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 November 30, 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
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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, 1996.
Title of Class Number of Shares Outstanding
-------------- ----------------------------
Common Stock, par value
$.01, per share 34,641,952
Preferred Stock, par value 2,074
$.01 per share
<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
NOVEMBER 30, 1996
INDEX
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets as at November 30, 1996
(Unaudited) and February 28, 1996
Statement of Operations for the Three and Nine
Months ended November 30, 1996 (Unaudited) and
November 30, 1995 (Unaudited)
Statement of Cash Flows for the Nine Months ended
November 30, 1996 (Unaudited) and November 30,
1995 (Unaudited)
Statement of Stockholders' Equity for the Nine
Months ended November 30, 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
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
BALANCE SHEETS
ASSETS
November 30,
1996 February 28,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents .................................. $ 1,149,955 $ 110,161
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Net of Accumulated Depreciation $142,689 -
November 30, 1996; $118,605 - February 28, 1996 .......... 47,577 67,481
------------ ------------
OTHER ASSETS
Deferred Charges ........................................... -- 8
Patents - Net of Accumulated Amortization,
$8,327 - November 30,1996; $6,375 - February 28, 1996 .... 30,673 32,625
Goodwill - Net of Accumulated Amortization $184,002 -
November 30, 1996; $166,750 - February 28, 1996 .......... 275,998 293,250
------------ ------------
Total Other Assets .................................... 306,671 325,883
------------ ------------
TOTAL ASSETS ..................................................... $ 1,504,203 $ 503,525
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ........................................... $ 4,255 $ 16,785
Other Accrued Liabilities .................................. 384,307 483,752
------------ ------------
Total Current Liabilities ............................. 388,562 500,537
------------ ------------
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 34,641,952 Shares ......... 346,420 284,745
Additional Paid-in Capital ................................. 16,702,404 14,275,896
Common Stock Subscription Receivable ....................... -- (18,750)
Accumulated Deficit ........................................ (15,933,204) (14,538,924)
------------ ------------
Total Stockholders' Equity ............................ 1,115,641 2,988
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ......................... $ 1,504,203 $ 503,525
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(UNAUDITED)
NINE MONTHS THREE MONTHS
----------- ------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales ........................ $ -- $ -- $ -- $ --
Cost of Sales .................... -- -- -- --
------------ ------------ ------------ ------------
Gross Profit ..................... -- -- -- --
General and Administrative Expense 1,074,567 528,307 156,044 171,856
Product Development Expense ...... 329,369 276,600 160,099 61,811
Advertising, Travel and Marketing 66,299 43,940 41,452 13,167
------------ ------------ ------------ ------------
Total Expenses ............. 1,470,235 848,847 357,595 246,834
------------ ------------ ------------ ------------
Other Income ..................... 75,955 7,090 17,329 4,938
------------ ------------ ------------ ------------
Net Loss ......................... $ (1,394,280) $ (841,757) $ (340,266) $ (241,896)
============ ============ ============ ============
Net Loss Per Common Share ........ $ (0.04) $ (0.03) $ (0.01) $ (0.01)
============ ============ ============ ============
Weighted Average Number of Shares 33,544,916 25,658,958 34,641,952 27,093,625
of Common Stock Outstanding ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ........................................................... $(1,394,280) $ (841,757)
Adjustment for Item Not Requiring Cash Outlay
Depreciation .................................................. 24,084 24,980
Amortization .................................................. 19,204 19,200
Stock Issued to Officer as Additional Compensation ............ 453,184 --
Stock Issued for Services ..................................... 5,000 --
----------- -----------
Subtotal ................................................. (892,808) (797,577)
Changes in Assets and Liabilities:
(Increase) Decrease in Deferred Charges ....................... 8 4,179
(Decrease) Increase in Accounts Payable ....................... (12,530) 1,415
(Decrease) in Other Accrued Liabilities ....................... (99,445) (195,886)
----------- -----------
Net Cash Flows Provided by (Used for) Operating Activities (1,004,775) (987,869)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment ........................................... (4,180) (4,816)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Issuance of Common Stock ............................. 2,029,999 1,129,500
Collection of Common Stock Subscriptions Receivable ................ 18,750 --
----------- -----------
Net Cash Flows Provided by (Used for) Financing Activities 2,048,749 1,129,500
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... 1,039,794 136,815
CASH AND CASH EQUIVALENTS
Beginning Balance .................................................. 110,161 55,613
----------- -----------
Ending Balance ..................................................... $ 1,149,955 $ 192,428
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996
(UNAUDITED)
Common
Preferred Stock Additional
Stock Number Preferred Number of Common Paid in
of Shares Stock Shares Stock Capital
--------- ----- ------ ----- -------
<S> <C> <C> <C> <C> <C>
Balance February 28, 1996 2,074 $ 21 28,474,455 $284,745 $14,275,896
Collection of Common Stock
Subscriptions Receivable
Issuance of Common Stock for Cash 2,666,667 26,666 1,953,333
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 100,000 1,000 49,000
Issuance of Common Stock
For Services 5,000 50 4,950
Net Loss for the Nine
Months Ended November 30, 1996
----- ----- ---------- -------- -----------
Balance November 30, 1996 2,074 $ 21 34,641,952 $346,420 $16,702,404
===== ===== ========== ======== ===========
<CAPTION>
Common Stock
Subscriptions Accumulated
Receivable Deficit
---------- -------
<S> <C> <C>
Balance February 28, 1996 $(18,750) $(14,538,924)
Collection of Common Stock
Subscriptions Receivable 18,750
Issuance of Common Stock for Cash
Exercised Stock Options and
Cancellation of Stock
Stock Issued to Officer
As Additional Compensation
Exercise of Warrants
For Common Stock
Issuance of Common Stock
For Services
Net Loss for the Nine
Months Ended November 30, 1996 (1,394,280)
--------- ------------
Balance November 30, 1996 $ - $(15,933,204)
========= ============
</TABLE>
<PAGE>
<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
June 1996 34,566,952 - 34,566,952
July 1996 34,566,952 - 34,566,952
August 1996 34,641,952 - 34,641,952
September 1996 34,641,952 - 34,641,952
October 1996 34,641,952 - 34,641,952
November 1996 34,641,952 - 34,641,952 33,544,916
</TABLE>
<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 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:
<TABLE>
<CAPTION>
<S> <C>
Legal and Professional Fees $ 159,750
Research & Development 117,699
Salaries, Consulting and Other 106,858
----------
$ 384,307
==========
</TABLE>
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.
