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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 September 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 November 10, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
MYO DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Balance Sheet (unaudited) as of September 30, 1997 3
Statements of Operations (unaudited) for the
Three Months Ended September 30, 1997 and 1996 and
the Nine Months Ended September 30, 1997 and 1996 4
Statements of Cash Flows (unaudited) for the
Nine Months Ended September 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
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
<S> <C>
SEPTEMBER 30,
1997
------------
ASSETS
------
Current assets:
Cash.............................................................. $ 542,615
Accounts receivable - less allowance for doubtful
accounts of $25,292............................................. 7,662
Prepaid expenses.................................................. 15,797
----------
Total current assets......................................... 566,074
Furniture and equipment, net of accumulated
depreciation of $199,012............................................. 178,704
Other assets, net of accumulated amortization
of $4,344............................................................ 34,992
----------
Total assets................................................. $ 779,770
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses............................. 109,333
Current portion of obligations under capital lease................ 24,770
Notes payable to bank............................................. 270,000
----------
Total current liabilities.................................... 404,103
Obligations under capital lease........................................ 61,628
----------
Total liabilities............................................ 465,731
----------
Commitments and contingencies
Shareholders' equity
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............. 5,500,680
Accumulated deficit during the development stage.................. (5,186,641)
----------
Total shareholders' equity................................... 314,039
----------
Total liabilities and shareholders' equity................... 779,770
==========
</TABLE>
Page 3
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<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------ ------ ------- ------
Revenue........................................ $ 4,197 $ 5,000 $ 9,771 $ 13,650
--------- -------- -------- ---------
Operating expenses:
Research and development..................... 96,041 76,540 278,455 167,798
Technical services........................... 47,893 55,566 170,637 128,182
Sales and marketing.......................... 26,599 18,966 66,145 66,670
General and administrative................... 238,365 147,632 613,771 371,952
--------- -------- -------- ---------
Total operating expenses................... 408,898 298,704 1,129,008 734,602
--------- -------- -------- ---------
Loss from operations....................... (404,701) (293,704) (1,119,237) (720,952)
Other income (expense)
Interest expense............................. (11,955) (15,788) (37,043) (43,512)
Interest income.............................. 6,155 3,326 38,180 5,121
--------- -------- -------- ---------
Total other income (expense)............... (5,800) (12,462) 1,137 (38,391)
--------- -------- -------- ---------
Loss before provision for income taxes..... (410,501) (306,166) (1,118,100) (759,343)
Provision for income taxes..................... 0 0 800 800
--------- -------- -------- ---------
Net loss....................................... $ (410,501) $(306,166) $(1,118,900) $(760,143)
========= ========= ========= =========
Net loss per share............................. $ (0.05) $ (0.04) $ (0.14) $ (0.11)
========= ========= ========= =========
Weighted average number of shares outstanding.. 8,223,037 7,241,037 8,034,539 6,820,580
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 4
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<TABLE>
<CAPTION>
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1997 1996
----------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................... $ (1,118,900) $ (760,143)
Adjustments to reconcile net loss to net cash used in
operating activities:.......................................
Depreciation and amortization.............................. 39,929 20,463
Changes in operating assets and liabilities:...............
(Increase) decrease in assets:
Accounts receivable.................................... (7,662) 13,446
Prepaid expenses....................................... (10,380) (1,171)
Other assets........................................... 420 (2,442)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses.................. (3,149) (264,471)
-------------- ------------
Net Cash Used in Operating Activities................ (1,099,742) (994,318)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases.......................................... (14,521) (93,541)
-------------- ------------
Net Cash Used in Investing Activities...................... (14,521) (93,541)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) borrowings on notes payable to related
parties..................................................... (130,000) 83,500
Net proceeds from issuance of common stock
and warrants................................................ 1,200,000 1,182,327
Obligations under capital lease.............................. (19,266) 46,566
-------------- ------------
Net Cash Provided by Financing Activities.................. 1,050,734 1,312,393
-------------- ------------
Net (Decrease) Increase in Cash............................ (63,529) 224,534
CASH -- Beginning of Period.................................... 606,144 3,030
-------------- ------------
CASH -- End of Period.......................................... $ 542,615 $ 227,564
============== ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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 nine
months ended September 30, 1997, the Company incurred a net loss of
$1,118,900. The Company is also in the development stage at September 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 nine months ended September 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
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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 that 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
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
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1996. The Company incurred net losses
of $1,118,900 for the nine months ended September 30, 1997 and $760,143 for
the nine months ended September 30, 1996. For the three months ended
September 30, 1997 and 1996, the Company incurred net losses of $410,501
and $306,166, respectively.
