725 as loss would have been recorded on the statement of
operations.
F-11
MW MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, Pro Forma
1997 P&H Sale Balances
----------------- ----------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 387,982 $ (315,585) $ 72,397
Accounts receivable (less allowance for doubtful
accounts of $20,000 in 1997) 559,783 (559,783) 0
Other receivables 19,824 (14,035) 5,789
Receivable - P&H Sale 0 653,659 653,659
Prepaid expense - P&H Sale 0 240,000 240,000
Inventories 809,977 (809,977) 0
Prepaid expense and other current assets 17,829 (12,558) 5,271
----------------- ----------------- ------------------
TOTAL CURRENT ASSETS 1,795,395 (818,279) 977,116
PROPERTY, PLANT, & EQUIPMENT 693,283 (541,479) 151,804
OTHER ASSETS
Deposits 21,705 (21,315) 390
Organization Costs 28,440 0 28,440
----------------- ----------------- ------------------
50,145 (21,315) 28,830
----------------- ----------------- ------------------
$ 2,538,823 $ (1,381,073) $ 1,157,750
================= ================= ==================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 227,587 $ (156,260) $ 71,327
Accrued expenses 147,667 (143,831) 3,836
Current portion of long-term debt 90,449 (90,449) 0
----------------- ----------------- ------------------
TOTAL CURRENT LIABILITIES 465,703 (390,540) 75,163
Payable - former parent 1,999,806 0 1,999,806
Long-term debt 329,808 (329,808) 0
----------------- ----------------- ------------------
2,329,614 (329,808) 1,999,806
----------------- ----------------- ------------------
TOTAL LIABILITIES 2,795,317 (720,348) 2,074,969
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 14,223,929 shares 14,224 0 14,224
Additional paid-in capital 35,876 0 35,876
Retained earnings (deficit) (306,594) (660,725) (967,319)
----------------- ----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (256,494) (660,725) (917,219)
----------------- ----------------- ------------------
$ 2,538,823 $ (1,381,073) $ 1,157,750
================= ================= ==================
This pro forma shows what the balance sheet would have looked like had the
sale of the net assets of P&H occurred on December 31, 1997.
F-12
MW MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended
December 31, Pro Forma
1997 P&H Sale Balances
----------------- ----------------- ------------------
Net sales $ 3,382,388 $ 0 $ 3,382,388
Cost of sales 2,659,882 0 2,659,882
----------------- ----------------- ------------------
GROSS PROFIT 722,506 0 722,506
Selling and General & administrative expenses 779,772 0 779,772
Depreciation and amortization 139,062 0 139,062
Research and development 1,057,759 0 1,057,759
----------------- ----------------- ------------------
1,976,593 0 1,976,593
----------------- ----------------- ------------------
NET OPERATING (LOSS) (1,254,087) 0 (1,254,087)
OTHER INCOME (EXPENSE)
Interest income 28,366 0 28,366
Interest expense (16,667) 0 (16,667)
Miscellaneous income 6,675 0 6,675
----------------- ----------------- ------------------
18,374 0 18,374
----------------- ----------------- ------------------
NET (LOSS) BEFORE OTHER (1,235,713) 0 (1,235,713)
Sale of net assets of P&H 0 (660,725) (660,725)
----------------- ----------------- ------------------
NET (LOSS) BEFORE INCOME TAXES (1,235,713) (660,725) (1,896,438)
INCOME TAX 16,765 0 16,765
----------------- ----------------- ------------------
NET (LOSS) $ (1,252,478) $ (660,725) $ (1,913,203)
================= ================= ==================
Net (loss) per weighted average share $ (.09) $ (.05) $ (.13)
================= ================= ==================
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
================= ================= ==================
On April 1, 1998, the Company sold the net assets of P&H. The actual loss on the
transaction was $477,862. This loss differs from the Pro Forma loss due to P&H
having activity through the date of sale which reduced the net assets sold.
This pro forma shows what the statement of operations would have looked
like had the sale of the net assets of P&H occurred on December 31, 1997.
