UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
(Mark One)
 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended: September 30, 2012
 
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission File No. 000-53298

  MYOS CORPORATION
   (Exact name of registrant as specified in its charter)
 
Nevada
90-0772394
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
 
45 Horsehill Road, Suite 106 Cedar Knolls, NJ. 07927
07927
(Address of Principal Executive Offices)
(Zip Code)
 
(973) 509-0444
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 the past 90 days.  Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o   Large accelerated filer
o    Accelerated filer
o   Non-accelerated filer
x   Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x
 
As of November 15, 2012, the registrant had 110,033,282 shares of common stock outstanding.
 


 
 
 
 
 
 
INDEX
 
Page
     
PART 1-FINANCIAL INFORMATION
 
2
         
 
Item 1.
Financial Statements
   
         
   
Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011
 
2
         
   
Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2012 and 2011 and the period from inception (April 11, 2007) to September 30, 2012
 
 
3
         
   
Consolidated Statement of Changes in Stockholders’ Equity (unaudited) for the period from inception (April 11, 2007) to September 30, 2012
 
4
         
   
Consolidated Statements of Cash Flows (unaudited) for the three and nine months ended September 30, 2012 and 2011 and the period from inception (April 11, 2007) to September 30, 2012
 
 
5 to 6
         
   
Notes to Consolidated Financial Statements
 
7 to 20
         
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
21 to 24
         
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
25
         
 
Item 4.
Control and Procedures
 
25
     
PART II-OTHER INFORMATION
   
         
 
Item 1.
Legal Proceedings
 
26
         
 
Item 1A.
Risk Factors
 
26
         
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
26
         
 
Item 3.
Defaults Upon Senior Securities
 
26
         
 
Item 4.
Mine Safety Disclosures
 
26
         
 
Item 5.
Other Information
 
26
         
 
Item 6.
Exhibits
 
27
     
SIGNATURES
 
28
 
 
1

 
 
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEETS
 
   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
ASSETS
           
Current assets
           
Cash
  $ 4,993,883     $ 61,266  
Accounts receivable
    215,599       17,557  
Inventories
    184,746       526,284  
Deferred financing cost
    -       49,451  
Prepaid expenses and other current assets
    52,790       140,336  
Total current assets
    5,447,018       794,894  
                 
Fixed assets, net of accumulated depreciation
    4,021       2,748  
Intellectual property
    2,000,000       2,000,000  
Security deposits
    -       10,000  
                 
Total assets
  $ 7,451,039     $ 2,807,642  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 199,824     $ 411,665  
Note payable for acquisition of intellectual property
    -       350,000  
Convertible notes payable
    -       400,000  
Accrued interest
    -       18,400  
Accounts payable and accrued expenses -  related parties
    -       132,934  
Loans payable
    -       60,000  
Notes payable - directors
    -       80,000  
Note payable
    -       7,500  
Total current liabilities
    199,824       1,460,499  
                 
Derivatives liability
    120,300       872,659  
                 
Total liabilities
    320,124       2,333,158  
                 
Stockholders' equity
               
Preferred stock, $.001 par value; 25,000,000 shares authorized;
               
   no shares issued and outstanding
    -       -  
Common stock, $.001 par value, 300,000,000 shares authorized;
               
   109,387,221 shares issued and outstanding at September 30, 2012
               
   66,813,997 shares issued and outstanding at December 31, 2011
    109,387       66,814  
Additional paid-in capital
    15,649,060       6,138,916  
Deficit accumulated during development stage
    (8,627,532 )     (5,731,246 )
                 
Total stockholders' equity
    7,130,915       474,484  
                 
Total liabilities and stockholders' equity
  $ 7,451,039     $ 2,807,642  
 
The accompanying notes are an integral part of the financial statements
 
 
2

 
 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
 
                           
April 11, 2007
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
   
(Inception Date)
to September 30,
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
Revenue
  $ 365,934     $ 55,841     $ 734,363     $ 55,841     $ 833,838  
Cost of sales
    354,590       26,010       655,997       26,010       705,929  
   Gross profit
    11,344       29,831       78,366       29,831       127,909  
                                         
General and administrative expenses
    1,058,968       1,405,161       2,091,975       3,729,548       6,883,954  
   Loss from operations
    (1,047,624 )     (1,375,330 )     (2,013,609 )     (3,699,717 )     (6,756,045 )
                                         
   OTHER INCOME (EXPENSE)
                                       
   Interest income
    5,561       -       5,561       -       5,561  
   Interest expense
    (106 )     (5,603 )     (802,614 )     (13,539 )     (827,815 )
Value of warrants in excess of the amount of additional paid-in capital received in the related private placement of restricted common stock
    -       (32,055 )     -       (2,405,303 )     (2,405,303 )
   Change in fair value of warrants
    229,591       3,270,821       (16,173 )     2,328,486       4,085,570  
   Impairment charge - intellectual property
    -       -       -       -       (2,662,000 )
   Amortization of deferred financing costs
    -       -       (69,451 )     -       (80,000 )
   Gain on forgiveness of debt
    -       -       -       -       12,500  
      235,046       3,233,163       (882,677 )     (90,356 )     (1,871,487 )
                                         
Net income (loss)
  $ (812,578 )   $ 1,857,833     $ (2,896,286 )   $ (3,790,073 )   $ (8,627,532 )
                                         
Weighted average number of common shares outstanding, basic and diluted
    106,387,551       65,476,225       86,017,222       60,126,634          
                                         
Basic and diluted net loss per share attributable to common stockholders
  $ (0.01 )   $ 0.03     $ (0.03 )   $ (0.06 )        
 
The accompanying notes are an integral part of the financial statements
 
 
3

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period from April 11, 2007 (date of inception) to September 30, 2012
 
   
Common Stock
                   
   
 
 
 
Shares
   
 
 
Amount $.001 par
   
 
 
Additional paid-in capital
   
Deficit accumulated during development stage
   
 
Total stockholders' equity (deficit)
 
Balance at April 11, 2007
    -     $ -     $ -     $ -     $ -  
Common stock issued for cash at $0.0002 per share
    28,000,000       28,000       (23,000 )             5,000  
Common stock issued for cash at $0.004 per share
    21,000,000       21,000       54,000               75,000  
Net loss
                            (60,185 )     (60,185 )
Balance at December 31, 2007
    49,000,000       49,000       31,000       (60,185 )     19,815  
Net loss
                            (17,928 )     (17,928 )
Balance at December 31, 2008
    49,000,000       49,000       31,000       (78,113 )     1,887  
Net loss
                            (39,308 )     (39,308 )
Balance at December 31, 2009
    49,000,000       49,000       31,000       (117,421 )     (37,421 )
Net loss
                            (16,525 )     (16,525 )
Balance at December 31, 2010
    49,000,000       49,000       31,000       (133,946 )     (53,946 )
Issuance of 7,024,000 shares of Common Stock to Peak Wellness, Inc. as part of the purchase price of intellectual property
    7,024,000       7,024       3,504,976               3,512,000  
Fair value of shares transferred from existing stockholder to the CEO in connection with employment agreement
                    1,500,000               1,500,000  
Proceeds from private placements of restricted common stock
    8,334,997       8,335       2,472,165               2,480,500  
Offering costs
                    (45,000 )             (45,000 )
Fair value of warrants issued to private placement investors
                    (2,432,365 )             (2,432,365 )
Shares issued for services
    2,055,000       2,055       688,138               690,193  
Vesting of options and shares issued to directors and advisory board members
                     360,402                360,402  
Shares issued in connection with debt
    400,000       400       59,600               60,000  
Net loss
                            (5,597,300 )      (5,597,300 ) 
Balance at December 31, 2011
    66,813,997       66,814       6,138,916       (5,731,246 )     474,484  
Proceeds from private placements of restricted common stock 
    34,430,000       34,430       6,855,560               6,889,990  
Offering costs
                    (178,800 )             (178,800 )
Shares issued to COO
    750,000       750       (750 )             -  
Shares issued to employee
    10,000       10       2,690               2,700  
Shares issued for services
    2,777,334       2,777       411,080               413,857  
Shares issued in debt conversions
    2,885,550       2,885       1,343,254               1,346,139  
Shares issued in exchange for warrants
    1,603,673       1,604       750,579               752,183  
                Shares issued for exercise of warrants
    116,667       117       11,550               11,667  
Vesting of options and shares issued to officers, directors and advisory board members
                    314,981               314,981  
Net loss
                            (2,896,286 )      (2,896,286 ) 
Balance at September 30, 2012
    109,387,221     $ 109,387     $ 15,649,060     $ (8,627,532 )    $ 7,130,915  
 
