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                         SECURITIES AND EXCHANGE COMMISSION
                                          
                               Washington, D.C. 20549

                                    FORM 10-KSB/A

[X]  Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
          Act of 1934

                    For the fiscal year ended December 31, 1997
                                          
[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

                          Commission file number 333-19285

                               MYO DIAGNOSTICS, INC.
                  (Name of Small Business Issuer In Its Charter) 

            CALIFORNIA                                        95-4089525
     (State  or Other Jurisdiction                         (I.R.S. Employer
    of Incorporation or Organization)                      Identification No.)

                              3760 SOUTH ROBERTSON BOULEVARD
                              CULVER CITY, CALIFORNIA 90232
                 (Address of Principal Executive Offices and Zip Code)

                                      (310) 559-5500
                     (Issuer's telephone Number, Including Area Code)

            Securities registered under to Section 12(b) of the Exchange Act: 

                                                       Name of Each Exchange
     Title of Each Class                                on which Registered 
     -------------------                               ---------------------
                                        NONE
                                          
         Securities registered under to Section 12(g) of the Exchange Act:

                                        NONE

     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      
              -----         -----

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB  [X]

     The issuer's revenues for the fiscal year ended December 31, 1997 were
$10,266.

     At March 27, 1998 the aggregate market value of the voting stock held by
non-affiliates of the issuer was $7,805,732.

     At March 27, 1998 the issuer had 8,323,037 shares of Common Stock, $0.001
par value, issued and outstanding.

     Transitional Small Business Disclosure Format (check one):  Yes     No  X 
                                                                     ---    ---

                        DOCUMENTS INCORPORATED BY REFERENCE
                                          
None
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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

HISTORY AND PRIOR ACTIVITIES

         Myo Diagnostics, Inc. (the "Company") is a development stage company
which was formed in 1988 to develop and bring to market a new patented medical
information system called Muscle Pattern Recognition ("MPR"). The Company,
headquartered in Culver City, California, was incorporated in California in
January 1987 as AREX, Inc. The name was changed to Devion Group and then to Myo
Diagnostics, Inc. in September 1989.

         The Company held a 97.2% general partnership interest in Myo 
Diagnostics, Ltd. (the "Partnership"), a California partnership, that began 
operations in April 1991. The Partnership researched and developed the hardware 
and related software to perform Muscle Pattern Recognition pursuant to a 
license agreement with Toomim Research Group ("TRG"), a partnership of three of 
the Company's shareholders, which holds a United States patent on the MPR 
technology. In December 1994, the Partnership's assets (including the license 
agreement) and liabilities were transferred to the Company at their book value 
and neither the Partnership nor the Company recognized any gain or loss. The 
2.8% partners exchanged their interests in the Partnership, totaling $547,885, 
for 755,330 shares of Common Stock of the Company and notes in the aggregate 
principal amount of $175,000. The business combination was recorded in a manner 
similar to a "pooling-of-interest" method of accounting. Under this method, 
assets and liabilities of the Partnership were recorded at historical cost.

GENERAL

         The Company was formed to develop and bring to market a new patented 
medical information system called Muscle Pattern Recognition ("MPR"). MPR 
analyzes patterns of muscle recruitment--the engagement of muscles in order to 
perform a specific body movement--to provide objective evidence of muscle 
dysfunction which assists in the diagnosis of muscle injury. It can identify 
affected muscle sites, determine the existence of muscle dysfunction, and 
measure its severity. The results of an MPR evaluation are presented in a 
comprehensive report which is generated at the Company's central processing 
facility.

         The Company believes that the capabilities of its MPR System are 
unique and the MPR System addresses an unmet market need which has become even 
more pressing in view of the cost-consciousness of the present health care 
environment. The MPR System supports the cost-containment and risk management 
goals of insurers and managed care providers by giving them means to measure 
treatment outcomes, to eliminate unnecessary care, and to detect outright 
fraud. It can serve as a forensic medical tool in medical/legal cases and 
reduce the exposure of insurers of disability and workers compensation risks.

         MPR's scientific foundation originates from the research of Dr. 
Toomim, one of the principals of the Company. Over the ten-year period that 
preceded the formation of the Company, Dr. Toomim did extensive research on the 
patterns of interactions occurring between the various muscles which 
participate in the execution of a movement. Central to the MPR concept is the 
discovery of movement-specific patterns which can be captured by simultaneously 
recording the electromyographic ("EMG") signals of all participating muscles. 
The comparison of a patient's patterns with those of "normal" subjects, using 
an expert system (described in greater detail below), is the basis of the 
evaluation. Up until now, the Company has focused its development efforts on 
the back and neck muscle application; it plans to address other muscle groups 
in the future.

         The first MPR system prototype capable of measuring simultaneously up 
to 14 muscle sites was Alpha and Beta tested in early 1990. A limited market 
test was initiated in September 1990 in Southern California, through a 
non-exclusive Mobile Diagnostic Distributor. Four technologists were certified 
by the Company and approximately 300 patients were tested through June 1991. 
The Company appointed in-house and independent sales representatives to expand 
the market test. These market tests served to establish the prerequisites 
necessary to commence marketing the product. These prerequisites included: an 
independent scientific validation of the system, conclusive clinical studies, a 
demonstration of the successful use of MPR information as medical/legal 
evidence, and the publication of papers in peer reviewed journals. In the 
opinion of management, these prerequisites have been met. See 
"Product--Scientific Validation of the System" and "--Legal Validation of the 
System."


<PAGE>

         In February 1996, the Company entered into a distribution agreement 
with Medical Consulting Images, Co. ("MCIC"), a well established, 
Cleveland-based diagnostic imaging service company. Under the distribution 
agreement, MCIC committed to present the product to potential users to create 
awareness of the MPR procedure ("introduce" the product) in 20 markets in the 
five states in which it operates. As of December 31, 1997, MCIC has not 
successfully introduced the product. As of December 31, 1997, no MPR 
evaluations had been conducted through MCIC other than limited evaluations 
for clinical purposes. On February 27, 1998 the Company terminated its 
distribution agreement with MCIC.

MARKET

         MARKET ENVIRONMENT. The United States health care delivery and payment 
systems have been undergoing profound changes over the past few years. These 
changes have been driven by the determination of employers to halt the alarming 
escalation of health care spending, by the concerns of the health care industry 
over the threat of regulatory controls, and by a general awareness that the 
system is plagued by major flaws. "Liability System Incentives to Consume 
Excess Medical Care," a study by the RAND Corporation Institute for Civil 
Justice, found an estimated 59% of the costs submitted in support of soft 
injury claims for auto accidents was excess. This study further indicated that 
"the implications of this analysis reached far beyond auto insurance premiums. 
Our data clearly suggests that large amounts of medical resources are being 
unnecessarily consumed." Lead by managed care providers, the re-engineering of 
the industry has brought a new focus on the cost-effectiveness of services and 
procedures. Capitated payment plans have reversed the financial incentives of 
managed care providers, and insurers of traditional indemnity plans have had to 
adopt similar cost-containment techniques to compete.

         Management believes these trends will benefit the Company as MPR 
provides important means required for cost-containment: means to objectively 
diagnose a condition to aid in the selection of the most appropriate treatment 
course, means to measure outcomes which can prevent overuse, and means to 
detect fraud in workers compensation, personal injury, and disability cases 
involving back injury.

         BACK MUSCLE DIAGNOSTIC MARKET. Back pain and back muscle injuries from 
automobile, sports and work related accidents affect a large number of 
individuals. In 1994, back injuries represented the largest cause of workdays 
lost (27% of all non-fatal occupational injuries and illnesses involving days 
away from work) according to the 75 Resource Tables, United States Department 
of Commerce, Bureau of Labor Statistics (May 1996). According to Work Injury 
Management, Vol. 2, No. 4 (July/August 1993), lower back injuries were the most 
prevalent cause of compensable injuries in the United States with an estimated 
cost of $16 billion per year. The United States Department of Health and Human 
Services, Public Health Service, Agency for Health Care Policy and Research, 
stated in Publication No. 95-0643, Acute Low Back Problems in Adults: 
Assessment and Treatment (December 1994) that low back problems affect more 
than 80% of the population sometime during their life. It also indicated that 
50% of working aged adults experience symptoms of back pain each year. An 
article in California Worker's Compensation Enquirer, Vol. 13, No. 4 (October 
1995) under the signature of Dr. Richard Hyman, estimates that, in 1994, soft 
tissue back injuries may have accounted for up to 70% or $2.1 billion of 
California's $3 billion annual worker's compensation medical costs. The Company 
believes that the United States offers as many annual examination opportunities 
for MPR as it does for MRI. According to Market Intelligence Research Company 
Annual Report (1993), there are in excess of seven million MRI examinations per 
year.

BUSINESS STRATEGY

         The Company's goal is to establish MPR as a widely recognized and 
accepted procedure, to capitalize upon the full potential of this technology by 
developing protocols for other applications, and to achieve and maintain a 
leadership position in muscle-related diagnostic techniques. The Company's 
strategy to achieve these goals consists of the following principal elements:

          -     ESTABLISH THE PRODUCT IN THE HMO AND CORPORATE MARKETS through 
                strategic partnerships with major health care firms, insurance 
                companies and through direct sales to targeted self-insured 
                corporations. The Company hopes that these strategic partners 
                will introduce MPR to users with whom they have existing
                relationships, which will provide accelerated entry into a large
                number of HMOs and major corporations. One such partnership is 
                presently being negotiated.

<PAGE>

          -     EXPAND GEOGRAPHICALLY through establishing regional and local
                distribution arrangements with diagnostic imaging services,
                rehabilitation centers and diagnostic clinics. The existing
                physician referral base of these distributors will provide 
                access to the personal injury, workers compensation, and general
                back pain markets more rapidly. While the Company does not 
                currently have any distributor relationships, the Company
                believes that distributors will have interest as the low capital
                investment and high margin of MPR provides an attractive 
                opportunity for incremental profits.

          -     INCREASE EXPOSURE AND PEER RECOGNITION THROUGH PUBLICATIONS IN
                MEDICAL AND SCIENTIFIC JOURNALS. Peer-reviewed publications play
                an important role in overcoming physician resistance to new 
                procedures. Accordingly, the Company has an on-going program of 
                studies and trials aimed at providing statistical and clinical 
                evidence for publication. As of December 31, 1997, the Company 
                had no clinical study in process, and its ability to conduct 
                additional clinical studies (each of which costs at minimum 
                approximately $250,000) is dependent upon obtaining additional 
                funding. See "Risk Factors--Need For Additional Funding".

         -      DEVELOP NEW APPLICATIONS OF ITS CORE TECHNOLOGY.  The Company 
                intends to use its know-how and core technology to address other
                applications related to arm and leg muscles.  For example, the 
                development of appropriate protocols may allow the Company to 
                introduce evaluation systems for carpal tunnel syndrome, rotator
                cuff injuries and pre- and post-operative arthroscopic surgery 
                evaluation.  In addition, the Company plans to develop a 
                disability management information system designed to provide the
                elements necessary to predict potential high risk of injury, 
                avoid injuries through appropriate preventative intervention, 
                assess injury through MPR and other data, establish protocols 
                for treatment of injuries, manage chronic back injury cases and 
                establish outcome measures.  This system of "disease management"
                provides significant elements of cost containment which are 
                currently being sought by payors.  The Company does not 
                anticipate completing development of new applications for at 
                least the next two years; in addition, its ability to complete 
                development of new applications will be contingent in part upon 
                obtaining additional funding or generating sufficient revenues 
                from the MPR System.

PRODUCT

         The MPR System is a computer-assisted evaluation procedure which is 
based on the simultaneous measurement of electromyographic signals produced by 
14 muscles during the execution of a movement. A patient's EMG readings, which 
are collected during the examination procedure, digitized, then processed by an 
expert system, can then be converted into graphic "images" of recognizable 
muscle patterns. A computer-assisted comparison of a patient's patterns with 
those produced by normal subjects reveals differences which are the basis of 
the diagnosis.

         All the proprietary components of the MPR System have been designed 
and built based on published and accepted scientific data and proven medical, 
electronic, and statistical technology. The two proprietary components of the 
system include:

     -   the Myo Diagnostics Expert System, and
     -   the Myo Diagnostics Muscle Pattern Recognition Report.

         The third component of the system is a data acquisition device which 
is commercially available, and which the Company purchases from third parties. 
The data acquisition device consists of a set of 33 cutaneous electrodes 
connected to the data acquisition device. The electrodes, which are 
commercially available, pick up the EMG signals produced by muscles and feed 
them into the device whose design provides for the simultaneous reception of up 
to 16 EMG signals.

         The data acquisition device has built-in features which analyze the 
quality of the signal received from each electrode and recognize and warn the 
technologist/operator of any malfunction, thereby ensuring that data reflects 
accurate EMG measurements. The data acquisition device also assists the 
operator by signaling the beginning and end of each movement through visual 
prompts and audio tones, and by providing a real-time feedback on the patient's 
performance through a graphic display.

         After affixing the electrodes on the skin of the patient's back at 
carefully selected muscle sites, the patient is directed to execute four 
repetitions of each of nine specific movements. Fourteen muscle sites are 
associated to each movement and

<PAGE>

report to the data acquisition device during the execution of such movement. 
Their repetitions are important for the protocol. To convert these parallel 
inflows of signals into digital patterns ("images"), the data acquisition 
device processes some 75,000 data points and calculates these points' 
relationships to each other.

         Technologists who perform the tests on the patient are presently 
required to receive three weeks training from the Company. No special 
governmental or regulatory license or approval is required for the 
technologists to perform the service.

         THE EXPERT SYSTEM. The data collected during the examination is 
submitted to the Company for processing. A report is generated which includes 
graphic, statistical and narrative representations of each muscle group's 
pattern compared to the pattern of a normative database of non-injured and 
pain-free subjects. The normative data has been collected utilizing the same 
protocols performed by the patient. The normative database is periodically 
updated as more data is collected. The report which is produced is reviewed to 
ascertain that the data was properly collected and processed.

         The system of statistical analysis used in the MPR evaluations is 
based on well-established principles of statistics which indicate that data 
which falls two standard deviations or more from the mean value of the data 
base to which it is compared has a statistical certainly of 95%-99% depending 
upon how far beyond two standard deviations the data falls. The MPR System 
requires that this phenomenon occur in multiple instances before it is 
considered to be significant for further analysis. This assures that there is a 
very high probability that the data is significant and a very low probability 
of falsely identifying an artifact as being significant.

