FORM 10-Q SB/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 May 31, 1996 Commission File Number 0-7405
MEDISCIENCE TECHNOLOGY CORP.
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(Exact Name of Registrant as Specified in its Certificate of Incorporation)
New Jersey
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(State or other jurisdiction on incorporation or organization)
22-1937826
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(I.R.S. Employer Identification Number)
1235 Folkestone Way, Cherry Hill, New Jersey 08034
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(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 May 31, 1996.
Title of Class Number of Shares Outstanding
-------------- ----------------------------
Common Stock, par value
$.01, per share 34,561,952
Preferred Stock, par value 2,074
$.01 per share
<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
MAY 31, 1996
INDEX
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets as at May 31, 1996 (Unaudited) and
February 28, 1996
Statement of Operations for the Quarter ended May
31, 1996 (Unaudited) and May 31, 1995 (Unaudited)
Statement of Cash Flows for the Period ended May
31, 1996 (Unaudited) and May 31, 1995 (Unaudited)
Statement of Stockholders' Equity for the Period
ended May 31, 1996 (Unaudited)
Exhibit to Statements of Operations
Notes to Financial Statements
Item 2. Management's Plan of Operation
PART II. Other Information
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
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<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
BALANCE SHEETS
May 31, 1996 February 28,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
- --------------
Cash and Cash Equivalents ............................. $ 1,640,923 $ 110,161
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Net of Accumulated Depreciation $126,617
May 31, 1996; $118,605 - February 28, 1996 .......... 62,822 67,481
------------ ------------
OTHER ASSETS
- ------------
Deferred Charges ...................................... -- 8
Patents - Net of Accumulated Amortization,
$7,025 - May 31,1996; $6,375 - February 28, 1996 .... 31,975 32,625
Goodwill - Net of Accumulated Amortization
$172,500 - May 31, 1996; $166,750 - February 28, 1996 287,500 293,250
------------ ------------
Total Other Assets ............................... 319,475 325,883
------------ ------------
TOTAL ASSETS ................................................ $ 2,023,220 $ 503,525
- ------------ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
Accounts Payable ...................................... $ 6,560 $ 16,785
Other Accrued Liabilities ............................. 319,827 483,752
------------ ------------
Total Current Liabilities ........................ 326,387 500,537
------------ ------------
STOCKHOLDERS' EQUITY
- --------------------
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 34,561,952 Shares .... 345,620 284,745
Additional Paid-in Capital ............................ 16,660,703 14,275,896
Common Stock Subscription Receivable .................. -- (18,750)
Accumulated Deficit ................................... (15,309,511) (14,538,924)
------------ ------------
Total Stockholders' Equity ....................... 1,696,833 2,988
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .................... $ 2,023,220 $ 503,525
- ---------------------------------------- ============ ============
</TABLE>
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<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
THREE MONTHS
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net Sales .................................. $ -- $ --
Cost of Sales .............................. -- --
------------ ------------
Gross Profit ......................... -- --
General and Administrative Expense ......... 664,764 157,592
Product Development Expense ................ 104,978 106,950
Advertising, Travel and Marketing .......... 13,657 19,916
------------ ------------
Total Expenses ....................... 783,399 284,458
------------ ------------
Other Expense (Income)
Interest Income ...................... (12,812) (304)
Cancellation of Stock Options ........ -- --
------------ ------------
Total Other Expense (Income) .... (12,812) (304)
------------ ------------
Net Loss ................................... $ (770,587) $ (284,154)
============ ============
Net Loss Per Common Share .................. $ (0.02) $ (0.01)
============ ============
Weighted Average Number of Shares ..........