The accompanying notes are an integral part of the financial statements
 
 
4

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW
 
         
 
April 11, 2007
(Inception Date)
 to September 30,
 
       
       
   
Nine Months Ended September 30,
 
   
2012
   
2011
    2012  
Cash Flows from Operating Activities
                 
                   
    Net loss
  $ (2,896,286 )   $ (3,790,073 )   $ (8,627,532 )
    Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation
    771       204       1,047  
Amortization
    49,451       -       49,451  
Stock based compensation
    707,143       2,422,442       3,257,738  
Loss on debt conversion
    760,566       -       760,566  
Impairment charges
    -       -       2,662,000  
Accounts payable paid in stock
    7,500       -       7,500  
Interest expense paid in stock
    43,762       -       43,762  
Related party loans and compensation paid in stock
    71,706       -       71,706  
Derivatives charges and credits
    (176 )     165,501       (1,559,882 )
                         
    Changes in operating assets and liabilities
                       
(Increase) decrease in accounts receivable
    (198,042 )     (12,649 )     (215,599 )
(Increase) decrease in inventories
    341,538       (562,141 )     (184,746 )
(Increase) decrease in prepaid expenses and other assets
    87,546       (252,213 )     (9,741 )
Increase (decrease) in accounts payable and accrued expenses
    (363,175 )     106,677       66,890  
Net cash used in operating activities
    (1,387,696 )     (1,922,252 )     (3,676,840 )
                         
Cash Flows from Investing Activities
                       
                         
Acquisition of intellectual property
    -       (450,000 )     (450,000 )
Acquisition of fixed assets
    (2,044 )     (3,025 )     (5,068 )
Decrease in security deposits
    10,000       -       10,000  
Net cash used in investing activities
    7,956       (453,025 )     (445,068 )
                         
Cash Flows from Financing Activities
                       
                         
(Repayments to) advances from related parties
    -       60,000       140,434  
Note payable - stockholder, net of repayments
    -       -       -  
Repayment of notes payable
    (350,000 )     -       (742,500 )
Insurance financing note
    -       (35,528 )     -  
Offering costs
    (178,800 )     -       (223,800 )
Proceeds from issuance of stock to initial stockholders
    -       -       80,000  
Proceeds from (repayments of) issuance of notes
    (40,500 )     -       499,500  
Proceeds from exercise of warrants
    11,667       -       11,667  
Proceeds from private placement of common stock
    6,869,990       2,395,500       9,350,490  
Net cash provided by financing activities
    6,312,357       2,419,972       9,115,791  
                         
Net increase in cash
    4,932,617       44,695       4,993,883  
Cash at beginning of the period
    61,266       -       -  
Cash at end of the period
  $ 4,993,883     $ 44,695     $ 4,993,883  
 
The accompanying notes are an integral part of the financial statements
 
 
5

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)
 
   
Nine Months Ended September 30,
   
April 11, 2007
(Inception Date)
 to September 30,
 
   
2012
   
2011
   
2012
 
Supplemental Disclosure of Cash Flow Information:
                 
                   
Cash paid for franchise taxes
  $ 2,578     $ 800     $ 3,378  
                         
Cash paid for interest
  $ 15,892     $ -     $ 15,892  
                         
Supplemental Disclosure of Non-Cash Transactions:
                       
                         
Offering costs paid by stockholder
  $ -     $ 25,000     $ 25,000  
                         
Conversion of stockholder loan and interest into common stock
  $ 543,261     $ 2,744     $ 546,005  
                         
Conversion of related party accounts payable and loan into common stock
  $ 110,295     $ -     $ 110,295  
                         
Conversion of stockholder loan into capital - no shares issued
  $ -     $ 22,256     $ 22,256  
                         
Conversion of 8,018,330 warrants into 1,603,673 common shares
  $ 752,183     $ -     $ 752,183  
                         
Note payable - insurance financing
  $ -     $ 42,500     $ 42,500  
                         
Note issued for accounts payable
  $ -     $ -     $ 7,500  
                         
Acquisition of intellectual property through note payable
  $ -     $ -     $ 700,000  
                         
Financing costs through issuance of restricted common stock
  $ 20,000     $ -     $ 80,000  
 
The accompanying notes are an integral part of the financial statements
 
 
6

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
NOTE 1 – NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization & Business Activities
MYOS Corporation, formerly known as Atlas Therapeutics Corporation (the "Company") was incorporated under the laws of the State of Nevada on April 11, 2007.  On February 25, 2011, the Company entered into an agreement to purchase certain intellectual property from Peak Wellness, Inc. (the "Acquisition").  Since the Acquisition, the Company’s business focus has been on the discovery, development and commercialization of therapeutic products, nutritional supplements and other technologies aimed at improving the health and performance of muscle tissue (see Note 8 – Intellectual Property Purchase Agreement).  The Company has only realized revenues of $833,838 through September 30, 2012 without fully implementing its plan of operations and therefore is still considered a development stage company.

Depreciation
The cost of property and equipment will be depreciated over the estimated useful life of 3 to 7 years. Depreciation is computed using the straight-line method when assets are placed in service.

Basis of Accounting and Principles of Consolidation
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiary, Atlas Acquisition Corp. (formed on February 23, 2011 to facilitate the purchase of the intellectual property discussed in Note 8).  All material intercompany balances and transactions have been eliminated.  These interim financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.

Cash & Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be a cash equivalent.

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 disclosures of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues & expenses during the reporting period.

Fair Value of Indefinite-Lived Intangible Assets
The Company's policy is to evaluate indefinite-lived intangible assets for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  An intangible asset with an indefinite life (the intellectual property) is evaluated for possible impairment by comparing the fair value of the asset with its carrying value.  Fair value is estimated as the discounted value of future revenues arising from a trademark using a royalty rate that an independent party would pay for use of that trademark.  An impairment charge is recorded if the trademark's carrying value exceeds its estimated fair value.  An impairment charge is recorded if the carrying value of the goodwill exceeds its implied fair value.  See Note 8 for information related to impairment charges recorded in 2011 for indefinite-lived intellectual property intangible assets.

Revenue Recognition
The Company recognizes revenue when products are shipped and collection is reasonably assured.
 
 
7

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011

Inventories
Inventory consist of the following:
 
   
September 30,
   
December 31,
 
   
2012
   
2011
 
Raw materials
  $ 184,746     $ -  
Work in process
    -       -  
Finished goods
    -       526,284  
Total Inventory
  $ 184,746     $ 526,284  

Inventories are stated at the lower of cost or market, with cost determined on a first in, first-out basis.

Advertising
The Company charges the costs of advertising to expense as incurred. The Company incurred $260,427 of advertising and promotional costs for the nine months ended September 30, 2012 and $525,592 since its inception.  Pursuant to its distribution agreement with Maximum Human Performance (“MHP”), entered into on May 16, 2012, the Company has a co-operative advertising arrangement whereby the Company pays MHP a fee for each unit sold (See Note 10).

Fixed Assets
Fixed assets consists solely of office equipment and are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of 3 to 7 years.  Repair and maintenance costs are expensed as incurred.  Depreciation expense for the nine months ended September 30, 2012 was $771.