         THE MUSCLE PATTERN RECOGNITION REPORT. The MPR Report provides the 
physician with findings to classify the patient as normal or with a graded 
level of muscle dysfunction. It provides four critical statements about the 
muscle groups examined, along with detailed information supportive of these 
conclusions:

-        EVIDENCE OF DYSFUNCTION:      Reports if muscle recruitment is normal 
                                       or abnormal and, if abnormal, the 
                                       location of the abnormality;

-        FREQUENCY AND SEVERITY        The severity of the dysfunction as 
         OF THE DYSFUNCTION:           compared to normal and the frequency it 
                                       occurs during the nine movements;

-        THE PATTERNS OF ABNORMAL      Graphic presentation of the abnormal 
         MUSCLE RECRUITMENT:           muscle patterns including the patterns 
                                       of muscle compensation;

-        THE BIO-MECHANICAL            Describes the reason for the functional 
         EXPLANATION OF THE            adjustments made during movement.
         ABNORMAL MUSCLE
         COMPENSATION:

         Patients may be retested to measure progress and treatment and to
assist the physician in making a decision for discharge. Such retests are not
normal, but are done at the discretion of the physician. When a patient is
retested to ascertain if additional treatment is advisable and the second MPR
evaluation is compared to the baseline test, several other critical questions
are addressed:

         IS THE PATIENT'S MUSCLE RECRUITMENT PATTERN NOW WITHIN THE RANGE OF
           NORMAL?
         IF STILL DYSFUNCTIONAL, HAS THE PATIENT PROGRESSED THROUGH TREATMENT? 
         SHOULD THE INSURANCE COMPANY CONTINUE TO FUND FURTHER (OR DIFFERENT) 
           TREATMENT?

         These questions address the issues of rehabilitation and short and 
long term disability which affect insurance reserves.

         SCIENTIFIC VALIDATION OF THE SYSTEM. In May 1992, an independent study 
of the Company's evaluation methodology was completed by Dr. Norman Carabet. 
The study determined that the overall classification accuracy of normal 
subjects was 90%. In a further cross validation study involving 196 subjects, 
the results confirmed the stability of the data base.

         In June 1992, a second clinical study was completed by Dr. Carabet. 
This study showed a high correlation between the Company's evaluation of 
doctor-diagnosed injured accident and Workers Compensation patients and the 
doctors'

<PAGE>

diagnoses. The results were particularly impressive because the test was able 
to detect injuries after a one to four week time lapse between the doctor's 
diagnosis and the Company's examination. A test/retest study of 40 of these 
patients indicated that 82% of the patients improved over a four week period. 
The retest also validated the accuracy of the Company's classification.

         Dr. Carabet received an option to purchase 15,000 shares of Common 
Stock for $750 for the provision of facilities and services in connection with 
these studies. The Company does not believe this affected his independence for 
purposes of the studies.

         The Company's MPR technology was submitted to leading academicians 
and clinicians. Dr. V. Reggie Edgerton of UCLA and Dr. Steven Wolf of Emory 
University reviewed the technical aspects of the MPR System in detail and 
confirmed the validity of the science behind the MPR technology. They have 
authored three published articles relating to the Company's MPR technology, 
entitled "Evaluating Patterns of EMG Amplitudes for Trunk and Neck Muscles of 
Patients and Controls," International Journal of Rehabilitation and Health, 
Vol. 2, No. 1 (1996), "Theoretical Basis for Patterning EMG Amplitudes to 
Assess Muscle Dysfunction," Medicine and Science in Sports and Exercise, Vol. 
28, No. 6 pp. 744-751 (1996), and most recently, EMG activity in neck and 
back muscles during selected static postures in adult males and females, 
Physiotherapy Theory and Practice, (1997) 13, 179-195.

         Dr. Edgerton and Dr. Wolf are members of the Company's Scientific 
Advisory Board and receive fees for attendance at meetings of that Board.  See 
"Management -- Scientific Advisory Board."  They have also received consulting 
fees on specific projects for the Company.

         LEGAL VALIDATION OF THE SYSTEM. In 1993, the California Workers 
Compensation Appeals Board ("WCAB") issued a decision that the Company had "...
persuaded the Court as to the validity of the lien-claimant's [Myo Diagnostics] 
methodology and mechanism" and that "it found that the procedure (muscle pattern
recognition) is a valid and useful diagnostic medical tool when used in the 
proper case...." This determination was in connection with an action pursuant to
which an insurance carrier had sought refund of payments made to a provider who 
had submitted claims for use of the MPR System (and the WCAB denied the 
insurance company such refund). The Company believes that this opinion helps to 
validate MPR as a valid medical/legal procedure.

         No court or administrative body other than the California Workers' 
Compensation Appeals Board has examined the validity or invalidity of the MPR 
System.

COMPETITION

         The Company believes it has no direct competition and that no other 
system in use today is capable of delivering information similar in content, 
comprehensiveness and reliability to the Company's MPR system. EMG signals have 
been used by others to evaluate muscles at rest and muscles that do not have 
kinesiological relationships; but the Company believes that these methodologies 
are not supported by scientific studies and are not reliable. The Company 
believes that Magnetic Resonance Imaging ("MRI") does not compete with MPR 
because it cannot measure interactive muscle relationships when the muscles are 
under constant tension. MRI's use in relation to back problems is primarily to 
diagnose disk injuries.

         However, there are many companies, both public and private, which are 
active in the field of medical diagnostic imaging. Some of these companies have 
substantially greater financial, technical and human resources, have a well 
established name, and enjoy a strong market presence. There is no assurance 
that one or several such companies are not currently developing, or will not 
start developing, technology that will prove more effective or desirable than 
the Company's technology. Such occurrence could severely affect the Company's 
ability to establish and develop a market presence and to maintain its 
competitive position.

MARKETING AND DISTRIBUTION

         MARKET AWARENESS. The Company's success will depend in substantial 
part upon its ability to establish MPR as a standard medical practice for 
diagnosis of muscle dysfunction. The Company hopes to achieve this awareness 
through an active public relations campaign. Company personnel will contact 
providers in the application of MPR and advise payors of the benefits of its 
utilization. The Company will create a web page on the Internet which will 
encourage easy access to information about the Company and the procedure. The 
Company intends to sponsor additional clinical studies, with the

<PAGE>

expectation that the results will be submitted for publication in peer-reviewed 
scientific journals. The Company will be assisted in these efforts through the 
activities of the members of its Medical and Scientific Advisory Boards. The 
Company will encourage these members to write articles about the MPR technology 
and present the technology at various professional conferences. The Company 
also intends to increase awareness through trade shows, seminars, professional 
conferences and scientific presentations. The Company may utilize direct mail 
to initiate contacts with key decision makers in target markets.

         The extent to which the Company can create this market awareness will 
depend in part upon obtaining additional funding.  See "Risk Factors--Need for 
Additional Funding."

         MARKET TARGETS. The Company's market is comprised principally of two 
major segments: the medical/legal market, which deals primarily with workers 
compensation and personal injury claims, and the physical medicine market. 
Initially, the Company will focus primarily on the medical/legal segment. To 
this end, the Company will continue to target strategic alliances with firms 
servicing insurance companies, HMOs and PPOs, self-insured employers and their 
third-party plan administrators, and risk and case management companies. The 
Company will also target the medical providers which service these markets such 
as hospitals, rehabilitation clinics, industrial clinics, diagnostic centers, 
physicians, physical therapists and MRI imaging centers. This second group is 
also an important component of the Company's strategy because, in addition to 
its capacity to prescribe MPR, it may serve as a delivery vehicle.

         INSURANCE COMPANIES are primary targets because their reimbursement 
policies and practices have a profound impact on the medical diagnostic 
industry; they largely dictate pricing policies, methods of distribution and 
growth strategies. Insurance companies are also playing an increasingly 
important role as prescribers. For example, recent workers compensation reforms 
in California have given insurers more control over treatment regimen. An 
insurer can now dictate the treatment of a patient for up to four months. 
Because MPR can serve to control direct medical costs and indirect costs such 
as lost time, disability claims, and litigation costs, the Company believes 
that its procedure will be well received by insurers who may become a major 
source of referrals, particularly in the workers compensation market.

         HMOs AND PPOs are expected to be of vital importance to the Company 
due to their leadership role in the cost containment drive and the considerable 
market share they enjoy.

         SELF-INSURED EMPLOYERS paid claims representing 34% of the claims paid 
in California for worker's compensation in 1995, according to Table No. 1, 1995 
State Wide Totals, Department of Industrial Relations, Office of Self-Insurance 
Plans, (1996). This could be a significant market for the MPR System.

         HEALTH CARE PLAN ADMINISTRATORS are large organizations which provide 
services to public and private self-insured employers. In their role to manage 
private plans, they can influence care strategies and/or treatment selection 
criteria, and they may have authority to commit funds for evaluation and 
treatment. Most of them have financial incentives to contain costs and limit 
payors' exposure related to ongoing treatment and disability.

         HOSPITALS, INDEPENDENT CLINICS, DIAGNOSTIC CENTERS AND PHYSICIANS will 
be recruited as evaluation centers for MPR evaluations. These providers may 
become the delivery system for corporate clients and insurance companies. They 
may service the medical/legal market and may later become the sites for entry 
into the medical back pain and physical medicine market.

         SERVICE DELIVERY STRATEGIES. The Company intends to market its 
services on a per-use basis, directly ("Direct Services Operations") and 
through distributors. As of the date of this 10-KSB, the Company has not 
performed any MPR evaluations except as part of research and development, 
clinical studies and test marketing.

         Patient data will be processed by, and reports will be prepared at, 
the Company's evaluation center at its executive offices in Los Angeles, 
California. The Company may establish other evaluation centers either as stand 
alone co-ventures with existing diagnostic, physical therapy and rehabilitation 
facilities, or based on lease arrangements with hospitals. The Company believes 
an evaluation center can be operated at very low fixed overhead by subleasing 
space and services at existing clinics.

         DIRECT SERVICES OPERATIONS. In this mode of operation, services will 
be provided either at a Company-owned and operated facility (evaluation 
center), or at the facility of a provider (mobile testing services). Mobile 
testing services will allow patient examinations to take place on the premises 
of medical providers, using the Company's equipment and

<PAGE>

personnel. The Company believes that this approach will overcome providers' 
resistance to invest in equipment and incur additional personnel costs. As of 
the date of this 10-KSB, the Company had no contracts for mobile testing 
services.

         DISTRIBUTORS. The Company intends to establish distributor operations 
with firms which presently provide mobile and fixed-site MRI, CT and ultrasound 
services to hospital clinics and managed care locations. These firms, which 
market to the same referral base of doctors, payors and HMO's which will refer 
MPR, are attracted by the low capital investment and high margin of MPR.

REGULATORY REQUIREMENTS

         The data acquisition device used in the MPR System is subject to 
regulation by the Food and Drug Administration ("FDA"). Under the FDA Act, 
manufacturers of medical devices must comply with certain regulations governing 
the testing, manufacturing, packaging and marketing of medical devices. FDA 
clearance to allow commercial sales and use may be acquired by means of a new 
pre-market approval ("PMA") application to the FDA or by notification under 
Section 510(k) of the FDA Act that the medical device used demonstrates 
"substantial equivalence" to devices on the market prior to 1976 or already 
approved under PMA applications. A substantially equivalent device requires no 
clinical trials such as those needed to establish the efficacy of a drug or 
invasive diagnostic system.

         The Company purchases the data acquisition device from Thought 
Technologies, Ltd., an unaffiliated manufacturer. The Company has been advised 
by the manufacturer that the data acquisition device used in the MPR system may 
be used as a result of notification under Section 510(k) of the FDA Act that it 
is deemed to be a substantially equivalent medical device. The Company believes 
that its use of the device is in compliance with the intended use of the device 
as contemplated by the Thought Technologies, Inc. Section 510(k) notification. 
The Company makes no marketing or use claims for the device inconsistent with 
such intended use. Any person who distributes a medical device in violation of 
the FDA Act is subject to having such distribution enjoined and to civil 
monetary penalties.

         If the Company distributes the device, the Company must notify the FDA 
by filing two short data entry forms, which forms are not subject to review or 
approval by the FDA. The Company has filed these forms.

         In the event that the data acquisition module is not available from a 
third party, the Company could manufacture the module itself (and, in past 
years, did manufacture such device). The Company's authority to manufacture and 
market the data acquisition module would be based upon its notification under 
Section 510(k) of the FDA Act that its device was a substantially equivalent 
medical device, which notification was accepted by the FDA in 1990.

         The Company believes that no other aspect of the MPR System is subject 
to regulation by the FDA.

INTELLECTUAL PROPERTY

         The Company licenses the right to manufacture, market, sell, 
distribute and further develop the MPR System and MPR technology and any 
related or derivative technology throughout the world pursuant to an exclusive 
license with TRG, a partnership among Gerald D. Appel, Daniel J. Levendowski 
and Hershel Toomim. Mr. Appel and Mr. Toomim are directors of the Company, and 
Mr. Appel is the principal shareholder and Chief Executive Officer of the 
Company. The MPR System and related technology and all additions or 
modifications thereto remain the property of TRG, provided, however, that any 
derivative technology developed by the Company for purposes other than the 
evaluation and treatment of muscle dysfunction in the back, arms and legs 
("Derivative Technology") will be the property of the Company.

         The Company pays royalties to TRG for the use of the MPR technology 
and any Derivative Technology as follows: (i) the lesser of $30.00 per use or 
10% of total revenues received by the Company for each of the first 10,000 
times the MPR procedure is ever used, (ii) the greater of $12.50 per use or 5% 
of total revenues received by the Company for each use thereafter, (iii) 5% of 
total revenues received by the Company for each sale, lease, license or other 
transfer of the MPR procedure or related equipment or technology and (iv) 3% of 
total revenues received by the Company for each sale, lease, license or other 
transfer of the Derivative Technology. The Company is not required to make any 
payments on revenues pursuant to (iii) or (iv) to the extent royalties were 
previously paid on such revenues pursuant to (i) or (ii). The procedure has 
been used in clinical tests approximately 350 times to date.

<PAGE>

         The license expires in 2013. As amended, the license is terminable 
by TRG upon 14 days notice (subject to cure during such period) (i) if the 
Company fails to observe the terms of the Agreement, (ii) the sale or other 
transfer of the license by the Company without TRG's consent.

         If the license is terminated for any reason, the Company becomes 
subject to a three-year agreement not to engage in the manufacture, sale or 
distribution of the MPR system or any similar product in any area in which the 
MPR system or procedure has been sold.

