SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 28, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________to ________________
Commission File No. 33-51218
MEDISCIENCE TECHNOLOGY CORP.
(Name of Small Business Issuer in its Charter)
New Jersey 22-1937826
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1235 Folkestone Way, Cherry Hill, New Jersey 08034
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(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (609) 428-7952
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock,
par value $.01 per share
Check 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
preceeding 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 [ ] No [ X ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-K contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ]
The aggregate market value of the voting stock held by non-afiliates of the
Registrant, as of December 4, 1998 was: $4,924,658.20
The number of shares outstanding of each of the registrant's classes of
common stock, as of December 4, 1998 were:
Title of Each Class Number of Shares Outstanding
------------------- ----------------------------
Common Stock, par value $.01 per share 35,176,130
Preferred Stock, par value $0.1 per share 2,074
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE:
(1) 8-K Report, filed 9/23/95 Investment Banking Agreement, Registrant and
Alle&Company Incorporated, New York, NY.
(2) 8-K Report, filed 4/16/96, H Hugill Employment Agreement (see Item 10
Directors and Officers of the Registrant.)
(3) 8-K Report filed 1/8/97, Approval by FDA of Registrant's Investigational
Device Amendment.
(4) 8-K Report, filed 1/28/97, H. Hugill steps down, Peter Katevatis President
CEO 1/28/97, John Matheu joins board see Directors and Officers of the
Registrant infra.
(5) 8-K Report, filed 4/8/98, CUNY introduction/review Optical Biopsy-Optical
Mammography Photonics to detect Cancer, March 11, 1998.
<PAGE>
MEDISCIENCE CORP.
Annual Report on Form 10-K
Table of Contents
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security-Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplemental Data
Report of Independent Public Accountants
Consolidated Balance Sheets- February 28, 1997 and 1996
Consolidated Statements of Operations for the years ended
February 28,1998,1997 and February 29, 1996
Consolidated Statement of Stockholders Equity for the years
ended February 28,1998, 1997 and February 29, 1996
Consolidated Statements of Cash Flows for the years ended
February 28,1998, 1997 and February 29, 1996
Consolidated Notes to Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
PART III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of certain Benficial Owners of Management
Item 13 Exhibits, List and Reports on Form 8-K
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PART I
Item 1. Business
Introduction
This annual report on Form 10-KSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Act of 1934. Actual events or results may differ materially
from those projected in the forward-looking statements as a result of the
factors described herein. Such forward-looking statements include, but are not
limited to, statements concerning business strategy, development and
introduction of new products, research and development, marketing, sales and
distribution, manufacturing, competition, third-party reimbursement, government
regulation (including, but not limited to, FDA requirements), continued clinical
trial relationships and operating and capital requirements.
Mediscience Technology Corp. ("the Company") is principally engaged in the
design and development of diagnostic medical devices that detect cancer using
light induced native tissue fluorescence spectroscopy (the "Technology") to
distinguish between malignant and normal or benign tissue, year 2000 computer
configuration is not of concern or a problem to our design. Animal and human
tissue contains molecules that fluoresce naturally when exited by light at
certain wavelengths. Since the molecular makeup of tissue changes as it becomes
cancerous, the Company's medical devices are able to detect a shift in the
resulting native tissue fluorescence spectrum allowing it to distinguish between
normal or benign tissue and cancerous tissue.
Background
On December 1, 1988, the Company acquired all the outstanding stock of Laser
Diagnostic Instruments, Inc. ("LDI") which is presently a wholly owned
subsidiary of the Company. The principle asset of ("LDI") was the ownership of
all rights, title and interest in a patent application entitled "Method and
Apparatus for Detecting Cancerous Tissue Using Visible Luminescence", which was
subsequently granted as patent number 4,930,516 by the US Patent and Trademark
Office on June 5, 1990,and whose claims were expanded from 9 to 59 on August
8,1998 in a re-examination initiated by the Company. The research and
development activities of the Company are the subject of this patent and other
patents subsequently applied for or granted to the Company, acquired by the
Company or exclusively licensed to the Company. The Company has successfully
conducted laboratory and other pre-clinical testing all of which continues to
support the Company's belief that its proprietary native tissue fluorescencee
and Raman spectrum cancer detection technology ("itsTechnology") when fully
developed, will be useful in the screening and or diagnosis of cancer.
Management believes that its Technology, if successfully developed, will have
substantial commercial appeal due to its non-invasive character, its delivery of
immediate, real time results, its diagnostic sensitivity and its appeal to
physicians who can generate additional office revenues that currently accrue to
an off site pathology laboratory. On January 6, 1997, the Company received FDA
approval of its Investigational Device Exemption to initiate Phase II clinical
trials with its CD Scan medical device for early stage detection of cancer. (see
"Government Regulation (FDA Matters)" below). Additionally principal
investigator Stimson P Shantz, MD continues to receive significant financial
support from the National Cancer Institute targeting the development of
Mediscience Technology in our clinical trial stage Phase II and Phase III.
<PAGE>
Strategy
The Company's strategy is to develop one or more products for the non-invasive
or minimally-invasive diagnosis of specific types of cancer which it ultimately
plans to market worldwide either directly for its own account or in various
types of partnering or licensing arrangements with other firms. The United
States will be the principal direct focus of the Company while international
markets are expected to be addressed via partnering or licensing arrangements
with other companies.
The Company believes its Technology will have rather broad application utility
in cancer diagnosis, however, each approved labeled indication is expected to
require separate premarketing approval (a "PMA"), which will be both
time-consuming and costly. The Company therefore plans to carefully select and
prioritize its targeted diagnostic applications to insure the best possible
payback on its product and clinical development investments. The Company regards
its "516" and other related patents such as 5,131,398 as pioneering, blocking
and dominant in the area of cancer diagnosis using fluorescence in vivo and in
vitro.
The Company has successfully conducted pre-clinical in vitro investigations with
tissue removed from the upper aerodigestive tract, the cervix, the breast and
the colon. A human clinical in vivo feasibility study was successfully completed
for the upper aerodigestive tract and human clinical in vivo feasibility studies
are scheduled for the breast and esophagus. Other possible application
opportunities will be evaluated during 1998-1999 and pre-clinical in vitro
evaluations are expected to be undertaken for the more promising opportunities
before moving on to human in vivo clinical studies.
The Products
The Company has developed three prototype products that employ its technology
for cancer diagnosis. They include Cancer Detection ("CD") Scan, CD Ratiometer
and CD Map. These devices use lamp light to provide a broad spectrum of safe,
scanning excitation light wavelengths to insure that the appropriate target
tissue molecules are sufficiently fluoresced to provide maximum diagnostic
sensitivity. A fiberoptic probe is atttached to each of the Company's devices
which is used to transmit the optical exitation signal and to recieve the native
fluorescence response. The CD instruments are believed to have a great deal of
versatility and a broad range of potential alternative application dependingon
the preferred configuration of the fiberoptic probe. For example, the fiberoptic
probe can be configured as a convenient hand held probe for easy-to-access areas
such as the oral cavity or the skin surface, or the optical fiber can be fed
down the working channel of a rigid or flexible endoscope for assessment of the
upper or lower GI tract, or the optical fiber can be inserted into a cytosope
for urinary tract exploration, or a colposcope for gynecological evauation or a
laparoscope for evaluation of internal organs, and even through a core biopsy
needle, to optically assess breast tumors or for optical assessment of other
deep tissue tumors, such as sometimes occur in the pancreas, liver or prostate.
<PAGE>
The CD Scan product prototype is oriented toward medical research. It is
designed to provide optical scanning capability of a broad spectrum of optical
wavelengths for evaluation of tissue, The Company uses the CD Scan whenever
possible to help define the critical scanning and emission wavelengths for its
two other prototype products. CD Ratiometer on the other hand is being designed
as a simple, compact instrument with user friendly features and characteristics.
It is designed to optically assess the scanned tissue only at pre-established
optical wavelengths and report out essentially a yes, no or maybe result on a
computer screen, instantaneously. CD Ratiometer with its anticipated assortment
of disposable probe designs is expected to be the preferred product for medical
practitioners to use in the office or clinical setting. CD Map is a vision
instrument that is being designed to optically assess an area of tissue rather
than selective individual points. Although it is at an earlier stage of design
than either CD Scan or CD Ratiometer, it is expected to report out results
similar to the CD Ratiometer but in pseudocolored graphics (a "MAP") on a
computer screen distinguishing the normal areas from cancerous areas via color
differentiation. CD Map, if it can be successfully developed, is expected to be
especially useful in assisting cancer surgeons in clearly defining the surgical
margins of tumors, real time, during cancer surgery without the use of extrinsic
dyes, drugs or other invasive agents.
Research and Product Development
The potential utility of native tissue fluorescence spectroscopy for in vivo
cancer detection in humans was first discovered by Professor Robert R. Alfano,
Distinguished Professor of Physics and Engineering at the City College of the
City University of New York ("CUNY") in the early 1980's. Subsequent to the
acquisition by the Company of LDI from Dr. Alfano in 1988, the Company also
developed a research agreement with the Research Foundation of CUNY to provide
research and development services to the Company. In 1992, the Company, CUNY,
and the Research Foundation of CUNY esablished the Mediphotonics Laboratory
("MPL") at the City College of New York which currently provides research and
development services to the Company. (See "Research Agreements with the City
University of New York")
The staff of MPL, which is supervised by Dr. Alfano, developed the Company's
current prototype CD devices. It has also conducted in vitro pre-clinical
testing of various human tissue types such as breast, cervical, colon and the
upper aerodigestive tract, to develop the preferred optical scanning and
emission wavelengths that yield the most definitive information about the native
fluorescent characteristics of specific scanned tissue. The insight gained from
this work has been the principal source of knowledge for the subsequently issued
and pending patents for which the Company either owns outright or possesses a
world wide exclusive licence, and which the Company regards as pioneering,
blocking.and dominant in the area of cancer diagnosis using fluorescence (e.g.
Patents 516--398). The information derived from this work was also the source
for a number of scientific papers published in peer-reviewed journals and for
presentations made at scientific symposia. This in vitro pre clinical research
and development work also provided the starting basis for the optical scanning
parameters for the Company's in vivo human clinical studies.