Concentrations of Risk and Significant Distributor and Customer
The Company's places its bank accounts with high credit quality financial institutions and at times, balances may exceed federally insured limits.  The Company has never experienced any losses related to these balances.  From December 31, 2010 through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the FDIC, regardless of the balance of the account and the ownership capacity of the funds, and interest bearing accounts are insured up to $250,000.  The Company currently has two noninterest-bearing checking accounts and one interest-bearing savings account.  The balance of the interest bearing account at September 30, 2012 is $4,819,098.  Accordingly, $4,569,098 of the balance is not covered by FDIC deposit insurance.  Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and non-interest bearing cash balances may again exceed federally insured limits.

Effective May 2012, MHP became the exclusive distributor and sole customer of the Company's MYO-T12 product and formula.

Equity Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC 718-10 Compensation - Stock Compensation and ASC 505-50 Equity Based Payments to Non-Employees.  ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  For stock options and restricted stock that do not vest immediately but which contain only a service vesting feature, we recognize compensation cost on the unvested shares and options on a straight-line basis over the remaining vesting period, net of any projected forfeitures

The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based compensation.  Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables.  These variables include, but are not limited to our expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.  Equity-based compensation expense for awards to employees and non-employees recognized was $707,143 and $2,422,442 for the nine month periods ended September 30, 2012 and 2011, respectively.

Comprehensive Loss
The Company had no items of other comprehensive income or expense for the years ended September 30, 2012 and 2011, respectively.  Accordingly, the Company's comprehensive loss and net loss are the same for all periods presented.
 
 
8

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
Segment Information
ASC 280, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for reporting information regarding operating segments in annual consolidated financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders.  It also establishes standards for related disclosures about products and services and geographic areas.  Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance.  The Company operates in a single segment, internally reports the results of operations for that segment and the information disclosed herein materially represents all of the financial information related to the single operating segment.

Fair Value Measurement
The Company adopted the provisions of ASC 820 “Fair Value Measurements and Disclosures” on January 1, 2009, the beginning of our 2009 fiscal year.  ASC 820 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.  Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy.  As originally issued, it was effective for fiscal years beginning after November 15, 2007, with early adoption permitted.  It does not require any new fair value measurements.  It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.

On February 12, 2008, the FASB allowed deferral of the effective date of ASC 820 for one year, as it relates to nonfinancial assets and liabilities.  Accordingly, our adoption related only to financial assets and liabilities.  Upon adoption ASC 820, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements as of December 31, 2010 and 2009, respectively.

Valuation techniques considered under ASC 820 techniques are based on observable and unobservable inputs.  The ASC classifies these inputs into the following hierarchy:

Level 1 inputs are observable inputs and use quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date and are deemed to be most reliable measure of fair value.

Level 2 inputs are observable inputs and reflect assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Level 2 inputs includes 1) quoted prices for similar assets or liabilities in active markets, 2) quoted prices for identical or similar assets or liabilities in markets that are not active, 3) observable inputs such as interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, credits risks, default rates, and 4) market-corroborated inputs.

Level 3 inputs are unobservable inputs and reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

In October 2008, the FASB clarified the application of ASC 820 in determining the fair value of a financial asset when the market for that financial asset is not active.

The Company adopted the provisions of ASC 825, “The Fair Value Option for Financial Assets and Liabilities”, on January 1, 2009, the beginning of our 2009 fiscal year. ASC 825 permits us to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (the “Fair Value Option”).  Election of the Fair Value Option is made on an instrument-by-instrument basis and is irrevocable.  At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected are reported as a cumulative adjustment to beginning retained earnings.

Our intangible assets are valued and tested for impairment using Level 3 inputs (see Note 8).  In the process of the valuation of the intangible asset, we determined that the carrying cost exceeded the fair value at December 31, 2011 and we recorded an impairment charge and adjusted the balance of the asset to reflect the fair value.
 
 
9

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011

Basic and Diluted Income (Loss) per Share
In accordance with ASC 260, Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding.  Diluted loss per common share is computed in a manner similar to basic loss per common 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.  At September 30, 2012 and 2011, the Company’s stock equivalents were anti-dilutive and excluded in the diluted loss per share computation.  The aggregate number of potentially dilutive warrants and options outstanding at September 30, 2012 were 1,650,000.

Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with ASC 740, Income Taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized.

The Company follows ASC 740 rules governing uncertain tax positions, which provides guidance for recognition and measurement.  This prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements.  It also provides accounting guidance on recognition, classification and disclosure of these uncertain tax positions.  The Company has no uncertain income tax positions.

Interest costs and penalties related to income taxes are classified as interest expense and selling, general and administrative costs, respectively, in the Company's financial statements.  For the nine months ended September 30, 2012 and 2011, the Company did not recognize any interest or penalty expense related to income taxes.  The Company files income tax returns in the U.S. federal jurisdiction and states in which it does business.

NOTE 2 - PRIVATE PLACEMENTS OF RESTRICTED COMMON STOCK

During April 2007, the Company sold 28,000,000 (after adjusting for the 1 to 14 split) shares of its common stock to its founders for cash proceeds of $5,000.  During December 2007, the company sold 21,000,000 (after adjusting for the 1 to 14 split) shares of its common stock in a private placement for cash proceeds of $75,000.

From February 25 through July 12, 2011, the Company issued an aggregate of 8,134,997 shares of common stock and warrants to purchase 8,134,997 shares of common stock to certain accredited investors (the “Private Placements”).  Each warrant has a three-year term and is exercisable at $0.60 per share (currently at $.10 due to the triggering of a down round full ratchet anti dilution provision).  The warrants are redeemable by the Company in the event the Company’s common stock exceeds $3.00 for twenty of thirty trading days.  The Company granted piggy-back registration rights for the securities issued in the Private Placements.

On December 2, 2011, one accredited investor purchased 200,000 shares for gross proceeds of $40,000 in a private placement.  The subscription agreement contained a "Purchase Price Protection" provision that granted the investor additional shares in the event of a private placement during the 10 month period from the date of the investment at a price per share less than the investor's purchase price.  The additional shares shall be issued for no additional payment such that the total per share price paid by this investor will equal the amount paid by investors in such later private placement.  In April 2012, the Company issued an additional 200,000 shares to the investor as a result of the price protection provision.

During February and March 2012, the Company issued an aggregate of 10,250,000 shares of restricted common stock to certain accredited investors in a private placement and received aggregate gross proceeds of $1,025,000.  The securities are subject to piggyback registration rights.

In April 2012, the Company issued an aggregate of 1,000,000 shares of restricted common stock to one accredited investor in a private placement and received aggregate gross proceeds of $100,000.  The securities are subject to piggyback registration rights.
 
 
10

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
In June 2012, the Company issued an aggregate of 2,400,000 shares of restricted common stock to certain accredited investors in a private placement and received aggregate gross proceeds of $600,000.  The securities are subject to registration rights.

In July 2012, the Company issued an aggregate of 20,580,000 shares of restricted common stock to certain accredited investors in a private placement and received aggregate gross proceeds of $5,144,990.  The securities are subject to registration rights.

The Company received aggregate gross proceeds of $9,350,490 from the private placements as follows:

 
 
Date
 
 
Shares
   
 
Gross
Proceeds
   
Related
Warrant
Liability at
Inception
   
Related Warrant
Liability at
September 30,
2012
 
February 25, 2011
    4,766,666     $ 1,430,000     $ 2,350,251     $ -  
May 31, 2011
    1,409,999       423,000       1,186,859       -  
June 27, 2011
    1,874,999       562,500       1,243,838       -  
July 12, 2011
    83,333       25,000       57,742       -  
December 2, 2011
    200,000       40,000       -       -  
February 10, 2012
    3,250,000       325,000       -       -  
February 14, 2012
    4,000,000       400,000       -       -  
March 7, 2012
    1,000,000       100,000       -       -  
March 15, 2012
    1,750,000       175,000       -       -  
March 22, 2012
    250,000       25,000       -       -  
April 9, 2012
    1,000,000       100,000       -       -  
April 24, 2012
    * 200,000       -       -       -  
June 28, 2012
    2,400,000       600,000       -       -  
July 6, 2012
    20,580,000       5,144,990       -       -  
      42,764,997     $ 9,350,490     $ 4,838,690     $ -  

* Shares issued under price protection provision of subscription agreement as described above.