         The Company and TRG rely upon the law of trade secrets, patent 
protection and unpatented proprietary know-how to protect the MPR technology. 
Due to the rapid technological change that characterizes the medical device 
industry, the Company believes that reliance upon trade secrets and unpatented 
know-how, and on the continued introduction of improvements and new products, 
are generally as important as patent protection in establishing and maintaining 
a competitive advantage. TRG was granted a United States patent covering the 
MPR system, which expires in 2013.

         The Company presently has no patent protection of the MPR technology 
outside the United States. The Company has the right to file patent 
applications and attempt to obtain patents in other jurisdictions. To date, the 
Company has not done so, in part because of lack of funds. TRG is under no 
obligation to patent the MPR technology in any jurisdiction and the Company's 
determination as to whether or not to seek patent protection will depend upon a 
number of factors, including the likelihood of the issuance of the patent, the 
Company's financial resources and marketing plans.

EMPLOYEES

         As of December 31, 1997, the Company had 13 full time and two part 
time employees, including six involved in research and development and nine 
involved in administration, operations and marketing.


ITEM 2.  DESCRIPTION OF PROPERTIES.

         The Company operates from leased facilities in Culver City, California 
consisting of approximately 9,749 square feet. Research and development, 
manufacturing, and report processing activities are centralized to allow closer 
control over service and response time, and to better protect the technology. 
The current annual base rental for the facilities is $123,600 and the current 
term of the lease expires in September 1999. The Company will also conduct 
research and development activities and clinical studies at universities and 
research hospital sites where the independent primary investigators reside. To 
the extent that these studies are conducted, they will be funded by the Company.


ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not involved in any litigation.


ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITYHOLDERS.

         On December 30, 1997, a majority of the Company's shareholders 
approved by written consent an amendment to the Company's bylaws increasing the 
authorized number of directors from three to a number not less than four nor 
more than seven, and fixing the exact number of directors at five. The 
amendment to the bylaws was approved by shareholders holding 4,183,185 shares, 
or 50.3%, of the Company's outstanding Common Stock, the only securities of the 
Company entitled to vote on the matter. The matter was not submitted for 
approval to the remaining holders of the Company's outstanding Common Stock.


<PAGE>

                                      PART II


ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED MATTERS.

COMMON STOCK AND DIVIDENDS

     There is no public market for the Company's Common Stock.  As of March 30,
1998, there were ninety-three holders of record of the Common Stock.

RECENT SALES OF UNREGISTERED SECURITIES

     In December 1994, the Company entered into a Securities Purchase 
Agreement (the "December Purchase Agreement") with Ontario Municipal 
Employees Retirement Board ("OMERB").  Pursuant to the terms of the December 
Purchase Agreement, the Company sold to OMERB 680,741 shares of Common Stock 
for an aggregate purchase price of $1,000,000, and granted to OMERB currently 
exercisable warrants to purchase 100,000 shares (the "Series A Warrant") and 
83,333 shares (the "Series B Warrant") of Common Stock with a current 
exercise price of $1.50 and $1.75 per share, respectively.  On December 15, 
1997, OMERB elected to exercise the "Series A Warrants" to purchase 100,000 
shares of the Company's Common Stock for $1.50 per share, for a total 
purchase price of $150,000. On May 7, 1998, OMERB elected to exercise the 
"Series B Warrants" to purchase 83,333 shares of the Company's Common Stock 
for $1.75 per share, for a total purchase price of $145,833.

DIVIDENDS

     Myo has never paid any dividends on its Common Stock.  Myo intends to 
retain any earnings for use in its business and does not intend paying any 
cash dividends on its Common Stock in the foreseeable future.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     The following discussion and analysis should be read together with the 
Financial Statements of the Company and notes thereto incorporated elsewhere 
in this Form 10-KSB.

     THIS DISCUSSION SUMMARIZES THE SIGNIFICANT FACTORS AFFECTING THE 
CONSOLIDATED OPERATING RESULTS, FINANCIAL CONDITION AND LIQUIDITY/CASH FLOWS 
OF THE COMPANY FOR THE TWELVE MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1996. 
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED 
IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS ARE FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND 
UNCERTAINTIES AND ARE BASED UPON JUDGMENTS CONCERNING VARIOUS FACTORS THAT 
ARE BEYOND THE COMPANY'S CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM 
THOSE PROJECTED IN THE FORWARD LOOKING STATEMENTS AS A RESULT OF, AMONG OTHER 
FACTORS, THE FACTORS SET FORTH UNDER THE CAPTION "CAUTIONARY STATEMENTS AND 
RISK FACTORS" BELOW.

RESULTS OF OPERATIONS

     TWELVE MONTHS ENDED DECEMBER 31, 1997 AS COMPARED TO TWELVE MONTHS ENDED 
DECEMBER 31, 1996.  The Company incurred net losses of $1,632,185 for the 
twelve months ended December 31, 1997 and $1,235,054 for the twelve months 
ended December 31, 1996.

     Revenues decreased from $13,650 for the twelve months ended December 31, 
1996 to $10,266 for the twelve months ended December 31, 1997.  Revenues 
consisted primarily of fees for performance of MPR evaluations.  Revenues 
were less for the twelve months ended December 31, 1997 as fewer MPR 
evaluations were conducted during those periods.

     The Company's operating expenses increased to $1,634,668 during the 
twelve months ended December 31, 1997 from $1,239,938 during the twelve 
months ended December 31, 1996.  During the twelve months ended December 31, 
1997 compared to the twelve months ended December 31, 1996, technical 
services expenses increased by $35,601, primarily as a 


<PAGE>

result of further product development and refinement. During the twelve 
months ended December 31, 1997 compared to the twelve months ended December 
31, 1996, research and development expenses increased to $419,295 from 
$256,211.  This increase was principally as a result of an increase of 
$53,782 in salary expenses and a $94,252 increase in consulting fees due to 
the development of clinical studies and treatment guidelines and the 
refinement of the MPR System, including software advancements to convert the 
MPR System from DOS to a Windows format.  Sales and marketing expenses for 
the twelve months ended December 31, 1997 increased only slightly, by 
$19,186, compared to the twelve months ended December 31, 1996 due to a 
slight increase in marketing efforts during the latter part of fiscal 1997.  
Sales and marketing expenses for this period increased only slightly as the 
Company focused the majority of its efforts on raising capital and further 
product development.  During the twelve months ended December 31, 1997 
compared to the twelve months ended December 31, 1996, general and 
administrative expenses increased to $880,141 from $703,274 respectively.  
This increase was principally as a result of an increase of $67,226 in rental 
and utility expenses due to an expansion of the Company's leased facilities, 
a $21,644 increase in consulting fees due to the addition of members to the 
Company's Scientific Advisory Board, a $35,114 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 
$65,174 increase in compensation expenses and payroll taxes due to the hiring 
of additional personnel involved, in part, in administration, and a $30,552 
increase in recruiting expenses due principally to the Company's search for a 
Vice President of Sales and Marketing and a CFO. 

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 twelve months ended December 31, 1997, the 
Company funded its operations principally from proceeds obtained from the 
sales of Common Stock and Warrants to purchase Common Stock.  During the 
twelve months ended December 31, 1997, the Company raised net proceeds of 
approximately $1,350,000 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 December 31, 1997, 
mature at various times through June 10, 1998, and may be extended 
thereafter. 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 July 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 July 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.

CAUTIONARY STATEMENTS AND RISK FACTORS

     Several of the matters discussed in this document contain forward 
looking statements that involve risks and uncertainties.  Factors associated 
with the forward looking statements which could cause actual results to 
differ materially from those projected or forecast in the statements that 
appear below.  In addition to other information contained in this document, 
readers should carefully consider the following cautionary statements and 
risks factors:

     RELIANCE ON SINGLE PRODUCT.  The Company has only one product, the MPR 
System.  There is no established market for this product.  Accordingly, if 
for any reason the MPR System cannot be marketed successfully (including the 
many reasons described elsewhere under "Factors That May Affect Future 
Results"), the Company would not survive.

     RELIANCE ON LICENSE.  The Company's entire business is based on an 
exclusive license of the MPR process and related technology from TRG.  See 
"Business -- Intellectual Property."  The license terminates in 2013, but may 
be terminated earlier upon the occurrence of certain events including (i) the 
failure by Licensee to observe or perform any of its covenants, conditions or 
agreements contained within the license.  Any termination of the license 
would have a material 


<PAGE>

adverse effect on the Company and would likely result in the Company not 
surviving.

     DEVELOPMENT STAGE COMPANY WITH LIMITED OPERATING HISTORY.  The Company 
is in the development stage and its operations are subject to all the risks 
inherent in launching a new business enterprise, in developing and marketing 
a new product or service, and in establishing a name and a business 
reputation. The likelihood of success of the Company must be considered in 
light of problems, expenses, difficulties and delays frequently encountered 
in converting prototype designs into viable production designs, and in 
achieving market acceptance with a new type of product or service.  The 
Company has had limited revenues to date, has operated at a loss since 
inception, and, because it is only now entering its commercial stage, it will 
likely sustain operating losses for an indeterminate time period.  There can 
be no assurance that the Company will ever generate material revenues or that 
the Company will ever be profitable.

     NEW AND UNCERTAIN MARKET.  Until now, muscle injuries have always been 
diagnosed and evaluated subjectively by physicians through physical 
examination. Accordingly, there is no established demand for a computer 
assisted procedure to assist in the diagnosis of such injuries, and it is 
difficult to predict if, and when, the procedure will gain wide acceptance by 
prescribers.  A prerequisite to success will be the ability of the Company to 
establish MPR as a standard medical practice for use in the diagnosis of 
muscle dysfunction.  The Company believes it will take a minimum of three to 
five years for such awareness to be achieved, if it can be achieved at all. 
Factors that may affect market acceptance could include resistance to change, 
concerns over the lack of track record of the procedure, and the risk for 
insurance companies to use the results of the procedure to challenge or 
overrule the diagnostic or treatment decisions of a physician.

     NEED FOR ADDITIONAL FUNDING.  To create market awareness of its MPR 
System, the Company will need to devote significant resources to marketing 
and sales. The Company's plan is to develop market awareness through a public 
relations campaign, including attendance at trade shows and professional 
conferences, scientific presentations and clinical studies.  The Company 
believes its success will depend, in part, on the Company's ability to 
conduct additional clinical studies.  In addition, and very critical to this 
process, will be direct contact with payors (primarily insurance companies, 
HMOs and PPOs) and providers (including physicians, rehabilitation 
professionals, hospitals and diagnostic clinics) to create awareness of the 
MPR System and to educate them as to its benefits and clinical applicability. 
To fully implement its marketing plan in 1998, the Company estimates it will 
need an additional $2.0 million to $2.5 million of funding.  The amount of 
funding, if any, the Company receives in 1998 will determine the degree to 
which it can implement its marketing plan.

     The Company may obtain additional funding primarily through private 
placements of debt and/or equity securities with strategic partners or 
others. In addition, the Company could obtain funds through development 
funding from and/or advance sales to strategic partners.  To date, the 
Company has no commitments for these additional funds.  The issuance of 
additional debt or equity securities by the Company could have the effect of 
impairing the rights of existing shareholders.  For example, the Company 
could issue securities senior to the Common Stock in liquidation (such as 
debt securities or preferred stock), with preferential voting rights, or 
which limit or restrict the payment of dividends.  In addition, the Company 
could issue securities at prices which are dilutive to the existing 
shareholders. 

     INTELLECTUAL PROPERTY.  TRG holds a United States patent on the MPR 
technology, and the Company is the exclusive licensee of the rights under the 
patent.  The Company believes that its ability to be successful will be 
contingent on its ability to protect the MPR technology, its future 
developments and its know how.  There can be no assurance, however, that this 
patent will provide substantial protection of the MPR technology or that its 
validity will not be challenged.  Pursuant to its license agreement with TRG, 
the Company has the right to protect the MPR technology.

     The Company presently has no patent protection of the MPR technology 
outside the United States.  The Company has the right to file patent 
applications and attempt to obtain patents in other jurisdictions.  To date, 
the Company has not done so, in part because of lack of funds.  TRG is under 
no obligation to patent the MPR technology in any jurisdiction and the 
Company's determination as to whether or not to seek patent protection will 
depend upon a number of factors, including the likelihood of the issuance of 
the patent, the Company's financial resources and marketing plans.

     COMPETITION.  The Company believes that there is no competitive 
diagnostic technology in use today capable of detecting, locating and 
evaluating soft tissue muscle injuries in a manner similar to the MPR System. 
However, there are many companies, both public and private, which are active 
in the field of medical diagnostic imaging.  Some of these 

<PAGE>

companies have substantially greater financial, technical and human 
resources, have a well established name and enjoy a strong market presence.  
There is no assurance that one or several such companies are not currently 
developing, or will not start developing, technology that will prove more 
effective or desirable than the Company's technology.  Such occurrence could 
severely affect the Company's ability to establish and develop a market 
presence and to maintain its competitive position.

     DEPENDENCE ON THIRD PARTIES.  The success of the Company will depend, in 
part, on insurance companies and managed care organizations paying for or 
reimbursing for MPR evaluations.  To date, over 60 insurance companies have 
reimbursed patients who have been diagnosed using the MPR System.  However, 
this has been a limited sample in that the Company's experience is based 
solely on clinical tests and test marketing.  No assurance can be given as to 
what extent, if at all, insurance companies will continue to reimburse for 
MPR evaluations.

     DEPENDENCE ON KEY MANAGEMENT PERSONNEL.  The Company is substantially 
dependent upon the experience and efforts of Gerald D. Appel, President, 
Chief Executive Officer and founder of the Company.  The loss of the services 
of Mr. Appel could have a material adverse impact on the Company and its 
business unless a suitable replacement for the individual is found promptly, 
but there is no assurance that such replacement can be found.

     PRODUCT LIABILITY.  The Company may be subject to substantial product 
liability costs if claims arise out of problems associated with the use of 
the Company's MPR System.  While the Company maintains insurance against such 
potential liabilities, there can be no assurance that such product liability 
insurance will adequately insure against such risk.

     CONTROL BY MANAGEMENT.  Gerald D. Appel owns beneficially 3,715,019 
shares of the Common Stock (which includes voting rights with respect to 
111,900 shares), representing 44.6% of the outstanding voting power of the 
Company as of December 31, 1997.  As of December 31, 1997, all directors and 
officers of the Company (including Mr. Appel) currently had voting power with 
respect to 50.9% of the outstanding Common Stock.  Accordingly, Mr. Appel, 
individually, and all directors and officers as a group, have the power to 
control the election of directors, and therefore the business and affairs of 
the Company.  See "Principal Shareholders."  This concentration of stock 
ownership may have the effect of delaying or preventing a change in the 
management or control of the Company.