of Common Stock Outstanding 31,400,843 23,773,958
============ ============
</TABLE>
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<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss ........................................................... $ (770,587) $ (284,154)
Adjustment for Item Not Requiring Cash Outlay
Depreciation .................................................. 8,012 8,220
Amortization .................................................. 6,400 6,400
Stock Issued to officer as additional compensation............. 453,184 --
----------- -----------
Subtotal ................................................. (302,991) (269,534)
Changes in Assets and Liabilities:
(Increase) Decrease in Deferred Charges ....................... 8 1,393
Increase (Decrease) in Accounts Payable ....................... (10,225) 305
Increase (Decrease) in Other Accrued Liabilities .............. (163,925) 124,725
----------- -----------
Net Cash Flows Provided by (Used for) Operating Activities (477,133) (143,111)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of Equipment ........................................... (3,353) --
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CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Collection of Common Stock Subscriptions Receivable ................ 18,750 --
Proceeds from Issuance of Common Stock ............................. 1,992,498 175,000
----------- -----------
Net Cash Flows Provided by Financing Activities .......... 2,011,248 175,000
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... 1,530,762 31,889
- ------------------------------------------------
CASH AND CASH EQUIVALENTS
- -------------------------
Beginning Balance .................................................. 110,161 55,613
----------- -----------
Ending Balance ..................................................... $ 1,640,923 $ 87,502
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MAY 31, 1996
(UNAUDITED)
Common
Preferred Stock Additional Common Stock
Stock Number Preferred Number of Common Paid in Subscriptions Accumulated
of Shares Stock Shares Stock Capital Receivable Deficit
------------ --------- ---------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 28, 1996 2,074 $ 21 28,474,455 $ 284,745 $14,275,896 $ (18,750) $(14,538,924)
Collection of Common Stock
Subscriptions Receivable 18,750
Issuance of Common Stock
for Cash 2,666,667 26,666 1,953,332
Exercised Stock Options and
Cancellation of Stock 2,843,166 28,432 (28,432)
Stock Issued to Officer as
Additional Compensation 552,664 5,527 447,657
Exercise of Warrants for
Common Stock 25,000 250 12,250
Net Loss for the Three
Months Ended May 31, 1996 (770,587
------------ --------- ---------- ---------- ----------- ------------ ------------
Balance May 31, 1996 2,074 $ 21 34,561,952 $ 345,620 $16,660,703 $ -- $(15,309,511
============ ========= ========== ========== =========== ============ ============
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT TO STATEMENTS OF OPERATIONS
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Weighted
Common Stock Average
$.01 Par Value Common Number of Number of
Issued and Stock Shares Shares
Outstanding Equivalents Outstanding Outstanding
------------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
March 1996 28,486,955 - 28,486,955
April 1996 31,153,622 - 31,153,622
May 1996 34,561,952 - 34,561,952 31,400,843
</TABLE>
<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
(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.
NOTE 2 OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
Legal and Professional Fees $ 97,000
Research & Development 96,675
Salaries, Consulting and Other 126,152
-------------
$ 319,827
NOTE 3 CANCELLATION OF STOCK OPTIONS
In April, 1996, various officers, directors or shareholders of the
Company collectively exercised all of their options and acquired
2,843,166 shares of the Company's common stock at an exercise price
of $0.25 per share. Shares of stock owned by these individuals were
tendered to the Company as payment for the options exercised and were
subsequently canceled by the Company.
NOTE 4 RELATED PARTY TRANSACTION
As previously reported, the Company elected a new President and Chief
Executive Officer, Herbert L. Hugill. Mr. Katevatis remains 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, the Company issued 552,664 restricted
shares of the Company's common stock in consideration for a reduction
in the term of his employment agreement and a reduction in his annual
salary. Accordingly, the Company recognized $453,184 as additional
compensation to Mr. Katevatis during the quarter ended May 1996.
MANAGEMENT'S PLAN OF OPERATION
The Company's mission is to discover, develop and market novel and effective
photonic technologies for the early detection of cancer. The focus of
Mediscience's devices is aimed toward less invasive, faster, more accurate and
more cost effective cancer diagnosis.
Mediscience's primary area of concentration is on development and
commercialization of its patented Tissue Fluorescence Spectroscopy technology
<PAGE>
which uses light for non-invasive and minimally invasive detection of cancer in
humans, in vivo (in the body). Its secondary focus is on research and
development of its Optical Imaging technology which uses laser light to image
dense tissue without exposing the body to harmful ionizing irradiation.