The warrants were subject to full ratchet anti-dilution protection if the Company sold shares or share-indexed financing instruments at less than the $0.60 exercise price.  Repricing events occurred twice while the warrants were issued, once to $0.20 on December 2, 2011 and again to $0.10 on February 10, 2012 as a result of private placements of restricted common stock.  The warrants issued in this financing arrangement did not meet the conditions for equity classification and were required to be carried as a derivative liability, at fair value.  Management estimated the fair value of the warrants on the inception dates, and subsequently at each reporting period, using the Black-Scholes option-pricing model, adjusted for dilution, because that technique embodies all of the assumptions (including volatility, expected terms, dilution and risk free rates) that are necessary to determine the fair value of freestanding warrants.

On June 27, 2012, holders of an aggregate of 7,529,999 warrants exchanged those warrants for 1,506,004 shares of common stock.
 
On September 24, 2012, holders of an aggregate of 488,331 warrants exchanged those warrants for 97,669 shares of common stock.

On September 24, 2012, a holder of 116,667 warrants exercised those warrants at $0.10 a share and received 116,667 shares of common stock.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
 
The Company does not believe that the adoption of any recently issued, but not yet effective, accounting standards will have a material effect on its financial position and results of operations.
 
 
11

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
NOTE 4 - ADVANCES, ACCOUNTS PAYABLE AND ACCRUED EXPENSES -  RELATED PARTIES

A shareholder advanced an aggregate amount of $34,811 to the Company in 2010 and 2009.  Additionally, the Company owed $11,100 in legal fees to another shareholder as of December 31, 2011.  The total amount owed at December 31, 2011 was $45,911 and was not subject to any interest.

On September 20, 2012, the aggregate amount of $45,911 was converted into 259,244 shares of common stock, the value of which exceeded the aggregate amount on the conversion date by $18,900.  This amount was charged to operations as an expense in the period ended September 30, 2012.

The aggregate balance due to all related parties for advances, accounts payable and accrued expenses as of September 30, 2012 was $NIL.

NOTE 5 - NOTES AND LOANS PAYABLE

Convertible Notes Payable
On November 29, 2011, the Company received aggregate proceeds of $400,000 from two individuals ($150,000 of which was from a director of the Company) on notes payable bearing interest at 18%, due on May 29, 2012 and convertible into common stock at the rate of $0.20  per share or an adjusted lower rate determined by reference to a subsequent qualified financing.  As additional consideration, the note holders were issued an aggregate of 400,000 shares of common stock valued at $0.15 per share for an aggregate of $60,000.  The value of the shares issued were recorded as deferred financing costs and were amortized over the 6 month term of the notes.  The unamortized balances were  $NIL at September 30, 2012 and $49,451 at December 31, 2011.  Related amortization expense was $49,451 for the nine months ended September 30, 2012.

On June 28, 2012, the aggregate principal of $400,000 and the accrued interest of $41,800 on the notes were converted into 2,209,000 shares of restricted common stock at $0.20 per share, the value of which exceeded the principal and accrued interest by $618,520 on the conversion date.  This amount was charged to operations as an expense in the nine month period ended September 30, 2012.

Notes Payable to Director
A director loaned the Company $99,500, of which $60,000 was advanced on September 29, 2011 and is evidenced by an unsecured note payable which was due on October 29, 2011 bearing interest at 3%; $10,000 was advanced in October 2011; $10,000 was advanced in December 2011 for direct payment to a vendor and $19,500 of which was advanced in January 2012 for direct payments to vendors.  On June 28, 2012, the principal plus accrued interest on the loans and advances of $1,961 (aggregate of $101,461) were converted into 507,306 shares of common stock at $0.20 per share, the value of which exceeded the principal and accrued interest by $140,046 on the conversion date.  This amount was charged to operations as an expense in the nine month period ended September 30, 2012.

Loan Payable
In November and December 2011, an unrelated third party loaned the Company $60,000, payable on demand without interest.  The loan was repaid in February 2012.

Note Payable to Shareholders
On June 15, 2012, a stockholder loaned the Company $65,000, payable on July 15, 2012 without interest.  The loan was repaid in July 2012.

On May 20, 2010, the Company issued a note for $7,500 bearing interest at 5% in exchange for a shareholder's payment of $7,500 on an open account payable balance.  The note was due and payable upon demand.  On September 20, 2012, the aggregate principal and accrued interest of $7,500 were converted into 30,000 shares of restricted common stock.  The principal balance of the note was $NIL at September 30, 2012 and $7,500 at December 31, 2011.  Accrued interest payable on this note was $NIL and $982 as of September 30, 2012 and December 31, 2011, respectively.
 
 
12

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011

NOTE 6 - CAPITAL STOCK

On February 12, 2010, the Company’s articles of incorporation were amended to increase the number of authorized preferred shares to 25,000,000 and the number of authorized common shares to 300,000,000. The Company’s 3,500,000 common shares outstanding were also forward split on a 14 shares for 1 basis with the result that 49,000,000 shares were issued and outstanding on that date. The accompanying financial statements reflect the forward stock split on a retroactive basis.

NOTE 7 - WARRANTS AND OPTIONS

During the year ended December 31, 2011, the Company issued a total of 8,284,997 warrants to purchase restricted common stock.  Of those warrants, 8,134,997 were issued to private placement investors and included down round full ratchet anti-dilution provisions requiring periodic repricing if shares are later offered at lower prices.  In May 2012 holders of 7,529,999 warrants received 1,506,004 shares of restricted common stock in exchange for those warrants.  In September 2012, holders of 488,331 warrants received 97,669 shares of restricted common stock in exchange for such warrants and a holder of 116,667 warrants exercised such warrants at $0.10/share and received 116,667 shares of restricted common stock.

The following tables summarize warrants issued during the year ended December 31, 2011 to private placement investors and consultants.  For the nine months ended September 30, 2012, no warrants were issued and no expense was recognized.  The number of warrants outstanding as of September 30, 2012 is 150,000.

 
 
 
 
Grant Date
 
 
Number of
Warrants
Issued
   
Number of
Warrants
Exchanged or Exercised
   
Number of
Warrants
Outstanding as of September 30, 2012
   
 
 
Exercise Price
Original/Repriced
   
 
Expiration
Term in
Years
 
February 25, 2011 (A)
    4,766,666       4,766,666       -     $ 0.60 /$0.10       2.67  
May 31, 2011  (A)
    1,409,999       1,409,999       -     $ 0.60/$0.10       2.92  
June 27, 2011  (A)
    1,874,999       1,874,999       -     $ 0.60/$0.10       3.00  
June 27, 2011 (B)
    100,000       -       100,000     $ 1.00       2.00  
July 12, 2011  (A)
    83,333       83,333       -     $ 0.60/$0.10       3.00  
December 27, 2011  (B)
    50,000       -       50,000     $ 1.00       2.00  
 
(A) Private placement warrants (these warrants were subject to down round full ratchet anti dilution provisions and the exercise price was adjusted to $0.10 per share in February 2012)
(B) Sponsorship agreement, including put option - see Note 10

Activity in warrants for each of the year ended December 31, 2011 and the nine months ended September 30, 2012 is summarized as follows:

   
Shares Under
Warrants
   
Weighted
Average
Exercise Price
Original/Repriced
 
Balance at January 1, 2011
    -        
Warrants granted
    8,284,997     $ 0.61/$0.10  
Warrants exercised
    -          
Warrants cancelled/expired
    -          
Balance at December 31, 2011
    8,284,997     $ 0.61/$0.10  
Warrants granted
    -          
Warrants exercised
    (116,667 )        
Warrants cancelled/exchanged/expired
    (8,018,330 )        
Balance at September 30, 2012
    150,000     $ 1.00  
 
 
13

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
The following table summarizes information about warrants outstanding and exercisable at September 30, 2012.  As all warrants currently outstanding are fully and immediately vested at issuance, the information for both outstanding and exercisable are identical.
 