     PREFERRED STOCK.  The Company is authorized to issue up to 10,000,000 
shares of Preferred Stock, issuable in one or more series, the rights, 
preferences, privileges and restrictions of which may be established by the 
Company's Board of Directors without stockholder approval.  As a result, in 
the future, the Company could issue Preferred Stock with voting and 
conversion rights that could adversely affect the voting power and other 
rights of the holders of the Common Stock.  No shares of Preferred Stock are 
presently outstanding and the Company has no present plans to issue shares of 
Preferred Stock.

     ABSENCE OF PUBLIC MARKET.  Presently, there is no public market for any 
securities of the Company.  No assurance can be given that any public market 
will ever develop for any of the Company's securities.  The Company does not 
presently meet the requirements for listing securities on any national 
securities exchange or the NASDAQ Stock Market.  The absence of a public 
market for the Company's securities makes an investment in such securities 
highly illiquid.  In addition, the absence of a public market results in 
there being no true "market price" for the Company's securities which would 
enable investors to determine the value of their investment.

     PENNY STOCK.  Broker-dealer practices in connection with transactions in 
"penny stocks" are regulated by certain penny stock rules adopted by the 
Securities and Exchange Commission.  Penny stocks generally are equity 
securities with a price of less than $5.00 (other than securities registered 
on certain national securities exchanges or the NASDAQ Stock Market provided 
that current price and volume information with respect to transactions in 
such securities is provided by the exchange or NASDAQ).  The penny stock 
rules require a broker-dealer, prior to a transaction in a penny stock not 
otherwise exempt from the rules, to deliver a standardized risk disclosure 
document that provides information about penny stocks and the risks in the 
penny stock market. The broker-dealer also must provide the customer with 
current bid and offer quotations for the penny stock, the compensation of the 
broker-dealer and its salesperson in the transaction, and monthly account 
statements showing the market value of each penny stock held in the 
customer's account.  In addition, the penny stock rules generally require 
that prior to a transaction in a penny stock the broker-dealer must make a 
special written determination that the penny stock is a suitable investment 
for the purchaser and receive the purchaser's written agreement to the 
transaction.

<PAGE>

     The Common Stock would be considered a penny stock when its price is 
less than $5.00 unless at such time the Common Stock is registered on a 
national securities exchange or the NASDAQ Stock Market.  For so long as the 
Common Stock is a penny stock, the penny stock rules may affect adversely the 
ability of purchasers to sell securities in the secondary market.

     FORWARD LOOKING STATEMENTS.  The Company may from time to time make 
"forward-looking statements" within the meaning of Section 27A of the 
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as 
amended.  When used in this discussion, the words, "estimate", and "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. 

<PAGE>

                                   PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

         The following table sets forth information with respect to each
director, executive officer and key personnel of the Company.

      NAME                         AGE    POSITION
      ----                         ---    --------
      Gerald D. Appel              62     President, Chief Executive Officer and
                                          Chairman of the Board of Directors

      Gary D. Weinhouse, Esq.      29     Director of Operations

      Kathleen Day                 41     Director of Research and Development

      Dr. Theodore Goldstein       60     Medical Director

      Dr. Hershel Toomim, Sc.D.    81     Director

      Wayne C. Cockburn            40     Director

      Harvey Wineberg              65     Director

      Donald Christie              43     Director

-----------------

         MR. APPEL has served as President and Chief Executive Officer of the 
Company since 1991, and as a director of the Company since inception.  Mr. 
Appel is also Chairman of the Board of Directors.

         MR. WEINHOUSE, JD, PFP, Director of Operations, is responsible for 
training, technical services, and support operations.  Previous experience 
includes the practice of law and consulting for Arthur Andersen.  He received 
his BA and PFP from UCLA and JD from Loyola Law School. Mr. Weinhouse has 
experience in Financial consulting, strategic planning, corporate, taxation, 
negotiation, litigation and securities matters.

         MS. DAY has served as Director of Research and Development of the 
Company since March 1997.  Ms. Day has been a member of the UCLA 
Neurophysiology laboratory, headed by V. Reggie Edgerton.  As such, she has 
participated in projects funded by the National Institute of Health and NASA. 
Ms. Day has been associated with the development of the MPR technology for the 
past four years.

         DR. GOLDSTEIN became Medical Director of the Company in March 1997.
He has been a practicing orthopedist for more than 30 years.  He is currently 
the Director of the West Coast Spine Institute in Los Angeles, California.  Dr. 
Goldstein lectures extensively on back injury and has co-authored the book, 
"Win The Battle Against Back Pain," (1996). He graduated from the University of 
Illinois Medical School with honors in 1964.

         DR. TOOMIM has served as a Director of the Company since he co-founded 
it with Mr. Appel in 1988.  Dr. Toomim also served as Vice President of 
Research and Development of the Company from 1988 to 1996.

         MR. COCKBURN has served as a Director of the Company since July 1995. 
Mr. Cockburn has been employed by Imutec Corporation, a Canadian 
biopharmaceutical company, since January 1995, and is currently Vice President 
of Corporate Development. From 1994 to 1995 Mr. Cockburn was an investment 
banker with McDermid St. Laurence Chisholm, Ontario, Canada, and for more than 
the three years prior to that, he was a securities broker with Midland Walwyn, 
Ontario, Canada.

         HARVEY WINEBERG has served as a director of the Company since January 
1998.  Mr. Wineberg received his C.P.A. in 1956.  Since 1963, he has been the 
President and Managing Partner of the C.P.A. firm of Wineberg & Lewis of 
Chicago,

<PAGE>

Illinois.  Prior to that he was a founder of Ticketron, Inc.  Wineberg is a 
Director of the Columbus Hospital Foundation and has served on the Board of 
Directors of the Mid-Town Bank of Chicago, Illinois for 20 years. In 1978, Mr. 
Wineberg completed study at the Kent College of Law and was admitted to the 
Illinois Bar in 1979.

         DONALD CHRISTIE has served as a director of the Company since January 
1998. Mr. Christie is a Director of Newcourt Capital's head office investment 
banking group in Toronto, Canada. He is responsible for the syndication of 
structured debt financings underwritten by Newcourt Capital. Prior to joining 
Newcourt, Mr. Christie was a Vice President with First City Capital Markets 
Inc., a merchant bank. Mr. Christie began his career in 1977 at Coopers & 
Lybrand. In 1982 he joined Continental Bank of Canada and gained further 
corporate finance experience with Toronto Dominion Securities Inc.

MEDICAL ADVISORY BOARD

         The Company has a Medical Advisory Board ("MAB") whose members are 
physicians who were contacted by the Company based upon their prominence and 
expertise in medical fields which the Company believed relevant to the 
Company's business, and who accepted invitations to serve upon the MAB. The 
role of the MAB is to advise on the medical considerations involved in 
designing the product, to provide a user/prescriber perspective, and to assist 
with the design of clinical trials. The MAB meets on an ad hoc basis. Members 
of the MAB presently receive $750 for each meeting attended. Certain members of 
the MAB are, and others may become, shareholders of the Company.

         THEODORE GOLDSTEIN, M.D., F.A.C.S., MEDICAL DIRECTOR: Dr. Goldstein 
graduated from the University of Illinois Medical School with honors in 1964.  
He is a practicing orthopedist for more than 30 years.  He is currently the 
Director of the West Coast Spine Institute in Los Angeles, California.  Dr. 
Goldstein lectures extensively on back injury and has co-authored the book, 
"Win The Battle Against Back Pain," (1996).

         GUNNAR ANDERSSON M.D., PH.D.  Dr. Andersson is Chairman of Orthopedic 
Surgery at Rush Presbyterian - St. Luke's Medical Center in Chicago.  He is the 
deputy editor for the journal SPINE.  Dr. Andersson is also a managing partner 
of Midwest Orthopedics and has served as President of the International Society 
for the Study of the Lumbar Spine.

         PHILIP J. FAGAN, JR., M.D. Dr. Fagan obtained his medical degree from 
the Tulane University School of Medicine, New Orleans in 1969. He is the Chief 
Executive Officer and President of Emergency Department Physicians Medical 
Group Inc. Dr. Fagan is the Director of the Emergency Department for Daniel 
Freeman Marina Hospital, Marina Del Rey and the Hollywood Presbyterian Medical 
Center, Los Angeles. He is the Medical Director of E.R. Physicians Medical 
Group, Inc., and Chief Executive Officer and Medical Director of the Burbank 
Urgent Care and Industrial Medicine Clinic. He is a Diplomate of the American 
Board of the Emergency Physicians and the American Board of Family Practice and 
a Fellow of the American Academy of Family Physicians and the American College 
of Emergency Physicians.

         HOWARD FULLMAN, M.D. Dr. Fullman has been trained as a medical 
technologist and as such has consulted for major health care firms regarding 
medical devices and procedures. He presently sits on the Board of Directors of 
several privately held medical services companies. Dr. Fullman has a medical 
practice in Los Angeles California.

         ALAN J. GOLDMAN, M.D. Dr. Goldman was awarded his degree in medicine 
from the University of Michigan Medical School in 1971. Currently he is in 
private practice while serving as an Assistant Clinical Professor of Neurology 
at the University of California at Irvine. For ten years beginning in 1976, he 
was an Assistant Clinical Professor of Neurology at UCLA and was the Chief of 
Staff and Chairman of the Department of Medicine at the Medicine Center at 
Garden Grove, California. Dr. Goldman serves as a neurological reviewer of new 
technologies for a number of national insurance carriers.

         DR. MICHAEL SINEL, M.D.  Dr. Sinel received his medical degree from 
the State University of New York at Downstate Medical Center.  He is board 
certified in physical medicine, rehabilitation and pain management.  He is 
engaged in ongoing clinical research and has published several scientific 
articles.  Dr. Sinel is attending physician at Cedars-Sinai Medical and with 
the UCLA Comprehensive Spine Center.

SCIENTIFIC ADVISORY BOARD

         The Company has a Scientific Advisory Board ("SAB") whose members are 
persons who were contacted by the Company, based upon their prominence and 
expertise in scientific fields related to the Company's business (including the 
scientific aspects of the MPR technology and in the area of statistical 
analysis, including modeling), who accepted invitations

<PAGE>

to serve upon the SAB. This Board meets twice yearly in January and July, and 
members receive $2,500 for each meeting attended.

         GUNNAR ANDERSSON M.D., PH.D.  Dr. Andersson is Chairman of Orthopedic 
Surgery at Rush Presbyterian - St. Luke's Medical Center in Chicago.  He is the 
deputy editor for the journal SPINE.  Dr. Andersson is also a managing partner 
of Midwest Orthopedics and has served as President of the International Society 
for the Study of the Lumbar Spine.

         ANTHONY DELITTO, PH.D. Dr. Delitto is an Associate Professor and 
Chairman of the Department of Physical Therapy in the School of Health and 
Rehabilitation Services at the University of Pittsburgh. Dr. Delitto also 
serves as the Director of Research for the Comprehensive Spine Center at the 
University of Pittsburgh and Vice President for Education and Research at CORE 
network.

         V. REGGIE EDGERTON, PH.D., M.S. Dr. Edgerton received his Bachelor of 
Science in Physical Education and Biology from East Carolina University, his 
Master of Science in Physical Education from the University of Iowa and Ph.D. 
in Exercise Physiology from Michigan State University. Dr. Edgerton is 
currently a professor within the Physiological Sciences Department at UCLA and 
has served as Chairman of UCLA's Department of Kinesiology. Dr. Edgerton has 
published over 200 papers in peer-reviewed journals focusing primarily on 
muscle fiber and its activity. Since 1980, he has been the Project Program 
Director of the NIH Grant regarding neurological sciences. He has also worked 
with NASA and has published extensively regarding muscle adaptation outside 
Earth's atmosphere. Dr. Edgerton has been an officer of and/or associated with 
organizations including the American Physiological Society, the American 
College of Sports Medicine, the American Society of Gravitational Biology, the 
Society for Neurosciences, the Neurotrauma Society, and the American Spinal 
Injury Association.

         JULES ROTHSTEIN, PH.D., PT.  Dr. Rothstein received his B.S. in 
Physical Therapy, physical therapy certification, M.A. in Kinesiology and Ph.D. 
in Physical Therapy from New York University.  Dr. Rothstein is currently Chair 
and Professor of Physical Therapy at the University of Illinois at Chicago.  He 
serves as an editor of the JOURNAL OF PHYSICAL THERAPY, the leading peer review 
journal for physical therapy.  He joined with Dr. Wolf and Serge Roy to author 
the ARehabilitation Specialist's Handbook.

         STEVEN L. WOLF, PH.D. Dr. Wolf received his Bachelor of Arts in 
Biology from Clark University, his Master of Science degrees in Physical 
Therapy from Boston University and Anatomy from Emory University and his Ph.D. 
in Anatomy and Neurophysiology from Emory University. Dr. Wolf is currently a 
professor and Director of Research within the Department of Rehabilitation 
Medicine, Emory University School of Medicine. Dr. Wolf has published over 130 
papers in peer-reviewed journals, authored six books focusing on 
electromyography, biofeedback, physical therapy and rehabilitation and has made 
over 300 presentations, including key note speaker for groups including the 
American Association of Orthopedic Surgeons, the American Physical Therapy 
Association, the International Society for Electrokinesiology and the American 
Neurology Association. Dr. Wolf has received over 20 grants from organizations 
including the National Institute of Aging and the Veterans Administration. Most 
recently, Dr. Wolf has served as Chairman of the Advisory Council of the 
American Physical Therapy Association, Board of Director of the International 
Society for Electrokinesiology, Chairman of the Scientific Abstracts Committee 
of the World Confederation of Physical Therapy, External Reviewer for 
Rehabilitation Graduate Programs for the University of Toronto and 
Massachusetts General Hospital (Harvard University) and on the Advisory 
Committee for the MGH Institute of Health Professions.

         JONATHAN FIELDING MD MPH MBA, Senior Advisor, is a successful health 
care entrepreneur as the founder of a wellness company selling to the employer 
market, former Johnson & Johnson executive, and an expert in public health 
research and practice. He is a Professor at the Schools of Public Health and 
Medicine, UCLA, a consultant to health care companies and government agencies, 
and Acting Health Officer of Los Angeles County. He is advising Myo management 
on strategic planning, alliance development and research and development. He 
received his MD, MPH and MA degrees from Harvard University and MBA in Finance 
from Wharton School of Business.

