-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q3wnEZa2fIvNRT0n7hntL7JbDZ1P5Dxl2u1iA+HDbXEcw0Cv+ttOA7FAiHNOoxse jd5Ox+T1zAeFHucoDUpAsg== 0000914317-02-000655.txt : 20020617 0000914317-02-000655.hdr.sgml : 20020617 20020617161433 ACCESSION NUMBER: 0000914317-02-000655 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011130 FILED AS OF DATE: 20020617 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-07405 FILM NUMBER: 02680712 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/A 1 form10qsb_45626-0602.txt FORM 10-QSB/A 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 November 30, 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) 856-428-7952 ------------ 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 November 30, 2001. Title of Class Number of Shares Outstanding - ----------------------- ---------------------------- Common Stock, par value 36,926,870 $.01 per share MEDISCIENCE TECHNOLOGY CORP. ---------------------------- NOVEMBER 30, 2001 ----------------- INDEX ----- PAGE ---- PART I. Financial Information Item 1. Consolidated Financial Statements Consolidated Balance Sheets as at November 30, 2001 (Unaudited) and February 28, 2001 (Audited) 1 Consolidated Statement of Operations for the Nine and Three Months Ended November 30, 2001 (Unaudited) and November 30, 2000 (Unaudited) 2 Consolidated Statement of Cash Flows for the Nine Months Ended November 30 , 2001 (Unaudited) and November 30, 2000 (Unaudited) 3 Exhibit to Statements of Operations 4 Notes to Financial Statements 5 - 9 Item 2. Management's Plan of Operation 10 - 12 PART II. Other Information 13 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 AMENDED -----------------------------------
ASSETS ------ November 30, 2001 February 28, (Unaudited) 2001 (Audited) ----------- -------------- CURRENT ASSETS Cash $ -- $ 7,120 Other Assets -- -- ----- ----- Total Current Assets -- 7,120 ----- ----- PROPERTY, PLANT AND EQUIPMENT Net of Accumulated Depreciation $201,811 - November 30, 2001; $199,178 - February 28, 2001 2,167 4,800 ----- ----- TOTAL ASSETS $2,167 $11,920 ====== ======= LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------------------- CURRENT LIABILITIES Accounts Payable $ 12,171 $ 14,943 Other Accrued Liabilities 2,384,081 2,127,028 Officer and Other Loans 167,729 152,229 ----------- ----------- Total Current Liabilities 2,563,981 2,294,200 ----------- ----------- STOCKHOLDERS' DEFICIENCY Preferred Stock - $.01 Par Value; Authorized 50,000 Shrs; Outstanding 2,074 Shrs - February 28, 2001; (Preference on Liquidation $20,740) -- 21 Common Stock $.01 Par Value, Authorized 39,950,000 Shares; Outstanding 36,926,870 Shares - November 30, 2001; 36,276,130 Shares - February 28, 2001 369,269 362,761 Additional Paid-in Capital 18,396,490 18,274,977 Accumulated Deficit (21,327,573) (20,920,039) ----------- ----------- Total Stockholders' Deficiency (2,561,814) (2,282,280) ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' DEFICIENCY $ 2,167 $ 11,920 =========== ===========
"See Accompanying Notes to Consolidated Financial Statements." 1 MEDISCIENCE TECHNOLOGY CORP. ---------------------------- CONSOLIDATED STATEMENT OF OPERATIONS AMENDED -------------------------------------------- FOR THE NINE AND THREE MONTHS ENDED NOVEMBER 30, 2001 AND 2000 -------------------------------------------------------------- (UNAUDITED) -----------
NINE MONTHS THREE MONTHS ----------------------------- ------------------------------ 2001 2000 2001 2000 ----------- ------------ ------------ ------------ Net Sales $ -- $ -- $ -- $ -- Cost of Sales -- -- -- -- ----------- ----------- ------------ ----------- Gross Profit -- -- General and Administrative Expense 365,131 535,567 165,791 173,343 Product Development Expense -- -- -- -- Advertising, Travel and Marketing 42,570 37,997 8,565 2,456 ----------- ----------- ------------ ----------- Total Expenses 407,701 573,564 174,356 175,799 ----------- ----------- ------------ ----------- Other Income 167 434 42 46 ----------- ----------- ------------ ----------- Net Loss $ (407,534) $ (573,130) (174,314) (175,753) =========== =========== ============ =========== Net Loss Per Common Share, Basic and Diluted $ (.01) $ (.02) (.005) $ (.005) =========== =========== ============ =========== Weighted Average Number of Shares of Common Stock Outstanding 36,606,212 36,181,686 36,879,710 36,226,130 =========== =========== ============ ===========
Supplemental Disclosure - ----------------------- In November 2001, Preferred Shareholders converted 1 share of Preferred for 10 shares of Common "See Accompanying Notes to Consolidated Financial Statements." 2 MEDISCIENCE TECHNOLOGY CORP. ---------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS AMENDED -------------------------------------------- FOR THE NINE MONTHS ENDED NOVEMBER 30, 2001 AND 2000 ---------------------------------------------------- (UNAUDITED) -----------
