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 June 30, 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 X No
--- ----
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,
8,223,037 shares issued and outstanding as of August 10, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
MYO DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Balance Sheet (unaudited) as of June 30, 1997 3
Statements of Operations (unaudited) for the
Three Months Ended June 30, 1997 and 1996 and
the Six Months Ended June 30, 1997 and 1996 4
Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 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 6. Exhibits and Reports on Form 8-K 9
PAGE 2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
JUNE 30,
1997
---------
ASSETS
------
<S>
Current assets: <C>
Cash $1,063,474
Accounts receivable - less allowance for doubtful
accounts of $25,945 3,911
Prepaid expenses and other assets 11,833
----------
Total current assets 1,079,218
Furniture and equipment, net of accumulated
depreciation of $185,512 180,151
Other assets, net of accumulated amortization
of $4,047 36,233
----------
Total assets $1,295,602
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 83,679
Current portion of obligations under capital lease 26,546
Notes payable to bank 400,000
----------
Total current liabilities 510,225
Obligations under capital lease 61,628
----------
Total liabilities 571,853
----------
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, 8,223,037 shares issued and outstanding 5,500,679
Accumulated deficit during the development stage (4,776,930)
----------
Total shareholders' deficit 723,749
----------
Total liabilities and shareholders' deficit $1,295,602
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PAGE 3
<PAGE>
<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- ----------------------
1997 1996 1997 1996
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 5,574 $ 5,650 $ 5,445 $ 8,650
-------- -------- --------- ---------
Operating expenses:
Research and
development 89,567 46,402 182,414 91,258
Technical services 46,365 46,897 122,744 72,616
Sales and marketing 18,248 23,191 39,724 47,704
General and
administrative 163,692 130,089 374,882 223,249
-------- -------- --------- --------
Total operating
expenses 317,872 246,579 719,764 434,827
-------- -------- --------- --------
Loss from
operations (312,298) (240,929) (714,319) (426,177)
Other income (expense)
Interest expense (14,802) (14,601) (25,088) (27,724)
Interest income 28,984 1,789 31,898 1,795
-------- -------- --------- --------
Total other income
(expense) 14,182 (12,812) 6,810 (25,929)
-------- -------- --------- --------
Loss before
provision for
income taxes (298,116) (253,741) (707,509) (452,106)
Provision for
income taxes 628 800 1,680 1,870
--------- --------- --------- ---------
Net loss $(298,744) $(254,541) $(709,189) $(453,976)
========= ========= ========= =========
Net loss per share $ (0.03) $ (0.04) $ (0.09) $ (0.07)
========= ========= ========= =========
Weighted average
number of shares
outstanding 8,133,367 6,713,872 7,939,775 6,628,097
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PAGE 4
<PAGE>
<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
------------------------------
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (709,189) $ (453,976)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 23,962 11,643
Changes in operating assets
and liabilities:
(Increase) decrease in assets:
Accounts receivable (3,911) 7,376
Prepaid expenses (6,416) (1,453)
Other assets (821) (2,421)
Increase (decrease)
in liabilities:
Accounts payable and
accrued expenses (28,932) (141,875)
--------- ---------
Net Cash Used in
Operating Activities (725,307) (580,706)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases --- (63,762)
--------- ---------
Net Cash Used in Investing Activities --- (63,762)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable
to related parties --- 83,500
Net proceeds from issuance
of common stock
and warrants 1,200,000 1,208,792
Obligations under capital lease (17,490) ---
---------- ---------
Net Cash Provided by
Financing Activities 1,182,510 1,292,292
--------- ---------
Net Increase in Cash 457,203 647,824
CASH -- Beginning of Period 606,144 3,030
--------- ---------
CASH -- End of Period $ 1,063,347 $ 650,854
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PAGE 5
<PAGE>
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 six months
ended June 30, 1997, the Company incurred a net loss of $709,189. The Company
is also in the development stage at June 30, 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 six months ended June 30, 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.
PAGE 6
<PAGE>
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" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO SIX MONTHS ENDED JUNE 30,
1996. The Company incurred net losses of $709,189 for the six months ended
June 30, 1997 and $453,976 for the six months ended June 30, 1996.
Revenues decreased from $8,650 for the six months ended June 30, 1996 to
$5,445 for the six months ended June 30, 1997. Revenues consisted primarily of
fees for performance of MPR evaluations. Revenues were less for the six months
ended June 30, 1997 as fewer MPR evaluations were conducted during that period.