         BILL FINKLE PHD is an economist with a MS in Mathematics and a Ph.D. 
in Economics from M.I.T.  Dr. Finkle has conducted epidemiological studies, 
including many projects sponsored by the National Institutes of Health, since 
the 1970s.  Dr. Finkle is President of Consolidated Research, Inc., a firm of 
specialists in Epidemiology, Economics, and Statistics conduction research for 
clients in the health care industry with emphasis on firms in the 
Pharmaceutical Industry.  Dr. Finkle brings to Myo Diagnostics, Inc. a 
combination of research and business experience which we expect to be 
exceedingly useful.

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets for certain information regarding the 
compensation of the Company's Chief Executive Officer for the fiscal years 
ended December 31, 1997 and 1996 (no other officer had annual compensation in 
excess of $100,000 during either of those years):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                    Long Term
                                                                   Compensation
                                                                   ------------
                                                                    Number of
                              Fiscal Year    Annual Compensation    Securities
                                 Ended       -------------------    Underlying      All Other
Name and Principal Position   December 31,     Salary    Bonus       Options      Compensation
---------------------------   ------------   -------------------   ------------   ------------
<S>                           <C>            <C>         <C>       <C>            <C>
Gerald Appel, President and       1997       $ 124,000    $ 0           0             $ 0
  Chief Executive Officer         1996       $ 124,000    $ 0           0             $ 0

</TABLE>

STOCK OPTION PLAN

         The Company adopted a Stock Option Plan (the "1997 Plan") in December 
1997. The purpose of the 1997 Plan is to attract, retain and motivate certain 
key employees of the Company by giving them incentives which are linked 
directly to increases in the value of the Common Stock of the Company. Each 
director, officer, employee or consultant of the Company is eligible to be 
considered for the grant of awards under the 1997 Plan. The maximum number of 
shares of Common Stock that may be issued pursuant to awards granted under the 
1997 Plan is 1,000,000, subject to certain adjustments to prevent dilution. Any 
shares of Common Stock subject to an award which for any reason expires or 
terminates unexercised are again available for issuance under the 1997 Plan.

         The 1997 Plan authorizes the Board of Directors or a committee of the 
Board whose members shall serve at the pleasure of the Board (the 
"Administrator") to grant stock options to eligible directors, officers, 
employees and consultants of the Company. Stock Options granted under the 1997 
Plan may, at the discretion of the Administrator, either be "incentive stock 
options" within the meaning of Section 422 of the Internal Revenue Code of 
1986, as amended (the "Code"), or options which do not qualify as "incentive 
stock options." The 1997 Plan currently is administered by the Board of 
Directors of the Company. Subject to the provisions of the 1997 Plan, the Board 
will have full and final authority to select the executives and other employees 
to whom options will be granted thereunder, to grant the options and to 
determine the terms and conditions of the options and the number of shares to 
be issued pursuant thereto.

         As of March 27, 1998, the Board had granted options covering an 
aggregate of 590,000 shares of Common Stock, 280,000 of which were granted 
under the 1997 Plan to certain directors, executive officers and consultants 
of the Company.

OPTION GRANTS IN LAST FISCAL YEAR

         There were no stock options granted to the Chief Executive Officer 
during the year ended December 31, 1997.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS

         The Chief Executive Officer did not hold any stock options of the 
Company during the fiscal year ended December 31, 1997.

DIRECTOR COMPENSATION

         On December 30, 1997, the Board of Directors approved the grant under 
the Company's 1997 Plan of an option to purchase 20,000 shares of Common Stock 
for $1.80 per share to each non-employee director of the Company (Hershel 
Toomim and Wayne Cockburn). These grants were to compensate Messrs. Toomim and 
Cockburn for services rendered in

<PAGE>

1997 as they did not receive any other compensation for such services. Each 
option has a five-year term, but expires earlier if the optionee ceases to be a 
director.

         In addition, the Board of Directors approved the grant under the 1997 
Plan to each of the four non-employee directors as of January 1, 1998 of an 
option to purchase 20,000 shares for services to be rendered in 1998 for $1.80 
per share. The options are identical to the options granted for services 
rendered in 1997, except they are not exercisable unless the optionee continues 
to serve as a director through December 31, 1998.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                            PRINCIPAL SHAREHOLDERS

         The following table sets forth as of March 31, 1998, certain 
information relating to the ownership of the Company's Common Stock by (i) each 
person known by the Company to be the beneficial owner of more than 5% of the 
outstanding shares of the Company's Common Stock, (ii) each of the Company's 
directors, (iii) the Chief Executive Officer and (iv) all of the Company's 
executive officers and directors as a group. Except as may be indicated in the 
footnotes to the table and subject to applicable community property laws, each 
of such persons has the sole voting and investment power with respect to the 
shares owned. Beneficial ownership has been determined in accordance with Rule 
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange 
Act"). Under this Rule, certain shares may be deemed to be beneficially owned 
by more than one person (such as where persons share voting power or investment 
power). In addition, shares are deemed to be beneficially owned by a person if 
the person has the right to acquire the shares (for example, upon exercise of 
an option) within 60 days of the date as of which the information is provided; 
in computing the percentage ownership of any person, the amount of shares 
outstanding is deemed to include the amount of shares beneficially owned by 
such person (and only such person) by reason of these acquisition rights. As a 
result, the percentage of outstanding shares of any person as shown in the 
following table does not necessarily reflect the person's actual voting power 
at any particular date. The address of each individual listed is in care of the 
Company, 3760 South Robertson Boulevard, Culver City, California 90232, unless 
otherwise set forth below such person's name.

<TABLE>
<CAPTION>
                                                                 Number
Name and Address                                                 of Shares    Percent of Class
----------------                                               ------------   ----------------
<S>                                                             <C>           <C>
Gerald D. Appel (1)............................................  3,715,019         44.64%

Ontario Municipal Employees Retirement Board (2)...............  1,401,561         16.24
  One University Avenue, Ste 1000, Tornoto, Ontario M5J 2P1

Altamira Management Ltd. (3)...................................    750,000          8.85
  250 Bloor Street East, Ste 300, Toronto, Ontario M4W 1E6

Bona Vista Asset Management Ltd. (4)...........................    450,000          5.35
  2300 Younge Street, Ste 2900, Toronto, Ontario M4P 1E4

Dr. Hershel Toomim, Sc.D (5)...................................    212,000          2.54

Wayne C. Cockburn (6)..........................................     82,000            *

Harvey Wineberg................................................         --           --

Donald Christie (7) ...........................................     37,500            *

All of the directors and executive officers as a group
     (8  persons) (8)..........................................  4,076,519         48.45%

</TABLE>
----------------------------
*   Less than 1%

(1)  Includes 111,900 shares with respect to which Mr. Appel believes he has
     voting power as a result of a proxy granted by Daniel J. Levendowski

<PAGE>

(2)  Includes 305,555 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(3)  Includes 150,000 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(4)  Includes 90,000 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(5)  Includes 20,000 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(6)  Includes 20,000 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(7)  Includes 20,000 shares of Common Stock reserved for issuance upon exercise
     of warrants which are currently exercisable.

(8)  Includes 111,900 shares with respect to which Mr. Appel believes he has
     voting power as a result of a proxy, and 90,000 shares of Common Stock
     reserved for issuance upon exercise of stock options which are currently
     exercisable.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In December 1994, the Company entered into a Securities Purchase 
Agreement (the "December Purchase Agreement") with Ontario Municipal Employees 
Retirement Board ("OMERB"). Pursuant to the terms of the December Purchase 
Agreement, the Company sold to OMERB 680,741 shares of Common Stock for an 
aggregate purchase price of $1,000,000, and granted to OMERB currently 
exercisable warrants to purchase 100,000 shares (the "Series A Warrant") and 
83,333 shares (the "Series B Warrant") of Common Stock with a current exercise 
price of $1.50 and $1.75 per share, respectively. On December 15, 1997, OMERB 
elected to exercise the "Series A Warrant" to purchase 100,000 shares of the 
Company's Common Stock for $1.50 per share, for a total purchase price of 
$150,000. The Series B Warrant expires on June 23, 1998.

         In August 1995, the Company entered into another Securities Purchase 
Agreement (the "August Purchase Agreement") with OMERB. Pursuant to the terms 
of the August Purchase Agreement, the Company sold to OMERB 111,111 shares of 
Common Stock for an aggregate purchase price of $200,000, and granted to OMERB 
currently exercisable warrants to purchase 222,222 shares of Common Stock (the 
"Series C Warrant") with a current exercise price of $2.00 per share. The 
Series C Warrant expires on December 31, 1998.

         The Company licenses the right to manufacture, market, sell, 
distribute and further develop the MPR System and technology and any related or 
derivative technology throughout the world pursuant to an exclusive twenty-year 
license with TRG, a partnership among Gerald D. Appel, Daniel J. Levendowski 
and Hershel Toomim.  Mr. Appel is the Chairman of the Board, Chief Executive 
Officer, President and a principal shareholder of the Company, and Dr. Toomim 
is a director and a principal shareholder of the Company.  See "Description of 
Business--Intellectual Property."

         In May 1996 the Company issued to Waldorf Investment Advisory 
Services, a corporation controlled by Mr. Cockburn, 100,000 shares of Common 
Stock in satisfaction of obligations aggregating $100,000 of the Company to 
such corporation for investment banking and financial consulting services 
rendered during the prior several years. This corporation presently provides no 
services to the Company.

         On December 30, 1997, the Board approved the extension of the 
expiration date of certain warrants (the "Guaranty Warrants") which had been 
issued by the Company to six individuals who had guaranteed an aggregate of 
$400,000 of loans obtained by the Company from Wells Fargo Bank, of which 
$270,000 is outstanding. The Board approved the extension of the expiration 
date of such Guaranty Warrants to December 31, 1998.

         On December 30, 1997, the Board approved the extension of the 
expiration date of certain warrants issued to Altamira Management, Ltd. And 
Bona Vista Asset Management, Ltd. Such warrants to purchase an aggregate of 
240,000 shares of Common Stock (hereinafter the "Financing Warrants") were 
granted in December 1996 and April 1997 as part of a private placement. The 
expiration date of the Financing Warrants was extended to December 31, 1998.

         On December 30, 1997, the Board approved the grant of an option to 
Jonathan Fielding in connection with services which Mr. Fielding has provided 
and will provide as a consultant to the Company (which services commenced in 
September 1997). Mr. Fielding also serves on the Scientific Advisory Board of 
the Company. The option provides for the purchase of up to 205,000 shares of 
Common Stock for $1.50 per share, of which 75,000 shares were vested as of the 
date of grant and

<PAGE>

65,000 shares will vest on each of September 30, 1998 and 1999. In addition, 
the option provides for the purchase of up to an additional 50,000 shares of 
Common Stock for $2.00 per share if the fair market value of the Common Stock 
exceeds $7.00 per share. This option expires on September 30, 2002.

         On December 30, 1997, the Board of Directors also approved the grant 
to Donald Christie of a five-year option to purchase 20,000 shares for $1.80 
per share. This option was granted in consideration of consulting services 
provided by Mr. Christie to the Company.

         From time to time Gerald D. Appel has loaned funds to the Company. 
These loans were payable on demand with interest at the rate of 10% per annum. 
The largest amount outstanding to Mr. Appel for these loans at any time since 
January 1, 1995 was $90,000. At March 30, 1998, no loans were outstanding.


ITEM 13.  EXHIBITS, LIST AND REPORTS ON FORM 8-K.

         (a)      Exhibits:

                  See attached Exhibit List.

         (b)      Reports on Form 8-K.

                  None.


                SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
                REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
                    EXCHANGE ACT BY NON-REPORTING ISSUERS

         As of the date this Form 10-KSB is filed with the Securities and 
Exchange Commission, the Company has not provided to its security holders any 
annual report with respect to the fiscal year ended December 31, 1997, nor has 
the Company sent to more than 10 of its security holders any proxy statement, 
form of proxy or other proxy soliciting material with respect to any annual or 
other meetng of security holders for the fiscal year ended December 31, 1997.



<PAGE>


                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                                       CONTENTS
                                                              DECEMBER 31, 1997



                                                            Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS            1

FINANCIAL STATEMENTS

  Balance Sheets                                              2

  Statements of Operations                                    3

  Statements of Shareholders' Equity (Deficit)              4 - 5

  Statements of Cash Flows                                  6 - 7

  Notes to Financial Statements                            8 - 20



<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Myo Diagnostics, Inc.

We have audited the accompanying balance sheets of Myo Diagnostics, Inc. (a 
development stage company) (the "Company") as of December 31, 1997 and 1996, 
and the related statements of operations, shareholders' equity (deficit), and 
cash flows for the years then ended.  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Myo Diagnostics, Inc. as of 
December 31, 1997 and 1996, and the results of its operations and cash flows 
for the years then ended in conformity with generally accepted accounting 
principles.

As more fully discussed in Note 1 to the financial statements, the 
accompanying financial statement disclosures related to the cumulative 
amounts for the period from January 5, 1987 (date of inception) to December 
31, 1997 are unaudited because it is impractical to audit the financial 
statement information for the first seven years of the Company's existence 
due to the lack of sufficient accounting records.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern.  During the year ended December 31, 
1997, the Company incurred a net loss of $1,632,185 and is in the development 
stage at December 31, 1997.  Recovery of the Company's assets is dependent 
upon future events, the outcome of which is indeterminable.  In addition, 
successful completion of the Company's development program and its 
transition, ultimately, 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. These factors, among others, as discussed in Note 1 to the 
financial statements, raise substantial doubt about the Company's ability to 
continue as a going concern.  The financial statements do not include any 
adjustments that might result from the outcome of this uncertainty.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 20, 1998

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                                 BALANCE SHEETS
                                                                   DECEMBER 31,
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                       
                                    ASSETS
                                                                          1997           1996
                                                                      ----------     ----------
<S>                                                                   <C>            <C>
CURRENT ASSETS
 Cash                                                                 $  150,508     $  606,144
 Accounts receivable, less allowance for doubtful
  accounts of $32,261 and $25,672                                              -              -
 Prepaid expenses and other current assets                                81,276          5,417                
                                                                      ----------     ----------

   Total current assets                                                  231,784        611,561

FURNITURE AND EQUIPMENT, net                                             166,981        204,112
OTHER ASSETS                                                              33,095         35,412
                                                                      ----------     ----------

    TOTAL ASSETS                                                      $  431,860     $  851,085
                                                                      ----------     ----------
                                                                      ----------     ----------


                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
 Accounts payable and accrued expenses                                $  201,996     $  112,482
 Notes payable to bank                                                   270,000        400,000
 Current portion of obligations under capital leases                      35,438         38,539
                                                                      ----------     ----------
  Total current liabilities                                              507,434        551,021

OBLIGATIONS UNDER CAPITAL LEASES                                          40,213         67,126
                                                                      ----------     ----------
   Total liabilities                                                     547,647        618,147
                                                                      ----------     ----------

COMMITMENTS AND CONTINGENCIES

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
  8,323,037 and 7,746,037 shares issued and outstanding                5,584,139      4,300,679
 Deficit accumulated during the development stage                     (5,699,926)    (4,067,741)
                                                                     -----------    -----------
   Total shareholders' equity (deficit)                                 (115,787)       232,938
                                                                     -----------    -----------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
     (DEFICIT)                                                      $    431,860   $    851,085
                                                                     -----------    -----------
                                                                     -----------    -----------
</TABLE>

     The accompanying notes are an integral part of these financial statements.

