0000914317-01-500403.txt : 20011019
0000914317-01-500403.hdr.sgml : 20011019
ACCESSION NUMBER: 0000914317-01-500403
CONFORMED SUBMISSION TYPE: 10QSB
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010831
FILED AS OF DATE: 20011015
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MEDISCIENCE TECHNOLOGY CORP
CENTRAL INDEX KEY: 0000064647
STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
IRS NUMBER: 221937826
STATE OF INCORPORATION: NJ
FISCAL YEAR END: 0228
FILING VALUES:
FORM TYPE: 10QSB
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-07405
FILM NUMBER: 1759178
BUSINESS ADDRESS:
STREET 1: 1235 FOLKESTONE WY
CITY: CHERRY HILL
STATE: NJ
ZIP: 08034
BUSINESS PHONE: 6094287952
MAIL ADDRESS:
STREET 1: 1235 FOLKESTONE WAY
CITY: CHERRY HILL
STATE: NJ
ZIP: 08034
FORMER COMPANY:
FORMER CONFORMED NAME: CARDIAC TECHNIQUES INC
DATE OF NAME CHANGE: 19730920
10QSB
1
form10qsb41015_10-15.txt
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended August 31, 2001 Commission File Number 0-7405
MEDISCIENCE TECHNOLOGY CORP.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Certificate of Incorporation)
New Jersey
--------------------------------------------------------------------------------
(State or other jurisdiction on incorporation or organization)
22-1937826
--------------------------------------------------------------------------------
(I.R.S. Employer Identification Number)
1235 Folkestone Way, Cherry Hill, New Jersey 08034
--------------------------------------------------------------------------------
(Address of principal executive offices)
(Registrant's telephone number, including area code) 609-428-7952
------------
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 ___
Registrant has not been involved in bankruptcy proceedings during the preceding
five years.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 31, 2001.
Title of Class Number of Shares Outstanding
-------------- ----------------------------
Common Stock, par value
$.01 per share 36,676,130
Preferred Stock, par value
$.01 per share 2,074
MEDISCIENCE TECHNOLOGY CORP.
AUGUST 31, 2001
---------------
INDEX
-----
PAGE
----
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as at August 31, 2001 (Unaudited)
and February 28, 2001 (Audited) 1
Consolidated Statement of Operations for the Six Months Ended
August 31, 2001 (Unaudited) and August 31, 2000 (Unaudited) 2
Consolidated Statement of Cash Flows for the Six Months Ended
August 31, 2001 (Unaudited) and August 31, 2000 (Unaudited) 3
Consolidated Statement of Stockholders' Deficiency for the Six
Months Ended August 31, 2001 (Unaudited) 4
Consolidated Statement of Stockholders' Deficiency for the Six
Months Ended August 31, 2000 (Unaudited) 5
Exhibit to Statements of Operations 6
Notes to Financial Statements 7
Item 2. Management's Plan of Operation 8-9
PART II. Other Information 10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
MEDISCIENCE TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
August 31, 2001 February 28, 2001
(Unaudited) (Audited)
------------- ------------
CURRENT ASSETS
--------------
Cash and Cash Equivalents $ 6,155 $ 7,120
Other Assets -- --
------------ ------------
Total Current Assets 6,155 7,120
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Net of Accumulated Depreciation $200,933 -
August 31, 2001; $199,178 - February 28, 2001 3,044 4,800
------------ ------------
TOTAL ASSETS $ 9,199 $ 11,920
------------ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
-------------------
Accounts Payable $ 2,951 $ 14,943
Other Accrued Liabilities 2,397,587 2,127,028
Officer and Other Loans 167,044 152,229
------------ ------------
Total Current Liabilities 2,567,582 2,294,200
------------ ------------
STOCKHOLDERS' DEFICIENCY
------------------------
Preferred Stock - $.01 Par Value; Authorized
50,000 Shrs; Outstanding 2,074 Shrs;
(Preference on Liquidation $20,740) 21 21
Common Stock $.01 Par Value, Authorized
39,950,000 Shares; Outstanding 36,676,130 Shares 366,761 362,761
Additional Paid-in Capital 18,315,977 18,274,977
Accumulated Deficit (21,241,142) (20,920,039)
------------ ------------
Total Stockholders' Deficiency (2,558,383) (2,282,280)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIENCY $ 9,199 $ 11,920
-------------------------------------------- ============ ============
"See Accompanying Notes to Financial Statements."