Clinical Development
The Company's CD products are designed primarily to be used directly on human
patients in vivo. Part of the process of product development and FDA approval
(see "Government Regulation (FDA Matters") is the development of sufficiently
<PAGE>
compelling clinical evidence to demonstrate safety and effectiveness of one or
more of the Company's prototype CD products for each intended diagnostic
application (labeled or intended use). Because of the anticipated clinical
utility of the Company's Technology and prototype CD products, the Company has
been able to develop important collaborative relationships with some of the most
highly regarded cancer center research hospitals in the United States to assist
it in the clinical evaluation of its prototype CD products. These institutions
include Memorial Sloan-Kettering, Columbia Presbyterian Hospital and the New
York Hospital (Cornell Medical Center), each of New York, and the Massachusetts
General Hospital (Harvard Medical School) in Boston.
The Phase I clinical feasability study of the upper aerodigestive tract was
carried out at Memorial Sloan-Kettering under the principle investigation of
Stimson P. Schantz, M.D., Associate Professor of Surgery and Director of Cancer
Prevention. It was established in this study that the Company's CD Scan
prototype product is able to distinguish between cancerous and normal tissue in
the oral cavity using its Technology. A Phase II clinical study in the upper
aerodigestive tract is scheduled to begin shortly.
At least two other clinical studies are also scheduled to begin during 1998. One
such clinical study is focused on diagnosis of breast cancer using the Company's
second prototype product, CD Ratiometer. This clinical study will be conducted
at Massachusetts General Hospital under the Principle Investigation of Daniel B.
Kopans, M.D., Associate Professor of Radiology, Harvard Medical School and
Section Head, Breast Imaging, Massachusetts General Hospital, to determine
whether the Company's Technology can optically distinguish on a real-time basis
between cancerous and benign breast tumors in vivo by passing a specially
designed optical fiber,attached to the CD Ratiometer, through a core biopsy
needle placed to within one millimeter of the tumor by stereotactic x-ray
guidance. If the technique ultimately proves successful, it will offer the
potential to further reduce the frequency of the highly-invasive practice of
open surgical biopsy currently employed while providing additional cancer
staging information to the radiologist when the tumor is cancerous. The clinical
feasability study will be sponsored by the Company and is expected to be be
partially funded by the United States Army Medical Research Acquisition Activity
who has provides partial funding to date for the Company's product development.
If successful, this Phase I clinical feasability study should provide the basis
for additional clinical investigation to establish the safety and effectiveness
of CD Ratiometer in providing minimally-invasive, real-time, in vivo diagnosis
of breast tumors. The second, planned, Phase I clinical study will be done at
New York Hospital's Cornell Medical Center to assess the potential utility of
the Company's CD Ratiometer with fiberoptic probe adapted to a flexible
endoscope furnished by Pentax Precision Instrument Corporation for monitoring
Barrett's Esophagus. The clinical trial agreement was executed on April 24,
1997, with initial funding for the study by the Company. Barrett's Esophagus is
a malady that is thought to be a possible precurser to esophageal cancer in
certain people. Barrett's patients are routinely monitored because of the
heightened risk that a small porportion of them is predisposed toward the
development of esophageal cancer. The current medical practice requires that
multiple excisional biopsies be taken during regularly scheduled follow-up
appointments (typically annually) to monitor the progression of the disease. The
practice is painful, costly and probably unnecessary in the majority of the
Barrett's suffering population but the current state of medical practice does
not provide sufficient molecular information to distiguish between the high risk
group and the lower risk group. It is hoped that endoscopic application of the
<PAGE>
Company's Technology will provide gastroenterologists with the ability to better
assess the condition of Barrett's tissue in the esophagus without the need for
the painful multiple excisional biopsies. It is also hoped that this additional
molecular information will provide the ability to assess the relative risk of
Barrett's patients toward the development of esophageal cancer allowing
gastroenterologists to establish individual patient moniitoring schedules
appropiate to their relative level of perceived risk.
Business Development and Marketing
More than 120,000,000 new cancer cases are diagnosed annually in the United
States according to the American Cancer Society. It is estimated by Theta
Corporation, a market research firm, that as many as 85 million people currently
alive in the United States, nearly 1/3 of the population, will develop cancer
during their lifetimes. Cancer care and treatment is estimated to cost $104
billion annually, $35 billion of which is estimated to be the direct cost of the
disease. Cancer therapy has progressed rapidly in recent years but the axiom
that early diagnosis is still critical for successful treatment for the majority
of cancer types still remains true.
Although several cancer screening techniques have been developed early
indication of various types of cancer in humans, such as, mammography for breast
cancer, PAP tests for cervical cancer, PSA tests for prostate cancer and chest
x-rays for lung cancer, excisional biopsy is still the "gold standard" for
making a definitive cancer diagnosis and for cancer staging, i.e., determining
the extent of the progression of the disease prior to mapping out the most
appropriate course of therapy.
The excisional biopsy, however, often requires a significant amount of surgical
intervention to collect an adequate tissue sample to make a proper diagnosis and
staging determination. The process can sometimes expose the patient to
unnecessary risks, lengthy hospital stays, long recovery times, pain and
discomfort and significant health care expense. The Company's technology is
believed to offer the potential of a less physically invasive method to diagnose
and stage a variety of cancers without the excessive costs and potentially
debilitating effects of excisional biopsy. The most widely practiced technique
for definitive diagnosis of breast cancer, the leading cause of death among
American women between the ages of 40 and 55, is open surgical biopsy (a
specific type of excisional biopsy) which is done under a general anesthetic and
typically results in surgical excision of a golf ball-sized mass of breast
tissue. About 800,000 such procedures are performed annually in the United
States at an estimated annual cost of between $2 billion and $4 billion. If the
Company can successfully adapt its technology to diagnose and stage breast
cancers, it believes it will save up to half the current cost, eliminate a
significant amount of patient discomfort for those patients determined to have
cancer and eliminate most of the trauma for the 70% to 80% of the patients who
are found not to have cancer.
The Company believes that its Technology in one or more of its prototype CD
products will potentially be useful in diagnosis and staging for more than half
of the various types of cancers. In addition to the pre-clinical and clinical
evaluations currently on the docket or already completed, i.e., upper
aerodigestive tract, breast and esophagus, the Company is in a process of
creating a prioritized list of other potential applications that it will then
evaluate on a pre-clinical basis and, if successful, it contemplates progressing
to the clinical evaluation phase and on to the premarket approval ("PMA")
application phase.
<PAGE>
The Company plans to develop certain of its CD products for diagnostic
applications, (sometimes referred to as "labelled indications"), that it will
ultimately market for its own account in the United States. In addition, the
Company also plans to co-develop one or more of its prototype CD products for
specific cancer diagnostic applications with one or more selected other
companies. The Company has nurtured relationships with a small number of highly
qualified companies who have expressed interest in working with the Company to
co-develop one or more of the Company's existing prototype products or possible
variations thereof in exchange for certain as yet undetermined rights to
commercially exploit a finished approved product in the marketplace.
The Company has, in the past, and continues to presently encourage these
possible collaborations especially with firms that have strong existing
franchises in certain specialized fields of diagnosis and treatment and who have
established reputations with prospective purchasers of diagnostic products and
who have proven selling, marketing and distribution capabilities. A select
number of these kinds of relationships, if the Company is successful in
fostering them, are expected to add value to the Company by stretching and
leveraging the Company's financial resource base with development licensing
revenues that the Company can then use to help fund the development of its own
products.
The Company also believes that a market for its CD products will exist in the
European Union and possibly Asia. The Company contemplates making a concerted
effort to identify one or more possible licensees to help develop its products
or variations thereof for the key markets of the European Union during 1998. It
will also make a preliminary investigation of the potential for utility of its
products in Asia and if the findings are positive, will develop a strategy for
exploiting its technology and products in that region as well.
Manufacturing
The Company's prototype products have been assembled to date by the staff of the
MPL at the City College of New York from components that are generally readily
available from one or more sources in the marketplace. The Company contemplates
continuing with this approach until the quantity of devices projected to be
required makes it appropriate and necessary to set up a contract manufacturer to
assemble its products. Although additional design improvements will likely be
required to refine the current prototype products for commercial use, it is
still believed that the key components will be available from one or more
suppliers. The Company executed a lease agreement, dated January 19, 1997 with
City College providing for 900 square feet of space as a "incubator" in which
prototypes of the products have been designed and assembled by MPL staff working
in concert with personnel from an engineering design firm engaged by the
Company.
The Company plans to outsource the manufacture and assembly of its medical
device products to contract manufacturers when it is no longer feasible for the
MPL to perform that service. The Company's contract manufacturer(s) will be
selected from a list of highly qualified companies who are familiar with the
regulatory requirements of the FDA for the manufacture of medical devices, who
are registered with and in good standing with the FDA and who employ current
Good Manufacturing Practices (GMP) in accordance with FDA guidelines. Pepco
Manufacuring Company ("Pepco") of Somerdale, N.J., which is owed by John M.
Kennedy, an officer, director and a principal of the Company, has been granted a
<PAGE>
right of first refusal to manufacture the Company's products on terms and
conditions no less favorable to the Company than those offered by other
qualified manufacturers. It is believed that Pepco is currently or can become
qualified to manufacture the Company's products. In the event of an opportunity
for a business arrangement with a major marketing co-developer involving
manufacture as well, Pepco has consented to relinquish its right of first
refusal in the best interest of the Company.
Research Arrangements with the City University of New York
In June 1992, the Company and the Research Foundation of CUNY established the
MPL at the Institute of Ultrafast Spectroscopy and Lasers ("IUSL") at the City
of College of New York. Dr. Robert Alfano, Distinguished Professor of Physics
and Engineering at City College and the Director of the IUSL, is also
responsible for supervising the operations of the MPL. The IUSL includes
approximately 60 scientists of which about 20 hold Ph.D's, 9 hold various other
graduate degrees and about 30 are graduate students from which the MPL draws its
research, talent and expertise. The Company provides a funding grant to the MPL
annually in accordance with a budget of activities and expenditures negotiated
between the Company, CCNY, and the Research Foundation of CUNY. The arrangement
is renewable annually and may be terminated without cause by either party upon
90 days notice prior to June 1 of each year. The contract with
CUNY-"Establishment of the MediPhotonics Laboratory" was extended by agreement
July 15, 1998 until June 1999. The Company is reviewing its present reseach
needs with Dr. Alfano in order to establish its grant of funds for the 1998/1999
budgetary year. In comparison, the Company committed to funding of $431,017 for
the 1996/1997 budgetary year and provided funding of $242,948 and $245,750 for
the budgetary years ending on May 31, 1996 and May 31, 1997 respectively.