               
                                         2

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                       STATEMENTS OF OPERATIONS
                             FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
              FROM JANUARY 5, 1987 (INCEPTION) TO DECEMBER 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                   
                                                                                  Period From
                                                                                   January 1,
                                                           For the Year Ended         1987
                                                               December 31,      (Inception) to
                                                    -------------------------      December 31,
                                                         1997           1996           1997
                                                    -------------  -----------    -------------
                                                                                   (unaudited)

<S>                                                 <C>            <C>            <C>
REVENUES                                            $      10,266  $      13,650  $      99,557
                                                    -------------  -------------  -------------

OPERATING EXPENSES
 Research and development                                 419,295        256,211      1,568,731
 Technical services                                       218,511        182,910        748,697
 Sales and marketing                                      116,721         97,535        414,173
 General and administrative                               880,141        703,282      2,960,354  
                                                    -------------  -------------  -------------
  Total operating expenses                              1,634,668      1,239,938      5,691,955
                                                    -------------  -------------  -------------
LOSS FROM OPERATIONS                                   (1,624,402)    (1,226,288)    (5,592,398)
                                                    -------------  -------------  -------------
OTHER INCOME (EXPENSES)
 Interest expense                                         (47,623)       (63,990)      (206,291)
 Interest income                                           40,640         56,024        103,563
                                                    -------------  -------------  -------------
  Total other income (expense)                             (6,983)        (7,966)      (102,728)
                                                    -------------  -------------  -------------
LOSS BEFORE PROVISION FOR INCOME TAXES                 (1,631,385)    (1,234,254)    (5,695,126)

PROVISION FOR INCOME TAXES                                    800            800          4,800
                                                    -------------  -------------  -------------
NET LOSS                                            $  (1,632,185) $  (1,235,054) $  (5,699,926)
                                                    -------------  -------------  -------------
                                                    -------------  -------------  -------------
BASIC LOSS PER SHARE                                $       (0.20) $       (0.18) $       (1.31)
                                                    -------------  -------------  -------------
                                                    -------------  -------------  -------------
DILUTED LOSS PER SHARE                              $       (0.20) $       (0.18) $       (1.31)
                                                    -------------  -------------  -------------
                                                    -------------  -------------  -------------

WEIGHTED-AVERAGE COMMON SHARES
 OUTSTANDING                                            8,085,895      6,963,810      4,345,200
                                                    -------------  -------------  -------------
                                                    -------------  -------------  -------------

</TABLE>

     The accompanying notes are an integral part of these financial statements.

                                          3
<PAGE>

                                                                               
                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                   STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                             FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
              FROM JANUARY 5, 1987 (INCEPTION) TO DECEMBER 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                        
                                                                                        Deficit
                                                                                      Accumulated
                                                                Common Stock           During the
                                                        ------------------------      Development
                                                          Shares        Amount         Stage          Total
                                                        ---------    -----------     ----------     ----------
<S>                                                     <C>          <C>             <C>            <C>
ISSUED UPON INCORPORATION FOR
 SERVICES                                                 910,000    $     7,685     $       -      $   7,685
ISSUED FOR SERVICES                                       952,250          9,523                        9,523
NET LOSS FROM INCEPTION THROUGH
 DECEMBER 31, 1990                                              -              -       (20,367)       (20,367)
                                                        ---------    -----------     ---------      ----------

BALANCE, DECEMBER 31, 1990                              1,862,250         17,208       (20,367)        (3,159)
ISSUED FOR SERVICES                                       305,950          2,404                        2,404
ISSUED FOR CASH                                            11,230         25,000                       25,000
NET LOSS                                                                              (243,621)      (243,621)
                                                        ---------    -----------     ---------      ----------

BALANCE, DECEMBER 31, 1991                              2,179,430         44,612      (263,988)      (219,376)
NET LOSS                                                                              (258,180)      (258,180)
                                                        ---------    -----------     ---------      ---------

BALANCE, DECEMBER 31, 1992                              2,179,430         44,612      (522,168)      (477,556)
ISSUED FOR CASH                                            11,230          1,123                        1,123
NET LOSS                                                                              (421,341)      (421,341)
                                                        ---------    -----------     ---------      ---------

BALANCE, DECEMBER 31, 1993                              2,190,660         45,735      (943,509)      (897,774)
STOCK SPLIT                                             2,190,660
ISSUED FOR EXCHANGE OF $174,090
 OF DEBT                                                  144,619        174,090                      174,090
ISSUED FOR SERVICES                                        60,000            600                          600
ISSUED FOR NET ASSETS OF LIMITED
 PARTNERSHIP, net of related
 expenses of $1,350                                       755,330        372,885                      372,885
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $6,600                        245,400        300,150                      300,150
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $164,036                      680,741        835,964                      835,964
NET LOSS                                                                              (821,898)      (821,898)
                                                        ---------    -----------     ---------      ---------

BALANCE, DECEMBER 31, 1994                              6,267,410      1,729,424    (1,765,407)       (35,983)
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                          4

<PAGE>


                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                       STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
                             FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
              FROM JANUARY 5, 1987 (INCEPTION) TO DECEMBER 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                        
                                                                                        Deficit
                                                                                      Accumulated
                                                               Common Stock            During the
                                                       -------------------------      Development
                                                           Shares        Amount          Stage          Total
                                                       ----------     ----------    --------------   -------------
<S>                                                    <C>            <C>           <C>              <C>
ISSUED FOR CASH                                            15,000         $  750     $                $        750
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $67,609                       125,000        157,391                           157,391
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $64,243                       111,111        135,757                           135,757
ISSUED FOR CASH                                             2,738          5,000                             5,000
NET LOSS                                                                              (1,067,280)       (1,067,280)
                                                       ------------   ----------   -------------    --------------

BALANCE, DECEMBER 31, 1995                              6,521,259      2,028,322      (2,832,687)         (804,365)
ISSUED FOR CASH                                            27,778         50,000                            50,000
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $14,243                       500,000        985,757                           985,757
ISSUED FOR THE FORGIVENESS OF
 ACCRUED EXPENSES                                         100,000        100,000                           100,000
ISSUED FOR DEBT                                            25,000         50,000                            50,000
ISSUED AS CONSIDERATION FOR LATE
 PAYMENT OF NOTES PAYABLE                                  42,000         75,600                            75,600
STOCK OPTIONS EXERCISED                                    50,000          5,000                             5,000
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $218,000                      480,000        982,000                           982,000
ISSUANCE OF STOCK OPTIONS                                                 24,000                            24,000
NET LOSS                                                                              (1,235,054)       (1,235,054)
                                                       ----------     ----------      ----------         ----------

BALANCE, DECEMBER 31, 1996                              7,746,037      4,300,679      (4,067,741)          232,938
ISSUED FOR CASH IN PRIVATE PLACEMENT,
 net of related expenses of $66,540                       480,000      1,133,460                         1,133,460
WARRANTS EXERCISED                                        100,000        150,000                           150,000
CANCELLED SHARES                                           (3,000)             -                                 -
NET LOSS                                                                              (1,632,185)       (1,632,185)
                                                       ----------   ------------    ------------       -----------

BALANCE, DECEMBER 31, 1997                              8,323,037   $  5,584,139    $ (5,699,926)      $  (115,787)
                                                       ----------   ------------    ------------       -----------
                                                       ----------   ------------    ------------       -----------


</TABLE>


     The accompanying notes are an integral part of these financial statements.

                                   5
<PAGE>
                                                                               
                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                       STATEMENTS OF CASH FLOWS
                             FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
              FROM JANUARY 5, 1987 (INCEPTION) TO DECEMBER 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                      
                                                                                       Period From
                                                                                       December 1,
                                                             For the Year Ended            1987
                                                                December 31,          (Inception) to
                                                   --------------------------------    December 31,
                                                         1997             1996             1997
                                                   -------------     --------------    --------------
<S>                                                <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                         $  (1,632,185)    $  (1,235,054)    $  (5,699,926)
  Adjustments to reconcile net loss to
    net cash used in operating activities
      Depreciation and amortization                       53,858            34,677           305,753
      Bad debt expense                                     6,589            19,450            26,394
      Compensation expense resulting from
        the issuance of stock options                          -            24,000            24,000
      Common stock issued in consideration
        for the extension of the repayment
        terms for notes payable to related
        parties                                                -            75,600            75,600
      Common stock issued for services
        rendered                                               -                 -            12,527
  (Increase) decrease in
    Accounts receivable                                   (6,589)           12,018            (6,944)
    Prepaid expenses and other assets                    (75,859)              242           (81,276)
    Other assets                                           2,317           (10,596)          (33,095)
  Increase (decrease) in
    Accounts payable and accrued expenses                 89,514          (130,086)          301,996
    Accrued interest payable                                   -           (45,520)                -
                                                   -------------     --------------    --------------

Net cash used in operating activities                 (1,562,355)       (1,255,269)       (5,074,971)
                                                   -------------     --------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of furniture and equipment                     (8,735)          (61,777)         (371,930)
                                                   -------------     --------------    --------------

Net cash used in investing activities                     (8,735)          (61,777)         (371,930)
                                                   -------------     --------------    --------------
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                      6

<PAGE>
                                                                               
                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                           STATEMENTS OF CASH FLOWS (CONTINUED)
                             FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
              FROM JANUARY 5, 1987 (INCEPTION) TO DECEMBER 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                      
                                                                                       Period From
                                                                                       December 1,
                                                             For the Year Ended            1987
                                                                December 31,          (Inception) to
                                                   --------------------------------    December 31,
                                                         1997             1996             1997
                                                   -------------     --------------    --------------
<S>                                                <C>               <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Net borrowings (payments) under bank lines
    of credit                                       $  (130,000)      $          -      $   270,000
  Borrowings on notes payable to related
    parties                                                   -             95,500          633,590
  Repayments on notes payable to related
    parties                                                   -           (191,500)        (409,500)
  Repayment on obligations under capital lease          (38,006)            (6,597)         (44,603)
  Net proceeds from issuance of common stock          1,283,460          2,022,757        5,147,922
                                                   -------------     --------------    --------------

Net cash provided by financing activities             1,115,454          1,920,160        5,597,409
                                                   -------------     --------------    --------------

Net increase (decrease) in cash                        (455,636)           603,114          150,508

CASH, BEGINNING OF PERIOD                               606,144              3,030                -
                                                   -------------     --------------    --------------

CASH, END OF PERIOD                                  $  150,508       $    606,144      $   150,508
                                                   -------------     --------------    --------------
                                                   -------------     --------------    --------------


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

  INTEREST PAID                                      $   47,623       $    109,510      $   250,431
                                                   -------------     --------------    --------------
                                                   -------------     --------------    --------------

  INCOME TAXES PAID                                  $      800       $        800      $     4,800
                                                   -------------     --------------    --------------
                                                   -------------     --------------    --------------
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During 1997, $7,992 of furniture and equipment was acquired under capital
leases.

During 1996, $112,262 of furniture and equipment was acquired under capital
leases.

During 1996, 100,000 shares of common stock were issued for the forgiveness of
accrued expenses, and 25,000 shares were issued for the conversion of debt.


The accompanying notes are an integral part of these financial statements.


                                      7

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION AND LINE OF BUSINESS
     Myo Diagnostics, Inc. (a development stage company) (the "Company"), a
     California corporation, was incorporated and commenced operations on
     January 5, 1987 as AREX, Inc.  On June 15, 1988, the name was changed to
     Devion Group and then to Myo Diagnostics, Inc. on September 15, 1989. The
     principal activity of the Company is the research and development of
     Muscle Pattern Recognition.  Muscle Pattern Recognition provides an
     objective evaluation of soft tissue muscle injuries.
     
     BASIS OF PRESENTATION
     The accompanying financial statements have been prepared in conformity
     with generally accepted accounting principles which contemplate
     continuation of the Company as a going concern. However, during the year
     ended December 31, 1997, the Company incurred a net loss of $1,632,185 and
     is in the development stage at December 31, 1997.  These factors raise
     substantial doubt about the Company's ability to continue as a going
     concern.  Recovery of the Company's assets is dependent upon future
     events, the outcome of which is indeterminable.  In addition, 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 sheets is dependent upon the Company's ability to meet its
     financing requirements and the success of its plans to sell its products.
     
     In addition to the capital raised in 1997 through private equity
     offerings, the Company is negotiating with several investors about raising
     additional capital through private placement offerings.  Management of the
     Company believes that its current cash on hand plus the additional capital
     that is expected to be raised in the future will be sufficient to cover
     its working capital needs until the Company's sales volume reaches a
     sufficient level to cover operating expenses.
     
     BUSINESS COMBINATION
     The Company held a 97.2% sole general partner interest in Myo Diagnostics,
     Ltd. (the "Partnership"), a California limited partnership, that began
     operations on April 18, 1991. The Partnership researched and developed the
     hardware and related software to perform Muscle Pattern Recognition.
     Effective on December 19, 1994, the Partnership's assets and liabilities
     were transferred to the Company at its book value, and neither the
     Partnership or Corporation recognized a gain or loss.  The 2.8% limited
     partners exchanged their interests in the Partnership, totaling $547,885,
     for 755,330 shares of common stock and $175,000 in notes payable.  The
     business combination was recorded in a manner similar to a "pooling-of-
     interest" method of accounting.  Under this method, assets and liabilities
     of the Partnership were recorded at historical cost.


                                       8

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     
     DEVELOPMENT STAGE COMPANY
     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.  The cumulative amounts presented for the statements of
     operations and cash flows from the Company's inception are unaudited
     because it is impractical to audit the financial statement information for
     the first seven years of the Company's existence due to the lack of
     sufficient accounting records.
     