 
Warrants Outstanding and Exercisable
 
 
 
 
 
Range of
Exercise Price 
 
Warrants Outstanding and
Exercisable
   
Weighted Average Remaining Contractual
Life
 
$
1.00
    150,000       .90  

The following table summarizes the assumptions used to value the warrants using the Black-Scholes option pricing model:
 
   
Grant Date
 
Number of Warrants Issued/
Outstanding
   
Stock Price on Measurement Date
   
Exercise
Price
   
Expected
Term
   
Expected Volatility
   
 
Dividend
Yield
   
Risk Free
Rate
 
(A)
 
02/25/11
    4,766,666     $ 0.500     $ 0.60       3.00       285.20 %     0.00 %     1.48 %
(A)
 
05/31/11
    1,409,999     $ 0.850     $ 0.60       3.00       208.89 %     0.00 %     0.79 %
(A)
 
06/27/11
    1,874,999     $ 0.670     $ 0.60       3.00       295.31 %     0.00 %     0.64 %
(A)
 
07/12/11
    83,333     $ 0.700     $ 0.60       3.00       278.00 %     0.00 %     0.42 %
(B)
 
06/27/11
    100,000     $ 0.670     $ 1.00       2.00       213.59 %     0.00 %     0.41 %
(B)
 
12/23/11
    50,000     $ 0.090     $ 1.00       2.00       209.00 %     0.00 %     0.28 %

(A) Private placement warrants
(B) Sponsorship agreement, including put option - see Note 10

The Company has issued an aggregate of 1,500,000 options to purchase restricted common stock to the following directors and scientific advisory board members (see Note 10).

 
Issued to and Grant Date
 
Number of
Options
   
Exercise
Price
   
Expiration
Term in
Years
 
Dr. Louis Aronne - director - July 14, 2011
    250,000     $ 0.64       10  
Dr. Louis Aronne - scientific advisory board - July 14, 2011
    500,000     $ 0.64       10  
Dr. Robert Hariri  - director - July 26, 2011
    250,000     $ 0.69       10  
Dr. Peter Diamandis - director -August 15, 2011
    250,000     $ 0.45       10  
Dr. Buzz Aldrin - director - May 24, 2012
    250,000     $ 0.14       10  

The following table summarizes the assumptions used to value the director/advisory board options using the Black-Scholes option pricing model:

Grant
Date
 
Number of Options
   
Stock Price on Measurement Date
   
Exercise
Price
   
Expected
Term
   
Expected Volatility
   
Dividend
Yield
   
Risk Free
Rate
 
07/14/11
    750,000     $ 0.640     $ 0.64       10.00       287.00 %     0.00 %     2.98 %
07/26/11
    250,000     $ 0.690     $ 0.69       10.00       285.00 %     0.00 %     2.99 %
08/15/11
    250,000     $ 0.450     $ 0.45       10.00       284.00 %     0.00 %     2.29 %
05/24/12
    250,000     $ 0.140     $ 0.14       10.00       187.00 %     0.00 %     1.77 %
 
 
14

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
Activity in stock options for each of the year ended December 31, 2011 and nine months ended September 30, 2012 is summarized as follows:
 
   
Shares Under
Options
   
Weighted Average
Exercise Price
 
Balance at January 1, 2011
    -        
Options granted
    1,250,000     $ 0.61  
Options exercised
    -          
Options cancelled/expired
    -          
Balance at December 31, 2011
    1,250,000     $ 0.61  
Options granted
    250,000       0.14  
Options exercised
    -          
Options cancelled/expired
    -          
Balance at September 30, 2012
    1,500,000     $ 0.53  
 
At September 30, 2012, the weighted-average remaining term of the options was 9.01 years.  As of September 30, 2012, the aggregate intrinsic value of outstanding and exercisable options was $12,500.  The aggregate intrinsic value was calculated by multiplying the number of outstanding and exercisable options by the amount by which the market price for our common stock at September 30, 2012 exceeded the exercise price for each option.  The market price for our common stock at September 30, 2012 was $0.29.  The aggregate unvested cost of the options at September 30, 2012 was $307,986.

The following table summarizes information about options outstanding and exercisable at September 30, 2012.

Options Outstanding
   
Options Exercisable
 
 
 
Range of
Exercise Price
   
 
 
Options
Outstanding
   
Weighted
Average
Remaining
Contractual
Life
   
 
 
Range of
Exercise Price
   
 
 
Options
Exercisable
   
Weighted
Average
Remaining
Contractual
Life
 
$ 0.64       750,000       8.79     $ 0.64       416,666       8.79  
$ 0.69       250,000       8.83     $ 0.69       166,666       8.83  
$ 0.45       250,000       8.88     $ 0.45       166,666       8.88  
$ 0.14       250,000       9.67     $ 0.14       83,333       9.67  

NOTE 8 – INTELLECTUAL PROPERTY PURCHASE AGREEMENT

On February 25, 2011, the Company, Atlas Acquisition Corp., a wholly-owned subsidiary of the Company formed in February 2011 (“Atlas Sub”), and Peak Wellness, Inc. (“Peak”), entered into and consummated an Intellectual Property Purchase Agreement (the “Purchase Agreement”), pursuant to which Atlas Sub purchased certain intellectual property assets from Peak (the “Acquisition”).  Pursuant to the Purchase Agreement, the Company acquired from Peak all intellectual property pertaining to MYO-T12, a natural-myostatin inhibitor, including the formula and process for making MYO-T12, certain trademarks, trade secrets, patent applications and certain domain names.  The aggregate consideration for MYO-T12 was $4,662,000 paid in cash, a promissory note and shares of common stock. The contractually stated purchase price for the assets was $1,150,000, of which $450,000 was paid in cash and $700,000 via the issuance of the promissory note.  Additionally, the Company issued 7,024,000 shares of common stock with an aggregate fair value of $3,512,000 to Peak as part of the purchase price of MYO-T12, representing 12% of the fully diluted voting common stock of the Company on the date of the Acquisition.

In connection with the Purchase Agreement, the Company issued a secured promissory note to Peak (the “Promissory Note”) in the amount of $700,000 with interest accruing at an interest rate of 3% per annum.  The Promissory Note was payable in two installments as follows: $350,000 plus accrued interest was due within 180 days after the closing date of the Agreement (originally August 25, 2011 but extended to the earlier of November 30, 2011 or the closing of a certain financing and paid on November 29, 2011) and $350,000 plus accrued interest was due on the first anniversary of the closing date of the Agreement and paid on February 21, 2012.
 
In connection with the Purchase Agreement and the Promissory Note, the Company entered into a security agreement with Peak to secure the payments due under the Promissory Note (the “Security Agreement”).  Pursuant to the Security Agreement, the Company granted Peak a continuing security interest in the assets purchased from Peak. The Security Agreement also secured all of the Company’s obligations to Peak, whether related or unrelated to the Promissory Note. The security interest was released in February 2012 upon payment of the final installment of the Promissory Note.  On the closing date of the Acquisition, new officers and a new director were appointed to serve the Company.
 
 
15

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
The Company completed its annual impairment testing for indefinite-lived intangible assets after the fourth quarter of 2011. Based on (i) assessment of current and expected future economic conditions, (ii) trends, strategies and projected revenues from sales of MYO-T12 and (iii) assumptions similar to those that market participants would make in valuing the Company's intangible assets, management determined that the carrying values of the intellectual property intangible assets exceeded its fair value.  Accordingly, the Company recorded noncash impairment charges totaling $2,662,000 for the year ended December 31, 2011, reducing the MYO-T12 intellectual property asset to its fair value of $2,000,000.