The objective of the MPL is to research the use of light and ultrafast laser
technology for cancer diagnosis and therapeutic purposes. The major projects of
the MPL have been the development of the Company's prototype products, CD Scan,
CD Ratiometer and CD Map, including the enhancement of fiberoptic attachments to
enable devices to be used with various types of endoscopes and core biopsy
needles. The MPL has additionally conducted in vitro preclinical evaluation of
various tissues to determine the most appropriate excitation and emission
wavelengths for use with a device for different types of human tissue and
cancers, assembled the prototype CD products for use in vivo for human clinical
trials and created the algorithms and computer software necessary for the
accurate performance of the instruments.
Prior to the current arrangement, the Company and the Research Foundation of
CUNY on behalf of the City College of New York worked together under a Research
Agreement pursuant to which the Company and the City College of New York jointly
sponsored the research and development of a cancer detection apparatus using
visible luminescence. The results of such research includes the development of
the proprietary rights that are subjects of several of the Company's patents and
the development of some of the Company's prototype products. The Research
Agreement provided that all patent rights or any CD inventions conceived or
discovered during its term vest in the Company, subject to a royalty payable to
the Research Foundation of CUNY of 5% of the sales of products resulting from
any of the inventions. Beginning in 1992 in concert with the formation of the
MPL, new inventions and patentable discoveries were assigned to the Research
Foundation of CUNY and the Company was (or will be) granted an exclusive
worldwide license to exploit the inventions. The royalty rate was reduced to
3.5% of the sales of products resulting from patented inventions conceived or
<PAGE>
discovered subsequent to June 1, 1992. In the event the Company has not made any
lawful sale of any products or sublicensed any patents at or above reasonable
market price within 5 years from the date of patent application, the Company has
agreed to negotiate a minimum royalty or return all rights with respect thereto
to the Research Foundation of CUNY. The Research Foundation of CUNY owns all
copyright and publication rights to the results of the research, subject to the
Company's right to produce, translate and use all materials copyrighted by the
Research Foundation of CUNY for the Company's own purposes on a royalty-free,
non-transferable and non-exclusive basis.
In 1994, the Company became a consortium industrial partner in the CUNY Center
for Advanced Technology in Ultrafast Photonic Materials and Applications (the
"CAT"). The participation fee paid was $25,000. The Company's membership in the
CAT has brought it into contact with other members of the New York State CAT
consortium partners and has facilitated in several SBIR and NIST proposals. The
Company has a continuing commitment to the CAT.
Competition
Cancer screening and diagnosis is a subject of intense current research and
development activity. Medical practitioners, heath care payors, other diagnostic
medical device companies and patients are all searching for less invasive, lower
cost and more effective ways for early stage diagnosis of cancer. The Company's
native tissue fluorescence spectroscopy technology is an emerging field of
medical diagnostics.
Xillix Corporation, British Columbia, Canada is the only competitor or which the
Company is aware with a commercial light-based product. Xillix received
pre-market approval from the FDA in September 1996 for its Life-Lung
Fluorescence Endoscopy System according to public disclosures made by the
Company. Xillix, in association with Olympus of Japan, has developed a
laser-induced fluorescence spectroscopy device for use with a bronchoscope for
early detection on lung cancer. Xillix and Olympus are also seeking to develop
the Life-GI Fluorescence Endoscopy System for the Gastrointestinal Tract.
LifeSpex, Inc., Houston, Texas, is also working in the field using laser-induced
fluorescence spectroscopy to develop an optical screening device for early
detection of cervical cancer in vivo. LifeSpex has a relationship with the
University of Texas and the MD Anderson Cancer Treatment Hospital that appears
similar to the relationship that the Company has with the Research Foundation of
CUNY.
The Company is also aware of other technologies that may compete for cancer
diagnostic business. In breast cancer diagnosis alone, there are at least three
other technologies vying for clinical and commercial superiority. Advanced
Technology Laboratories, Bothell, Washington recently received FDA approval for
the use of one of its ultrasound medical devices for diagnosis of certain breast
lesions. Biofield, Roswell, GA, a development stage company, is researching and
developing products that measure the cellular electrical charge distribution to
defect epithelial cancers and is currently conducting clinical trials targeted
to diagnose breast cancers using its new technology. Biopsys, Irvine, CA has
developed and recently received FDA approval for a new core biopsy gun as an
improvement to the original core needle for less invasive breast cancer biopsy.
The established competitor technology to both the Company and its existing and
potential new technology competitors, however, is the traditional excisional
biopsy. It is entrenched, trusted and effective. However, it suffers from many
deficiencies that the Company's Technology and prototype CD products are
<PAGE>
designed to address. These deficiencies include, among others; {1} it is
physically invasive, {2} there is generally a lapse of one or more days between
taking the excisional sample and receiving the pathology results, {3} there is
risk of human error in accurately reading the pathology slides and {4} there is
risk of mislabeling or mishandling the samples as they are transferred from the
physician's office to the external pathology laboratory. Excisional biopsy can
also be extremely costly, especially if an operating room setting and general
anesthesia is required and the Company's patient recovery time is often
prolonged due to the healing process related to the excisional biopsy.
The Company believes its technology has certain advantages over that of other
developers of fluorescence techniques described above. Broad band xenon lamp,
not laser, is used as the excitation source. Laser energy, which is far more
expensive, is not needed. More importantly, a laser can only interrogate tissue
at a single wavelength. To improve both the Sensitivity and Specificity of the
method it is necessary to use several wavelengths to derive information from
several key fluorescent molecules. In the Company method, scans or ratios are
taken, both by holding the excitation wavelength constant with the emission
wavelength as the variable and by reversing the constant and variable. With this
techinique, the Company believes its Technology is further advanced than its
direct competitors' and that its proprietary rights are protected by its
patents. However, the competition from both new firms offering potential new
methods of cancer diagnosis and from established firms already in the business
is expected to be intense. Many of the competing firms have greater resources
that the Company including financial resources, more employees, larger research
staffs and more experience in the cancer diagnosis field. There can be no
assurances that the company's Technology, even if successfully developed, will
be commercially accepted in the maket place.
Government Regulation (FDA) Matters
The FDA classifies medical devices into one of three classes, Class I, II, or
III. This classification is based on the controls deemed necessary by the FDA to
reasonably insure the safety and effectiveness of the device. Class I devices
are those whose safety and effectiveness can be reasonably ensured through the
use of general controls, such as labeling, adherence to GMP requirements and the
"510-(k)" process of marketing pre-notification. Class II devices are those
whose safety and effectiveness can reasonably be ensured through implemention of
general and special controls, such as performance standards, post market
surveillance, patient registries, and FDA quidelines. Class III devices are
those devices that must receive premarket approval ("PMA") to insure their
safety and effectiveness. They are generally life-sustaining, life-supporting,
or implantable devices, and also include devices that are not substantially
equivalant to a legally marketed Class I or II device or to a Class III device
first marketed prior to May 28, 1976 for which a PMA has not yet been requested
by the FDA.
The Company believes that clinical applications of its native tissue
fluorescence spectroscopy devices (CD Scan, CD Ratiometer and CD Map) are Class
III medical devices because they lack substantial equivalancy to a legally
marketed Class I or II device or a pre-1976 Class III device. Because of this
classifiation, the Company does not qualify for the 510-(k) process (market
pre-notification) of regulatory compliance but instead is obliged to submit a
full PMA to the FDA for its careful review and, hopeful, approval. Laboratory
versions of its native tissue florescence spectroscopy devices for non-clinical
in vitro applications may face a less lengthy approval process.
<PAGE>
FDA review and approval of PMA applications usually takes from 12 to 24 months
after they are submitted and considered "complete" (meaning that they are
sufficiently in compliance with filing requirements that the FDA will
substantively review the application) but sometimes can take longer and on rare
occasions can take less time. Additional delay often results from insufficient
clinical data to satisfactorily prove safety and effectiveness for the proposed
intended use of the device and it is not unusual for an applicant to be required
to produce additional data to satisfy an objection raised by the FDA in its
review process prior to granting a PMA.
Although management of the Company believes that its cancer diagnostic products
will ultimately be approved, there is no assurance the FDA will act favorably or
quickly in making such reviews and approving its products for sale. Delays or
unanticipated costs may be encountered by the Company in its efforts to secure
governmental approvals or licenses, which could delay or possibly preclude the
Company from marketing its CD products.
To the extent the Company intends to market its CD products in foreign markets,
it will be subject to foreign governmental regulations with respect to the
manufacture and sale of its medical device products. The Company cannot
accurately estimate the cost and time that will be required in order to comply
with such regulations.
Patents and Proprietary Rights
The medical device industry places considerable importance on obtaining patent
protection and protecting trade secrets for new technologies, products, and
processes because of the substantial length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace. Accordingly, the Company or the Research Foundation of CUNY files
patent applications to protect technologies that the Company believes are
significant to the development of the Company's business. The Company either
owns or holds exclusive licenses to 22 U.S. patents, plus 1 in Japan, for a
total of 23 and has rights to exclusively license an additional 20 U.S. pending
patents. There can be no assurance, however, that the pending patent
applications will ultimately issue as patents, or if patents do issue, that the
claims will be sufficiently broad to protect what the Company believes to be its
proprietary rights. In addition, there can be no assurance that issued patents
or pending patent applications will not be challenged or circumvented by
competitors, or that the rights granted thereunder will provide competitive
advantage to the Company.
The Company also relies on trade secrets and know-how that it seeks to protect
in part, through the use of confidentiality agreements. There can be no
assurance that these agreements will not be breached, that the Company will have
adequate remedies for any breach, or that the Company's trade secrets and
know-how will not otherwise become known to or independently developed by
competitors.