     Net revenues to date have primarily been from the sale of in-house
     evaluations of patients.
     
     REVENUE
     Revenue is reported at the estimated net realizable amounts from patients,
     third parties, and others for services rendered.
     
     FURNITURE AND EQUIPMENT
     Furniture and equipment are stated at cost.  Depreciation and amortization
     are computed using the straight-line method over the estimated useful
     lives of the related assets as follows:

     <TABLE>
         <S>                                         <C>
         Furniture and equipment                     5 to 7 years
         Computer hardware and software                   5 years
     </TABLE>

     Leasehold improvements are amortized over three years, which is the
     remaining term of the lease.
     
     Expenditures for maintenance and repairs are charged to operations as
     incurred while renewals and betterments are capitalized.  When furniture
     and equipment are retired or disposed of, the related costs and
     accumulated depreciation are eliminated from the accounts, and any gain or
     loss on such disposition is reflected in operations.
     
     PATENTS
     Patents, which are included in other assets in the accompanying balance
     sheets, consist of legal fees incurred in securing a patent for the
     Company's product.  These costs are amortized over a period of seventeen
     years using the straight-line method.
     

                                       9

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     
     CAPITAL LEASES
     The Company is the lessee of certain equipment under capital leases
     expiring in various years through 2001.  The assets and liabilities under
     capital leases are recorded at the lower of the present value of the
     minimum lease payments or the fair value of the asset. The assets are
     amortized over the lower of their related lease terms or their estimated
     productive lives. Amortization of assets under capital leases is included
     in depreciation expense.
     
     RESEARCH AND DEVELOPMENT COSTS
     Research and development costs are charged to expense as incurred.  These
     costs consist primarily of salaries and consulting fees.
     
     INCOME TAXES
     Prior to January 1, 1993, the Company had elected to be treated as an "S"
     corporation for both federal and California state income tax purposes.
     The shareholders of the "S" corporation were taxed on their proportionate
     share of taxable income (loss).  Effective January 1, 1993, the Company
     terminated such election and became taxable as a "C" corporation.  The
     Company will not realize any future tax benefits of net operating losses
     incurred prior to January 1, 1993.
     
     The Company accounts for income taxes under the liability method required
     by SFAS No. 109 which requires the recognition of deferred tax liabilities
     and assets for the expected future tax consequences of events that have
     been included in the financial statements or tax returns.  Under this
     method, deferred income taxes are recognized for the tax consequences in
     future years of differences between the tax bases of assets and
     liabilities and their financial reporting amounts at each period end based
     on enacted tax laws and statutory tax rates applicable to the periods in
     which the differences are expected to affect taxable income. Valuation
     allowances are established, when necessary, to reduce deferred tax assets
     to the amount expected to be realized. The provision for income taxes
     represents the tax payable for the period and the change during the period
     in deferred tax assets and liabilities.
     
     NET LOSS PER SHARE
     For the year ended December 31, 1997, the Company adopted SFAS No. 128,
     "Earnings per Share."  Basic earnings per share is computed by dividing
     income available to common shareholders by the weighted-average number of
     common shares available. Diluted earnings per share is computed similar to
     basic earnings per share except that the denominator is increased to
     include the number of additional common shares that would have been
     outstanding if the potential common shares had been issued and if the
     additional common shares were dilutive.  Earnings per share for 1996 has
     been restated using the methodologies of SFAS No. 128.


                                       10

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     
     ESTIMATES
     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     the disclosures of contingent assets and liabilities at the date of the
     financial statements, as well as the reported amounts of revenues and
     expenses during the reporting period.  Actual results could differ from
     those estimates.
     
     FAIR VALUE OF FINANCIAL INSTRUMENTS
     The Company measures its financial assets and liabilities in accordance
     with generally accepted accounting principles.  For certain of the
     Company's financial instruments, including cash, accounts receivable, and
     accounts payable and accrued expenses, the carrying amounts approximate
     fair value due to their short maturities.  The amounts shown for notes
     payable also approximate fair value because current interest rates offered
     to the Company for notes payable of similar maturities are substantially
     the same.
     
     
NOTE 2 - CASH
     
     The Company maintains cash deposits at a bank located in southern
     California. Deposits at the bank are insured by the Federal Deposit
     Insurance Corporation up to $100,000.  As of December 31, 1997 and 1996,
     the uninsured portion of balances held at the bank aggregated to $162,578
     and $557,556, respectively.  The Company has not experienced any losses in
     such accounts and believes it is not exposed to any significant risk on
     cash.
     
     
NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
     
     Prepaid expenses and other current assets at December 31 consisted of the
     following:
     
     <TABLE>
     <CAPTION>
                                                          1997        1996
                                                       ---------    --------
          <S>                                          <C>          <C>
          Miscellaneous receivables                    $  67,683    $    198
          Prepaid expenses                                11,493       5,219
          Employee advances                                2,100           -
                                                       ---------    --------

            TOTAL                                      $  81,276     $ 5,417
                                                       ---------    --------
                                                       ---------    --------
     </TABLE>


                                       11


<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 4 - FURNITURE AND EQUIPMENT
     
     Furniture and equipment at December 31 consisted of the following:
     <TABLE>
     <CAPTION>
                                                           1997           1996
                                                       ----------     ----------
          <S>                                          <C>            <C>
          Furniture and equipment                      $  117,567     $  108,832
          Computer hardware and software                  139,496        139,496
          Equipment held under capital leases             120,254        112,262
          Leasehold improvements                            2,605          2,605
                                                       ----------     ----------

                                                          379,922        363,195
          Less accumulated depreciation and 
               amortization                               212,941        159,083
                                                       ----------     ----------

               TOTAL                                   $  166,981     $  204,112
                                                       ----------     ----------
                                                       ----------     ----------
       </TABLE>


NOTE 5 - OTHER ASSETS

     Other assets at December 31 consisted of the following:
     <TABLE>
     <CAPTION>
                                                           1997           1996
                                                       ----------     ----------
          <S>                                          <C>            <C>
          Patents, net of accumulated amortization
              of $4,732 and $3,544                     $  17,623      $  18,811
          Security deposits                               15,472         16,601
                                                       ----------     ----------

              TOTAL                                    $  33,095      $  35,412
                                                       ----------     ----------
                                                       ----------     ----------
     </TABLE>

     Amortization expense on patent costs charged to operations during the
     years ended December 31, 1997 and 1996 was $1,188 and $1,279,
     respectively.
     
     
NOTE 6 - NOTES PAYABLE TO BANK
     
     As of December 31, 1997, the Company has four revolving lines of credit
     with a bank that provide for borrowings up to a total of $270,000.  At
     December 31, 1996, the Company had six revolving lines of credit with a
     bank that provided for borrowings up to a total of $400,000.  Borrowings
     under these lines of credit bear interest at the bank's prime rate (8.5%
     as of December 31, 1997) plus 0.75% to 1.5%, payable monthly. These
     revolving lines of credit will mature beginning May 10, 1998 through July
     10, 1998 and are collateralized by standby letters of credit issued by
     certain third parties. The Company has $270,000 outstanding on these
     revolving lines of credit as of December 31, 1997.


                                       12

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 6 - NOTES PAYABLE TO BANK (CONTINUED)
     
     As collateral for the bank revolving lines of credit, certain third
     parties (the "Guarantors") have guaranteed the notes payable to bank by
     obtaining standby letters of credit totaling $270,000.  The Company
     granted stock options to the Guarantors for the Company's common stock as
     consideration for the guarantees.  These options entitle the Guarantors to
     purchase an aggregate of 400,000 shares of common stock for $1.13 per
     share if certain conditions are met. The options became exercisable at
     various dates during 1995.  On December 30, 1997, the Board of Directors
     approved the extension of the expiration date of these options to December
     31, 1998.  None of these options had been exercised as of December 31,
     1997 (see note 13).
     
     
NOTE 7 - OBLIGATIONS UNDER CAPITAL LEASES
     
     Minimum future lease payments under capital leases as of December 31, 1997
     for each of the next five years are:
     <TABLE>
     <CAPTION>

          Years Ending
          December 31,
          ------------
          <S>                                              <C>
             1998                                          $  42,383
             1999                                             17,889
             2000                                             17,889
             2001                                             11,926
             2002 and thereafter                                   -
                                                           ---------

             Total minimum lease payments                     90,087
             Less amount representing interest                14,436
                                                           ---------

             Present value of minimum lease payment           75,651
             Less current portion of obligations 
                  under capital leases                        35,438
                                                           ---------

                  TOTAL                                    $  40,213
                                                           ---------
                                                           ---------
     </TABLE>

     Interest rates on capitalized leases vary from 7% to 21.79% and are
     imputed based on the lower of the Company's incremental borrowing rate at
     the inception of each lease or the lessor's implicit rate of return.
     
     
                                       13

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 8 - RELATED PARTY TRANSACTIONS
     
     LICENSING AGREEMENT
     The Company is obligated under a licensing agreement to a partnership
     whose partners are officers and shareholders of the Company (see Note 10).
     
     
NOTE 9 - INCOME TAXES
     
     The Company has not recorded a current or deferred provision for federal
     income taxes for the year ended December 31, 1997 due to losses incurred
     during that period. The provision for income taxes represents the minimum
     required for state franchise taxes. To reconcile from the federal
     statutory tax rate of 34% to the Company's effective tax rate of
     approximately 1%, the deferred tax asset valuation reserve is deducted. At
     December 31, 1997, the Company had net operating loss carryforwards of
     approximately $5,100,000 and $2,300,000 for federal and state income tax
     purposes, respectively, expiring in varying amounts through the year 2012,
     which are available to offset future federal and state taxable income. The
     Company also had a research tax credit of approximately $133,000 at
     December 31, 1997 that expires in 2012. The ability of the Company to
     utilize the federal and state net operating loss carryforwards may be
     subject to annual limitations under certain provisions of the Internal
     Revenue Code.
     
     Deferred tax assets (liabilities) for the years ended December 31, 1997
     and 1996 consisted of the following:
     <TABLE>
     <CAPTION>

                                                            1997         1996
                                                         ----------   ----------
          <S>                                            <C>          <C>
          Deferred tax assets
            Net operating loss carryforwards             $1,987,000   $1,400,000
            Research tax credit                             133,000            -
                                                         ----------   ----------

              Total deferred tax assets                   2,120,000    1,400,000

          Valuation allowance for deferred tax assets     2,042,000    1,400,000
                                                         ----------   ----------

                                                             78,000            -
          Deferred tax liabilities
            Deferred state taxes                             78,000            -
                                                         ----------   ----------

              NET DEFERRED TAX ASSETS                    $        -   $        -
                                                         ----------   ----------
                                                         ----------   ----------
     </TABLE>

     The valuation allowance increased by $642,000 during the year ended
     December 31, 1997.


                                       14

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 10 - COMMITMENTS AND CONTINGENCIES
     
     OPERATING LEASES
     The Company leases its facility and certain equipment under non-cancelable
     operating leases expiring at various dates through 2001.  Certain leases
     contain renewal provisions.  Future minimum lease payments under these
     leases are as follows:
     <TABLE>
     <CAPTION>

          Years Ending
          December 31,
          ------------
          <S>                    <C>
             1998                $  131,835
             1999                   103,680
             2000                    10,980
             2001                     1,830
                                 ----------
                  TOTAL          $  248,325
                                 ----------
                                 ----------
     </TABLE>

     Rent expense under operating leases was $127,044 and $70,316 for the years
     ended December 31, 1997 and 1996, respectively.
     
     LICENSE AGREEMENT
     The Company has a licensing agreement with Toomin Research Group ("TRG"),
     a partnership, whose partners are officers and shareholders of the Company
     (see Note 8). Under the terms of the licensing agreement, the Company is
     entitled to exclusive rights to the product under development by the
     Company, beginning on August 1, 1993 and ending on August 1, 2013, unless
     terminated earlier.  As consideration for the exclusive rights to the
     product, the Company pays TRG a royalty.
     
     The royalty is payable quarterly under the following terms:
     
     -  The Company shall pay a royalty on the lesser of 10% of total revenue or
        $30 per patient examined and reported upon up to the first 10,000 
        examinations.  After the first 10,000 examinations, the Company shall 
        pay a royalty of 5% of total revenue but not less than $12.50 per 
        patient examined and reported upon.
     
     -  The Company shall pay a royalty of 5% of total revenue for each sale,
        lease, rental, license, transfer, or assignment of the product under 
        license to the extent that no royalty was paid on such total revenue.
     
     -  The Company shall pay a royalty of 3% of total revenue for any 
        derivative technology developed by the Company to the extent that no 
        royalty was paid on such total revenue.
     

                                       15

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
     
     LICENSE AGREEMENT (Continued)
     Under the terms of this agreement, included in accounts payable and
     accrued expenses are royalties payable of $0 and $1,350 as of December 31,
     1997 and 1996, respectively.
     
     LITIGATION
     In or about July 1997, a former employee of the Company threatened to file
     a claim against the Company and the president of the Company for
     employment related matters including, without limitation, harassment and
     retaliation and termination of employment in violation of public policy.
     Pursuant to mediation in or about December 1997, the parties resolved the
     claim via a settlement and release agreement requiring the Company to pay
     $97,250, net of insurance reimbursements of $43,500, which was charged to
     general and administrative expense on the statement of operations during
     the year ended December 31, 1997.  The Company has unpaid settlement
     payments of $40,750 accrued in accounts payable as of December 31, 1997.
     
     
NOTE 11 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
     
     Accounts payable and accrued expenses at December 31 consisted of the
     following:
     <TABLE>
     <CAPTION>

                                                     1997         1996
                                                 ----------    ---------
          <S>                                    <C>           <C>
          Accounts payable                       $  135,227    $  95,011
          Accrued salaries                           30,000            -
          Accrued vacation payable                   32,269       12,971
          Customer deposits                           4,500        4,500
                                                 ----------    ---------

             TOTAL                               $  201,996    $ 112,482
                                                 ----------    ---------
                                                 ----------    ---------
     </TABLE>

NOTE 12 - SHAREHOLDERS' EQUITY
     
     On May 4, 1994, the Board of Directors authorized a two-for-one stock
     split of the Company's common stock for shareholders as of that date.  As
     a result of the split, 2,190,660 shares were issued.  All references in
     the accompanying financial statements to the per share amount have been
     restated to reflect the stock split.
     
     In 1996, the Company settled its obligation to pay $100,000 in connection
     with services rendered in 1995 for 100,000 shares of common stock and
     issued 25,000 shares of its common stock for debt totaling $50,000.


