-----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, SVyofBiTZXPm0Yg8ViEpi6AHkRZjWV5iEXakV32dS86Lmw6kAI24HR5U9ZpDvCu+ d2/yhA+NUf3sxzXh4r70Cg== 0000914317-08-000135.txt : 20080118 0000914317-08-000135.hdr.sgml : 20080118 20080118154919 ACCESSION NUMBER: 0000914317-08-000135 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071130 FILED AS OF DATE: 20080118 DATE AS OF CHANGE: 20080118 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: 08538850 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 form10qsb-88959_mdsc.txt 10QSB 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 November 30, 2007 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) 215-485-0362 ------------ 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, 2007. Title of Class Number of Shares Outstanding -------------- ---------------------------- Common Stock, par value 66,064,274 $.01 per share MEDISCIENCE TECHNOLOGY CORP. ---------------------------- NOVEMBER 30, 2007 ----------------- INDEX ----- PAGE ---- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheet as of November 30, 2007 1 (Unaudited) and February 28, 2007 (Audited) Consolidated Statement of Operations for the Nine and Three Months Ended November 30, 2007 (Unaudited) and November 30, 2 2006 (Unaudited) Consolidated Statement of Changes in Stockholders' Deficit for the Nine Months Ended November 30, 2007 (Unaudited) 3 Consolidated Statement of Cash Flows for the Nine Months Ended November 30, 2007 (Unaudited) and November 30, 2006 4 (Unaudited) Exhibit to Consolidated Statement of Operations 5 Notes to Financial Statements 6-11 Item 2. Management's Discussion and Analysis and Plan of Operation 12-15 Item 3. Controls and Procedures 16 PART II. Other Information 17 Item 1. Legal Proceedings Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures 18 Exhibit Index 19 Exhibits 20-22
MEDISCIENCE TECHNOLOGY CORP. ---------------------------- CONSOLIDATED BALANCE SHEET -------------------------- ASSETS ------ November 30, February 28, 2007 2007 (Unaudited) (Audited) ------------ ------------ CURRENT ASSETS - -------------- Cash and Cash Equivalents $ 185,380 $ 138,508 Prepaid Expenses and Other Current Assets 60,507 25,536 ------------ ------------ Total Current Assets 245,887 164,044 PROPERTY, PLANT AND EQUIPMENT - ----------------------------- Net of Accumulated Depreciation 454 1,162 OTHER ASSETS - Security Deposit 1,800 1,800 - ------------ - Deferred Costs 380,729 750,994 ------------ ------------ TOTAL ASSETS $ 628,870 $ 918,000 - ------------ ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES - ------------------- Convertible Debt, Net of Discount $449,629 and $75,000 $ 550,371 $ -- Accounts Payable 56,307 35,971 Accrued Liabilities 3,629,004 3,531,898 ------------ ------------ Total Current Liabilities 4,235,682 3,567,869 ------------ ------------ STOCKHOLDERS' DEFICIT - --------------------- Convertible Preferred Stock, $.01 Par Value, 50,000 Shares Authorized; Issued and Outstanding -0- Shares -November 30, -- -- 2007; -0- Shares - February 28, 2007 Common Stock $.01 Par Value, Authorized 199,950,000 Shares; Issued and Outstanding Shares - 66,064,274 Shares 660,643 641,283 November 30, 2007; 64,128,274 Shares - February 28, 2007 Additional Paid-in Capital 26,230,572 25,073,282 Accumulated Deficit (30,498,027) (28,364,434) ------------ ------------ Total Stockholders' Deficit (3,606,812) (2,649,869) ------------ ------------ TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 628,870 $ 918,000 - ----------------------------------------- ============ ============ See Notes to Consolidated Financial Statements. -1-
MEDISCIENCE TECHNOLOGY CORP. ---------------------------- CONSOLIDATED STATEMENT OF OPERATIONS ------------------------------------ FOR THE NINE AND THREE MONTHS ENDED NOVEMBER 30, 2007 AND 2006 -------------------------------------------------------------- (UNAUDITED) ----------- NINE MONTHS THREE MONTHS 2007 2006 2007 2006 ------------ ------------ ------------ ------------ Net Sales $ -- $ -- $ -- $ -- Cost of Sales -- -- -- -- ------------ ------------ ------------ ------------ Gross Profit -- -- -- -- ------------ ------------ ------------ ------------ General and Administrative Expense 908,286 832,102 300,823 252,858 Product Development Expense 626,179 206,578 278,342 71,102 ------------ ------------ ------------ ------------ Total Expenses 1,534,465 1,038,680 579,165 323,960 ------------ ------------ ------------ ------------ Interest Income 8,555 3,221 3,264 1,255 Interest Expense (57,312) -- (29,919) -- Accretion of Interest on Convertible Debt (550,371) -- (298,659) -- ------------ ------------ ------------ ------------ Total Other Income and (Expense) (599,128) 3,221 (325,314) 1,255 ------------ ------------ ------------ ------------ Net Loss $ (2,133,593) $ (1,035,459) $ (904,479) $ (322,705) ============ ============ ============ ============ Basic and Diluted Loss Per Common Share $ (0.032) $ (0.017) $ (0.014) $ (0.005) ============ ============ ============ ============ Weighted Average Common Shares Outstanding 65,499,607 61,845,270 66,064,274 62,751,446 ============ ============ ============ ============ See Notes to Consolidated Financial Statements. - 2 -