Third Party Reimbursement
If the Company is successful in developing its cancer diagnostic technology, and
one or more medical devices that are used by healthcare providers for diagnostic
testing for which the providers may seek reimbursement from third-party payors,
principally, in the United States, medicare, medicaid and private health
insurance plans, and in many other countries, typically national government
sponsored health and welfare plans, such reimbursement will be subject to the
<PAGE>
regulations and policies of governmental agencies and other third-party payors.
Reduced governmental expenditures in the United States and in many other
countries continue to put pressure on diagnostic procedure reimbursement. The
Company cannot predict what, if any changes, may be forthcoming in these
policies and procedures, nor the effect of such changes on the Company's
business potential.
Other Technologies and othe applications
The Company, in addition to its developments in native tissue fluorescence
spectroscopy has also invented certain other potetially useful diagnostic
optical imaging technology. The optical imaging technology uses laser light to
image dense tissues by capturing the early photons of light shown through the
imaged tissue and gating off the scattered, later arriving light, which reduces
the interference and results in clearer images than can be traditionally be seen
using currently available optical imaging technologies, such as, computed
tomography scanning or x-rays or mammograms. In 1994 the Company and General
Electric Company ("GE") acting on behalf of its Corporate research and
Development component signed a five year non-exclusive Collaborative Research
Agreement to explore potential uses of the Company's optical imaging technology.
(see "Subsequent Events" below)
Subsequent Events
There were five patents issued during the fiscal reporting period and four
subsequently:
1 U.S. Patent No. 5,635,402 issued June 3,1997 TECHNIQUE FOR DETERMINING WHETHER
A CELL IS MALIGNANT AS OPPOSED TO NON-MALIGNANT USING EXTRINSIC FLUORESCENCE
SPECTROSCOPY.
2 U.S. Patent No. 5,636,050 issued June 3, 1997 APPARATUS USING OPTICAL
DEFLECTION.
3 U.S Patent No.5,656,810 issued August 12, 1997 ,METHOD AND APPARATUS FOR
EVALUATING THE COMPOSITION OF AN OIL SAMPLE.
4 U.S Patent No. 5,625,458 issued April,29 1997 IMAGING OF OBJECTS IN TURPID
MEDIA USING DIFFUSIVE FERMAT PHOTONS.
5 U.S. Patent No. 5,644,429 issued July 1, 1997 2-DIMENSIONAL IMAGING OF
TRANSLUCENT OBJECTS IN TURBID MEDIA.
6 U.S.Patent No. 5,710,429 issued January 20, 1998 ULTRAFAST OPTICAL IMAGING OF
OBJECTS IN OR BEHIND SCATTERING MEDIA.
7 U.S.Patent No. 5,719,399 issued February 17, 1998 IMAGING AND CHARACTERIZATION
OF TISSUE BASED UPON THE PRESERVATION OF POLARIZED LIGHT TRANSMITTED
THERETHROUGH.
8 U.S. Patent No. 5,769,081 issued March 18, 1998 METHOD FOR DETECTING CANCEROUS
TISSUE USING OPTICAL SPECTROSCOPY AND FOURIER ANALYSIS.
9 U.S.Patent No. 5,799,656 issued September 1, 1998 OPTICAL IMAGING OF BREAST
TISSUES TO ENABLE THE DETECTION THEREIN OF CALCIFICATION REGIONS SUGGESTIVE OF
CANCER.
<PAGE>
Scientific/Medical Advisory Board
The Company established a Scientific Advisory Board in January, 1993 under the
chairmanship of Professor Robert R. Alfano to provide critical review and
analysis of its research and product development programs in the area of
photonics (lasers and optics) and to serve as a source of information on new
product ideas, new technologies and current research activities. Its function
served the Company well during the formative stages of its research. Currently,
the Board consisting of Dr. Alfano and one other continuing member, is being
expanded to include increased representation from the medical arts, including
pathology, and will be staffed with medical specialists who are skilled in the
medical fields of primary interest to the Company. The Company believes that it
will be able to attract accomplished clinicians who will help guide it in
clinical study design aimed at gaining regulatory approval for applications of
theCompany's diagnostic technology. They will also be called upon to advise the
Company about priorities and unmet needs in their respective disiplines and in
matters such as physician's habits and preferences that would bear on product
design and cofiguration. (see "Management")
Employees
As of Febuary 28, 1998, the Company had one full-time employee and several
retained consultants who dedicate a substantial portion of their time toward the
affairs of the Company and the full-time equivalent of a number of scientists,
most of whom hold Ph.D.'s in physics or electrical engineering or lesser
advanced degrees in similar disciplines from the MPL at the City College of New
York (see "Research Arrangements with the City University of New York"). None of
the employees, retained consultants or contract researchers is governed by any
collective bargaining agreement and the relations between the Company and its
employees, retained consultants and contract researchers is believed to be
satisfactory to the present time.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's headquarters are located at 1235 Folkestone Way, Cherry Hill, New
Jersey, which is owned by Peter Katevatis, who is Chairman of the Company. Such
offices are occupied in accordance with an oral arrangement with Mr. Katevatis
pursuant to which the Company is required to pay its porportionate share of
maintanance, utilities and taxes. The New York Office is located at the leased
"incubator" site at CCNY.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation, nor to the knowledge of
management is any litigation threatened against the Company, which may
materially affect the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During its fiscal year ending Febuary 28,1998, no matters were submitted to a
vote of the Company's security holde
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information. The Company's Common Stock is traded on the
over-the-counter market under the symbol."MDSC" The following table sets forth
the range of high and low bid quotations of the Company's Common Stock for the
periods set forth below,as reported by the National Association of Securities
Dealers , Inc. Such quotations represent inter-dealer quotations, without
adjustment for retail markets, markdowns or commissions, and do not necessarily
represent actual ransactions.
<TABLE>
<CAPTION>
Fiscal Period Common Stock
- ------------- ----------------------------------
High Bid Low Bid
1998
<S> <C> <C> <C>
1st Quarter 5/31/97 0.28 0.28
2nd Quarter 8/31/97 0.68 0.43
3rd Quarter 11/30/97 0.73 0.52
4th Quarter 2/28/98 0 9/16 0.40
1997
1st Quarter 5/31/96 1-31/32 1-9/32
2nd Quarter 8/31/96 1-19/32 15/16
3rd Quarter 11/30/96 1 5/8
4th Quarter 2/28/97 1 1/2
</TABLE>
(b) Holders. The approximate number of holders of record of the Companys
Common Stock and Series A Preferred Stock as of December 4, 1998 were 889 and 8
respectively .
(c) Dividends. The Company has not paid or declared any dividends on its
Common Stock since its inception, and intends to reinvest earnings, if any, in
the Company to accelerate its growth. Accordingly, the Company does not
contemplate or anticipate paying any dividends upon its Common Stock in the
foreseeable future.
Talk to Frank B about this..doen to item8 is this all done by aa to go to r&t
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
Results of Operations:
Year ending February 28, 1998 compared to year ended February 28, 1997.
The Company had no revenues during its fiscal years ended February 28, 1998
(its "1998 Fiscal Year") and Feruary 28, 1997 (its "1997 Fiscal Year"). The
Company's primary focus was the development of its light-based technology.The
Company's technology imbedded in its design and computer related format confirms
to year 2000 requirements.
<PAGE>
General and administrative expenses decreased approximately 57% or $1,133,000
during its 1998 fiscal year as compared to its 1997 fiscal year. The principle
reason for the decrease was in fiscal 1997, various directors and shareholders
of the Company, collectively excercised options for 2,763,166 shares of the
Company's common stock at no cost in cosideration for the cancellation of the
remaining 452,582 options held by these individuals. The exercise price for
these options was $0.25 per share and,accordingly the Company recorded
approximately $691,000 as additional compensation expense. An additional reason
for the decrease was in 1997 the Company incurred a compensation change in
connection with the amendment of an employment agreement with a key officer,
wherby annual compensation was fixed at $100,000 per year. As a result, stock
was issued to an officer as additional compensation for the amendment, which
increased compensation in the prior year by $353,000 when compared to the
current year.
The Company's product development expense decreased approximately 22% or
$145,600 during the 1998 fiscal year when compared to the 1997 fiscal year. The
Company conducts a number of R&D projects with the City College of CUNY, During
the 1998 fiscal year, the Company advanced or accrued approximately $384,000 to
CUNY for reimbursment of development costs which approximated the ame amount in
1997. During 1998 the Company decreased its outside consulting approximately
$77,000 for costs associated with its Food and Drug Administration applications.
There was also a decline in other expenditures approximating $70,000 for cancer
research conducted at Sloan-Kettering Institute ($81,000), for patent
applications filings and fees($23,000) and an increase in other research and
development costs totaling $34,000.
The Company decreased its advertising, travel and marketing expense
approximately 13% or $13,700 during its 1998 fiscal year as compared to its 1997
fiscal year. This decreased activity with prospective corporate business
"partners" and fund raising efforts is primarily the result of a decline in
available funds to conduct these activities.
During fiscal year 1998 The Company concluded that its intangible assets
including goodwill and patents should be written-off. As a result, The Company
recorded a non-cash charge of $274,675, which represents the difference between
the carrying value of these assets and their fair value based on estimated
discounted future cash flows.
Other income increased by approximately $152,000 in the 1998 fiscal year when
compared to the 1997 fiscal year. The increase was primarily comprised of a
$200,000 receipt from Spectrx, Inc., which entered into a no-shop agreement
while it studied possible merger, joint venture licensing or other substantial
collaboration with the Company by accessing the Company's United States and
Japanese patent portfolio and research capabilities for both corporate and
world-wide synergy. The no-shop agreement expired on January 18, 1998. The
increase was offset by a decline of approximately $48,000 of interest income due
to decreased cash balances previously invested in money market funds.
<PAGE>
Liquidity and Capital Resources:
The Company has a deficiency in working capital as of February 28, 1998 of
approximately ($890,000) representing a decrease of approximately ($1,080,000)
during the 1998 fiscal year. The deficiency is primarily comprised of accruals
for professional fees, research and development costs and salaries and wages.
The Company's abilty 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 ability of the Company to generate significant revenues from operations is
largely dependent upon obtaining regulatory approval for the commercialization
of its 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. The Company intends to defray the costs of obtaining
regulatory approval for the commercialization of such technology by the
establishment of clinical trial arrangements with medical institutions, similar
to its agreement with Sloan Kettering Memorial Hospital. The Company intends 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.
