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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to ___________________.
Commission file number 333-19285
MYO DIAGNOSTICS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
CALIFORNIA 95-4089525
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3760 South Robertson Boulevard
Culver City, California 90232
(Address of Principal Executive Offices)
(310) 559-5500
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, no par value,
8,226,037 shares issued and outstanding as of May 1, 1997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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MYO DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Balance Sheet (unaudited) as of March 31, 1997 3
Statements of Operations (unaudited) for the
Three Months Ended March 31, 1997 and 1996 4
Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
PAGE 2
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<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Unaudited)
<S> <C>
March 31,
1997
-----------
ASSETS
------
Current assets:
Cash $ 219,413
Accounts receivable - less allowance for doubtful
accounts of $25,672 ---
Prepaid expenses and other assets 12,535
----------
Total current assets 231,948
Furniture and equipment, net of accumulated
depreciation of $127,297 193,366
Other assets, net of accumulated depreciation
of $3,305 34,283
----------
Total assets $ 459,597
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 147,379
Current portion of obligations under capital lease 35,382
Notes payable to bank 400,000
==========
Total current liabilities 582,761
Obligations under capital lease 61,628
----------
Total liabilities 644,389
----------
Commitments and contingencies
Shareholders' deficit:
Preferred stock: no par value, 10,000,000 shares
authorized, no shares issued and outstanding ---
Common stock: no par value, 50,000,000 shares
authorized, 7,746,037 shares issued and outstanding 4,300,679
Accumulated deficit during the development stage (4,485,471)
----------
Total shareholders' deficit (184,792)
----------
Total liabilities and shareholders' deficit $ 459,597
==========
The accompanying notes are an integral part of these financial statements.
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</TABLE>
<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31,
<S> <C> <C>
1997 1996
---------- ----------
Revenue $ --- $ 3,000
Operating expenses:
Research and development 92,847 44,856
Technical services 76,392 25,719
Sales and marketing 21,476 24,513
General and administrative 218,717 93,160
---------- ----------
Total operating expenses 409,432 188,248
---------- ----------
Loss from operations (409,432) (185,248)
---------- ----------
Other income (expense)
Interest expense (10,286) (13,123)
Interest income 3,041 6
---------- ----------
Total other income (expense) (7,245) (13,117)
---------- ----------
Loss before provision for
income taxes (416,677) (198,365)
Provision for income taxes 1,052 1,070
---------- ----------
Net loss $ (417,729) (199,435)
========== ==========
Net loss per share $ (0.05) $ (0.03)
========== ==========
Weighted average number of shares
outstanding 7,746,037 6,549,438
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PAGE 4
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<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
<S> <C> <C>
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (417,729) $ (199,435)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 10,746 4,553
Changes in operating assets and
liabilities:
(Increase) decrease in assets:
Accounts receivable --- 17,061
Prepaid expenses (7,118) (1,903)
Other assets 1,129 (394)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 34,896 (100,500)
---------- ----------
Net Cash Used in Operating
Activities (378,076) (280,618)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable to related
parties --- 213,600
Net proceeds from issuance of common
stock --- 60,463
Obligations under capital lease (8,655) ---
---------- ----------
Net Cash (Used in) Provided by
Financing Activities (8,655) 274,063
---------- ----------
Net Decrease in Cash (386,731) (6,555)
CASH -- Beginning of Period 606,144 3,030
---------- ----------
CASH -- End of Period $ 219,413 $ (3,525)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------
The financial statements included herein have been prepared by Myo
Diagnostics, Inc. (the "Company"), without audit, according to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures that are made are adequate to make the information presented
not misleading. Further, the financial statements reflect, in the opinion of
management, all adjustments necessary to state fairly the financial position
and results of operations as of and for the periods indicated. These financial
statements should be read in conjunction with the Company's December 31, 1996
audited financial statements and notes thereto.
The financial statements have been prepared on the basis of the
continuation of the Company as a going concern. However, during the quarter
ended March 31, 1997, the Company incurred a net loss of $418,129. The Company
is also in the development stage at March 31, 1997, and recovery of the
Company's assets is dependent upon future events, the outcome of which is
indeterminable. Successful completion of the Company's development program and
its transition to the attainment of profitable operations is dependent upon
obtaining adequate financing to fulfill its development activities and
achieving a level of sales adequate to support the Company's cost structure.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon the Company's ability to meet its
financing requirements and the success of its plans to sell its products.
Further, the results of operations for the three months ended March 31, 1997,
are not necessarily indicative of results to be expected for the full fiscal
year ending December 31, 1997.
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially all of
its present efforts to establish a new business and its planned principal
operations have not yet commenced. All losses accumulated since inception have
been considered as part of the Company's development stage activities.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which will be required to be adopted on December 31,
1997. The impact of Statement 128 on the calculation of earnings per share for
the quarters is not expected to be material.
2. SUBSEQUENT EVENT
----------------
On April 16, 1997, the Company issued and sold 480,000 units to
institutional investors for aggregate net proceeds of $1,116,000. Each unit
was comprised of one share of Common Stock and one quarter stock purchase
warrant. Each whole warrant entitles the holder to purchase one share of
Common Stock at a price of $3.00 per share through April 16, 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a development stage company which has yet to realize any
material revenues. The Company is ready to bring its product to market, but
needs additional funding to implement its marketing plan.