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE NINE MONTHS ENDED NOVEMBER 30, 2007 (UNAUDITED) Preferred Stock Common Stock Additional Accumulated --------------- ------------ ---------- ----------- Shares Amount Shares Amount Paid-In Capital Deficit ------ ------ ------ ------ --------------- ------- BALANCE, FEBRUARY 28, 2007 -- $ -- 64,128,274 $ 641,283 $ 25,073,282 $(28,364,434) Issuance of Stock - Anti-dilution Rights 336,000 3,360 (3,360) Issuance of Stock - For Cash 1,000,000 10,000 90,000 Issuance of Stock - Consulting Services 600,000 6,000 54,000 Issuance of Warrants - Prepaid Financing Charges 91,650 Discount on Debt due to Beneficial Conversion Option 925,000 Net Loss (2,133,593) ------------ ------------ ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 2007 -- $ -- 66,064,274 $ 660,643 $ 26,230,572 $(30,498,027) ============ ============ ============ ============ ============ ============ See Notes to Consolidated Financial Statements. - 3 -
MEDISCIENCE TECHNOLOGY CORP. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006 (UNAUDITED) 2007 2006 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES - ------------------------------------ Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Operating Activities: Net Loss $(2,133,593) $(1,035,459) Accretion of Interest on Convertible Debt 550,371 -- Depreciation 708 708 Amortization of Prepaid Financing Charges 45,317 -- Amortization of Deferred Costs 406,656 401,479 Stock Issued for Consulting Services -- 14,880 ----------- ----------- Subtotal (1,130,541) (618,392) Changes in Assets and Liabilities (Increase) Decrease in Prepaid Expense and Other Current Assets 34,971 (2,002) (Decrease) Increase in Accounts Payable 20,336 (22,609) Increase in Accrued Liabilities 97,106 294,914 ----------- ----------- Net Cash Used in Operating Activities 152,413 (348,089) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES - ------------------------------------ Proceeds from Common Stock Subscribed -- 60,000 Proceeds from Issuance of Common Stock 100,000 240,000 Proceeds from Issuance of Convertible Debt 925,000 -- ----------- ----------- Net Cash Provided by Financing Activities 1,025,000 300,000 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 46,872 (48,089) - ------------------------------------------------ CASH AND CASH EQUIVALENTS - ------------------------- Beginning Balance 138,508 136,635 ----------- ----------- Ending Balance $ 185,380 $ 88,546 =========== =========== SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING - ------------------------------------------- ACTIVITIES: ----------- Common Stock Issued for Future Services $ 60,000 $ 139,520 =========== =========== Common Stock Issued for Anti-Diluting Rights $ 3,360 $ 6,304 =========== =========== Discount on Debt Due to Beneficial Conversion Option $ 925,000 $ -- =========== =========== Warrants Issued for Prepaid Financing Charges $ 91,650 $ -- =========== =========== Common Stock Issued - Cancellation of Debt $ -- $ 28,333 =========== =========== See Notes to Consolidated Financial Statements - 4 -
EXHIBIT TO CONSOLIDATED STATEMENT OF OPERATIONS WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (UNAUDITED) ----------- WEIGHTED -------- NET AVERAGE SHARES PER SHARE --- -------------- --------- LOSS OUTSTANDING AMOUNT ---- ----------- ------ Nine Months Ended November 30, 2007 ----------------------------------------- Basic/diluted loss per common share: Net Loss $(2,133,593) 65,499,607 $ (0.032) Effect of Dilutive Securities -- -- -- ----------- ----------- ----------- Total $(2,133,593) 65,499,607 $ (0.032) =========== =========== =========== Nine Months Ended November 30, 2006 ----------------------------------------- Basic/Diluted Loss Per Common Share: Net Loss $(1,035,459) 61,845,270 $ (0.017) Effect of Dilutive Securities -- -- -- ----------- ----------- ----------- Total $(1,035,459) 61,845,270 $ (0.017) =========== =========== =========== Three Months Ended November 30, 2007 ----------------------------------------- Basic/Diluted Loss Per