<PAGE> 1
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, 1999
[ ] 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.
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(Exact Name of Small Business Issuer as Specified in its Charter)
California
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(State or Other Jurisdiction of Incorporation or Organization)
95-4089525
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(I.R.S. Employer Identification No.)
3710 South Robertson Boulevard
Culver City, California 90232
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(Address of Principal Executive Offices)
310-559-5500
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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,
9,523,370 shares issued and outstanding as of August 1, 1999.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
MYO DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Balance Sheet (unaudited) as of June 30, 1999 3
Statements of Operations (unaudited) for the
Six months Ended June 30, 1999 and 1998 4
Statements of Cash Flows (unaudited) for the
Six months Ended June 30, 1999 and 1998 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
<PAGE> 3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Unaudited)
Jun 30, 1999
Current Assets ____________
Cash $ 127,257
Accounts receivable 11,295
Prepaid expenses & Other Current Assets 15,588
____________
Total current assets 154,140
Furniture & Equipment, net 138,486
Capitalized Product Development Costs 1,470,875
Other Assets 31,780
____________
Total assets $ 1,795,281
Current Liabilities
Accounts Payable & Accrued Expenses 276,022
Notes Payable to Bank -
Current Portion of Leases Payable 29,186
____________
Total Current Liabilities 305,208
Non Current Liabilities
Convertible Debenture Loans 167,000
Loans from Shareholder 39,000
Capital Leases Payable 10,018
Notes Payable 25,000
____________
Total liabilities 546,226
Shareholders' Equity (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
9,073,370 and 8,323,037 issued and
outstanding 6,804,309
Paid in capital 145,000
Deficit accumulated during development stage (5,700,254)
____________
Total Shareholders' Equity 1,249,055
____________
Total Liabilities & Shareholders' Equity $ 1,795,281
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Myo Diagnostics, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS (Unaudited)
For the Six Months Ended June 30, 1999 and from
January 5, 1987 (Inception) to June 30, 1998
For the Period From
Six Months Ended Inception to
June 30, June 30,
1999 1998 1999
__________ __________ __________
Revenues $ 36,136 $ - $ 145,032
Operating Expenses
Research & Development 34,320 223,694 1,108,766
Technical Services 49,897 61,264 612,649
Sales & Marketing 39,278 72,149 551,086
General & Administrative 157,983 422,272 3,383,025
__________ __________ __________
Total Operating Expenses 281,478 779,379 5,655,526
__________ __________ __________
Loss from Operations (245,344) (779,379) (5,510,494)
Other Income (Expenses)
Interest Expense (23,746) (16,973) (262,954)
Miscellaneous - - (6,475)
Interest Income - 223 103,786
__________ __________ __________
Total Other Income (Expenses) (23,746) (16,750) (165,643)
Provision for Income Taxes 2,302 1,543 24,111
__________ __________ __________
Net Loss $ (286,097) $ (797,672)$(5,700,248)
__________ __________ __________
Basic Loss Per Share ($0.03) ($0.09) ($1.01)
__________ __________ __________
Diluted Loss Per Share ($0.03) ($0.09) ($1.01)
__________ __________ __________
Weighted Average Common Shares 9,219,870 8,364,704 5,667,699
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Myo Diagnostics, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30, 1999 & 1998 and from
January 5, 1987 (Inception) to June 30, 1998
For the
Six Months Ended Period From
June 30, Inception to
1999 1998 Jun 30, 1998
__________ __________ __________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (286,098) $ (797,672)$(5,700,249)
Adjustments to Net Income (Loss):
Depreciation & Amortization - 31,404 367,011
Bad Debt Expense - - 26,394
Stock Options Issued for
Services Rendered - - 24,000
Common Stock Issued in Consideration for
Extension of Repayment Terms for
Notes Payable to Related Parties - - 75,600
Common Stock Issued for Services
Rendered - - 12,527
(Increase)/Decrease in:
Accounts Receivables (9,000) 67,500 (18,239)
Other Receivables - - 67,683
Prepaid Expenses (7,500) 1,193 (84,380)
Other Assets (990) 600 (31,985)
Increase/(Decrease) in:
Accounts Payable (71,011) 150,834 223,055
Other Current Liabilities (286,179) - (117,039)
__________ __________ __________
Net Cash Provided (Used) by
Operating Activities (660,778) (546,141) (5,155,622)
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Fixed Assets - (34,240) (403,378)
Software Development Costs - - (1,470,875)
__________ __________ __________
Net Cash Provided (Used) by
Investing Activities - (34,240) (1,874,253)
See accompanying notes and accountant's report.