Management of the Company anticipates that substantial resources will be
committed to a continuation of its research and development efforts and to
finance government regulatory applications. While management believes that the
Company will obtain sufficient funds to satisfy its liquidity and capital
resources needs for the short term, 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. In the absence of the availability of
financing on a timely basis, the Company may be forced to materially curtail or
cease its operations. The Company's 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 its products; (iv) the amount of resources which the
Company devotes to clinical evaluation and the establishment of marketing and
sales capabilities; and (v) the Company's success in entering into, and cash
flows derived from, co-promotion arrangements.
Year ended February 28, 1997 Compared to Year ended February 29, 1996
The Company had no revenues during its fiscal years ended February 28, 1997
(its 1997 fiscal year") and February 129,1996 (its "1996 fiscal year"). The
Company's primary focus was the development of its light-based technology.
General and administrative expenses increased approximately 70% or $820,000
during its 1997 fiscal year as compared to its 1996 fiscal year. The principle
reason for the increase was in April 1996 various directors and shareholders of
the Company, collectively excercised options for 2,763,166 shares of the
Company's common stock at no cost in consideration for the cancelation of the
remaining 452,582 options held by these individuals. The exercise price for
these options was $0.25 per share and, accordingly, the Company recorded
approximately $691,000 as additional compensation expense. An additional reason
<PAGE>
for the increase was in March 1996 the Company incurred a compensation charge in
connection with the amendment of an employment agreement wth a key officer,
whereby annual compensation was fixed at $100,000 per year for a three year
period. As a result, stock was issued to an officer as additional compensation
for the amendment which increased compensation approximately $181,000 during the
current year when compared to the prior year. The Company also increased its
outside consulting approximately $119,000 for costs associated with its Food and
Drug Administration applications.
The increases for fiscal 1997 were partially offset by decreases in other
consulting fees, professional fees, salaries and license fee income credited
against general and administrative expense of $32,000, $54,000, $50,000 and
$25,000 respectivily, when compared to the prior year.
The Company's product development expense increased aproximately 80% or $300,400
during the 1997 fiscal year when compared to the 1996 fiscal year. The Company
conducts a number of R&D projects with the City College of the City University
of New York. During the 1997 fiscal year the Company advanced or accrued
aproximately $384,000 to CUNY for reimbursement of development costs. In
addition, increases were also attributable to research conducted at Sloan
Kettering Institute for cancer research and to patent appication filings and
fees.
The Company increased its advertising, travel and marketing expense
approximately 34% or $24,700 during its 1997 fiscal year as compared to its 1996
fiscal year. This reflects increased activity with prospective corporate
business "partners" and increased fund-raising efforts.
The improvement in net interest income of $62,000 to income of $9,000 in the
1996 fiscal year is due to increased cash balances invested in money market
funds, derived from a prior private placement.
Liquidity and Capital Rsources:
The Company's working capital as of February 28, 1997 was a positive
($189,000") representing an increase of approximately $580,000 during the 1997
fiscal year. During fiscal 1997, the Company successfully completed a private
placement offering of 2,666,667 shares of its comon stock for proceeds to the
Company of approximately $2,000,000. The Company's ability to maintain its
operations throughout its hstory has been dependent upon the periodic infusion
of capital and the willingness of its creditors to accept payment beyond normal
terms.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mediscience Technology Corp.:
We have audited the accompanying consolidated balance sheets of Mediscience
Technology Corp. (a New Jersey corporation) and subsidiary as of February 28,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended February 28, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mediscience
Technology Corp. and subsidiary as of February 28, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended February 28, 1998 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has no revenues,
has incurred significant losses from operations, has an accumulated deficit and
requires substantial additional capital to fund its operations. These factors
raise substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regard to these matters are described in Note 1.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Roseland, New Jersey
November 5, 1998
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- FEBRUARY 28, 1998 AND 1997
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) .............................. $ 21,240 $ 678,397
Other assets .................................................... 17,123 31,664
------------ ------------
Total current assets ............................... 38,363 710,061
EQUIPMENT, net of accumulated depreciation of $177,574 and
$150,820 in 1998 and 1997, respectively (Note 2) ................ 26,404 40,275
INTANGIBLES, net of amortization of $198,725 in 1997 (Note 10) ..... 0 300,283
------------ ------------
Total assets ....................................... $ 64,767 $ 1,050,619
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ................................................ $ 30,860 $ 101,313
Accrued liabilities (Note 4) .................................... 897,926 419,549
------------ ------------
Total current liabilities .......................... 928,786 520,862
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 7)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 2, 3, and 8):
Preferred stock, $.01 par value; authorized 50,000 shares-
Series A preferred stock; issued and outstanding 2,074 shares
(preference on liquidation $20,740) ......................... 21 21
Common stock, $.01 par value; authorized 39,950,000 shares;
issued and outstanding 34,943,618 and 34,691,952 shares in 1998
and 1997, respectively ........................................ 349,436 346,920
Additional paid-in capital ...................................... 17,573,096 17,430,196
Accumulated deficit ............................................. (18,786,572) (17,247,380)
------------ ------------
Total stockholders' equity (deficit) ............... (864,019) 529,757
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 64,767 $ 1,050,619
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997
AND FEBRUARY 29, 1996
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES ......................................... $ 0 $ 0 $ 0
COST OF SALES ..................................... 0 0 0
------------ ------------ ------------
Gross profit ...................... 0 0 0
------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSE
(Notes 2, 3 and 4) ............................. 864,485 1,997,422 1,177,006
PRODUCT DEVELOPMENT EXPENSE ....................... 529,551 675,178 374,781
ADVERTISING, TRAVEL AND MARKETING
EXPENSE ........................................ 84,625 98,331 73,599
WRITE-OFF OF INTANGIBLES (Note 10) ................ 274,675 0 0
------------ ------------ ------------
Total expenses .................... 1,753,336 2,770,931 1,625,386
------------ ------------ ------------
OTHER INCOME:
Interest income, net ........................... (14,144) (62,475) (9,042)
Other income (Note 9) .......................... (200,000) 0 0
------------ ------------ ------------
Total other income ................ (214,144) (62,475) (9,042)
------------ ------------ ------------
Net loss .......................... $ 1,539,192 $ 2,708,456 $ 1,616,344
============ ============ ============
BASIC LOSS PER COMMON SHARE (Note 6) .............. ($ .04) ($ .08) ($ .06)
============ ============ ============
DILUTED LOSS PER COMMON SHARE (Note 6) ............ ($ .04) ($ .08) ($ .06)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 6)
34,893,011 33,908,028 26,261,301
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997 AND FEBRUARY 29, 1996
Preferred Common
Stock Stock
Number of Preferred Number of
Shares Stock Shares
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE, February 28, 1995 ................................................ 2,074 $ 21 23,540,625
Issuance of common stock for cash ...................................... 0 0 3,393,000
Exercise of options and warrants for common stock ...................... 0 0 323,750
Issuance of common stock for legal and consulting services rendered .... 0 0 392,500
Stock issued to officer as additional compensation ..................... 0 0 824,580
Cash received in advance for stock issuance in March 1996 .............. 0 0 0
Net loss for the year ended February 29, 1996 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 29, 1996 ................................................ 2,074 21 28,474,455
Collection of stock subscription receivable ............................ 0 0 0
Issuance of common stock for cash in connection with a private placement 0 0 2,666,667
Stock issued upon exercise of stock options at no cost ................. 0 0 2,843,166
Stock issued to officer as additional compensation ..................... 0 0 602,664
Exercise of warrants for common stock .................................. 0 0 100,000
Issuance of common stock for consulting services ....................... 0 0 5,000
Net loss for the year ended February 28, 1997 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 28, 1997 ................................................ 2,074 21 34,691,952
Issuance of common stock for services .................................. 0 0 85,000
Stock issued to a director at no cost .................................. 0 0 166,666
Net loss for the year ended February 28, 1998 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 28, 1998 ................................................ 2,074 $ 21 34,943,618
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997 AND FEBRUARY 29, 1996
(continued)
Common
Additional Stock
Common Paid-in Subscriptions
Stock Capital Receivables
------------ ------------ -------------
<S> <C> <C> <C>
BALANCE, February 28, 1995 ................................................ $ 235,406 $ 12,725,891 $ 0
Issuance of common stock for cash ...................................... 33,930 839,320 0
Exercise of options and warrants for common stock ...................... 3,238 113,638 (18,750)
Issuance of common stock for legal and consulting services rendered .... 3,925 276,075 0
Stock issued to officer as additional compensation ..................... 8,246 300,972 0
Cash received in advance for stock issuance in March 1996 .............. 0 20,000 0
Net loss for the year ended February 29, 1996 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 29, 1996 ................................................ 284,745 14,275,896 (18,750)
Collection of stock subscription receivable ............................ 0 0 18,750
Issuance of common stock for cash in connection with a private placement 26,666 1,953,333 0
Stock issued upon exercise of stock options at no cost ................. 28,432 662,360 0
Stock issued to officer as additional compensation ..................... 6,027 484,657 0
Exercise of warrants for common stock .................................. 1,000 49,000 0
Issuance of common stock for consulting services ....................... 50 4,950 0
Net loss for the year ended February 28, 1997 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 28, 1997 ................................................ 346,920 17,430,196 0
Issuance of common stock for services .................................. 850 102,900 0
Stock issued to a director at no cost .................................. 1,666 40,000 0
Net loss for the year ended February 28, 1998 .......................... 0 0 0
------------ ------------ ------------
BALANCE, February 28, 1998 ................................................ $ 349,436 $ 17,573,096 $ 0
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997 AND FEBRUARY 29, 1996
(continued)
Accumulated
Deficit
------------
<S> <C>
BALANCE, February 28, 1995 ................................................ ($12,922,580)
Issuance of common stock for cash ...................................... 0
Exercise of options and warrants for common stock ...................... 0
Issuance of common stock for legal and consulting services rendered .... 0
Stock issued to officer as additional compensation ..................... 0
Cash received in advance for stock issuance in March 1996 .............. 0
Net loss for the year ended February 29, 1996 .......................... (1,616,344)
------------
BALANCE, February 29, 1996 ................................................ (14,538,924)
Collection of stock subscription receivable ............................ 0
Issuance of common stock for cash in connection with a private placement 0
Stock issued upon exercise of stock options at no cost ................. 0
Stock issued to officer as additional compensation ..................... 0
Exercise of warrants for common stock .................................. 0
Issuance of common stock for consulting services ....................... 0
Net loss for the year ended February 28, 1997 .......................... (2,708,456)
------------
BALANCE, February 28, 1997 ................................................ (17,247,380)
Issuance of common stock for services .................................. 0
Stock issued to a director at no cost .................................. 0
Net loss for the year ended February 28, 1998 .......................... (1,539,192)
------------
BALANCE, February 28, 1998 ................................................ ($18,786,572)
============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997
AND FEBRUARY 29, 1996
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... ($1,539,192) ($2,708,456) ($1,616,344)
----------- ----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation ................................. 26,754 32,215 33,522
Amortization ................................. 25,608 25,600 25,600
Write-off of intangibles ..................... 274,675 0 0
Stock issued for consulting services and
interest ................................... 103,750 5,000 280,000
Stock issued upon exercise of stock options
at no cost ................................. 0 690,792 0
Stock issued to a director at no cost ........ 41,666 0 0
Stock issued to officer as additional
compensation ............................... 0 490,684 309,218
Changes in assets and liabilities-
Decrease (increase) in other assets ........ 14,541 (31,664) 4,564
(Decrease) increase in accounts payable .... (70,453) 84,528 12,790
Increase (decrease) in accrued liabilities . 478,377 (64,203) 20,248
----------- ----------- -----------
Total adjustments ................... 894,918 1,232,952 685,942
----------- ----------- -----------
Net cash used in operating activities (644,274) (1,475,504) (930,402)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchase of fixed assets ......................... (12,883) (5,009) (6,426)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in stock subscription receivable ........ 0 18,750 0
Proceeds from issuance of common stock, net of
costs .......................................... 0 2,029,999 991,376
----------- ----------- -----------
0 2,048,749 991,376
----------- ----------- -----------
Net (decrease) increase in cash ..... (657,157) 568,236 54,548
CASH AND CASH EQUIVALENTS, beginning of
year ............................................. 678,397 110,161 55,613
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year .............. $ 21,240 $ 678,397 $ 110,161
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997
AND FEBRUARY 29, 1996
continued)
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Common stock was issued for the following-
Legal and consulting services rendered ........... $103,750 $ 5,000 $280,000
To officer as additional compensation ............ 41,666 490,684 309,218
-------- -------- --------
$145,416 $495,684 $589,218
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION OF THE COMPANY:
The consolidated financial statements include the accounts of Mediscience
Technology Corp. ("Mediscience") and its wholly-owned subsidiary, Laser
Diagnostic Instruments, Inc. ("Laser") (collectively the "Company").