Common Share: Net Loss $ (904,479) 66,064,274 $ (0.014) Effect of Dilutive Securities -- -- -- ----------- ----------- ----------- Total $ (904,479) 66,064,274 $ (0.014) =========== =========== =========== Three Months Ended November 30, 2006 ----------------------------------------- Basic/Diluted Loss Per Common Share: Net Loss $ (322,705) 62,751,446 $ (0.005) Effect of Dilutive Securities -- -- -- ----------- ----------- ----------- Total $ (322,705) 62,751,446 $ (0.005) =========== =========== =========== - 5 - Notes to Consolidated Financial Statements (Unaudited) ----------- 1. Management Plans and Going Concern Matters Mediscience Technology Corp. and Subsidiaries (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 Company expects to incur substantial expenditures to further the development and commercialization of its products. The Company intends to seek additional financing through private placements or other financing alternatives, and may 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. 2. Nature of Operations and Basis of Presentation The Company operates in one business segment and is principally engaged in the design and development of medical diagnostic instruments that detect cancer in vivo in humans by using light to excite the molecules contained in tissue and measuring the differences in the resulting natural fluorescence between cancerous and normal tissue. The consolidated financial statements include the accounts of Mediscience Technology Corp. ("Mediscience") and its wholly-owned subsidiaries, Laser Diagnostics Instruments, Inc. ("LASER"), Photonics for Women's Oncology, LLC ("PHOTONICS"), Proscreen, LLC ("PROSCREEN"), Medi-Photonics Development, LLC ("MEDI"), and Bioscopix, Inc. ("Bioscopix"). Mediscience and Bioscopix are the only active subsidiaries of the Company. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements as of and for the nine month periods ended November 30, 2007 and 2006 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included and have been prepared on a consistent basis using the accounting policies described in the Summary of Accounting Policies included in the Annual Report on Form 10-KSB for the fiscal year ended February 28, 2007. The interim operating results for the nine months ended November 30, 2007 may not necessarily be indicative of the operating results expected for the full year. - 6 - 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 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. Loss per Common Share Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. Basic loss per share is based on the average number of shares outstanding during the period. Diluted loss per share is the same as basic loss per share, as the inclusion of common stock equivalents, such as options, would be antidilutive. Accounting for Stock-Based Compensation The adoption of SFAS No. 123R effective March 1, 2006, using the modified prospective method, had no effect on the Company's results of operations since there were no nonvested options at March 1, 2006. There were no employee stock options issued during the fiscal nine months ended November 30, 2007 and 2006. Recent Accounting Pronouncements In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes. FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. FIN 48 will be effective for fiscal years beginning after December 15, 2006 (in fiscal year 2007) and the provisions of FIN 48 will be applied to all tax positions under Statement No. 109 upon initial adoption. The cumulative effect of applying the provisions of this interpretation will be reported as an adjustment to the opening balance of retained earnings for that fiscal year. The adoption of FIN 48 did not require an adjustment to its consolidated financial statements. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, ("SFAS No. 157"). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure value, and the expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact on the consolidated financial statements. - 7 - In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure many financial instruments and certain other times at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will become effective for us beginning with the first quarter of 2008. The Company has not yet determined the impact of the adoption of SFAS No. 159 on its financial statements and footnote disclosures. 