NOTE 9 - INCOME TAXES

The Company has the following deferred tax assets and liabilities:
 
   
September 30, 2012
   
December 31, 2011
 
 Noncurrent assets and liabilities            
Intellectual property
  $ 1,000,000     $ 1,038,000  
Net operating loss carryforwards
    936,800       843,000  
      1,936,800       1,881,000  
Valuation allowance
    (1,936,800 )      (1,881,000 ) 
Net deferred tax asset
  $ -     $ -  
 
The valuation allowance for the deferred tax asset increased by $55,800 for the nine months ended September 30, 2012.

The Company has net operating losses amounting to approximately $2,342,000 that expire in various periods through 2031.  The ultimate realization of the net operating losses is dependent upon future taxable income, if any, of the Company and may be limited in any one period by alternative minimum tax rules.  Although management believes that the Company will have sufficient future taxable income to absorb the net operating loss carryovers before the expiration of the carryover period, the current global economic crisis imposes additional profitability risks that are beyond the Company’s control.  Accordingly, management has determined that a full valuation allowance of the deferred tax asset is appropriate at this time.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased by more than 50 percentage points.  Management intends to carefully monitor share ownership of 5% shareholders but cannot control the ownership changes occurring as a result of public trading of the Company’s Common Stock.  Accordingly, there is a risk of an ownership change beyond the control of the Company that could trigger a limitation of the use of the loss carryover.

The Company has no uncertain income tax positions.

The tax years ended December 31, 2007 through 2011 are open for examination by federal and state taxing authorities.
 
The statutory federal income tax rate and the effective rate are reconciled as follows:

   
September 30, 2012
   
December 31, 2011
 
Statutory federal income tax rate
    34 %     34 %
State taxes, net of federal tax benefit
    5 %     5 %
Valuation allowance
    (39 )%     (39 )% 
Net deferred tax asset
    - %     - % 
 
 
16

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
NOTE 10 - COMMITMENTS, CONTINGENCIES AND OTHER COMMENTS

Distribution Agreement
On May 16, 2012, the Company entered into a distribution agreement (the "Agreement") with MHP, a company engaged in the development, marketing and distribution of nutritional and other therapies for the consumer.  Pursuant to the Agreement, MHP will, on an exclusive basis, provide marketing, sales and distribution of MYO-T12, to be sold under the brand name MYO-X, in retail and other outlets.  MHP agreed to pay the Company $195,301 upon the execution of the Agreement, with such amount credited against inventory purchases.  The Agreement also provides, upon termination of MHP's exclusively rights, additional supply and payment rights to MHP (including a per-unit royalty in the low single digits).  The term of the Agreement is one year, with an effective date for exclusivity beginning on September 29, 2012.  In the event MHP achieves certain sales targets for MYO-T12, the exclusivity provisions of the Agreement will be extended for an additional one or two years.  The Agreement further provides for a co-operative advertising arrangement with MHP, whereby the Company is required to pay MHP a fee for each unit of MYO-T12 sold.

Operating Lease
The Company leases its corporate offices under an operating lease expiring in July 2017.  The Company has two options to renew such lease for a term of three years each with annual rent increases of 3%.  Currently, the Company pays $2,000 per month until such time the office space becomes fully available, which is expected to occur in January 2013.

The future minimum lease payments under the non-cancelable operating lease in excess of one year at September 30, 2012 is as follows:

Year Ending December 31,
 
Amount
 
         2012
  $ 6,000  
         2013
    53,121  
         2014
    59,434  
         2015
    65,095  
         2016
    67,163  
         2017
    39,623  
    $ 290,436  

Rent expense for the nine month period from January 1, 2012 to September 30, 2012 was $22,155, rent expense for the three month period from July 1, 2012 to September 30, 2012 was $12,500 and rent expense for 2011 was $49,507.

Employment Agreements

J.B. Bernstein: On February 25, 2011, the Company entered into an employment agreement with J.B. Bernstein, pursuant to which Mr. Bernstein served as Chief Executive Officer of the Company.  The employment agreement was amended effective as of March 1, 2011.  On April 30, 2012, J.B. Bernstein resigned from his positions as President and Chief Executive Officer and as a member of the Company’s board of directors.  In connection with his resignation, Mr. Bernstein entered into a consulting agreement with the Company (the “Consulting Agreement”), pursuant to which Mr. Bernstein will be entitled to a consulting fee of $5,000 per month during the six-month term of the Consulting Agreement.  The Consulting Agreement also includes confidentiality and non-competition obligations and provisions for intellectual property assignments by Mr. Bernstein.

Carlon Colker MD, FACN: On February 25, 2011, concurrent with the closing of the Acquisition, the Company entered into an employment agreement with Carlon Colker, MD, FACN, pursuant to which Dr. Colker will serve as Chief Medical Officer and Executive Vice President of the Company.  On June 14, 2012, Dr. Carlon Colker resigned from his positions as Chief Medical Officer and Executive Vice President.  Simultaneously with his resignation, Dr. Colker agreed to serve on the Company’s Scientific Advisory Board.  In connection with his appointment to the Scientific Advisory Board, Dr. Colker entered into an advisory board agreement with the Company, pursuant to which the Company issued him 300,000 shares of common stock.  The Agreement also includes standard confidentiality and non-competition obligations and provisions for intellectual property assignments by Dr. Colker.
 
 
17

 

MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011

Peter A. Levy: On February 10, 2012, the Company entered into an employment agreement (the “Agreement”) with Peter Levy, age 51, pursuant to which Mr. Levy will serve as the Company’s Chief Operating Officer and Executive Vice President.

Pursuant to the terms of the Agreement, Mr. Levy will work for the Company on a full-time basis and will receive an annual base salary of $200,000.  Mr. Levy will be entitled to such bonus compensation (e.g. cash, stock or other property) as determined by the Company’s board of directors in its sole discretion.  In addition, upon signing, Mr. Levy was granted 500,000 shares of the Company’s common stock, which shares will vest semi-annually commencing on August 10, 2012. The term of the Agreement is two years, and the Agreement will automatically renew for successive two-year periods, unless a notice of non-renewal is provided by either party more than 60 days prior to the expiration date of the term.

In the event Mr. Levy’s employment with the Company is terminated as a result of his death, his estate will be entitled to receive any accrued and unpaid compensation through the date of termination and certain benefits for six months following the date of termination.  In addition, all of his unvested options will expire immediately and any vested options will expire twelve months following the date of termination.  In the event Mr. Levy’s employment with the Company is terminated as a result of a disability, he will be entitled to receive his base salary for six months following the date of termination and certain benefits for twelve months following the date of termination.  In addition, all of his unvested options will expire immediately and any vested options will expire twelve months following the date of termination.

In the event Mr. Levy’s employment with the Company is terminated for any reason other than death or disability, he will be entitled to receive any accrued and unpaid compensation through the date of termination. If he is terminated without cause (as defined in the Agreement) or resigns for good reason (as defined in the Agreement), all of his unvested options will vest immediately and any vested options will expire twelve months following the date of termination. If Mr. Levy is terminated for cause, all unvested options will expire immediately and any vested options will expire three months following the date of termination. In lieu of any severance payment, Mr. Levy is entitled to receive $40,000 on the effective date of the Agreement.

Sponsorship Agreement
On June 27, 2011, the Company entered into a one year agreement with a celebrity spokesperson pursuant to which the spokesperson agreed to perform certain services for the Company and granted the Company the worldwide right to use the spokesperson’s name and approved image in various media.  The agreement provided for cash compensation of $150,000 in three equal installments of $50,000, all of which was paid in 2011.  Royalties at the rate of $0.50 per unit sold are payable to the spokesperson for the term of the agreement and an additional 12 months thereafter.  The agreement expired in June 2012.

The agreement also provided for the issuance of warrants to purchase 150,000 shares of common stock, 100,000 of which were issued upon signing of the agreement and 50,000 of which were issued in December 2011.  The warrants have a term of two years with an exercise price of $1.00 per share.  The warrants further provide that in the event (a) the trading price of the common stock of the Company on its principal trading market does not exceed $2.00 within two years of issuance and (b) the warrants were not exercised prior to such time, then the spokesperson shall have the right to sell any unexercised portion of the warrants to the Company in exchange for $1.00 for each share of common stock underlying the unexercised portion of the warrants.