1
MEDISCIENCE TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2001 AND 2000
(UNAUDITED)
SIX MONTHS THREE MONTHS
-------------------------------- ---------------------------------
2001 2000 2001 2000
---- ---- ---- ----
Net Sales $ -- $ -- $ -- $ --
Cost of Sales -- -- -- --
------------ ------------ ------------ ------------
Gross Profit -- --
General and Administrative Expense 287,223 362,224 127,709 187,618
Product Development Expense -- -- -- --
Advertising, Travel and Marketing 34,005 35,541 26,869 17,123
------------ ------------ ------------ ------------
Total Expenses 321,228 397,765 154,578 204,741
------------ ------------ ------------ ------------
Other Income 125 388 58 164
------------ ------------ ------------ ------------
Net Loss $ (321,103) $ (397,377) $ (154,520) $ (204,577)
============ ============ ============ ============
Net Loss Per Common Share, Basic
and Diluted $ (.01) $ (.01) $ (.01) $ (.01)
============ ============ ============ ============
Weighted Average Number of Shares
of Common Stock Outstanding 36,409,463 36,159,463 36,542,797 36,226,130
============ ============ ============ ============
"See Accompanying Notes to Financial Statements."
2
MEDISCIENCE TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 2001 AND 2000
(UNAUDITED)
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net Loss $(321,103) $(397,377)
Adjustment for Item Not Requiring Cash Outlay
Depreciation 1,756 1,894
Stock Issued for Services -- 65,000
--------- ---------
Subtotal (319,347) (330,483)
Changes in Assets and Liabilities:
Decrease in Other Assets -- 20,191
Increase (Decrease) in Accounts Payable (11,992) (1,586)
Increase (Decrease) in Other Accrued Liabilities 270,559 259,886
Increase (Decrease) In Officer and Other Loans 14,815 1,237
--------- ---------
Net Cash Flows (Used for) Operating Activities (45,965) (50,755)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
------------------------------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds from Issuance of Common Stock 45,000 37,500
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (965) (13,255)
------------------------------------------------
CASH AND CASH EQUIVALENTS
-------------------------
Beginning Balance 7,120 17,066
--------- ---------
Ending Balance $ 6,155 $ 3,811
========= =========
"See Accompanying Notes to Financial Statements."
3
MEDISCIENCE TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE SIX MONTHS ENDED AUGUST 31, 2001
(UNAUDITED)
Preferred
Stock Common Stock
Number of Preferred Number of
Shares Stock Shares
------------ ------------ ---------------
Balance February 28, 2001 2,074 $ 21 36,276,130
Issuance of Stock for Cash 400,000
Net Loss for the Six Months Ended
August 31, 2001 -- -- --
---------- ---------- ----------
Balance August 31, 2001 2,074 $ 21 36,676,130
========== ========== ==========
Common Additional Paid Accumulated
Stock in Capital Deficit
-------------- --------------- --------------
Balance February 28, 2001 $ 362,761 $ 18,274,977 $(20,920,039)
Issuance of Stock for Cash 4,000 41,000 --
Net Loss for the Six Months Ended
August 31, 2001 -- -- (321,103)
------------ ------------ ------------
Balance August 31, 2001 $ 366,761 $ 18,315,977 $(21,241,142)
============ ============ ============
"See Accompanying Notes to Financial Statements."
4
MEDISCIENCE TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE SIX MONTHS ENDED AUGUST 31, 2000
(UNAUDITED)
Preferred
Stock Common Stock
Number of Preferred Number of
Shares Stock Shares
------------ ------------ ---------------
Balance February 29, 2000 2,074 $21 35,976,130
Issuance of Stock for Cash - - 150,000
Issuance of Stock for Services - - 100,000
Net Loss for the Six Months Ended
August 31, 2000 - - -
------------ ------------ ---------------
Balance August 31, 2000 2,074 $21 36,226,130
============ ============ ===============
Common Additional Paid Accumulated
Stock in Capital Deficit
-------------- --------------- ------------------
Balance February 29, 2000 $359,761 $18,215,977 $(20,588,721)
Issuance of Stock for Cash 1,500 36,000 -
Issuance of Stock for Services 1,000 64,000 -
Net Loss for the Six Months Ended
August 31, 2000 - - (397,377)
-------------- -------------- ------------------
Balance August 31, 2000 $362,261 $18,315,977 $(20,986,098)
============== ============== ==================
"See Accompanying Notes to Financial Statements."