<PAGE> 6
Myo Diagnostics, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30, 1999 & 1998 and from
January 5, 1987 (Inception) to June 30, 1998
For the
Six Months Ended Period From
June 30, Inception to
1999 1998 Jun 30, 1998
__________ __________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Bank Overdraft - 83,552
Issuance of Convertible Debentures - - 167,000
Net Increase (Decrease) in Notes
Payables - 25,000 295,000
Net Increase (Decrease) in Notes
Payables to Related Parties - 25,500 263,090
Repayment (Borrowings) on Obligations
Under Capital Lease (27,700) 4,990 (81,050)
Net Proceeds from Issuance of
Common Stock 574,874 290,835 6,368,092
Increase (Decrease) in Paid-In Capital - - 145,000
__________ __________ __________
Net Cash Provided (Used) from
Financing Activities 547,174 429,877 7,157,132
__________ __________ __________
Prior Period Adjustment - -
Net Increase (Decrease) in Cash 113,604 (150,508)
Beginning Cash 249,861 150,508
__________ __________ __________
Ending Cash $ 127,257 -
__________ __________ __________
<PAGE> 7
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, 1998 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, 1999, the Company incurred a net loss of $286,097. The
Company is also in the development stage at June 30, 1999, 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, 1999
are not necessarily indicative of results to be expected for the full fiscal
year ending December 31, 1999.
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.
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.
<PAGE> 8
Results of Operations
During 1998, the Company adopted a change in the method of accounting for
the costs associated with certain research and development costs related its
product. Certain of these research and development costs are now being
capitalized in accordance with SFAS No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed. Previously, the
Company had expensed all research and development costs. As a result of this
change in accounting for research and development costs, the Company now
capitalizes costs previously expensed.
Six Months Ended June 30, 1999 as Compared to Six Months Ended June 30,
1998. The Company incurred net losses of $286,097 for the six months ended
June 30, 199 and $797,672 for the six months ended June 30, 1998.
The Company's operating expenses decreased to $281,478 during the six months
ended June 30, 1999 from $779,379 during the six months ended June 30, 1998
because of the change in the method of accounting for the costs associated with
certain research and development costs relating to its product. During the six
months ended June 30, 1999 compared to the six months ended June 30, 1998,
research and development expenses decreased $189,374 primarily as a result of
lower development costs and the change in accounting for research and
development costs. Technical service expenses decreased $11,367 due to lower
research costs in general. Sales and marketing expenses for the six months
ended June 30, 1999 decreased $32,871 compared to the six months ended June 30,
1998 due to the time required to negotiate an international marketing and
distribution agreement. During the six months ended June 30, 1999 compared to
the six months ended June 30, 1998, general and administrative expenses
decreased to $157,983 from $422,272 respectively, primarily due to the change
in accounting methods.
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, 1999, the Company raised net proceeds of
$748,874 in the private placement of 450,000 shares of Common Stock.
At January 1, 1999 the Company had 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%. Approximately $140,000 of these lines matured
during the first quarter and was repaid by the collateral backing the
irrevocable letters of credit. The remaining lines were originally set to
mature at various times through June 10, 1999 however the bank demanded payment
of the balance during the first quarter of 1999. The Company settled the
remaining $130,000 of the debt through the issuance of options to purchase
130,000 shares of Common Stock at $1.13, which options expire July 1, 2001.
The Company presently has funds to continue operations at its present level
only through September of 1999. The Company expects very little or no revenues
during this period, and is continuing its efforts to raise additional capital.
If the Company does not obtain additional capital by the end of September 1999,
it will be forced to severely curtail operations and, if additional capital is
not obtained shortly hereafter, the Company may be forced to cease operations.
<PAGE> 9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
N/A
Item 2. Changes in Securities
In April 1999, the Company issued an aggregate of 450,000 shares of Common
Stock to two qualified Canadian institutional buyers, for a purchase price of
$1.67 per share (an aggregate of $748,874). The Company paid a brokerage
commission of $50,000 to St. James Securities in connection with this issuance.
The issuance of these securities was exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of the Securities
Act, as a transaction not involving a public offering, and pursuant to
Regulation S as an off-shore transaction with investors which are not U.S.
Persons.
In June 1999 the Company issued options to purchase 130,000 shares of
Common Stock to [Wells Fargo Bank] in consideration of the cancellation of
indebtedness with a principal amount of $130,000. The options have an exercise
price of $1.13 and expire July 1, 2001. No underwriting discounts or brokerage
commissions were paid in connection with this issuance. The issuance of these
securities was exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) of the Securities Act, as a transaction not
involving a public offering.
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submission of Matters to a Vote of Security Holders
N/A
Item 5. Other Information
N/A
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> 10
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: January 31, 2000 By: ________________________________________
Gerald D. Appel, President, Chief Executive
Officer and Chairman of the Board
[Principal Financial and
Accounting Officer]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS OF MYO DIAGNOSTICS, INC. DATED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 127,257
<SECURITIES> 0
<RECEIVABLES> 11,295
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 154,140
<PP&E> 15,588
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,795,281
<CURRENT-LIABILITIES> 305,208
<BONDS> 0
0
0
<COMMON> 6,804,309
<OTHER-SE> (5,700,254)
<TOTAL-LIABILITY-AND-EQUITY> 1,795,281
<SALES> 36,136
<TOTAL-REVENUES> 36,136
<CGS> 0
<TOTAL-COSTS> 281,478
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,746
<INCOME-PRETAX> (286,097)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (286,097)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