                                       16

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 12 - SHAREHOLDERS' EQUITY (CONTINUED)
     
     In 1996, the Company also issued to note holders 42,000 shares of common
     stock valued at $75,600 as consideration for the note holders extending
     the repayment terms pursuant to the terms of the note agreement.
     
     In 1997, the Company sold an additional 480,000 shares of common stock for
     gross proceeds of $1,200,000.  In connection with this issuance of common
     stock, investors also received 120,000 warrants to purchase common stock
     at $3.00 per share through April 16, 1998.
     
     
NOTE 13 - STOCK OPTIONS AND WARRANTS
     
     WARRANTS
     As of December 31, 1997, the Company had outstanding warrants to purchase
     a total of 631,955 shares of common stock that were issued in conjunction
     with private placement offerings and other transactions as follows:

     <TABLE>
     <CAPTION>

                                       Number of
                                         Shares     Warrant Price     Expiration
             Description               Allocated      Per Share           Date
          ---------------------        ---------    -------------     ----------
          <S>                          <C>          <C>               <C>
          Series B warrants              83,333        $  1.75          06/23/98
          Agency agreement               43,200        $  2.50          12/05/98
          Financing warrants            120,000        $  3.00          12/31/98
          Financing warrants            120,000        $  3.00          12/31/98
          Series C warrants             222,222        $  2.00          12/31/98
          Agency agreement               43,200        $  2.50          04/16/99
                                       ---------

             WARRANTS OUTSTANDING,
             DECEMBER 31, 1997          631,955
                                       ---------
                                       ---------

             WARRANTS EXERCISABLE,
             DECEMBER 31, 1997          631,955
                                       ---------
                                       ---------
     </TABLE>

     During the year ended December 31, 1997, the Company issued 163,200
     warrants with an average warrant price per share of $2.87.  Additionally,
     100,000 shares were exercised at $1.50 per share during the year ended
     December 31, 1997.


                                       17

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS AND WARRANTS (CONTINUED)
     
     STOCK OPTION PLAN
     The Company adopted the 1997 Stock Option Plan (the "1997 Plan") in
     December 1997.  The purpose of the 1997 Plan is to attract, retain, and
     motivate certain key employees of the Company by giving them incentives
     which are linked directly to increases in the value of the common stock of
     the Company.  Each director, officer, employee, or consultant of the
     Company is eligible to be considered for the grant of awards under the
     1997 Plan.  The maximum number of shares of common stock that may be
     issued pursuant to awards granted under the 1997 Plan is 1,000,000,
     subject to certain adjustments to prevent dilution.  Any shares of common
     stock subject to an award, which for any reason expires or terminates
     unexercised, are again available for issuance under the 1997 Plan.
     
     STOCK OPTION AGREEMENTS
     Options and warrants were granted, which under certain agreements, allows
     employees, consultants, and Guarantors to purchase shares of common stock,
     which were issued outside the 1997 Plan.  These options expire upon
     certain events.
     
     The following summarizes the Company's stock option transactions under the
     stock option agreements:

     <TABLE>
     <CAPTION>
                                            1997         Weighted-      Other          Weighted-
                                           Stock         Average        Stock          Average
                                           Option        Exercise    Options and       Exercise
                                            Plan          Price        Warrants          Price
                                          --------      ---------    -----------      ----------
          <S>                             <C>            <C>          <C>              <C>
          Options outstanding,
          January 1, 1994                        -       $      -        50,000         $  0.10
            Granted                              -       $      -       400,000         $  1.13
                                          --------                    ---------

          Options outstanding,
          December 31, 1994                      -       $      -       450,000         $  1.02
            Granted                              -       $      -        20,000         $  0.44
                                          --------                    ---------

          Options outstanding,
          December 31, 1995                      -       $      -       470,000         $  0.99
            Granted                              -       $      -        12,000         $  0.50
            Exercised                            -       $      -       (50,000)        $  0.10
                                          --------                    ---------

          Options outstanding,
          December 31, 1996                      -       $      -       432,000         $  1.08
            Granted                        280,000       $   1.98       310,000         $  1.44
                                          --------                    ---------
     </TABLE>
(continued)


                                       18

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS AND WARRANTS (CONTINUED)

     STOCK OPTION AGREEMENTS (Continued)
     <TABLE>
     <CAPTION>
                                            1997         Weighted-      Other          Weighted-
                                           Stock         Average        Stock          Average
                                           Option        Exercise    Options and       Exercise
                                            Plan          Price        Warrants          Price
                                          --------      ---------    -----------      ----------
          <S>                             <C>            <C>          <C>              <C>
          OPTIONS OUTSTANDING,
          DECEMBER 31, 1997                280,000       $   1.98       742,000         $  1.23
                                          --------                    ---------
                                          --------                    ---------

          OPTIONS EXERCISABLE,
          DECEMBER 31, 1997                      -                      432,000
                                          --------                    ---------
                                          --------                    ---------
     </TABLE>

     The remaining weighted-average contractual life of options outstanding at
     December 31, 1997 and 1996 was 2.50 and 3.25 years, respectively.
     
     The Company has adopted only the disclosure provisions of SFAS No. 123,
     "Accounting for Stock-Based Compensation."  It applies Accounting
     Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued
     to Employees," and related interpretations in accounting for its plans and
     does not recognize compensation expense for its stock-based compensation
     plans.  If the Company had elected to recognize compensation expense based
     upon the fair value at the grant date for awards under these plans
     consistent with the methodology prescribed by SFAS 123, the Company's net
     loss and loss per share would be reduced to the pro forma amounts
     indicated below:
     <TABLE>
     <CAPTION>
                                                  For the Years Ended
                                                       December 31,
                                           --------------------------------
                                                  1997             1996
                                           --------------    --------------
          <S>                              <C>               <C>
          Net loss
            As reported                    $  (1,632,185)    $  (1,235,054)
            Pro forma                      $  (1,653,085)    $  (1,298,834)
          Loss per share
            As reported                    $       (0.20)    $       (0.18)
            Pro forma                      $       (0.20)    $       (0.18)
     </TABLE>

     
                                       19

<PAGE>

                                                          MYO DIAGNOSTICS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                  NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 1997
-------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS AND WARRANTS (CONTINUED)
     
     STOCK OPTION AGREEMENTS (Continued)
     These pro forma amounts may not be representative of future disclosures
     because they do not take into effect pro forma compensation expense
     related to grants made before 1995.  The fair value of these options was
     estimated at the date of grant using the Black-Scholes option-pricing
     model with the following weighted-average assumptions for the years ended
     December 31, 1997 and 1996, respectively: dividend yields of 0% and 0%;
     expected volatility of 35% and 54%; risk-free interest rates of 5.7% and
     7%; and expected life of 2.50 and 2.75 years.  The weighted-average per
     share fair value of options granted during the years ended December 31,
     1997 and 1996 was $0.54 and $2.09, respectively, and the weighted-average
     exercise price of options granted during the years ended December 31, 1997
     and 1996 was $1.60 and $0.50, respectively.
     
     
NOTE 14 - SUBSEQUENT EVENTS
     
     Subsequent to the balance sheet date, the Company had the following
     significant financial transactions:
     
     -  The Company received $50,000 from short-term promissory notes, including
        $25,000 from an officer of the Company.

     -  The Company received $145,833 when 83,333 shares of stock warrants were
        exercised for $1.75 per share and 83,333 shares of Series D warrants at
        $1.75 per share were issued.

     -  The Company received $125,000 of additional paid-in capital from an
        investor.
     

                                       20

<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.

                                      /s/ Gerald Appel
                                -----------------------------------------
                                By:   Gerald D. Appel
                                Its:  President, Chief Executive Officer and
                                      Chairman of the Board (Principal Financial
                                      and Accounting Officer)


                              POWER OF ATTORNEY

         Each person whose signature appears below constitutes and appoints 
Gerald D. Appel and Gary Weinhouse, and each of them, as his true and lawful 
attorneys-in-fact and agents with full power of substitution and 
resubstitution, for him and his name, place and stead, in any and all 
capacities, to sign any or all amendments to this Annual Report on Form 10-KSB 
and to file the same, with all exhibits thereto, and other documents in 
connection therewith, with the Securities and Exchange Commission, granting 
unto said attorneys-in-fact and agents, and each of them, full power and 
authority to do and perform each and every act and thing requisite and 
necessary to be done in and about the foregoing, as fully to all intents and 
purposes as he might or could do in person, hereby ratifying and confirming all 
that said attorneys-in-fact and agents, or either of them, or their 
substitutes, may lawfully do or cause to be done by virtue hereof.

                                  SIGNATURES

         In accordance with the Exchange Act, this report has been signed below 
by the following persons on behalf of the Registrant and in the capacities and 
on the dates indicated.

<TABLE>
<CAPTION>
         Signature                                    Title                              Date
         ---------                                    -----                              ----
<S>                                  <C>                                             <C>
   /s/ Gerald D. Appel               President, Chief Executive Officer and          March 30, 1998
---------------------------------    Chairman of the Board of Directors
       Gerald D. Appel               (Principal Financial and Accounting Officer)

   /s/ Hershel Toomim                Director                                        March 30, 1998
---------------------------------
       Dr. Hershel Toomim, Sc.D.

   /s/ Wayne Cockburn                Director                                        March 30, 1998
---------------------------------
       Wayne C. Cockburn

   /s/ Harvey Wineberg               Director                                        March 30, 1998
---------------------------------
       Harvey Wineberg

   /s/ Donald Christie               Director                                        March 30, 1998
---------------------------------
       Donald Christie

</TABLE>

<PAGE>

                                  EXHIBIT INDEX

 Exhibit
 Number                                   Exhibit Description
 -------                                  -------------------
   3.1      Amended and Restated Articles of Incorporation of Registrant. 
            Incorporated by reference to Exhibit 3.1 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
   3.2      Bylaws of Registrant.+
   4.1      Specimen Stock Certificate of Common Stock of Registrant. 
            Incorporated by reference to Exhibit 4.1 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.1      Form of  Registrant's  Indemnification  Agreement. Incorporated by 
            reference to Exhibit 10.1 to Form SB-2 filed on January 6, 1997, and
            the amendments thereto.
  10.2      Licensing Agreement, dated October 31, 1993, by and between 
            Registrant and Toomim Research Group, as amended.  Incorporated by 
            reference to Exhibit 10.2 to Form SB-2 filed on January 6, 1997, and
            the amendments thereto.
  10.3      Securities Purchase Agreement, dated December 23, 1994, by and 
            among Registrant, OMERB, Gerald Appel and Hershel Toomim.  
            Incorporated by reference to Exhibit 10.3 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.4      Securities Purchase Agreement, dated August 18, 1995, by and among 
            Registrant, OMERB and Gerald Appel. Incorporated by reference to 
            Exhibit 10.4 to Form SB-2 filed on January 6, 1997, and the 
            amendments thereto.
  10.5      Series A Warrant of OMERB, dated December 23, 1994, as amended. 
            Incorporated by reference to Exhibit 10.5 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.6      Series B Warrant of OMERB, dated December 23, 1994, as amended. 
            Incorporated by reference to Exhibit 10.6 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.7      Series C Warrant of OMERB, dated August 18, 1995, as amended.
            Incorporated by reference to Exhibit 10.7 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.8      Waiver Letter, dated December 8, 1995, from OMERB to Registrant. 
            Incorporated by reference to Exhibit 10.8 to Form SB-2 filed on 
            January 6, 1997, and the amendments thereto.
  10.9      Letter Agreement, dated July 8, 1996, by and between Registrant 
            and OMERB. Incorporated by reference to Exhibit 10.9 to Form SB-2 
            filed on January 6, 1997, and the amendments thereto.
  10.10     Letter Agreement, dated December 13, 1994, by and among Registrant 
            and Donald Patterson, Ronald Goldsack, James Connacher, Chris 
            Skillen, Richard Reid and James Black, and Form of Stock Option 
            Agreement, dated December 19, 1994, by and among Registrant and such
            persons, as amended.  Incorporated by reference to Exhibit 10.10 to 
            Form SB-2 filed on January 6, 1997, and the amendments thereto.
  10.11     Lease Agreement, dated August 1, 1996, by and between Registrant and
            The Urcis Family Trust. Incorporated by reference to Exhibit 10.11 
            to Form SB-2 filed on January 6, 1997, and the amendments thereto.
  10.12     Non-transferable Warrant of Griffiths McBurney & Partners, dated 
            December 6, 1996. Incorporated by reference to Exhibit 10.12 to 
            Form SB-2 filed on January 6, 1997, and the amendments thereto.
  10.13     Form of Warrant, dated December 6, 1996, by and among Registrant 
            and persons purchasing units in private placement of December 6, 
            1996. Incorporated by reference to Exhibit 10.13 to Form SB-2 filed 
            on January 6, 1997, and the amendments thereto. Form of Amendment to
            Warrant.
  10.14     Stock Option Agreement, dated March 23, 1995, by and between 
            Registrant and Steve Nelson. Incorporated by reference to Exhibit 
            10.14 to Form SB-2 filed on January 6, 1997, and the amendments 
            thereto.
  10.15     Business PrimeLine Promissory Notes, between Registrant and Wells 
            Fargo Bank, National Association, as amended.  Incorporated by 
            reference to Exhibit 10.15 to Form SB-2 filed on January 6, 1997, 
            and the amendments thereto.
  10.16     Master Equipment Lease Agreement, dated March 1, 1996 by and between
            Registrant and Medical Consulting Imaging Co., and Distribution 
            Agreement, dated March 1, 1996, by and among Registrant, Medical 
            Consulting Imaging Co. and MCIC/HNI.  Incorporated by reference to 
            Exhibit 10.16 to Form SB-2 filed on January 6, 1997, and the 
            amendments thereto. Termination of Distribution Agreement, dated 
            February 23, 1998.
  10.17     Renewal Notices with respect to Business PrimeLine Promissory Notes 
            between Registrant and 

<PAGE>

 Exhibit
 Number                                   Exhibit Description
 -------                                  -------------------
            Wells Fargo Bank, National Association.  Incorporated by reference 
            to Exhibit 10.1 to Form 10-QSB for the quarter ended June 30, 1997.
  10.18     Form of Warrant, dated April 16, 1997, by and among Registrant and 
            persons purchasing units in private placement of April 16, 1997. 
            Form of Amendment to Warrant.+
  10.19     1997 Stock Option Plan.+
  10.20     Amendment Number Three, Waiver and Consent between Toomim 
            Research Group and Myo Diagnostics, Inc.
  24.1      Power of Attorney (included on signature page).
  27.1      Financial Data Schedule.

--------------------
+ Previously Filed