4. Deferred Costs Expected future amortization of all deferred costs is as follows: Nine Months Ending February 29, 2008 $ 114,362 Year Ending February 28, 2009 165,820 Year Ending February 28, 2010 100,547 5. Convertible Debt On January 10, 2007 the Company commenced a Private Placement Offering for $2,000,000 of 12% convertible promissory notes ("the Notes") in amounts of not less than $25,000. The Notes shall be due and payable, together with accrued and unpaid interest on the earlier of April 15, 2008 or three months after the completion of the initial public offering ("the IPO) of the shares of Bioscopix. Holders of the Notes may convert the notes into (i) cash in the amount of the principal and accrued and unpaid interest due and a warrant exercisable until April 15, 2009 to purchase shares of Bioscopix in an amount equal to 50% of the principal of the Notes at an exercise price of 120% of the five day volume weighted average price preceding the effective date of the IPO of Bioscopix or (ii) shares of Bioscopix at a price equal to 50% of the IPO price of the Bioscopix shares of common stock in an amount equal to the principal and accrued and unpaid interest due on the Notes. In accordance with EITF 00-27 under option (ii), the carrying value of the Notes was reduced by the intrinsic value of the beneficial conversion option resulting in a carrying value of $0. As of November 30, 2007 and February 28, 2007, $1,000,000 and $75,000 of the Notes have been issued with related discount of $1,000,000 and $75,000. The Notes will be accreted to their maturity value over the term of the Notes. Accretion of discount on a convertible debt amounted to $550,371 and $298,659 for the nine months and three months ended November 30, 2007. Accrued interest on convertible debt amounted to $57,312 and $29,919 for the nine months and three months ended November 30, 2007. 6. Related Party Transactions Legal services rendered by Mr. Katevatis, Chairman/CEO amounted to $37,500 for the nine months ended November 30, 2007 and 2006. These amounts are recorded in general and administrative expense. - 8 - As part of Mr. Katevatis' employment agreement, 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 $15,306 and $15,125 for the nine months ended November 30, 2007 and 2006, respectively. 7. Accrued Liabilities Accrued liabilities consist of the following: November 30, February 28, ------------ ------------ 2007 2007 ---- ---- Legal and professional fees $ 190,882 $ 227,381 Consulting and university fees 1,438,415 1,440,616 Salaries and wages 1,764,667 1,847,759 Other 149,747 101,435 ---------- ---------- Total $3,629,004 $3,531,898 ========== ========== Included in legal and professional fees as of November 30, 2007 and February 28, 2007 is $63,458 and $75,958 respectively, for legal services rendered by Mr. Katevatis (Note 6). Included in Consulting and University Fees as of November 30, 2007 and February 28, 2007 is $1,397,019 and $1,394,818, respectively, owed to Dr. Alfano, a principal stockholder and former Chairman of the Company's scientific advisory board, with respect to his former consulting agreement. Included in salaries and wages as of November 30, 2007 and February 28, 2007 is $1,838,759 and $1,689,667 respectively, owed to Mr. Katevatis with respect to his employment agreement. Included in salaries and wages as of November 30, 2007 and February 28, 2007 is $9,000 and $15,000, respectively, owed to Mr. Benick, Chief Financial Officer, with respect to his employment agreement. 8. Stockholders' Deficit Anti-Dilution Rights The Company granted certain anti-dilution rights to Mr. Peter Katevatis and Dr. Robert Alfano. Mr. Katevatis was granted anti-dilution rights on certain shares ("Katevatis Shares"), which at the time represented 17% ("Katevatis Anti-Dilution Percentage") of the then issued and outstanding shares of common stock of the Company. The anti-dilution rights require the Company from time to time to issue additional shares of common stock of the Company to Mr. Katevatis so that the Katevatis Shares represent 17% of the - 9 - issued and outstanding shares of common stock of the Company. If Mr. Katevatis were to sell a portion or all of the Katevatis Shares, the Katevatis Anti-Dilution Percentage would be adjusted proportionately. During the nine months ended November 30, 2007, the Company issued 272,000 shares of common stock of the Company to Mr. Katevatis in connection with the anti-dilution rights. In connection with the issuance of these shares, the Company capitalized only the stock's par value from additional paid-in-capital because of the Company's accumulated deficit. Dr. Alfano was granted anti-dilution rights on certain shares ("Alfano Shares"), which at the time represented 4% ("Alfano Anti-Dilution Percentage") of the then issued and outstanding shares of common stock of the Company. The