2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (407,534) $ (573,130) Adjustment for Item Not Requiring Cash Outlay Depreciation 2,633 2,842 Stock Issued for Services 83,000 65,000 ------------- ------------ Subtotal (321,901) (505,288) Changes in Assets and Liabilities: Decrease (Increase) in Other Assets -- 20,191 Increase (Decrease) in Accounts Payable (2,772) (5,334) Increase (Decrease) in Other Accrued Liabilities 257,053 428,578 Increase (Decrease) In Officer and Other Loans 15,500 7,856 ------------- ------------ Net Cash Flows Used for Operating Activities (52,120) (53,997) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES -- -- ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Issuance of Common Stock 45,000 37,500 ------------- ------------ DECREASE IN CASH (7,120) (16,497) CASH Beginning Balance 7,120 17,066 ------------- ------------ Ending Balance $ -- $ 569 ============= ============
"See Accompanying Notes to Consolidated Financial Statements." 3 EXHIBIT TO STATEMENTS OF OPERATIONS WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Common Weighted Stock Average $.01 Par Value Common Number of Number of Issued and Stock Shares 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 36,856,130 -- 36,856,130 August 2001 36,856,130 -- 36,856,130 September 2001 36,856,130 -- 36,856,130 October 2001 36,856,130 -- 36,856,130 November 2001 36,926,870 -- 36,926,870 36,606,212
"See Accompanying Notes to Consolidated Financial Statements." 4 Notes to Financial Statements 1. Management Plans and Going Concern Matters The Company expects to incur substantial expenditures to further the development and commercialization of its products. To achieve this, management will seek additional financing through private placements or other financing alternatives, and might also seek to sell the Company or its technology. There can be no assurance that continued financings will be available to the Company or that, if available, the amounts will be sufficient or that the terms will be acceptable to the Company. The Company has no revenues, incurred significant losses from operations, has an accumulated deficit and a highly leveraged position that raises substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis are dependent upon, among other things, (i) the Company's ability to obtain capital resources to fund operations (ii) the Company's ability to create and implement a strategic business plan, and (iii) the Company's ability to generate sufficient cash from operations to meet its obligations. 2. Nature of Operations and Basis of Presentation 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. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements as of and for the three and nine month periods ended November 30, 2001 and 2000 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's 2000 Annual Report on Form 10-K. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (which are of a normal recurring nature) necessary for a fair statement of the results for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year. 3. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the 5 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 4. Related Party Transactions In May 1992, the Company entered into a five-year employment agreement with Peter Katevatis, then Chief Executive Officer, President and Stockholder of the Company. Pursuant to the terms of such agreement, Mr. Katevatis was to be paid $190,000 per year, plus annual increases based on the consumer price index. The employment agreement further provided for a bonus and fringe benefits in accordance with policies and formulas mutually agreed upon by Mr. Katevatis and the Board of Directors. In January 1996, the Company elected a new President and Chief Executive Officer, Herbert L. Hugill. Mr. Katevatis remained Chairman and Treasurer of the Company. Accordingly, the employment agreement with Mr. Katevatis was amended effective March 1, 1996 providing for an annual salary of $100,000 per year for the next three years. In connection with this amendment, in March 1996, the Company issued 552,664 restricted shares of the Company's common stock of Mr. Katevatis, which was recorded as additional compensation expense in fiscal 1997 of $453,184. All other provisions of the agreement remained the same. Pursuant to the terms of an employment agreement, Mr. Hugill, was to be paid $50,000 per annum, was issued options to purchase 200,000 shares of the Company's stock, and was to receive warrants to purchase shares equal to 5% of the number of common shares outstanding on January 18, 1996 (or up to 10% as of such date at the discretion of the Board of Directors) at an option price of $1.00 per share, upon the attainment of certain milestones in the future. On January 31, 1997, Mr. Hugill resigned as President and Chief Executive Officer of the Company and the 200,000 options were cancelled. The warrant agreement was amended and effective January 31, 1997, Mr. Hugill was granted a warrant to purchase up to 473,220 shares of the Company's common stock at a price of $1.00 per share. This warrant is exercisable at any time through July 2003 except for 315,480 shares which is exercisable only upon the attainment of certain milestones. Compensation expense will be recognized for the difference between the warrant price and the fair market value of the stock at the date that the milestones are attained. As of November 30, 2001, no milestones have been achieved. In addition, the Company issued 50,000 shares of common stock to Mr. Hugill upon his termination. The Company recorded $37,500 as compensation expense for the fair value of the shares issued. In February 1997, Mr. Katevatis resumed the role as President and Chief Executive Officer. Accordingly, the employment agreement with Mr. Katevatis was amended for an annual salary of $200,000 per year. In August 1999, the Board of Directors approved the extension of Mr. Katevatis's existing contract from March 5, 2002 to March 5, 2007, maintaining all other original contract terms and conditions. 