The Company's operating expenses increased to $719,764 during the six
months ended June 30, 1997 from $434,827 during the six months ended June 30,
1996. Research and development and technical services expenses increased
$91,156 and $50,128, 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 $374,882 during the six months ended June 30, 1997 from $223,249
during the six months ended June 30, 1996 principally as a result of an
increase of $37,200 in rental expense due to an expansion of the Company's
leased facilities, a $37,160 increase in insurance costs as a result of the
Company's acquisition of a directors liability policy and the increase in
coverage under the Company's errors and omissions policy, a $27,198 increase in
consulting fees due to the addition of members to the Company's Scientific
Advisory Board and the development of clinical studies and treatment
guidelines, and a $23,008 increase in compensation expenses due to the hiring
of additional personnel involved, in part, in administration.
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 six months ended June 30, 1997, the Company funded its
operations principally from proceeds obtained from the sales of Common Stock
and Warrants to purchase Common Stock. During the six months ended June 30,
1997, the Company raised net proceeds of $1,200,000 from the sale of Common
Stock and Warrants to purchase Common Stock.
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
PAGE 7
<PAGE>
of interest plus .75% to 1.50%. These lines, which were fully utilized at June
30, 1997, mature at various times through June 10, 1998. Subsequent to June
30, 1997, the Company repaid an aggregate of $130,000 under two of the
revolving lines of credit. 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
received options to purchase an aggregate of 400,000 shares of Common Stock for
$1.13 per share.
The Company believes that the proceeds from the latest sales of Common
Stock and Warrants 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 June 30, 1997, the Company had one contract with a distributor to market
and sell the Company's MPR System. Although the Company believes that it can
fund operations through the end of fiscal 1997, it will need additional funding
to build infrastructure, implement its marketing plan and deliver a quality
product. The amount of additional funding (if any) the Company receives will
determine the degree to which it can accomplish these objectives. 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
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 10.1 Renewal Notices with respect to Business
PrimeLine Promissory Notes between Registrant and
Wells Fargo Bank, National Association.
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
PAGE 9
<PAGE>
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: August 13, 1997 By:/s/ Gerald D. Appel
-------------------------------
GERALD D. APPEL,
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE BOARD
PAGE 10
RENEWAL NOTICE
June 3, 1997
Myo Diagnostics, Inc.
3760 S. Robertson Blvd.
Culver City, CA 90232-2347
RE: Renewal of Business PrimeLine
Application #04089961
Customer #: 5542712565
Dear Myo Diagnostics, Inc.:
Wells Fargo Bank is pleased to inform you that your Business PrimeLine
#5542712565, in the amount of $75,000.00 was renewed on June 3, 1997. The new
maturity date is June 10, 1998.
Your PrimeLine remains subject to all terms and conditions of the
Business Loan Agreement, as modified by this Renewal Notice. The interest rate
to be applied to the unpaid Principal balance of the Note will be at a rate of
0.75% over the Index.
A non-refundable renewal fee of $300.00 will be charged to your account
#0619073265.
If you have any questions, please do not hesitate to call us at our toll
free number 1-800-372-8242 press 1, press 3. We appreciate your business and
look forward to continuing to serve as your business bank.
Sincerely,
Liela Alemania
Documentation Representative
<PAGE>
RENEWAL NOTICE
June 3, 1997
Myo Diagnostics, Inc.
3760 S. Robertson Blvd.
Culver City, CA 90232-2347
RE: Renewal of Business PrimeLine
Application #04089962
Customer #: 5542712565
Dear Myo Diagnostics, Inc.:
Wells Fargo Bank is pleased to inform you that your Business PrimeLine
#5542712565, in the amount of $65,000.00 was renewed on June 3, 1997. The new
maturity date is June 10, 1998.
Your PrimeLine remains subject to all terms and conditions of the
Business Loan Agreement, as modified by this Renewal Notice. The interest rate
to be applied to the unpaid Principal balance of the Note will be at a rate of
0.75% over the Index.
A non-refundable renewal fee of $300.00 will be charged to your account
#0619073265.
If you have any questions, please do not hesitate to call us at our toll
free number 1-800-372-8242 press 1, press 3. We appreciate your business and
look forward to continuing to serve as your business bank.
Sincerely,
Liela Alemania
Documentation Representative
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF MYO DIAGNOSTICS, INC. DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> $1,063,474
<SECURITIES> 0
<RECEIVABLES> 29,856
<ALLOWANCES> 25,945
<INVENTORY> 0
<CURRENT-ASSETS> 1,079,218
<PP&E> 365,663
<DEPRECIATION> 183,512
<TOTAL-ASSETS> 1,295,602
<CURRENT-LIABILITIES> 510,225
<BONDS> 0
0
0
<COMMON> 5,500,679
<OTHER-SE> (4,776,930)
<TOTAL-LIABILITY-AND-EQUITY> 1,295,602
<SALES> 5,445
<TOTAL-REVENUES> 5,445
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 719,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,088
<INCOME-PRETAX> (707,509)
<INCOME-TAX> 1,680
<INCOME-CONTINUING> (709,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (709,189)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