The 100,000 warrants issued upon execution of the agreement and the 50,000 warrants issued in December 2011 were valued at $88,600 and $48,050, respectively, using a Black-Scholes option pricing model and determining that the put option was the predominant feature of the instrument.

 
18

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
Director Agreements

Dr. Louis Aronne:
On July 14, 2011, the Company entered into two separate agreements with Dr. Louis Aronne to be a member of the Board of Directors and the Scientific Advisory Board. The director agreement provides for compensation in the form of 100,000 shares of restricted common stock vesting in five equal annual installments commencing on execution of the agreement and an option to purchase 250,000 shares of common stock at an exercise price of $0.64 for 10 years vesting over a period of 3 years, the first installment of which vested immediately.  Upon a Change of Control, the unvested shares and the option will vest immediately.  The advisory board agreement has a term of 5 years and provides for the issuance of 500,000 shares vesting in five equal annual installments commencing July 14, 2012 and an option to purchase 500,000 shares at $.64 per share vesting in four equal annual installments, and the first installment vested immediately upon the execution of the agreement.  Upon a Change of Control, all unvested option shall immediately vest.

Dr. Robert Hariri:
On July 26, 2011, the Company entered into an agreement with Dr. Robert Hariri to be a member of the Board of Directors.  The director agreement provides for 100,000 shares of restricted common stock vesting in five equal annual installments (the first installment of which vested immediately) and an option to purchase 250,000 shares of common stock at an exercise price of $0.69 for 10 years vesting over a period of 3 years, the first installment of which vested immediately.  Upon a Change of Control, the unvested shares and the option shall immediately vest. 

Dr. Peter Diamandis:
On August 15, 2011, the Company entered into an agreement with Dr. Peter Diamandis to be a member of the Board of Directors.  The director agreement provides for 100,000 shares of restricted common stock vesting in five equal annual installments (the first installment of which vested immediately) and an option to purchase 250,000 shares of common stock at an exercise price of $0.45 for 10 years vesting over a period of 3 years, the first installment of which vested immediately.  Upon a Change of Control, the unvested shares and the option shall immediately vest.

Dr. Buzz Aldrin:
On May 24, 2012, the Company entered into an agreement with Dr. Buzz Aldrin to be a member of the Board of Directors.  The director agreement provides for 100,000 shares of restricted common stock vesting in five equal annual installments (the first installment of which vested immediately) and an option to purchase 250,000 shares of common stock at an exercise price of $0.14 for 10 years vesting over a period of 3 years, the first installment of which vested immediately.  Upon a Change of Control, the unvested shares and the option shall immediately vest.

Stock-Based Compensation
On September 24, 2012, the Company’s board of directors adopted the 2012 Equity Incentive Plan, which is subject to stockholder approval.  The Company has reserved 10,000,000 shares of common stock under the 2012 Equity Incentive Plan.  As of September 30,2012, there were no options outstanding under the 2012 Equity Incentive Plan.  Prior to the adoption of the 2012 Equity Incentive Plan, we granted restricted common stock awards to consultants from time to time.  Additionally, during the nine months ended September 30, 2012 and the year ended December 31, 2011, we granted options to directors to acquire an aggregate of 250,000 and 1,250,000 shares of restricted common stock, respectively.  As of September 30, 2012, 833,333 have vested and 666,667 remain unvested.  The vesting terms range from 3 to 4 years and the options have a weighted average remaining term of 9.01 years and a weighted average exercise price of $0.53 per share.

During the nine months ended September 30, 2012, the Company issued an aggregate of 3,537,334 shares of restricted common stock to consultants, a director, an employee and an officer for services.  The shares issued were valued at trading prices on the date of issuance between $0.07 and $0.45 per share for an aggregate charge of $308,552.  The shares issued to our officer and director are subject to certain vesting requirements.
 
 
19

 
 
MYOS CORPORATION AND SUBSIDIARY
(a development stage company)
Notes to Consolidated Financial Statements
September 30, 2012 and 2011
 
NOTE 11 - SUBSEQUENT EVENT

Andrew J. Einhorn: On October 15, 2012, the Company entered into an offer letter with Andrew J. Einhorn to serve as the Company’s Chief Financial Officer. Pursuant to the terms of the offer letter, Mr. Einhorn will work for the Company on a full-time basis and will receive an annual base salary of $220,000.  Mr. Einhorn will be entitled to an annual bonus of up to 100% of his annual base salary, as determined by the Company’s board of directors in its sole discretion.  Upon execution of an employment agreement, Mr. Einhorn will be entitled to receive 2,000,000 shares of the Company’s common stock which will vest in four equal semi-annual installments commencing upon execution of the agreement.  Each installment of shares will be subject to transfer restrictions as will be specified in the employment agreement.
 
 
20

 
 
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on  Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
Certain statements in this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements contained in this report and not clearly historical in nature are forward-looking, and the words “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) generally are intended to identify forward-looking statements.  Any statements in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements involve risks and uncertainties, including but not limited to those relating to product and customer demand, market acceptance of our products, the ability to create new products, the ability to achieve a sustainable profitable business, the effect of economic conditions, the ability to protect our intellectual property rights, competition from other providers and products, risks in product development, our ability to raise capital to fund continuing operations, and other factors discussed from time to time in the Company's Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made except as required by law.
 
 Plan of Operation

We are focused on the development and commercialization of therapeutic and dietary products relating to muscle health, including the formulation, acquisition and distribution of nutritional, nutraceutical, physical performance enhancement and wellness products.  Our initial core product, MYO-T12, a myostatin-inhibiting product is sold under the brand name MYO-X.  Up until May, 2012 our operations were supported by outside third party vendors, who provided the order processing controls, such as electronic data interface with our customers.  Following the execution of our exclusive distributor relationship with Maximum Human Performance (“MHP”), our plan is to produce our current nutrition maximization and wellness products (principally MYO-T12) for sale by MHP, and to research and test new products.  We are also focusing on reducing the cost of producing MYO-T12  by finding more efficient manufacturing partners and processes, and we are focusing on conducting clinical trials of MYO-T12 and developing new products.

Three Months Ended September 30, 2012 compared to the Three Months Ended September 30, 2011

For the three months ended September 30, 2012, the Company generated revenues of $365,934 compared to revenues of $55,841 for the three months ended September 30, 2011, the period in which we began selling MYO-T12.  The increase in revenues during the three months ended September 30, 2012 includes $344,959 of sales to MHP with whom the Company did not have a relationship during 2011.  Gross profit for the three months ended September 30, 2012 was $11,344 compared to $29,831 for the three months ended September 30, 2011.  The decrease in gross profit reflects a lower net selling price per unit, and a higher cost of inventory sold in the three month period ended September 30 2012 compared to the same period in 2011.  General and administrative expenses for the three months ended September 30, 2012 of $1,058,968, were $346,193 lower than the $1,405,161 for the three months ended September 30, 2011 mostly due to lower consulting and director compensation expenses during 2012. During the three months ended September 30, 2012 the Company recognized a gain of $229,591 due to the change in the fair value of outstanding warrants, compared to a gain of $3,270,821 during the three months ended September 30, 2011.  The Company incurred a net loss of $812,578 for the three months ended September 30, 2012 compared to net income of $1,857,833 for the three months ended September 30, 2011 with such difference mostly attributable to the effects of the change in fair value of outstanding warrants in the respective periods.
 