F-13
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1999 1998
(Unaudited) (Audited)
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 918,002 $ 890,283
Receivable - former parent 150,000 200,000
Receivable - P & H sale 106,570 21,625
Other receivables 4,990 2,000
Prepaid expense and other current assets 14,258 61,282
----------------- ------------------
TOTAL CURRENT ASSETS 1,193,820 1,175,190
PROPERTY, PLANT, & EQUIPMENT 918,168 67,392
OTHER ASSETS
Receivable - P&H sale 76,555 161,500
Organization costs 280 400
----------------- ------------------
76,835 161,900
----------------- ------------------
$ 2,188,823 $ 1,404,482
================= ==================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 524,180 $ 70,766
Loan payable 425,000 0
Income taxes payable 800 1,600
Accrued expenses 1,449 1,038
Deposits 10,000 0
Accrued expenses - related party 130,005 132,714
----------------- ------------------
TOTAL CURRENT LIABILITIES 1,091,434 206,118
----------------- ------------------
TOTAL LIABILITIES 1,091,434 206,118
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 16,723,929 shares (15,723,929 in 1998) 16,724 15,724
Additional paid in capital 1,729,997 1,055,997
Retained earnings (deficit) (649,332) 126,643
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 1,097,389 1,198,364
----------------- ------------------
$ 2,188,823 $ 1,404,482
================= ==================
F - 14
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
General & administrative expenses $ 222,785 $ 86,249 $ 477,320 $ 87,304
Depreciation and amortization 24,672 25,282 49,344 50,564
Research and development 144,636 159,783 262,151 351,940
------------- ------------- ------------- -------------
392,093 271,314 788,815 489,808
------------- ------------- ------------- -------------
NET OPERATING (LOSS) (392,093) (271,314) (788,815) (489,808)
OTHER INCOME (EXPENSE)
Interest income 5,684 580 13,640 627
Debt cancellation - former parent 0 0 0 2,169,806
Fee - former parent 0 0 0 200,000
Sale of subsidiary 0 (500,862) 0 (500,862)
------------- ------------- ------------- -------------
5,684 (500,282) 13,640 1,869,571
------------- ------------- ------------- -------------
Income (loss) from continuing operations before
income taxes (386,409) (771,596) (775,175) 1,379,763
Income tax expense 0 0 800 800
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (386,409) (771,596) (775,975) 1,378,963
Discontinued operations:
Operations of subsidiary sold 4/1/98 0 0 0 (193,468)
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (386,409) $ (771,596) $ (775,975) $ 1,185,495
============= ============= ============= =============
Net income (loss) per weighted average share $ (.02) $ (.05) $ (.05) $ .08
============= ============= ============= =============
Weighted average number of common shares used
to compute net income (loss) per weighted
average share 16,232,262 14,223,929 16,003,096 14,223,929
============= ============= ============= =============
F - 15
MW MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
1999 1998
------------------ ------------------
OPERATING ACTIVITIES
Net income (loss) $ (775,975) $ 1,185,495
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 49,344 89,141
Net value of subsidiary sold 0 1,398,034
Debt cancelled 0 (2,169,806)
Changes in assets and liabilities:
Accounts receivable 47,010 (683,519)
Inventories 0 80,636
Prepaid expenses and other 47,024 (166,791)
Accounts payable and accrued expenses 451,116 (7,756)
Deposits 10,000 37,000
Income taxes payable (800) 0
------------------ ------------------
NET CASH USED BY OPERATING ACTIVITIES (172,281) (237,566)
INVESTING ACTIVITIES
Loan - other 0 (6,231)
Purchase of equipment (900,000) (1,796)
Deposits 0 (2,225)
------------------ ------------------
NET CASH USED BY INVESTING ACTIVITIES (900,000) (10,252)
FINANCING ACTIVITIES
Borrowings - former parent 0 170,000
Loans 425,000 0
Cash remaining with former subsidiary 0 (243,102)
Sale of common stock 675,000 0
Principal payments on debt 0 (9,951)
------------------ ------------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 1,100,000 (83,053)
------------------ ------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 27,719 (330,871)
Cash and cash equivalents at beginning of period 890,283 387,982
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 918,002 $ 57,111
================== ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 3,963 $ 9,824
Cash paid for income taxes 1,600 800
F - 16
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
Securities and Exchange Commission registration fee $ 5,007.07
Accounting fees and expenses 20,000.00
Legal fees and expenses 30,000.00
Blue Sky fees and expenses 2,000.00
Miscellaneous 20,000.00
--------------
Total $ 77,007.07
==============
- ------------------------------------------------------------------
* All amounts are estimates other than the Commission's
registration fee. No portion of these expenses will be borne by
the Selling Stockholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The officers and directors of the Company are indemnified as
provided under the Nevada Revised Statutes and the Bylaws of the
Company.
Under the NRS, director immunity from liability to a corporation
or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a corporation's articles of
incorporation (which is not the case with the Company's Articles
of Incorporation). Excepted from that immunity are: (i) a willful
failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the director has a material
conflict of interest; (ii) a violation of criminal law (unless the
director had reasonable cause to believe that his or her conduct
was lawful or no reasonable cause to believe that his or her
conduct was unlawful); (iii) a transaction from which the director
derived an improper personal profit; and (iv) willful misconduct.
The Bylaws provide that the Company shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of
the fact that he is or was a Director, Officer, employee or agent
of this corporation, or is or was serving at the request of this
corporation as a Director, Officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by a director in connection with such action,
suit or proceeding, if he or she acted in good faith and in a
manner reasonably believed to be in or not opposed to the best
interests of this corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe this
conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself,
create a presumption that the person did not act in good faith and
in a manner which he or she reasonably believed to be in or not
opposed to the best interests of this corporation, and with
respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
34
<Page >
The Company also indemnifies any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or
completed action or suit, by or in the right of the Company to
procure a judgment in its favor by reason of the fact that the
person is or was a Director, Officer, employee, or agent of the
Company, or is or was serving at the request of the Company as a
Director, Officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or
settlement of such action or suit, if he or she acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of this corporation, and except
that no indemnification will be made in respect of any claim,
issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of
his or her duty to the Company, unless and only to the extent that
the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper;
To the extent that a Director, Officer, employee, or agent of the
Company has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to above, or in
defense of any claim, issue, or matter therein, he or she will be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith;
Any indemnification may be made by the Company only as authorized
in the specific case upon a determination that indemnification of
the Director, Officer, employee, or agent is proper under the
circumstances because he or she has met the applicable standard of
conduct set forth in paragraphs above. Such determination shall
be made: (1) by the board of directors by a majority vote of a
quorum consisting of directors who where not parties to such
action, suit, or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders;
Expenses incurred in defending a civil or criminal action, suit,
or proceeding may be paid by the Company in advance of the final
disposition of such action, suit, or proceeding as authorized by
the board of directors under receipt of an undertaking by or on
behalf of the director, officer, employee, or agent to repay such
amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by the Company as authorized in the
Bylaws.