Revenues decreased from $13,650 for the nine months ended September
30, 1996 to $9,771 for the nine months ended September 30, 1997, and from
$5,000 for the three months ended September 30, 1996 to $4,197 for the
three months ended September 30, 1997. Revenues consisted primarily of
fees for performance of MPR evaluations. Revenues were less for the three
and nine months ended September 30, 1997 as fewer MPR evaluations were
conducted during those periods.
The Company's operating expenses increased to $1,129,008 during the
nine months ended September 30, 1997 from $734,602 during the nine months
ended September 30, 1996, and to $408,898 during the three months ended
September 30, 1997 from $298,704 for the three months ended September 30,
1996. During the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996, research and development and technical
services expenses increased $110,657 and $42,455, respectively, primarily
as a result of further product development and refinement. Research and
development expenses increased $19,501, and technical services expenses
decreased $7,673, for the three months ended September 30, 1997 compared to
the three months ended September 30, 1996, respectively. Sales and
marketing expense for the nine months ended September 30, 1997 decreased
slightly compared to the nine months ended September 30, 1996 due to a
reduction in marketing efforts during the first part of fiscal 1997 as the
Company focused its efforts on raising capital and further product
development. During the three months ended September 30, 1997, however,
sales and marketing expense increased by $7,633 compared to the three
months ended September 30, 1996 due to an increase in the Company's sales
and marketing efforts during this three month period. During the nine
months ended September 30, 1997 compared to the nine months ended September
30, 1996, general and administrative expenses increased to $613,771 from
$371,952 respectively. This increase was principally as a result of an
increase of $64,666 in rental and utility expenses due to an expansion of
the Company's leased facilities, a $43,607 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, a $38,438
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 $35,033 increase in compensation expenses
and payroll taxes due to the hiring of additional personnel involved, in
part, in administration, and a $27,242 increase in legal expenses
Page 7
<PAGE>
due principally to securities and employment matters. Similarly, during the
three months ended September 30, 1997 compared to the three months ended
September 30, 1996, general and administrative expenses increased to
$238,365 from $147,632, respectively. This increase was principally as a
result of an increase of $26,494 in legal expenses, a $21,084 increase in
rental and utility expenses, a $16,409 increase in consulting fees and a
$15,275 increase in accounting expenses.
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 nine months ended September 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
nine months ended September 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 paid off two revolving lines of credit from a commercial
bank in the total amount of approximately $130,500, in July 1997. The
Company currently has four revolving lines of credit from a commercial bank
pursuant to which the Company may from time to time borrow up to an
aggregate of $270,000 at interest rates equal to the bank's prime rate of
interest plus .75% to 1.50%. These lines, which were fully utilized at
September 30, 1997, mature at various times through September 10, 1998. The
Company was able to obtain these lines of credit because four 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 270,000 shares of Common Stock for $1.13 per share.
The Company presently has funds to continue operations at its present
level only through the end of 1997. The Company expects very little or no
revenues during this period, and is attempting to raise additional capital.
If the Company does not obtain additional capital by the end of 1997, it
will be forced to severely curtail operations and, if additional capital is
not obtained shortly thereafter, the Company may be forced to cease
operations.
Page 8
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
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 ExchangLe 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: November 13, 1997 By: /s/ Gerald D. Appel
----------------------------
GERALD D. APPEL, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
(Principal Financial and
Accounting Officer)
Page 10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS OF MYO DIAGNOSTICS, INC. DATED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> $542,615
<SECURITIES> 0
<RECEIVABLES> 32,954
<ALLOWANCES> 25,292
<INVENTORY> 0
<CURRENT-ASSETS> 566,074
<PP&E> 377,716
<DEPRECIATION> 199,012
<TOTAL-ASSETS> 779,770
<CURRENT-LIABILITIES> 404,103
<BONDS> 0
0
0
<COMMON> 5,500,680
<OTHER-SE> (5,186,641)
<TOTAL-LIABILITY-AND-EQUITY> 779,770
<SALES> 9,771
<TOTAL-REVENUES> 9,771
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,129,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,043
<INCOME-PRETAX> (1,118,100)
<INCOME-TAX> 800
<INCOME-CONTINUING> (1,118,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,118,900)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
<PAGE>
</TABLE>
