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 September 30, 1998
[ ] 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,
8,616,370 shares issued and outstanding as of October 1, 1998.
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 September 30, 1998 3
Statements of Operations (unaudited) for the
Nine months Ended September 30, 1998 and 1997 4
Statements of Cash Flows (unaudited) for the
Nine months Ended September 30, 1998 and 1997 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
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Unaudited)
Sep 30, 1998
Current Assets ____________
Cash $ -
Accounts receivable -
Prepaid expenses and other current assets 6,039
____________
Total current assets 6,039
Fixed assets 154,977
Other assets 32,204
____________
Total assets $ 193,220
Current Liabilities
Accounts payable and accrued expenses 475,055
Notes payable to bank 270,000
Current portion of leases payable 9,813
____________
Total current liabilities 754,868
Non Current Liabilities
Convertible debenture loans 167,000
Loans from shareholders - 44,000
Capital leases payable 64,752
Notes payable 25,000
____________
Total liabilities 1,055,620
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
8,616,370 and 8,323,037 issued and
outstanding 5,769,956
Paid in capital 145,000
Deficit accumulated during development stage (6,777,356)
____________
Total shareholders' deficit (862,400)
____________
Total liabilities and shareholders' deficit $ 193,220
The accompanying notes are an integral part of these financial statements.
4
MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine months
ended Sept 30, ended Sept 30,
1998 1997 1998 1997
_________ _________ _________ _________
Revenues $ - $ 4,197 $ - $ 9,771
Operating Expenses:
Research and Development 53,193 96,041 276,887 278,455
Technical Services 28,229 47,893 89,493 170,637
Sales and Marketing 16,038 26,599 88,187 66,145
General and Administrative 175,826 238,365 598,098 613,771
_________ _________ _________ _________
Total Operating Expenses 273,286 408,898 1,052,665 1,129,008
_________ _________ _________ _________
Loss from Operations (273,286) (404,701) (1,052,665) (1,119,237)
Other Income (Expenses)
Interest Expense (6,746) (11,955) (23,719) (37,043)
Miscellaneous - - - -
Interest Income - 6,155 233 38,180
__________ _________ ________ _________
Total Other Income (Expenses) (6,746) (5,800) (23,496) 1,137
Loss before provision for
income taxes (280,032) (410,501) (1,076,161) (1,118,100)
Provision for income taxes (279) - 1,264 800
__________ __________ _________ _________
Net loss $ (279,753) $(410,501) $(1,077,425) $(1,118,900)
__________ __________ _________ _________
Net loss per share $ (0.03) $ ( 0.05) $ (0.13) $ (0.14)
Weighted average number of 8,469,704 8,223,037 8,469,704 8,034,539
shares outstanding
The accompanying notes are an integral part of these financial statements.
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MYO DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months ended Sept 30,
1998 1997
____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,077,425) $ (1,118,900)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 47,136 39,929
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 67,500 (7,662)
Prepaid expenses 6,912 (10,380)
Other assets 825 420
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 245,632 (3,149)
____________ ____________
Net Cash Used in Operating
Activities (709,420) (1,099,742)
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (34,240) (14,521)
____________ ____________
Net Cash Used in Investing Activities (34,240) (14,521)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank overdraft 27,420 (130,000)
Proceeds from notes payable 69,000 -
Convertible Debenture 167,000 -
Net proceeds from issuance of common stock 330,817 1,200,000
(Repayments) borrowings of obligations under
capital lease (1,085) (19,266)
____________ ____________
Net Cash Provided by Financing Activities 593,152 1,050,734
____________ ____________
Net (Decrease) in Cash (150,508) (63,529)
CASH -- Beginning of Period 150,508 606,144
____________ ____________
CASH -- End of Period $ - $ 542,615
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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, 1997
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, 1998, the Company incurred a net loss of $1,077,425. The
Company is also in the development stage at September 30, 1998, 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, 1998 are not
necessarily indicative of results to be expected for the full fiscal year ending
December 31, 1998.
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.
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Results of Operations
Nine Months Ended September 30, 1998 as Compared to Nine Months Ended
September 30, 1997. The Company incurred net losses of $1,077,425 for the
nine months ended September 30, 1998 and $1,118,900 for the nine months ended
September 30, 1997.
The Company's operating expenses decreased to $1,052,665 during the nine
months ended September 30, 1998 from $1,129,008 during the nine months ended
September 30, 1997. During the nine months ended September 30, 1998 compared
to the nine months ended June 30, 1997, research and development expenses
decreased $1,568. Technical service expenses decreased $81,114 due to limited
financial resources. Sales and marketing expenses for the nine months ended
September 30, 1998 increased $22,042 compared to the nine months ended
September 30, 1997 due to a slight increase in marketing efforts. During the
nine months ended September 30, 1998 compared to the nine months ended September
30, 1997, general and administrative expenses increased to $598,098 from
$613,771 respectively.
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, 1998, the Company funded
its operations principally from bank overdraft facilities, from net proceeds of
$167,000 from the issuance of Convertible Notes and from net proceeds of
$200,000 from a private placement of Common Stock of the Company. See Part II,
Item 2 of this Form 10QSB.
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, 1998, matured at various times through June 10, 1998. The Company
is currently negotiating with the bank for an extension of these lines.
The Company presently has funds to continue operations at its present level
only through December of 1998. 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 December 1998, 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.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
N/A
Item 2. Changes in Securities
In July 1998, the Company issued to 31 shareholders of the Company, all of
whom are Canadian residents, 10% Convertible Notes due August 13, 2000 (the
"Notes") in aggregate principal amount of $167,000 for a purchase of $167,000.
The Notes are convertible into Common Stock at any time prior to maturity at
$1.00 per share. No underwriting discounts or brokerage commissions were paid
in connection with these issuances. 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 an
investor which is not a U.S. Person.
In August 1998 the Company entered into an agreement with St. James
Securities Inc., a registered broker-dealer under Canadian law in Toronto,
Canada, pursuant to which St. James Securities agreed to purchase from the
Company as principal 500,000 shares of Common Stock for $1.00 per share and the
Company appointed St. James Securities as its exclusive agent to sell on a best
efforts basis an additional 1,000,000 shares of Common Stock in a private
placement in Canada. Under the agreement, St. James Securities was entitled to a
7% commission on all securities sold pursuant to the agreement and, three-year
warrants to purchase 200,000 shares of Common Stock for $.50 per share. In
September 1998, pursuant to the agreement, the Company sold to St. James
Securities 200,000 shares of Common Stock for $1.00 per share. 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 an investor which is not a U.S. Person.
In September 1998, the Company issued to Gary Weinhouse, the former Director
of Operations for the Company, 10,000 shares of Common Stock for services
rendered to the Company valued at $15,000. The issuance of these securities
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended, as a transaction not involving any 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 10.1 Form of 10% Convertible Note due August 13, 2000
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
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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: February 11, 2000 By: /s/ GERALD D. APPEL
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Gerald D. Appel, President, Chief Executive
Officer and Chairman of the Board
[Principal Financial and
Accounting Officer]