5
EXHIBIT TO STATEMENTS OF OPERATIONS
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Common Stock
$.01 Par Value Number of Weighted Average
Issued and Common Stock Shares Number of Shares
Outstanding Equivalents Outstanding Outstanding
------------------- --------------- ----------------- -------------------
March 2001 36,276,130 - 36,276,130
April 2001 36,276,130 - 36,276,130
May 2001 36,276,130 - 36,276,130
June 2001 36,276,130 - 36,276,130
July 2001 36,676,130 - 36,676,130
August 2001 36,676,130 - 36,676,130 36,409,463
6
MEDISCIENCE TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2001
(UNAUDITED)
NOTE 1 RESULTS OF OPERATIONS
------ ---------------------
The financial statements, in the opinion of management, include all
adjustments and accruals necessary for a fair presentation.
The results of operations for each interim period are not necessarily
indicative of results to be expected for the year due to the
unpredictability of market factors, product development, competition and
sales in general.
These financial statements should be read in conjunction with the
Company's most recent audited financial statements dated February 28,
2001.
NOTE 2 OTHER ACCRUED LIABILITIES
------ -------------------------
Other accrued liabilities consist of the following:
August 31, 2001 February 28, 2001
--------------- -----------------
Legal and Professional Fees $ 230,100 $ 180,100
Research and Development 1,044,065 962,399
Salaries and Wages 1,075,083 943,833
Other 48,339 40,696
---------- ----------
Total $2,397,587 $2,127,028
========== ==========
7
MANAGEMENT'S PLAN OF OPERATION
The Company is engaged in the design and development of diagnostic medical
devices that detect cancer using light induced native tissue fluorescence
spectroscopy to distinguish between pre-malignant, malignant, and normal or
benign tissue. Both pre-clinical and clinical study results support the
Company's belief that its proprietary technology, when fully developed, will be
a useful and commercially viable adjunct to the physician for screening and
diagnosis of cancer.
While we believe that our diagnostic technology will be broadly useful in
multiple organ systems, each approved indication will require a separate, costly
and time-consuming pre-marketing approval (PMA). We plan to carefully select and
prioritize our targeted indications to maximize the return on development and
clinical investments. We regard our seminal U.S. "516" and other related patents
(such as 5, 131, 398) as pioneering, blocking and dominant in the area of cancer
diagnosis using fluorescence spectroscopy both in-vivo and in-vitro.
Until July, 1998, the Company provided annual funding grants to the
Mediphotonics Laboratory of the City University of New York in accordance with a
budget of activities and expenditures negotiated between the Company and the
University. The arrangement was renewable annually and could be terminated
without cause by either party upon 90 days prior written notice. The contract
with CUNY was extended by agreement at no cost until October 1, 1998. Because of
funding limitations, the Company was unable to renew its contract following
expiration of the October, 1998 extension. The Company plans to resume its
support of relevant programs when, and if, current fund raising efforts are
successful.
In April, 1999, the Company and the City University initiated a joint effort
with Sarnoff Corporation of Princeton NJ for the purpose of developing a
commercial imaging system based on the Company's technology, and on the
engineering background and expertise, and certain proprietary technology of
Sarnoff.
In November, 1999, Frank S. Castellana, M.D., Eng. Sc. D. joined its executive
team as President and Chief Executive Officer, effective February 1, 2000. The
Company announced that it was seeking investment partners to support the funding
of a joint effort between itself, Sarnoff Corporation, and the Mediphotonics
Laboratory of the City University of New York to develop and commercialize an
advanced, second generation version of its proprietary two-dimensional
fluorescence imaging system for early cancer detection. Effective June 1, 2001
with notice to the Board of Directors Dr. Castellana voluntarily terminated his
employment agreement and additionally waived all salary to that date. He felt
that he could not satisfy the Company's needs and choose to step aside. Dr.
Castellana now has a full time consulting business and the Company expects to
use his consulting services in the future.