The Company 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 Company is subject but not limited to a number of risks similar to
those of other companies at this stage of development, including
dependence on key individuals, the development of commercially usable
products and processes, competition from substitute products or
alternative processes, the impact of research and product development
activity, competitors of the Company, many of whom have greater financial
or other resources than those of the Company, the uncertainties related
to technological improvements and advances, the ability to obtain
adequate additional financing necessary to fund continuing operations and
product development and the uncertainties of future profitability. The
Company expects to incur substantial additional costs before beginning to
generate income from product sales, including costs related to ongoing
research and development activities, preclinical studies and regulatory
compliance. Although the Company was able to obtain additional financing
in April 1996 (Note 8), substantial additional financing is needed by the
Company.
On April 21, 1997, the Company announced a joint collaboration agreement
with General Electric Company ("GE") and the Research Foundation of the
City University of New York ("CUNY") to develop proprietary imaging
technology for medical purposes. The development and commercialization of
non x-ray based optical mammography and optical tomography products with
greater effectiveness, decreased side effects and improved cost
efficiencies are the objective of this collaboration. The collaboration
will focus on noninvasive methods to image subsurface tumors in the
breast, brain, etc. CUNY, through a NSASA Institutional Research Award,
through a Navy grant, and through the New York State HEAT program,
anticipates more than $3,800,000 of funding over a five year period to
support this collaboration agreement. GE did not disclose the amount it
intends to spend on the development and commercialization of the
Company's proprietary technology. To date no funding has been received
pursuant to this collaboration agreement.
The Company's financial statements have been prepared on a going concern
basis which contemplates the realization of assets, liabilities and
commitments in the normal course of business. The Company has no
revenues, incurred substantial net losses and has an accumulated deficit
through February 28, 1998. The Company expects to incur substantial
expenditures to further the development and commercialization of its
products. To achieve this, management will seek additional financing
through private placements or other financing alternatives, and might
also seek to sell the Company or its technology. There can be no
assurance that continued financings will be available to the Company or
that, if available, the amounts will be sufficient or that the terms will
be acceptable to the Company.
<PAGE>
(2) SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates-
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Cash and Cash Equivalents-
Cash and cash equivalents include cash held in banks and mutual funds
and is stated at cost, which approximates market. For purposes of the
statement of cash flows, the Company considers all highly liquid
financial instruments purchased with an initial maturity of three
months or less to be cash equivalents.
Equipment-
Equipment is stated at cost. Depreciation is computed using the
straight-line method over an estimated useful life of five years.
Long-Lived Assets-
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets" ("SFAS 121"). SFAS 121 requires, among other things,
that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. (see
Note 11 for write-off of intangibles)
Income Taxes-
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 utilizes the liability method, and
deferred taxes are determined based on the estimated future tax effects
of differences between the financial statement and tax bases of assets
and liabilities at currently enacted tax laws and rates.
Accounting for Stock-Based Compensation-
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 requires that an entity account
for employee stock compensation under a fair value-based method.
However, SFAS 123 also allows an entity to continue to measure
compensation cost for employee stock-based compensation plans using the
intrinsic value-based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). The
Company has elected the disclosure requirements of SFAS 123 and will
continue to account for employee stock-based compensation under APB 25.
<PAGE>
(3) RELATED PARTY TRANSACTIONS:
In May 1992, the Company entered into a five year employment agreement
with Peter Katevatis, then Chief Executive Officer, President and
Stockholder of the Company. Pursuant to the terms of such agreement, Mr.
Katevatis was to be paid $190,000 per year, plus annual increases based
on the consumer price index. The employment agreement further provided
for a bonus and fringe benefits in accordance with policies and formulas
mutually agreed upon by Mr. Katevatis and the Board of Directors.
In January 1996, the Company elected a new President and Chief Executive
Officer, Herbert L. Hugill. Mr. Katevatis 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, in March, 1996 the Company issued 552,664 restricted shares of
the Company's common stock to Mr. Katevatis, which was recorded as
additional compensation expense in fiscal 1997 of $453,184. All other
provisions of the agreement remained the same.
Pursuant to the terms of an employment agreement, Mr. Hugill, was to be
paid $50,000 per annum, was issued options to purchase 200,000 shares of
the Company's stock (Note 8), and was to receive warrants to purchase
shares equal to 5% of the number of common shares outstanding on January
18, 1996 (or up to 10% as of such date at the discretion of the Board of
Directors) at an option price of $1.00 per share, upon the attainment of
certain milestones in the future. On January 31, 1997, Mr. Hugill
resigned as President and Chief Executive Officer of the Company and the
200,000 options were cancelled. The warrant agreement was amended and
effective January 31, 1997, Mr. Hugill was granted a warrant to purchase
up to 473,220 shares of the Company's common stock at a price of $1.00
per share. This warrant is exercisable at any time through July, 2003
except for 315,480 shares which is exercisable only upon the attainment
of certain milestones. Compensation expense will be recognized for the
difference between the warrant price and the fair market value of the
stock at the date that the milestones are attained. In addition, the
Company issued 50,000 shares of common stock to Mr. Hugill upon his
termination. The Company recorded $37,500 as compensation expense for the
fair value of the shares issued.
In February 1997, Mr. Katevatis resumed the role as President and Chief
Executive Officer. Accordingly, the employment Agreement with Mr.
Katevatis was amended for an annual salary of $200,000 per year for the
next three years.
Legal services rendered by Mr. Katevatis amounted to $50,000 for each of
the three years ended February 28, 1998. These amounts have been charged
to operations.
<PAGE>
(4) ACCRUED LIABILITIES:
Accrued liabilities consist of the following-
1998 1997
-------- --------
Legal and professional fees $240,350 $194,700
Research and development (see Note 7) 485,141 224,849
Salaries and wages 172,435 0
-------- --------
$897,926 $419,549
======== ========
(5) INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS 109. Under
SFAS 109, deferred tax assets and liabilities are computed based on the
differences between the financial statement and income tax bases of
assets and liabilities as measured by currently enacted tax laws and
rates. As of February 28, 1998, the Company has operating loss
carryforwards of approximately $11,000,000 which may be used to reduce
future income subject to income taxes and expire in various amounts from
1999 to 2013. As of February 28, 1998 and February 28, 1997, the Company
had a deferred tax asset of approximately $3,800,000 and $3,600,000,
respectively, for which valuation allowances for the entire amounts were
provided.
(6) LOSS PER COMMON SHARE:
Effective for the year ended February 28, 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 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 year.
Diluted loss per share is the same as basic loss per share, as the
inclusion of common stock equivalents would be antidilutive.
(7) COMMITMENTS AND CONTINGENCIES:
In April 1992, the Company entered into a five year consulting agreement
(the "Agreement") with Dr. Robert R. Alfano, a principal shareholder of
the Company and Chairman of its Scientific Advisory Board. Pursuant to
the terms of such Agreement, Dr. Alfano is to be paid a consulting fee of
not less than $150,000 per annum in exchange for services to be rendered
for approximately fifty (50) days per annum in connection with the
Company's medical photonics business. The Agreement further provides that
Dr. Alfano is to be paid a bonus and fringe benefits in accordance with
policies and formulas provided to key executives of the Company. In
August 1995, the contract was extended to March 2002. All other
provisions of the agreement remained the same.
