FORM 10-Q SB
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.
- - --------------------------------------------------------------------------------
(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
- - --------------------------------------------------------------------------------
(I.R.S. Employer Identification Number)
1235 Folkestone Way, Cherry Hill, New Jersey 08034
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(Registrant's telephone number, including area code) 609-428-7952
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Registrant has not been involved in bankruptcy proceedings during the preceding
five years.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 31, 1996.
Title of Class Number of Shares Outstanding
-------------- ----------------------------
Common Stock, par value
$.01, per share 33,984,288
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 ............................. 332,327 483,752
------------ ------------
Total Current Liabilities ........................ 338,887 500,537
------------ ------------
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 33,984,288 Shares .... 339,843 284,745
Additional Paid-in Capital ............................ 16,200,796 14,275,896
Common Stock Subscription Receivable .................. -- (18,750)
Accumulated Deficit ................................... (14,856,327) (14,538,924)
------------ ------------
Total Stockholders' Equity ....................... 1,684,333 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 ......... 211,580 157,592
Product Development Expense ................ 104,978 106,950
Advertising, Travel and Marketing .......... 13,657 19,916
------------ ------------
Total Expenses ....................... 330,215 284,458
------------ ------------
Other Expense (Income)
Interest Income ...................... (12,812) (304)
Cancellation of Stock Options ........ -- --
------------ ------------
Total Other Expense (Income) .... (12,812) (304)
------------ ------------
Net Loss ................................... $ (317,403) $ (284,154)
============ ============
Net Loss Per Common Share .................. $ (0.01) $ (0.01)
============ ============
Weighted Average Number of Shares ..........
of Common Stock Outstanding 32,147,677 23,773,958
============ ============
</TABLE>
<PAGE>
<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 ........................................................... $ (317,403) $ (284,154)
Adjustment for Item Not Requiring Cash Outlay
Depreciation .................................................. 8,012 8,220
Amortization .................................................. 6,400 6,400
----------- -----------
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 .............. (151,425) 124,725
----------- -----------
Net Cash Flows Provided by (Used for) Operating Activities (464,633) (143,111)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- - ------------------------------------
Acquisition of Equipment ........................................... (3,353) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- - ------------------------------------
Collection of Common Stock Subscriptions Receivable ................ 18,750 --
Proceeds from Issuance of Common Stock ............................. 1,979,998 175,000
----------- -----------
Net Cash Flows Provided by Financing Activities .......... 1,998,748 175,000
----------- -----------
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>
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<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
Exercising Stock Options and
Cancellation of Stock 2,843,166 28,432 (28,432)
Net Loss for the Three
Months Ended May 31, 1996 (317,403)
------------ --------- ---------- ---------- ----------- ------------ ------------
Balance May 31, 1996 2,074 $ 21 33,984,288 $ 339,843 $16,200,796 $ -- $(14,856,327)
============ ========= ========== ========== =========== ============ ============
</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 28,474,455 - 28,474,455
April 1996 33,984,288 - 33,984,288
May 1996 33,984,288 - 33,984,288 32,147,677
</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 138,652
--------
$332,327
========
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.
<PAGE>
MANAGEMENT'S PLAN OF OPERATION
The Company's mission is to discover and develop novel and effective photonic
technologies for the early detection of cancer and other forms of disease.
Mediscience's primary areas of concentration are to develop and commercialize:
(i) non-invasive in vivo techniques using proprietary light based
instrumentation for diagnosing cancer (such as a real time, highly accurate,
objectively analytical alternative to the subjectively interpreted 70% accurate
common PAP test), (ii) minimally invasive photonic in vivo diagnostic techniques
for early detection of cervical, breast, colon and throat cancer, (iii) "smart"
endoscopes for the medical community using fluorescence spectroscopy which can
identify changes in the tissue state, and (iv) Raman spectroscopy, in
preliminary stage of development, which measures the vibrational bands of
specific functional groups of molecules in the tissue sample.
All of the above has resulted in the Company's focusing on the introduction of
an in vitro instrument to diagnose skin cancers as well as breast and cervical
biopsies and for the rapid examination of PAP smears. The Company is hopeful
that such an instrument can be brought to market within 12 to 18 months of
initiation of FDA review.
The Company is also pursuing, through licensing and academic alliances,
satellite research programs based on photonic technology that fall outside of
the medical diagnostic focus area and concentrate on industrial applications of
its technology.
MTC's sophisticated research and development capability comes from its
relationship with the Institute of Ultrafast Spectroscopy and Lasers ("IUSL") of
City College of the City University through its agreement with the Research
Foundation of CUNY.
Due to its research relationship with the Institute of Ultrafast Spectroscopy
and Lasers ("IUSL") at City College of the City University of New York and the
New York State Center for Advanced Technology, Sloan Kettering Cancer Center,
Columbia Presbyterian Medical Center, Massachusetts General Hospital, Harvard
and Yale Universities among others, the Company owns, has exclusive licenses or
the right to license exclusively 14 patents and the rights for 17 pending patent
applications for the development of proprietary medical and industrial
analytical/diagnostic devices. The focus of MTC's devices is aimed toward less
invasive, faster, more accurate, and cost effective cancer diagnosis.
Over time, the Company intends to develop its own in-house research and
development capability. Until volume dictates otherwise, the Company will rely
on contract manufacturing relationships in the production of its devices. It is
currently negotiating its first such relationship with several major market
participants.
Two prototype instruments have been developed and tested, and the Company is in
the process of demonstrating the efficacy of its instruments to gain an
Investigational Device Exemption (IDE) approval from the Food and Drug
Administration. Concurrently, testing on breast and gynecological tissue will
continue and preliminary testing on tissue from other organs (e.g. brain, colon,
lung) will be initiated.
<PAGE>
The Company expects prompt evaluation of its first two devices, the CD ScanTM
and the CD RatiometerTM. It believes that approval and initial marketing will be
accomplished in about 18 months. Following that, two more devices are scheduled
for introduction. Break-even performance is dependent upon FDA approval. Once
approval is obtained and commercialization of its products and an efficient
marketing system is put in place, profits are expected to be generated in the
first full year of commercial sales.
The Company will initially focus on applications targeted for dermatologists,
OBGYN, and the aero digestive tract, private practices as well as hospitals,
cytologists, pathologists and radiologists. The Company will consider utilizing
the existing marketing organizations of "corporate partners" and/or independent
distributor companies in the initial sale of its products.
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 co-venturing
research and promotional arrangements to defray costs. 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 private placement offering will satisfy it's
working capital needs for the next twelve months.
<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> 339
<BONDS> 0
0
0
<COMMON> 340
<OTHER-SE> 1,344
<TOTAL-LIABILITY-AND-EQUITY> 2,023
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (317)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (317)
<INCOME-TAX> 0
<INCOME-CONTINUING> (317)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (317)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