anti-dilution rights require the Company from time to time to issue additional shares of common stock of the Company to Dr. Alfano so that the Alfano Shares represent 4% of the issued and outstanding shares of common stock of the Company. If Dr. Alfano were to sell a portion or all of the Alfano Shares, the Alfano Anti-Dilution Percentage would be adjusted proportionately. During the nine months ended November 30, 2007, the Company issued 64,000 shares of common stock of the Company to Dr. Alfano in connection with the anti-dilution rights. In connection with the issuance of these shares, the Company capitalized only the stock's par value from additional paid-in-capital because of the Company's accumulated deficit. Common Stock Issued for Future Services During March 2006, the Company issued 500,000 restricted shares of its common stock with a value of $80,000 to a consulting company in exchange for services to be rendered over a period of approximately three years. The transaction was recognized based on the fair value of the shares issued. Those services would consist of ongoing consultation in the construction of eight CD-Ratiometer units. During the quarter ended August 31, 2007, the consulting agreement with Alfanix was cancelled. The Company has requested the return of the 500,000 shares of common stock of Mediscience. Mediscience is to return the 10,000 shares of common stock of Alfanix. The shares are expected to be returned in a subsequent period and be cancelled. All unamortized costs associated with the above transaction have been expensed in the quarter ended August 31, 2007. During May 2007, the Company issued 600,000 restricted shares of its common stock with a value of $60,000 to a medical consultant in exchange for services to be rendered over a period of one year. These services will consist of development and commercialization. The transaction was recognized based on the fair value of shares issued. Common Stock Issued for Cash In connection with the issuance of common stock during the nine months ended November 30, 2007, the Company issued 1,000,000 restricted shares of its common stock for cash proceeds of $100,000. - 10 - 9. Stock Options and Warrants Stock Options ------------- Activity related to stock options during the nine months ended November 30, 2007 is as follows: Weighted -------- Exercise Average -------- ------- Shares Price Range Exercise Price ------ ----------- -------------- Outstanding, February 28, 2007 700,000 $1.00 - $2.00 $ 1.50 Granted -- Exercised -- Forfeited -- ------------- ------------- ------------- Outstanding, November 30, 2007 700,000 $1.00 - $2.00 $ 1.50 ============= ============= ============= Stock Warrants -------------- Activity related to stock warrants during the nine months ended November 30, 2007 is as follows: Shares Exercise ------ -------- Available Price Range --------- ----------- Outstanding, February 28, 2007 6,599,332 $0.25 - $3.00 Granted 1,000,000 $ 0.10 Exercised -- Forfeited -- ------------- ------------- Outstanding, November 30, 2007 7,599,332 $0.10 - $3.00 ============= ============= In conjunction with convertible debt (Note 5), during the nine months ended November 30, 2007, the Company issued 1,000,000 warrants to a company assisting in raising capital, valued at $91,650, which were recorded as prepaid financing charges and being amortized over the term of the convertible debt. The warrants expire on July 19, 2012. All of the warrants were valued at the fair market value at the time of issuance. The fair value was estimated using the Black-Scholes model with the following assumptions: no dividend yield, expected volatility of 115.5%, and a risk-free interest rate based on the 5 year treasury bill rate at the time of issuance. 10. Income Taxes There is no income tax benefit for the losses for the nine months ended November 30, 2007 and 2006 because the Company has determined that the realization of the net deferred tax asset is not assured. The Company has created a valuation allowance for the entire amount of such. - 11 - Managements Discussion and Analysis ----------------------------------- Nine Months Ending November 30, 2007 Compared to ------------------------------------------------ Nine Months Ending November 30, 2006 ------------------------------------ Revenues - -------- We had no revenues during our nine months ending November 30, 2007 and 2006. Our primary focus was our continued development of our light-based technology. General and Administrative Expense - ---------------------------------- General and administrative expenses increased approximately $76,000 or 9% during the current