Mediscience completed a phase I clinical feasibility study at New York's
Memorial Sloan-Kettering Hospital in 1994 and demonstrated the feasibility of
Tissue Fluorescence Spectroscopy to distinguish among cancerous, precancerous
and normal tissue in the oral cavity. A phase II clinical study is currently
pending at Memorial Sloan-Kettering to build on the earlier work under the
cosponsorship of the National Cancer Institute and Mediscience.
The Company is also planning to perform additional phase I clinical feasibility
studies to define additional medical applications for its Tissue Fluorescence
Spectroscopy technology that it can develop for sale to the medical marketplace.
Of the two clinical feasibility studies that are committed presently, one
involves in vivo optical diagnosis of breast tumors by passing a fine optical
fiber through a minimally invasive stereotactic needle to optically determine if
the tumor is cancerous or benign without surgical excision, while the second
involves optical assessment of patients with Barrett's esophagus, a known
precursor to esophageal cancer in some people. In addition, up to four
additional clinical feasibility studies are anticipated during the next 18
months.
In addition to working on its own, Mediscience is also seeking one or more
corporate alliance arrangements to jointly develop specific end use applications
for its two technologies. The Company is also selectively considering other
non-medical applications of its technology through possible partnering
arrangements.
Mediscience subcontracts its research and development through an arrangement
with the City University of New York. Dr. Robert Alfano, a consultant to the
Company, distinguished professor of science and engineering at CUNY and the
inventor of the technology, supervises the Company's research as CUNY's
Principal Investigator. As a result of the contract research relationship with
CUNY, the Company has exclusive rights to 12 patents and optional rights to 17
pending patents. Mediscience also licensed 3 other patents from two other
institutions.
The Company has a research agreement with Memorial Sloan-Kettering Hospital for
investigation of its Tissue Fluorescence Spectroscopy technology and maintains
close working relationships with Columbia Presbyterian Hospital, New York
Hospital's Cornell Medical Center and Massachusetts General Hospital. The breast
clinical feasibility study is scheduled to be conducted at Massachusetts General
Hospital and the Barrett's esophagus feasibility study is scheduled for Cornell
Medical Center.
Two Prototype devices have been developed and a third is in progress. CD Scan,
the first device, has been tested pre-clinically and was successfully used in
the above noted phase I clinical feasibility study at Memorial Sloan-Kettering.
CD Ratiometer, the Company's second device has been used successfully on a
pre-clinical basis and will be employed in each of the pending phase I clinical
feasibility studies, i.e., optical breast biopsy and Barrett's esophagus
studies.
<PAGE>
In an effort to address its liquidity problems and its shortage of capital
resources, the Company successfully completed a $2,000,000 private placement of
its common stock in April, 1996. The Company continues to explore codevelopment
arrangements with other companies to defray costs and extend the Company's
capital and human resources. The Company's ability to maintain its operations
throughout its history has been dependent upon the periodic infusion of capital
and the willingness of its creditors to accept payment beyond normal terms.
The Company believes that its recent private placement offering will satisfy
it's working capital needs beyond the end of its current fiscal year.
<PAGE>
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
On April 16, 1996, the Company filed Form 8-K acknowledging an
employment agreement with Mr. Hubert Hugill. Under the terms of the
agreement, Mr. Hugill became the President and Chief Executive
Officer. He is be paid $50,000 per annum. Mr. Hugill was issued
options to purchase 200,000 shares of the Company's stock and will
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.
<PAGE>
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: 7/15/96 By: /s/ Herbert L. Hugill
-------------------- --------------------------
Herbert L. Hugill
President/CEO
By: /s/ Peter Katevatis
--------------------------
PETER KATEVATIS
Treasurer and
Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 1,641
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,641
<PP&E> 189
<DEPRECIATION> 126
<TOTAL-ASSETS> 2,023
<CURRENT-LIABILITIES> 326
<BONDS> 0
0
0
<COMMON> 346
<OTHER-SE> 1,351
<TOTAL-LIABILITY-AND-EQUITY> 2,023
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (771)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (771)
<INCOME-TAX> 0
<INCOME-CONTINUING> (771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (771)
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