The indemnification is not exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise, both as
to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of equity securities sold by the Company
within the past three years which, pursuant to the exemption
provided by Section 4(2) of the Securities Act, were not
registered under the Securities Act.
35
<Page >
The Company has issued to Dynamic 14,223,929 common shares
pursuant to the Contribution Agreement in consideration for the
transfer by Dynamic to the Company of all shares and shareholders
loans of each of MMC and P&H, and the agreement of Dynamic to
advance to the Company a total of $200,000 ($50,000 of which has
been paid). The shares of the Company issued to Dynamic have
subsequently been distributed to the shareholders of Dynamic on
the basis of one common share of the Company for each common share
of Dynamic. The issue of common shares by the Company to Dynamic
was completed pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act of 1933 (the "Act").
The Company has also issued 2,500,000 common shares in a private
placement to accredited investors at a price of $0.75 per share
pursuant to Rule 506 of Regulation D of the Act as follows:
(1) 1,500,000 shares in October,1998;
(2) 300,000 shares in March, 1999;
(3) 700,000 shares in June, 1999
On July 14, 1999, the Company entered into a Convertible Debenture
and Warrants Purchase Agreement in which it agreed to sell to
certain named investors a total of $3,500,000 worth of Convertible
Debentures pursuant to the exemption from registration provided by
Rule 506 of Regulation D of the Act. In addition to the
Convertible Debentures, each investor under the Debenture Purchase
Agreement was entitled to Warrants in a proportional amount to
their purchase of Debentures. The exercise price of the Warrants
is at a price of $2.75 per share. Of the $3,500,000 in Convertible
Debentures, only $3,000,000 were sold immediately. The remaining
$500,000 were agreed to be purchased by three of the investors
upon the registration of the Common Stock as required by a
Registration Rights Agreement signed contemporaneously with the
Debenture Purchase Agreement. Between July 21 and July 23, 1999,
the Investors exercised their conversion rights under the
Debentures and converted $2,620,000 worth of Debentures into
2,386,750 shares of common stock in the Company.
On July 20, 1999, the Company also issued warrants to purchase
250,000 shares of common stock in the Company to JW Genesis
Securities, Inc. as part of its fee for arranging the Convertible
Debenture financing. These warrants were also issued pursuant to
an exemption from registration provided by Rule 506 of Regulation
D of the Act. These warrants are exercisable at a price of $3.312
per share at any time prior to 5:00 pm New York City Time on July
20, 2004.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------
3.1 Company's Articles of Incorporation*
3.2 Company's By-Laws*
4.1 Company's Stock Option Plan, dated March 23, 1999
5.1 Opinion of Michael A. Cane, Esq., with consent to
use
10.1 Debenture Purchase Agreement, dated as of July
14, 1999, between the Company and the Purchasers
listed therein
36
<Page >
10.2 Registration Rights Agreement, dated as of
July 14, 1999, between the Company and the
Purchasers Listed therein
10.3 Stock Purchase Warrant Form
10.4 8% Convertible Debenture Form
23.1 Consent of Smith and Company to use its Report on
Audited Financial Statements
- -------------
* Incorporated herein by reference from the Company's Registration
Statement on Form 10-SB12B filed with the commission on 7-13-98
(File No. 001-14297)
ITEM 17. UNDERTAKING.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in this Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which
remain unsold at the termination of the offering.
Insofar as indemnifications for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act,
and will be governed by the final adjudication of such issue.
37
<Page >
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing Form S-1
and has duly caused this registration statement to be signed on
its behalf by the undersigned thereunto duly authorized in the
City of Scottsdale, State of Arizona on September 1, 1999.
MW MEDICAL, INC.
\s\ Jan Wallace
By: __________________________
JAN WALLACE, PRESIDENT
AND CHAIRMAN OF THE
BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on September 1, 1999.
SIGNATURE CAPACITY IN WHICH SIGNED
\s\ Grace Sim Director
- -------------------------------------
GRACE SIM
\s\ Jan Wallace President and Chief Executive
- ------------------------------------- Officer (Principal
JAN WALLACE Executive Officer)
Chief Financial Officer
\s\ Grace Sim (Principal Financial/
- ------------------------------------- Accounting Officer)
GRACE SIM
38