nine month period ended November 30, 2007 as compared to November 30, 2006. The major expense components were as follows: salaries and wages of approximately $186,000 decreased $17,500 due to the departure of the Company's CEO, consulting costs decreased approximately $163,000 due to the decrease in deferred costs and the expiration of Dr. Alfano's agreement. All other general and administrative expenses totaling approximately $383,000 increased $257,000 mainly due to $120,000 of fees for the bridge financing. Product Development Expense - --------------------------- Product development expense increased approximately $420,000 or 203% during the current nine month period ended November 30, 2007 when compared to the prior nine month period ended November 30, 2006. The increase is due to the clinical research being conducted at Infotonics in Rochester, NY. Infotonics has been retained by the Company to develop and commercialize medical diagnostic systems using tissue autofluorescence to detect disease states. Liquidity and Capital Resources - ------------------------------- We had a deficiency in working capital as of November 30, 2007 of approximately $3,990,000 compared to a deficiency of approximately $3,404,000 at February 28, 2007 or a decrease in the deficiency of approximately $586,000 for the current nine month period ended November 30, 2007. The decrease in the deficiency was comprised of an increase of approximately $82,000 in current assets, consisting of cash and prepaid expenses, and an increase of approximately $668,000 in current liabilities which is primarily composed of accrued liabilities. The deficiency in working capital is primarily represented by accruals for professional fees, consulting, salaries and wages and other general obligations. Cash flows from financing activities were $1,025,000 for the nine months ended November 30, 2007, which was related to the proceeds from the private placement of common stock and convertible debt. The proceeds from the private placement will be primarily used for working capital. Our ability to continue our operations is largely dependent upon obtaining regulatory approval for the commercialization of our cancer detection technology. There can be no assurance as to whether or when the various requisite government approvals will be obtained or the terms or scope of these approvals, if granted. We intend to defray the costs of obtaining regulatory approval for the commercialization of such technology by the establishment of - 12 - clinical trial arrangements with medical institutions. We intend to continue to pursue the establishment of co-promotional arrangements for the marketing, distribution and commercial exploitation of its cancer detection technology. Such arrangements, if established, may include up-front payments, sharing of sales revenues after deduction of certain expenses, and/or product development funding. Our management anticipates that substantial resources will be committed to a continuation of our research and development efforts and to finance government regulatory applications. While management believes that we will obtain sufficient funds to satisfy our liquidity and capital resources needs for the short term from the private placement of our securities and short term borrowings, no assurances can be given that additional funding or capital from other sources, such as co-promotion arrangements, will be obtained on a satisfactory basis, if at all. In the absence of the availability of financing on a timely basis, we may be forced to materially curtail or cease our operations. Our operating and capital requirements, as described above, may change depending upon several factors, including: (i) results of research and development activities; (ii) competitive and technological developments; (iii) the timing and cost of obtaining required regulatory approvals for our products; (iv) the amount of resources which we devote to clinical evaluation and the establishment of marketing and sales capabilities; and (v) our success in entering into, and cash flows derived from, co-promotion arrangements. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the small business issuer's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. - 13 - MANAGEMENT'S PLAN OF OPERATION ------------------------------ The Company is principally engaged in the design, development, marketing, and licensing of medical diagnostic instruments that detect cancer in humans through the utilization of ultra violet light. The Company uses UV light to algorithmically excite molecules contained in human tissue. Once excited, the Company's device measures the differences in the resulting natural fluorescence between cancerous and normal tissue providing an algorithmic signature of anomaly. The Company has successfully conducted certain preclinical and clinical evaluations. Due to its; non-invasive characteristics, point of care - real time results, and diagnostic sensitivity and specificity, the Company believes that the commercial appeal for its medical devices could be significant. The Company's strategy is to commercialize early cancer detection devices in the area of cervical, esophagus, oral and colon cancers and is based upon completed technology, prototypes (in the area of cervical cancer) and expertise in the area of fluorescent imaging. The Company formed Medi-photonics Development Company, LLC, a New York limited liability company (Medi), to engage in the development of equipment for optical biopsy. On November 9, 2004, Mediscience entered into an agreement to jointly develop the "Compact Photonic Explorer" (CPE) or "pill camera", for medical and non- medical applications with Infotonics Technology Center, Inc. (Infotonics), (a consortium of Corning, Inc., Eastman Kodak Company and Xerox Corporation). The parties' initial focus is to develop a Compact Photonic Explorer (CPE) or "smart pill". The CPE has a photonic sensor that uses ultraviolet (UV) light to remotely monitor the health of human tissue in various environments. The product is being designed to potentially take a biopsy of various areas of the FI tract through spectroscopy. The initial target of the CPE is to develop a "smart pill" that targets the diagnosis of various forms of cancer throughout the GI tract. On October 26, 2005 Mediscience noted that their joint development of the "Compact Photonic Explorer" (CPE), or "pill camera," for medical applications utilizing (MTC) optical biopsy IP, to advance to a production prototype, (manufacturability, meeting all "market-ready" product performance specs, on a best case scenario and an aggressive time-line). Infotonics has invested several million dollars of funding sponsored by NASA for the research and development of a prototype Optical Biopsy Pill at CUNY. As a result of this investment, a bench-top prototype pill was demonstrated in December of 2005. On December 9, 2005, Mediscience completed development of the CD-Ratiometer and submitted Pre-IDE briefing materials to the FDA with respect to the use of the CD-Ratiometer in the area of cervical cancer detection. On January 5, 2006, Mediscience filed an Investigational Device Exemption (IDE) application with the Center for Devices and Radiological Health of the FDA. The filing is subject to evaluation by the FDA to determine when a proposed human clinical pilot study of the Company's Cervical Cancer Detection Radiometer (CD-R) may begin. - 14 - April 23, 2006, Michael Engelhart's three year employment agreement from April 23, 2003 to April 23, 2006 ended, see Registrants SEC 10-K 2003 page 44 incorporated by reference. CEO, Chairman Katevatis assumed the interim role of President April 24, 2006 and Dr. Stefane Lubitcz assumed the title of Chief Medical Operations Officer (CMOO) as of February 28, 2006 consistent with his on-going FDA responsibilities. (See 8-K filed April 9, 2005), 2006 10-K Exhibit 99.1) May 18, 2006 US patent disclosure 60/725,670 filed September 29, 2005 "Phosphorescence and Fluorescence Spectroscopy for Detection of Cancer and Pre-Cancer from Normal/Benign regions" contractually acquired by Registrants from RFCUNY and Dr. Alfano inventor. On or about May 22, 2006 Registrant in support of its FDA approved application of March 29, 2006 pilot clinicals began negotiations for a month to month CD-Ratiometer (CDR) agreement with INFO TONICS and IUSUCUNY CAT staff for specific tasks to be performed e.g. on-going product design review, software enhancements, product functionality, and up-grading of manual materials in accordance with FDA criteria. It is expected that Registrant's monthly costs will be supplemented with matching funds from the NY state CAT. (NYSTAR). June 10, 2006 Registrant and a New York Investment Group executed an agreement seeking a minimum of $5 million and a maximum of $10 million on terms favorable to registrant's shareholders and providing a "firm commitment public offering" by Registrants wholly owned subsidiary for its Ingestible Diagnostic Pill presently under joint development with its equity partner Infotonics Research of Rochester NY - the "Compact Photonic Explorer" (CPE). The Underwriting Agreement and related agreements shall contain such other terms and conditions as are customarily contained in agreements of such character. Mediscience Technology Corporation, has asked Infotonics for a proposal, including costs and schedule, to miniaturize the technology into a manufacturable, commercial product and to produce a quantity of such diagnostic pills sufficient to conduct market trials for FDA approval. A principal issue 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. - 15 - Critical Accounting Policies The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The most significant of these involve the use of estimates. In each situation, management is required to make estimates about the effects of matters or future events that are inherently uncertain. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and, as such, include amounts based on informed estimates and judgments of management, such as: < Determining accruals and contingencies; < Valuing options and other equity instruments; < Reviewing the realization/recoverability of deferred costs resulting from the issuance of common stock to acquire certain consulting services to be rendered in future periods. < Deferred tax valuation allowance. The Company used what it believes are reasonable assumptions where applicable, established valuation techniques in making its estimates. Actual results could differ from those estimates. Item 3. Controls and Procedures (a) Evaluation of disclosure controls and procedures Our chief executive officer and chief financial officer evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. (b) Change in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. - 16 - PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ----------------------------------------------------------- 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 -------------------------------- (1) Exhibits 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 202 - 17 - SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-QSB to be signed on its behalf by the undersigned thereunto duly authorized. MEDISCIENCE TECHNOLOGY CORP. (Registrant) /s/ Peter Katevatis -------------------------------- Peter Katevatis Chairman of the Board and Chief Executive Officer January 18, 2008 - 18 - EXHIBIT INDEX ------------- EXBITIT NO. DESCRIPTION - ----------- ----------- 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - 19 - EX-31.1 2 ex31-1.txt EX-31.1 EXHIBIT 31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Peter Katevatis, Chief Executive Officer, certify that: (1) I have reviewed this quarterly report on Form 10-QSB of Mediscience Technology Corp.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in the report any change in the registrant's internal control over financial reporting that has occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 18, 2008 /s/ Peter Katevatis - --------------------------- Peter Katevatis Chief Executive Officer - 20 - EX-31.2 3 ex31-2.txt EX-31.2 EXHIBIT 31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Frank D. Benick, Chief Financial Officer, certify that: (1) I have reviewed this quarterly report on Form 10-QSB of Mediscience Technology Corp.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in the report any change in the registrant's internal control over financial reporting that has occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 18, 2008 /s/ Frank D. Benick - --------------------------------- Frank D. Benick Chief Financial Officer - 21 - EX-32 4 ex32.txt EX-32 EXHIBIT 32 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S. C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Mediscience Technology Corp., (the "Company") on Form 10-QSB for the quarter ended November 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter Katevatis, Chairman of the Board and Chief Executive Officer of the Company, and I, Frank D. Benick, Chief Financial Officer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of Section 13 (a) of 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Peter Katevatis January 18, 2008 ------------------------------------------------ Peter Katevatis Chairman of the Board and Chief Executive Officer /s/ Frank D. Benick January 18, 2008 ------------------------------------------------ Frank D. Benick Chief Financial Officer A signed original of the written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within this electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished in accordance with Securities and Exchange Commission Release Nos. 34-47551 and 34-47986 and shall not be considered "filed" as part of this 10-QSB. This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. - 22 - -----END PRIVACY-ENHANCED MESSAGE-----