6 Legal services rendered by Mr. Katevatis amounted to $37,500 for the nine months ended November 30, 2001 and 2000 and $12,500 for the three months ended November 30, 2001 and 2000. These amounts have been charged to operations. In 2000 and 2001, Mr. Katevatis advanced funds to the Company in order to provide the Company with the funding to pay operational expenses as they became due. These advances do not accrue interest and are to be repaid as soon as the Company raises additional funds. As of November 30, 2001 and February 28, 2001, the balance of the officer and other loans payable to Mr. Katevatis was $137,729 and $122,229, respectively. In fiscal 1999, the Company borrowed $25,000 from Tami Adelstein and issued Mr. Adelstein a warrant to purchase 100,000 shares of the Company's common stock at $.25 per share. The warrant was valued at $11,400 and was recorded as interest expense. The loan is due and payable by the Company without interest on or before August 12, 1999; thereafter, interest is payable at the rate of 1.5% per month. On August 12, 1999, the Company did not repay the note. On October 12, 1999, Peter Katevatis, advanced the funds for the repayment of the note and accrued interest to October 12, 1999. In addition, the Company pays property taxes and certain operating expenses on the home of Mr. Katevatis in lieu of rent, since the Company's operations are located in Mr. Katevatis home. Expenses recognized were $5,022 and $5,218 for the nine months ended November 30, 2001 and 2000 and $756 and $2,259 for the three months ended November 30, 2001 and 2000. On November 17, 1999, the Company entered into a three year employment agreement beginning February 1, 2000 with Dr. Frank S. Castellana. Pursuant to the terms of such agreement, Dr. Castellana became the President and Chief Executive Officer of the Company and is to be paid $100,000 per annum. In addition, he was issued options to purchase up to 914,373 shares of the Company's common stock at an option price of $.32 per share and was issued a warrant to purchase up to 1,978,746 shares of the Company's common stock at an exercise price of $.05 per share for the first 150,000 shares and at an exercise price of $.50 per share for the remaining 1,828,746 shares. The 150,000 shares vested upon his first day of work which was February 1, 2000. In connection with vesting on February 1, 2000, the Company recognized an expense of $98,079 which represented the fair market value of the warrant on the vesting date since the warrant was issued prior to the effective employment date. Dr. Castellana's ability to exercise these options and remaining shares under the warrant is subject to a series of milestones described in his employment agreement. The Company may have to recognize compensation expense in the future on these options and warrants calculated as the difference between the option and warrant prices and the fair market value of the Company's common stock on the date the milestones are achieved. 7 5. Other Accrued Liabilities Accrued liabilities consist of the following: November 30, February 28, ------------ ------------ 2001 2001 ------------ ------------ Legal and professional fees $ 258,850 $ 180,100 Research and development 1,084,898 962,399 Salaries and wages 1,003,000 943,833 Other 37,333 40,696 ---------- ---------- $2,384,081 $2,127,028 ========== ========== Included in legal and professional fees as of November 30, 2001 and February 28, 2001 is $175,000 and $137,500, respectively, for legal services rendered by Mr. Katevatis (Note 4). Included in research and development as of November 30, 2001 and February 28, 2001 is $757,817 and $635,318, respectively, owed to Dr. Alfano (Note 6) with respect to his consulting agreement. Included in salaries and wages as of November 30, 2001 and February 28, 2001 is $956,333 and $806,333, respectively, owed to Mr. Katevatis and $168,750 and $137,500, respectively, owed to Mr. Castellana in accordance with their respective employment agreements. 6. Commitments and Contingencies In April 1992, the Company entered into a five year consulting agreement (the "Agreement") with Dr. Robert R. Alfano, a principal shareholder of the Company and Chairman of its Scientific Advisory Board. Pursuant to the terms of such Agreement, Dr. Alfano is to be paid a consulting fee of not less that $150,000 per annum in exchange for services to be rendered for approximately fifty (50) days per annum in connection with the Company's medical photonics business. The Agreement further provides that Dr. Alfano is to be paid a bonus and fringe benefits in accordance with policies and formulas provided to key executives of the Company. In August 1999, the contract was extended to March 2007. All other provisions of the Agreement remained the same. The Company has committed to fund approximately $295,000 over a twelve-month period beginning June 1, 1995 for Mediphotonics Laboratory research at the City College of the City University of New York ("CCNY") under a contract which is renewed annually. The Company has funded CCNY approximately $157,565 for the twelve-month periods ended May 31, 1999. The Company did not provide any funding during the three and nine month periods ended November 30, 2001 and 2000. In connection with the acquisition of patent rights to its cancer detection technology, the Company assumed an obligation to pay to Dr. Alfano's daughter a royalty of one percent of the gross sales derived from any equipment made, leased or sold which utilizes the concepts described in the Company's cancer detection patent. Additionally, the Company is to pay a royalty equal to three and 8 one half percent of the gross sales of any invention from the Company's existing patents or newly obtained patents, respectively. No amounts have been paid during the three and nine month periods ended November 30, 2001 and 2000. In addition to the above royalties, the Company has obtained worldwide licensing rights for patents from two universities and has agreed to pay royalties of four percent of the net sales of all products generated form the patents and fifty percent of any income received from sublicensing of the patents. No amounts have been paid during the three and nine month periods ended November 30, 2001 and 2000. 9 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. 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 a three year 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 10 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. Pursuant to the terms of such agreement, Mr. Braginsky is to be paid $100,000 per annum. In addition, on the date of this Agreement, MDSC will grant to Employee an incentive stock option / Warrant pursuant to the 1999 Plan (the "Option") to purchase a total of 2,000,000 shares of MDSC common stock. (i) 1,850,000 shares of MDSC Common Stock at option price of $.1.00 per share, and (ii) 150,000 shares at $.25 per share. Sidney Braginsky's ability to exercise these options and remaining shares under the warrant is subject to a series of milestones described in his employment agreement. The Company may have to recognize compensation expense in the future on these options and warrants calculated as the difference between the option and warrant prices and the fair market value of the Company's common stock on the date the milestones are achieved. This option shall be effected as to any adjustment in the event of first round funding, stock splits, reverse stock splits, warrants, etc., excepting however contract rights, agreements anti-dilution rights, etc. (reflected in corporate SEC filings) in Peter Katevatis and Dr. Robert Alfano founders. The five critical milestones (each, a "Critical Milestone") described in the Business Plan for Sidney Braginsky to accomplish with appropriate funding to the Company are: (vii) preclinical toxicity studies within 9 months of the initial funding contemplated by the Business Plan (the "Initial Funding Date"), (viii) device development and preclinical validation within 15 months of the Initial Funding Date, (ix) phase I clinical trials within 24 months of the Initial Funding Date, (x) phase 111 clinical trials and PMA submission to the FDA within 34-1/2months of the Initial Funding Date and (xi) PMA approval within 36 months of the Initial Funding Date. 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. This contract matter is in continued negotiations with outside counsel acting for Drexel. 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 11 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. The Company has entered into a three-year agreement on very favorable terms (83.3%) with a New Jersey corporate taxpayer, Public Service Electric and Gas Co. of New Jersey to purchase the NOL. The Company applied again as of June 25, 2001 (second of three year Agreement). On September 27, 2001 Peter Katevatis, Esq. successfully re-negotiated this percentage increasing it from 83.3% to 87.0%. On November 16, 2001 the New Jersey Economic Development Authority advised that our (2nd) application for State fiscal year 2002 (July 1, 2001 to June 30, 2002) was approved with authority to transfer $278,008 from present total tax benefits of $513,070 based on our total State audited NOL as of 2001 of $5,700,779. Under the negotiated terms of our agreement with PSE&G the Company expects to receive $241,867 in proceeds in January 2002. 12 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- As of November 30, 2001 Preferred Stock Shareholders converted Series A Preferred at the rate of ten (10) shares of Mediscience Common for each share of Preferred with a total issuance of 20,740 shares. 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 -------------------------------- 13 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: June 17, 2002 By: /s/ Peter Katevatis ------------------- --------------------------------------------- PETER KATEVATIS Chairman/CEO By: /s/ John M. Kennedy --------------------------------------------- JOHN M. KENNEDY Treasurer Chief Accounting Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----