Effective July 9th 2001 Peter Katevatis, Esq. Chairman CEO on behalf of the
Company entered into an employment relationship with Mr. Sidney Braginsky as the
new President and COO. Mr. Braginsky was formerly with OLYMPUS OPTICAL LTD for
27 years most recently as President CEO of OLYMPUS AMERICA, Inc., the Olympus US
subsidiary. OLYMPUS LTD. is a multi-national corporation headquartered in Tokyo
Japan and a world leader in microscopes, endoscopes, automatic blood and fluid
chemistry analyzers measuring research, industrial and consumer products. The
Company will seek investment and/or corporate partners to support the funding of
a joint effort between itself, Sarnoff Corporation, and the Mediphotonics
Laboratory of the City University of New York to develop and commercialize an
advanced, second generation version of its proprietary two-dimensional
fluorescence imaging system for early cancer detection. Mr. Braginsky is a
present board member of, NOVEN Pharmaceuticals, REDOX Pharmaceuticals,
ELECTRO-OPTICAL SYSTEMS, Inc., ESTEK CARDIOLOGY, Chairman of Double D Venture
Funds LLC and Chairman of the Board of City College of New York's Robert
Chambers Laboratory.
On June 14, 2001 Peter Katevatis, Esq. Chairman CEO entered into an agreement
with Drexel University, a Pennsylvania non-profit institution of higher
education wherein the parties agreed to explore a mutually satisfactory
arrangement or collaboration to develop uses for Mediscience's technology in the
field of fluorescence medical imaging. Drexel's successful efforts leading to
such funding would provide Drexel with compensation and/or equity interest from
Mediscience.
The principal issue currently facing the Company is a lack of the financial
resources and liquidity required to maintain business momentum and to properly
leverage intellectual property assets; the resolution of this issue is the
highest priority of management. In the absence of the availability of such
financing on a timely basis, the Company may be forced to materially curtail or
cease its operations.
Two important derivative issues relate to the Company's research and licensing
agreements with the City University of New York. The Company has an outstanding
financial obligation to the University for work conducted during the period
August 1997 through July 1998. In 1999, an agreement was reached to extend the
time for payment until June 30, 2000. In October 2000, the Company and the City
University entered into a second agreement, which further extended the time for
payment until October 31, 2001. The time period for negotiating a minimum
royalty agreement on certain patents, which have or will pass the five-year
period for commercialization, was also extended until October 31, 2001. While we
are actively working to negotiate additional time extensions there is no
guarantee that we will be successful, and if so, that any subsequent agreements
will be on terms favorable to the Company. In addition, according to the terms
of our research and licensing agreement with the University, the Company must
negotiate a minimum royalty Agreement within 5 years of the date of filing for
all licensed patents for which product commercialization has not yet occurred.
As of the date of this filing, nine patents for which the Company has an
exclusive license from the Research Foundation have passed the five-year
commercialization window. The Company has negotiated with the Research
Foundation and extended the period of exclusivity for this intellectual
property. If the Company is unsuccessful in future negotiations, it could lose
rights to several of its key patents. The Company holds and totally owns certain
patents independent of CUNY that are not so affected which are seminal to its
basic technology.
We believe that the Company is eligible to receive benefits under the State of
New Jersey Technology Business Tax Certificate Program (which allows emerging
technology and biotechnology businesses to sell their unused Net Operating Loss
(NOL) carryover to any corporate taxpayer in the state for at least 75% of the
tax benefits) through the sale of its New Jersey Net Operating Loss carryover.
On June 28, 2000, the Company submitted an application for benefits under this
program. This application was approved and the Company received $237,556 in net
proceeds from the sale. The Company has applied again as of June 25, 2001 and
continues in its belief that it is eligible for participation in this program.
It is our intention to use any proceeds derived to fully fund the payment of our
obligation to the City University and to support other relevant development
activity. The Company has entered into a three-year agreement on very favorable
terms (83.3%) with a New Jersey corporate taxpayer to purchase the NOL. On
September 27, 2001 Peter Katevatis successfully re-negotiated this percentage
increasing it from 83.3% to 87.3%.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
--------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
MEDISCIENCE TECHNOLOGY CORP.
----------------------------
(REGISTRANT)
DATE: October 15, 2001 By: /s/ Peter Katevatis
--------------------------- ------------------------------------
PETER KATEVATIS
Chairman/CEO
By: /s/ John M. Kennedy
------------------------------------
JOHN M. KENNEDY
Treasurer
Chief Accounting Officer