<PAGE>
NOTE 5 OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Interest Income $ 50,955
Licensing Option Fee 25,000
----------
Total $ 75,955
==========
</TABLE>
MANAGEMENT'S PLAN OF OPERATION
Except for the historical information contained in this section, the matters set
forth herein are forward-looking statements that are dependent on certain risks
and uncertainties including such factors, among others, as the Company's ability
to continuously satisfy the FDA's requirements for safety of Mediscience's
medical devices, its ability to raise sufficient capital to conduct the
necessary human clinical trials to ultimately prove the safety and effectiveness
of its medical devices sufficiently to allow for FDA premarket approval and its
ability to sell its devices to health care providers if it is successful in
completing their development.
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 technology 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 human clinical feasibility study at New York's
Memorial Sloan-Kettering Hospital in 1994 and demonstrated the technical and
clinical feasibility of Tissue Fluorescence to distinguish among cancerous,
pre-cancerous and normal tissue in the oral cavity. A phase II human clinical
study is currently pending at Sloan-Kettering to build on this earlier work. The
pending study will be co-sponsored by Mediscience and the National Cancer
Institute.
The Company is also planning to perform additional phase I human clinical and
technical feasibility studies to define additional medical diagnostic
applications for its Tissue Fluorescence 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 performing an
open surgical biopsy, 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.
<PAGE>
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 has continuing discussions ongoing with a
small number of highly qualified firms, any one of which could substantially
assist the Company in achieving its goals if satisfactory arrangements can be
arrived at.
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 21
pending patents. Mediscience has also licensed 3 other patents from two other
institutions.
The Company has a research agreement with Sloan-Kettering Cancer Research Center
for investigation of its Tissue Fluorescence technology and also maintains close
working relationships with Columbia Presbyterian Hospital, New York
Hospital-Cornell Medical Center and Massachusetts General Hospital. Both the
breast clinical feasibility study and the Barrett's esophagus study, mentioned
above, are planned to be conducted at Massachusetts General Hospital and Cornell
Medical Center, respectively.
Mediscience has developed two prototype medical devices and has a third device
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. The CD Scan device will also be used in a phase II
human clinical study that is scheduled to begin during the first quarter of
1997, pending FDA approval of the Investigational Device Exemption, which is
required of all deemed "significant risk" devices prior to the conduct of human
clinical studies.(1) 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.
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-development
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 April 1996 private placement stock offering will
continue to satisfy it's working capital needs beyond the end of the current
fiscal year.
- ------------
(1) See reference to January 10, 1997 Form 8-K under item 6 contained herein.
<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 January 10, 1997, the Company filed Form 8-K with regard to the
following matter:
Registrant, Mediscience Technology Corp. (OTCMDSC), received
approval from the FDA for an Investigational Device Exemption
("IDE") in relation to its CD Scan medical device and a Phase II
human clinical study on patients with oral leukoplakia, a
pre-cancerous disease of the mouth. The clinical study, which is
being co-sponsored by Mediscience and the NCI is targeted to
begin at Sloan-Kettering in New York City during the next
several weeks.
<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: January 10, 1997 By: /s/Herbert L. Hugill
---------------------------
HERBERT L. HUGILL
President/CEO
By: /s/Peter Katevatis
------------------
PETER KATEVATIS
Treasurer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<CASH> 1,150
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,150
<PP&E> 190
<DEPRECIATION> 143
<TOTAL-ASSETS> 1,504
<CURRENT-LIABILITIES> 388
<BONDS> 0
0
0
<COMMON> 346
<OTHER-SE> 770
<TOTAL-LIABILITY-AND-EQUITY> 1,504
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,394)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,394)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