 
21

 
 
Nine Months Ended September 30, 2012 compared to the Nine Months Ended September 30, 2011

For the nine months ended September 30, 2012, the Company generated revenues of $734,363, compared to $55,841 for the nine months ended September 30, 2011.  Revenues during 2012 includes $657,440 of sales to MHP with whom the Company did not have a relationship in 2011.  Gross profit for the nine months ended September 30, 2012 was $78,366 compared to $29,831 for the nine months ended September 30, 2011.  General and administrative expenses of $2,091,975 for the nine months ended September 30, 2012 were $1,637,573 lower than the $3,729,548 for the nine months ended September 30, 2012.  Almost the entire decrease is attributable to stock compensation of $1.5 million to an officer during 2011 which did not occur in 2012.  During the nine months ended September 30, 2012, the Company incurred interest expense of $802,614 versus $13,539 in 2011.  We also incurred an expense of $69,451 during the nine months ended September 30, 2012 related to amortization of deferred financing costs.  For the nine months ended September 30, 2011, the Company issued warrants, the value of which was in excess of the amount of additional paid-in capital received by $2,405,303, however this expense was almost entirely offset by a change in the fair value of outstanding warrants of $2,328,486.  We are required to revalue certain derivative financial instruments each quarter and the change in value from the dates of their original issuance in 2011 resulted in an increase to our net loss for the nine months ended September 30, 2012 by $16,173.  Such revaluations do not affect our cash flow.  For the nine months ended September 30, 2012 the Company incurred a net loss of $2,896,286 compared to a net loss of $3,790,073 for the nine months ended September 30, 2011.

April 11, 2007 (Inception Date) to September 30, 2012

In the period from April 11, 2007 (inception) to September 30, 2012, we generated revenues of $833,838 (including revenues to MHP of $657,440) while incurring $6,883,954 in general and administrative expenses. The cumulative net loss since inception was $8,627,532 including net non-cash derivatives valuation adjustments of $1,680,267 and intellectual property impairment charges of $2,662,000.  Upon completion of our annual impairment testing for indefinite-lived intangible assets after the fourth quarter of 2011, we determined that the carrying values of the intellectual property intangible assets exceeded its fair value and we recorded noncash impairment charges totaling $2,662,000, reducing the carrying value of the asset to its fair value of $2,000,000. Such revaluations do not affect our cash flow.

Liquidity and Capital Resources

As of September 30, 2012, we had cash of $4,993,883 and $7,451,039 in total assets (which includes $2,000,000 of intangible assets). For the nine months ended September 30, 2012, we used cash of $1,387,696 for operating activities.   The first installment of $350,000 on the note payable to Peak was paid on November 29, 2011 and the second and final installment of $350,000 was paid on February 21, 2012.  In late June and July 2012, the Company issued an aggregate of 22,980,000 shares of restricted common stock to accredited investors in a private placement and received aggregate gross proceeds of $5,744,990.  We believe that with those additional private placement proceeds received, we will have sufficient funds for operations, inventory procurement and product development for the next 12 months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the financial statements.  Estimates are used for, but not limited to, the selection of the useful lives of property and equipment, provisions necessary for contingent liabilities, fair values, revenue recognition, taxes, budgeted costs and other similar charges.  Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent.  Actual results could differ from these estimates.
 
 
22

 

Impact of Derivative Accounting
As a result of recent financing transactions we have entered into, our financial statements are impacted by the accounting effect of the application of derivative accounting.  ASC Topic 815 and ASC Topic 815-40 govern the accounting treatment for both freestanding and embedded derivative financial instruments in our financial statements.  Generally, warrants, conversion features in debt, and similar terms that include “full-ratchet” or reset provisions, which mean that the exercise or conversion price adjusts to pricing in subsequent sales or issuances, no longer meet the definition of indexed to a company's own stock and are not an exemption for equity classification provided in ASC Topic 815-15.  The amount of non-cash gains or losses we record is based upon the fair market value of our common stock on the measurement date.  The fair value of certain warrants outstanding which have “full-ratchet” or reset provisions (whereby the exercise or conversion price adjusts to pricing in subsequent sales or issuances in certain instances) is based on judgment as to expected future volatility of our common stock.

Long-lived assets
We apply the provisions of Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) No. 360, “Property, Plant and Equipment”.  ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets.  Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property, plant and equipment and other assets, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value.  Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets.  The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset.  If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value.  The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments.  The Company estimates fair value based on the information available in making the necessary estimates, judgments and projections.

Fair Value of Indefinite-Lived Intangible Assets
The Company's policy is to evaluate indefinite-lived intangible assets for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An intangible asset with an indefinite life (the intellectual property) is evaluated for possible impairment by comparing the fair value of the asset with its carrying value. Fair value is estimated as the discounted value of future revenues arising from a trademark using a royalty rate that an independent party would pay for use of that trademark.  An impairment charge is recorded if the trademark's carrying value exceeds its estimated fair value.  An impairment charge is recorded if the carrying value of the goodwill exceeds its implied fair value.  See Note 8 for information related to impairment charges recorded in 2012 for indefinite-lived intellectual property intangible assets.

Equity Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC 718-10 Compensation - Stock Compensation and ASC 505-50 Equity Based Payments to Non-Employees. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  For stock options and restricted stock that do not vest immediately but which contain only a service vesting feature, we recognize compensation cost on the unvested shares and options on a straight-line basis over the remaining vesting period, net of any projected forfeitures.

The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based compensation.  Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables.  These variables include, but are not limited to our expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.
 
 
23

 
 
Income taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized.  If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company’s net income when those events occur.
 
 
24

 
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
We are a smaller reporting company and therefore are not required to provide the information for this item for Form 10-Q.
 
ITEM 4. CONTROLS AND PROCEDURES.
 
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2012.  Based on their evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2012, our disclosure controls and procedures were not effective.

Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
25

 
 
PART II- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.
 
None.

ITEM 1A.  RISK FACTORS.

Factors that could cause our actual results to differ materially from those in this report are any of the risks described in our Annual Report for the year ended December 31, 2011 filed with the SEC.  Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.  Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this report, except as set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Since our revenues are generated in U.S. dollars but a significant portion of our expenses may be incurred in euros, our earnings may be reduced due to currency exchange rate fluctuations.

Our revenues are generated in U.S. dollars, while a significant portion of our expenses, principally the payments to our manufacturer, may be paid in euros.  The exchange rate between the euro and the U.S. dollar may fluctuate and is affected by, among other things, changes in political and economic conditions.  Any significant fluctuation between the exchange rate for these currencies may materially and adversely affect our earnings, cash flows and financial condition.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On September 15, 2012, we issued 169,244 shares of common stock to an unrelated third party as repayment for loans and advances in the amount of approximately $42,000.  No underwriting discounts or commissions were paid.  The shares were issued in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.

On July 26, 2012, we issued an aggregate of 600,000 shares of common stock to certain accredited investors.  We received gross proceeds of $150,000 in the offering.  No underwriting discounts or commissions were paid.  The shares were issued in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.

On July 6, 2012, we completed a private placement with certain accredited and institutional investors and issued approximately 22.4 million shares of common stock for aggregate proceeds of approximately $5.6 million. Chardan Capital Markets, LLC served as a placement agent in the offering and received 6.0% of the aggregate purchase price paid (or approximately $180,000) by the purchasers that it introduced to us. The shares were issued in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. MINE SAFETY DISCLOSURES.

None

ITEM 5. OTHER INFORMATION.
 
None
 
 
26

 
 
ITEM 6.  EXHIBITS

No.
 
Description of Exhibit
10.1
 
Form of Subscription Agreement, dated July 2, 2012, by and between the Company and the signatories thereto (incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K, filed on July 2, 2012)
10.2  
Commercial Lease, dated August 1, 2012 (incorporated by reference to Exhibit 10.10 in our Registration Statement on Form S-1, filed on November 5 , 2012)
31.1
 
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
 
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
 
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 0f 2002
32.2
 
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 0f 2002
101.INS *
 
XBRL Instance Document
101.CAL *
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH *
 
XBRL Taxonomy Extension Schema Document
101.DEF *
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *
 
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE *
 
XBRL Taxonomy Extension Presentation Linkbase Document
 

*
XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
27

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

   
MYOS CORPORATION
     
Date:  November 21, 2012
 
By: /s/ Andrew J. Einhorn
   
Name: Andrew J. Einhorn
   
Title: Chief Financial Officer
 
 
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