The Company has committed to fund approximately $295,000 over a
twelve-month period beginning June 1, 1995 for Mediphotonics Laboratory
research at the City College of the City University of New York ("CCNY")
under a contract which is renewed annually. The Company has funded CCNY
approximately $402,000, $384,000 and $220,000 for each of the
twelve-month periods ending May 31, 1998, 1997 and 1996.
<PAGE>
On July 1, 1994, the Company entered into a Research Agreement with
Sloan-Kettering Institute for Cancer Research and the Company has agreed
to fund $100,000 towards such efforts. The Company funded $80,000 and
$20,000 in fiscal 1996 and 1995, respectively.
In connection with the acquisition of patent rights to its cancer
detection technology, the Company assumed an obligation to pay to Dr.
Alfano's daughter a royalty of one percent of the gross sales derived
from any equipment made, leased or sold which utilizes the concepts
described in the Company's cancer detection patent. Additionally, the
Company is to pay a royalty equal to three and one half percent of the
gross sales of any invention from the Company's existing patents or newly
obtained patents, respectively. No amounts have been paid during the
three year period ended February 28, 1998.
In addition to the above royalties, the Company has obtained worldwide
licensing rights for patents from two universities and has agreed to pay
royalties of four percent of the net sales of all products generated from
the patents and fifty percent of any income received from sublicensing of
the patents. No amounts have been paid during the three year period ended
February 28, 1998.
(8) STOCKHOLDERS' EQUITY:
Preferred Stock-
The Company is authorized to issue 50,000 shares of preferred stock,
$.01 par value per share, which may be issued from time-to-time in one
or more series, the terms of which may be designated by the Board of
Directors without further action by shareholders. The Board of
Directors has designated 2,074 shares of preferred stock as series A
preferred stock, all of which series is issued and outstanding as of
February 28, 1998. Any preferred stock issued will have preferences
with respect to dividends, liquidation and other rights, but will not
have preemptive rights.
Holders of series A preferred stock are entitled to a preference of $10
per share before any payment is made to holders of common stock in
liquidation of the assets of the Company. Additionally, holders of
series A preferred stock have no redemption or dividend rights and vote
only with respect to corporate matters affecting their respective
rights, preferences or limitations, but do not vote for the election of
directors or on general corporate matters.
Common Stock Compensation Award-
In December 1995, the Board approved the issuance of 824,580 restricted
shares of the Company's common stock to Mr. Katevatis for past
performance and services rendered to the Company. The restricted shares
were recorded based on their deemed fair market value and accordingly,
the Company recorded a compensation charge of $309,218 in the
accompanying consolidated statement of operations.
Private Placement Offerings-
During fiscal 1996, the Company closed on a private placement offering
("Offering") with Allen & Company ("Allen"), whereby Allen purchased
2,000,000 restricted shares of the Company's common stock at $.25 per
share. In connection with the Offering, Allen received warrants to
<PAGE>
purchase 975,000 shares of the Company's common stock and another
individual, instrumental to the Offering, received warrants to purchase
50,000 shares of the Company's common stock. The warrants are fully
vested and are exercisable at $1.00 per share.
In addition, during fiscal 1996 the Company also sold 1,393,000 shares of
common stock for aggregate proceeds of $373,250.
During fiscal 1997, the Company successfully completed a private
placement offering (the "97 Offering") of 2,666,667 shares of its
common stock for proceeds to the Company of approximately $2,000,000.
In connection with the 97 Offering, the Company issued warrants to
purchase 400,000 shares of the Company's common stock at an exercise
price of $1.00 per share. The warrants are exercisable, at the option
of the holder, at any time through March 27, 2003.
Common Stock Issued for Service-
During fiscal 1998, 1997 and 1996, respectively, the Company issued
85,000, 5,000 and 392,500 shares, respectively, of restricted common
stock for various legal and consulting services provided to the
Company. The number of shares issued were determined based on the fair
market value of the services provided.
Stock Options-
Prior to fiscal 1996, all stock options were issued at the discretion
of management. In fiscal 1996, the Company adopted the 1996 incentive
stock option plan (the "Plan") which provides for granting of incentive
stock options ("ISO's") to employees. Options vest over a period of
time as determined by the Board of Directors upon the granting of such
options, except that no option shall be exercisable in whole or in part
prior to the first anniversary of the date of granting of such option.
Options are exercisable 10 years from the grant date. The exercise
price of ISO's granted under the Plan will not be less than 100% of the
fair market value on the date of grant (110% for ISO's granted to more
than 10% stockholders).
In April 1996, Messrs. Katevatis, Kouvatis, Kennedy and Armstrong,
directors and stockholders of the Company, collectively exercised
options for 2,763,166 shares of the Company's common stock at no cost
in consideration for the cancellation of the remaining 452,582 options
held by these individuals. The exercise price for these options was
$0.25 per share and, accordingly, the Company recorded $690,792 as
additional compensation expense.
In May 1997, Mr. Kraum, a director and stockholder of the Company, was
issued 166,666 shares of the Company's common stock at no cost in
consideration for the cancellation of the remaining 200,000 options he
held. The Company recorded $41,666 as additional compensation expense
in connection with the issuance of the stock.
<PAGE>
Stock option activity during the three year period ended February 28,
1998, was as follows-
<TABLE>
<CAPTION>
Weighted
Average
Exercise Exercise
Shares Price Range Price
---------- ----------- --------
<S> <C> <C> <C>
Outstanding, February 28, 1995 3,910,748 $0.25-$2.00 $ 0.36
Granted ...................... 200,000 $ 1.00 $ 1.00
Exercised .................... (180,000) $ 0.25 $ 0.25
---------- ----------- --------
Outstanding, February 29, 1996 3,930,748 $0.25-$2.00 $ 0.40
Exercised .................... (2,843,166) $ 0.25 $ 0.25
Cancelled .................... (652,582) $0.25-$1.00 $ 0.48
---------- ----------- --------
Outstanding, February 28, 1997 435,000 $1.00-$2.00 $ 1.25
Cancelled .................... (200,000) $ 1.00 $ 1.00
---------- ----------- --------
Outstanding, February 28, 1998 235,000 $1.00-$2.00 $ 0.95
========== =========== ========
</TABLE>
Stock Warrants-
Stock warrant activity during the three year period ended February 28,
1998, was as follows-
<TABLE>
<CAPTION>
Shares Exercise
Available Price Range
--------- -------------
<S> <C> <C>
Outstanding, February 28, 1995 392,162 $.50 - $1.20
Granted ...................... 1,025,000
Exercised .................... (143,750) $ .50
---------- ------------
Outstanding, February 29, 1996 1,273,412 $.50 - $1.20
Granted ...................... 873,220 $ 1.00
Exercised .................... (100,000) $ .50
---------- ------------
Outstanding, February 28, 1997 2,046,632 $.50 - $1.20
---------- ------------
Outstanding, February 28, 1998 2,046,632 $.50 - $1.20
========== ============
</TABLE>
<PAGE>
(9) OTHER INCOME:
On October 20, 1997 the Company entered into a 90 day "no shop"
agreement with SpectRx, Inc. Norcross Ga., a developer of products for
less invasive and painless alternatives to blood tests for glucose
monitoring, diabetic screening, and infant jaundice based on
proprietary technology for the consideration of $200,000. This was to
enable discussions toward a merger, joint venture licensing or other
substantial collaboration with the Company by accessing the Company's
United States and Japanese patent portfolio and research capabilities
for both corporate and world-wide synergy. On January 18, 1998 the no
shop agreement expired. The Company has recorded the $200,000 as other
income in the accompanying statement of operations.
(10) WRITE-OFF OF INTANGIBLES:
Applying the criteria established by Statement of Financial Accounting
Standards No. 121, Accounting for the Impairments of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, the Company concluded that
certain intangible assets including goodwill and patents were impaired.
Goodwill of $460,000 represented the excess of the purchase price over
the net assets acquired in the acquisition of Laser and was being
amortized over twenty years, using straight-line method. As a result of
the impairment, the Company recorded a non-cash charge of $274,675,
which represents the difference between the carrying value of these
assets and their fair value based on estimated discounted future cash
flows. The circumstances that led to this impairment relate primarily
from the Company's inability to generate revenue.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE----None
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (A) OF THE EXCHANGE ACT
Officers and Directors
The directors, executive officers and significant employees of the Company are:
Name Age Position
- ---- --- --------
Peter Katevatis 64 Chairman of the Board, Chief Executive
and Treasurer
John M. Kennedy 61 Vice President and Secretary
William Armstrong 81 Director
Mathew Culligan 78 Director
Michael N. Kouvatas 71 Director
John P. Matheu 76 Director
Clarence Z. Wurts 57 Director
Directors hold office until the next annual sharholders' meeting or until their
successors have been duly elected and qualified. Executive officers are
appointed and serve at the pleasure of the Board of Directors
Peter Katevatis has served as Chairman of the Board of Directors since
1993. He served as President and Chief Executive Officer of the Company from
November, 1983 until the appointment of Herbert L. Hugill and served as director
of the Company since 1981. From 1981 until his election as President and Chief
Executive Officer, Mr. Katevatis was a Vice President of the Company. Mr.
Katevatis was elected Treasurer of the Company in January, 1996. Mr. Katevatis
has been a practicing attorney in Philadelphia Penna. and Marlton New Jersey,
and is also licensed as an attorney in the State of New York and in the District
of Columbia. Mr. Katevatis was a trustee of the New Jersy State's Police and
Firemans Retirement Pension Fund and served as a member of the State of New
Jersey Investment Council from 1990 until December , 1992. He is also a member
of the American Arbitration Association and a member of the National District
Attorney's Association.
John M. Kennedy currently serves a Vice President and Secretary of the
Company, as well as being a director of the Company since 1982. Mr. Kennedy has
served the Company as Vice President since 1983, as Treasurer from 1984 to
January, 1996 and as secretary since 1986. Mr. Kennedy is Chairman of the Board,
Secretary-Treasurer and General Manager, of Pepco Manufacturing Co., a sheet
metal fabricator for the elctronics industry located in Somerdale, New Jersey.
Mr. Kennedy also was a director of First Peoples Bank of New Jersy from 1979 and
served as a member of its executive board until 1994 when Core-States Bank
purchased First Peoples Bank.