FORWARD LOOKING STATEMENTS AND PROJECTIONS
The Company may from time to time make forward-looking statements and
projections concerning future expectations. When used in this discussion, the
words "estimate", "project", "anticipate" and similar expressions, are subject
to certain risks and uncertainties, such as changes in general economic
conditions, competition, changes in federal regulations, as well as
uncertainties relating to raising additional financing and acceptance of the
Company's product and services in the marketplace, including those discussed
below that could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as to the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
those forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AS COMPARED TO THREE MONTHS ENDED MARCH
31, 1996. The Company incurred net losses of $417,729 for the three months
ended March 31, 1997 and $199,435 for the three months ended March 31, 1996.
Revenues decreased from $3,000 for the three months ended March 31, 1996
to no revenues for the three months ended March 31, 1997. Revenues in the
prior year consisted primarily of fees for performance of MPR evaluations in
connection with test marketing. Revenues were less for the three months ended
March 31, 1997 as no new test marketing commenced during that period.
The Company's operating expenses increased to $409,432 during the three
months ended March 31, 1997 from $188,248 during the three months ended March
31, 1996. Research and development and technical services expenses increased
$47,991 and $50,673, respectively, primarily as a result of further product
development and refinement. Sales and marketing expense decreased, due to a
reduction in marketing efforts as the Company focused its efforts on raising
capital and further product development. General and administrative expenses
increased to $218,717 during the three months ended March 31, 1997 from $93,160
during the three months ended March 31, 1996 principally as a result of a
$13,911 increase in legal fees relating primarily to the Company's capital
raising efforts, a $81,937 increase in compensation expenses due to the hiring
of additional personnel involved, in part, in administration, and an increase
of $18,600 in rental expense due to an expansion of the Company's leased
facilities.
FINANCIAL CONDITION
The Company has funded its operating expenses principally through equity
and debt financings, as the Company has had no material cash flows from
operations. During the three months ended March 31, 1997, the Company funded
its operations principally from proceeds obtained from the sales of Common
Stock during fiscal year ended December 31, 1996, which amounted to $2,022,757.
The Company has six revolving lines of credit from a commercial bank
pursuant to which the company may from time to time borrow up to an aggregate
of $400,000 at interest rates equal to the bank's prime rate of interest plus
.75% to 1.50%. These lines, which were fully utilized at March 31, 1997, mature
at various times through July 1997. The Company was able to obtain these lines
of credit because six unaffiliated individuals delivered to the bank
irrevocable letters of credit in support of such lines, for which these
individuals
PAGE 7
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received options to purchase an aggregate of 400,000 shares of Common Stock for
$1.13 per share.
On April 16, 1997, the Company issued and sold 480,000 units to two
existing shareholders for aggregate net proceeds to the Company of $1,116,000.
Each unit was comprised of one share of Common Stock and one quarter stock
purchase warrant. Each whole warrant entitles the holder to purchase one share
of Common Stock at a price of $3.00 per share through April 16, 1998.
The Company believes that the proceeds from the latest sale of units will
enable the Company to fund operations through the end of fiscal 1997. While
the Company also anticipates generating revenues from the sale of MPR
evaluations in 1997, the amount of such revenues remains extremely uncertain
due to the fact that the MPR technology is a new product. As of March 31,
1997, the Company had one contract with a distributor to market and sell the
Company's MPR's System. Although the Company believes that it can fund
operations through the end of fiscal 1997, it will need additional funding.
The amount of additional funding (if any) the Company receives will determine
the degree to which it can implement its marketing plan. Without any
additional funding, the Company does not believe it will be able to develop
sufficient market awareness of the MPR System to operate profitably in the
foreseeable future.
PAGE 8
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On April 16, 1997, the Company issued and sold 480,000 units to
institutional investors for aggregate net proceeds of $1,116,000. Each unit
was comprised of one share of Common Stock and one quarter stock purchase
warrant. Each whole warrant entitles the holder to purchase one share of
Common Stock at a price of $3.00 per share through April 16, 1998. The Company
utilized the services of Griffiths McBurney & Partners, a broker/dealer in
Ontario, Canada, in connection with this transaction, which received a fee of
$84,000 and warrants to purchase 43,200 shares of Common Stock at a price of
$2.50 per share, exercisable through April 16, 1999. The issuance of these
securities was exempt from registration pursuant to Regulation S and pursuant
to Section 4(2) of the Act as a transaction not involving any public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
Report on Form 8-K dated April 22, 1997 reporting under Item
9 sales of equity securities pursuant to Regulation S.
PAGE 9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MYO DIAGNOSTICS, INC.
Date: May 16, 1997 By: /s/ Gerald D. Appel
----------------------------------
GERALD D. APPEL, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND CHAIRMAN OF
THE BOARD
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF MYO DIAGNOSTICS, INC. DATED MARCH 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> $219,413
<SECURITIES> 0
<RECEIVABLES> 25,672
<ALLOWANCES> 25,672
<INVENTORY> 0
<CURRENT-ASSETS> 221,648
<PP&E> 320,663
<DEPRECIATION> 127,297
<TOTAL-ASSETS> 459,597
<CURRENT-LIABILITIES> 582,761
<BONDS> 0
0
0
<COMMON> 4,300,679
<OTHER-SE> (4,485,883)
<TOTAL-LIABILITY-AND-EQUITY> 459,597
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 409,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,286
<INCOME-PRETAX> (416,677)
<INCOME-TAX> 1,052
<INCOME-CONTINUING> (417,729)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (417,729)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> 0
</TABLE>