William W. Armstrong has served as a director of the Company since 1978. He
has been in retirement since 1982 following a 36 year career as a research
<PAGE>
scientist with Pfizer Inc, a world wide health care, personal care and specialty
chemicals manufacturer headquartered in New York City. Since his retirement, Mr.
Armstrong has continued to serve as a consultant to Pfizer concerning programs
involved with disperse systems and complex liquids his field of expertise. He
has been awarded 14 patents concerned in general with therapeutic agent dosage
delivery systems.
Mathew Culligan has served as a director of the Company since March, 1990.
Since 1988, Mr. Culligan has served as Chairman and Chief Executive of
Culligan/Kahn Associates, a broadcast production company located in New York,
New York. Mr. Culligan, in 1984 founded Enviornmental Monitor, a non-profit
organization dedicated to providing a computerized service of enviornmental
conditions and currently serves as its Chairman. Mr. Culligan has at various
times during his career, served as Presdent of the NBC Radio Network; Exective
Vice President of NBC Television; Chairman of the Mutual Broadcasting Company;
and as Chairman and President of Curtis Publishing Inc., the publisher of among
other periodicals, Saturday Evening Post, Ladies Home Journal and Holiday. Mr.
Culligan has also been the author of twelve published books and was the creator
of two television shows.
John P. Matheu has served as a director of the Company since July , 1996.
Mr Matheu is currently general partner and co-founder of MATCO & Associates, a
firm speciaizing in providing managment consulting services to decision makers
in biopharmaceutical, medical devices and health care firms. Previously, he was
employed by Pfizer Inc. during which time he held a wide range of managemnt
positions primarily in distribution, marketing and sales. As Vice President, he
established and directed Pfizer's generic drug division. Prior to that
assignment he directed Pfizer Laboratories 800 person field sales force, its
hospital marketing group and its training department. He left Pfizer in 1984 and
founded Matheu Associates, a management consulting firm.
Michael N. Kouvatas has served as a Director of the Company since 1971. For
the past 10 years Mr. Kouvatas has been an attorney with offices in Haddonfied
New Jersey and additionally is a pricipal in various food operations in the
Southern New Jersey area.
Clarence Z. Wurts has served as a Director of the Company since July ,1996.
Mr. Wurts is founder, President and CEO of Philadelphia Investors Ltd., a full
service regional investment bank. Previously, he was President and director of
Edard C. Rorer &o., Inc. and a Partner of Alex Brown & Sons.
There are no family relationships among directors and, to the knowledge of the
Company, there have been no legal proceedings or judgments during the past five
years which would be material to the evaluation of the ability and integrity of
any director.
Scientific Advisory Board
The Scientific Advisory Board's Chairman is Dr. Robert R. Alfano distinguished
Professor of Science and Engineering and the Director of the IUSL at the City
College of CUNY. He is co-author of a number of patents concerning the Company's
photonic technology and a principal stockholder of the Company. He supervises
the research and development of the Company's cancer diagnostic technology and
is principal investigator at CCNY. Since 1972, he has been affiliated with the
Physics Department of CCNY. He presently directs the institute for Ultrafast
Spectroscopy and Lasers and the Photonics Engineering Laboratories at City
College. From 1964 to 1972, he was a member of the technical staff of General
Telephone & Electronics Laboratories. Dr. Alfano received an Alfred P. Sloan
<PAGE>
Fellowship Research corporation Award and was made a Fellow of the American
Physical Society in 1976. In 1983 he received the Outstanding Italian-American
Award for Science. In May, 1989, Dr. Alfano was elected a Fellow of the Optical
Society of America for his studies of ultrafast phenomena. He has been a
consultant to several major corporations including GTE, Clairol, Phillips Dental
and Hamamatsu Photonics. Dr. Alfano is on the advisory board of Photonics
Spectra Magazine. He is a reviewer for prestigeous professional journals in the
fields of physics, optics, photobiology, photochemistry and biophysics. He
received his B.S. and M.S. degrees in Physics from Fairleigh Dickinson
University in 1963 and 1964, respectively. He received his Ph.D in Physics from
New york University in 1972.
Stimson P. Schantz, M.D. is Director of Cancer Prevention, Department of Surgery
Cornell University Memorial Sloan-Kettering Cancer Center, New York. Dr. Schantz
has been appointed as the principle investigator under the Company's Clinical
Trial Agreement with Memorial Hospital for Cancer and Allied Diseases and in
such capacity, overesees the pilot study of tissue autofluorescence pursuant to
such agreement. Between 1984 and 1991, Dr. Schantz served in various faculty
positions at the M.D. Anderson Cancer Center in the Department of Head and Neck
Surgery. Dr. Schantz is presently a member of the Society of Surgical Oncology,
American Society for Head and Neck Surgeons, the Society of Head and Neck
Surgery, and has served as the Director of research programs and as a member of
the research committee at the University of Texas, M.D Anderson Cancer Center.
He has been the recipient of several honors and awards, including the First
Independent Investigator Award of the National Cancer Institute awarded in March
1988 and an NCI contract to study biomarkers awarded in 1995. Dr. Schantz serves
as reviewer and editor of a number of professional medical publications and is
the author of numerous articles. papers, books and chapters, and abtracts. He
was awarded a Bathelor of Arts Degree from Harvard College in 1970 and his M.D.
from the University of Cincinnati in 1975. In April ,1998 Dr. Schantz was
recruited to lead a multi-institutional effort revolving around cancer
prevention clinical research programs and constituting a consortium effort with
hospitals in the metrolpolitan New York City area supported by the National
Cancer Institute approval and high priority rating on a $1.6 million dollar
grant to carry out collaborative clinical trials which will be targeted
specifically at developing Mediscience Technology and positioned to conduct
phase II and phase III trials on a multi-organ basis involving diseases of the
breast, upper and lower aerodigestive tract, and gynecologic tissues.
Each member of the Scientific Advisory Board is paid a fee of $1,000 for each
meeting attended. Additionally, certain members past and present have been
granted an option of unlimited duration to purchase 10,000 shares from the
Company's Common Stock at a price of $2.00 per share.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The followinfg sets forth a summary of compensation paid or accued to the
executive officers of the Company or fiscal years ending Febuary, 28,1998,
Febuary 28, 1997 and Febuary 28, 1996 whose compensation exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name and Year ended Other Annual
Principle Position Feb. 28 (29) Salary Compensation
- ------------------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Peter Katevatis 1998 $200,000 $ 64,865 (2)
Chairman and Chief 1997 $100,000 (1) $523,231 (2)
Executive Officer 1996 $208,578 (1) $ 64,176 (2)
</TABLE>
- --------------------
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) Includes payment to Mr. Katevatis of $50,000 for legal services rendered
during each of the fiscal years ending Febuary 28,1998 Febuary 28,1997,
Febuary 28,1996 (fiscal years 1998,1997,1996 respectively). and fringe
benefits under his employment agreement for automobile expense of $6,000 ,
automobile insurance of $2,856 and health insurance of $ 4,800 paid during
1998. Contract benefits paid in 1997 automobile expense $12,721, automobile
insurance $2,155 and health insurance $4,470. Conract benefits paid in
1996, automobile expense $4,928, automobile insurance $2,155, health
insurance $7,093. Also inclused $453,184 of stock compensation expense. See
Note 3 to Notes to Consolidated Statements.
Option Excercises and Holdings
In April 1996, Messrs. Katevatis, Kouvatas, Kennedy and Armstrong, directors and
shareholders of the Company, collectively excercised options for 2,763,166
shares ofthe Company's common stock at no cost in cosideration for the
cancellation of the remaining 452,582 options held by these individuals. The
excersise price for these options was $0.25 per share and accordingly, the
Company recorded $690,792 as additional compenation expense.
<PAGE>
The folowing table provides information regarding the number of shares covered
by both exercisable and non-execisable stock options held by the Company's
executive officers at Febuary 28, 1998 (ses Notes to Consolidated Statements).
In addition the following table sets forth the values for "in-the-money"
options, which represent the positive spread between the exercise price of the
existing options and $________________ which was the closing price for the
Company's Common Stock in the over-the-counter market on Febuary 28, 1998.
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS AT FISCAL YEAR-END
Number of shares underlying Value of unexercised
unexercised options at year end in-the-money options at year end
- ------------------------------- --------------------------------
Exercisable Unexercisable Exercisabe Unexercisable
----------- ------------- ---------- -------------
<S> <C> <C> <C>
0 0 0 0
</TABLE>
The Company does not have any other contigent forms of compensation for officers
and directors, including any pension,retirement, stock bonus or other
compensation plan. No compensation has been paid to any individual for services
rendered as a director.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
The following table sets forth certain information at December 4, 1998 with
respect to (i) those persons known by the Company to be the owners of more than
5% of the Company's Common Stock, (ii) the ownership of the Company's Common
Stock by each director and (iii) the ownership of the Common Stock by all
exective officers and directors of theCompany as a group. Except as otherwise
indicated, each of the stokholders named below has sole voting and investment
power with respect to the Shares of Common Stock beneficially owned by him:
<TABLE>
<CAPTION>
Amount of Beneficial Percentage of
Name and Address Ownership Class
- ---------------- --------- -----
<S> <C> <C>
Peter Katevatis
P.O. Box 598
Woodcrest Cherry Hill NJ, 08003 4,725,595 (1)(2)(3)(4)(5)(12) 13.4%
John M. Kennedy
c/o Pepco Mfg. Co.
100 Somerdale, NJ 08083 2,677,933 (5)(6)(12) 7.6
William W.Armtsrong
P.O Box 607
Tupper Lake, NY 2986 355,200 (5)(7)(12) 1.0
Michael Kouvatas
27 Kings Highhway
East Haddonfield NJ 08033 684,666 (5)(8)(12) 1.9
Mathew Culligan
410 East 65 Street
New York, NY 10021 20,000 (10) 0.006
Robert C. Miller
c/o Allen &Company, Inc
711 Fifth Avenue
New York, NY 10022 0 (14) 0.00
Dr. Robert R. Alfano
c/o City College of CUNY
Convent Avenue @ 138th Street
New York, NY 10031 1,414,000 (11) 4.02
All directors and officers as a group
7 persons 8,770,894 (13) 24.9
</TABLE>
- ---------------------
(1) Includes the issuance of a net of 398,167 restricted shares acquired by Mr.
Katevatis pursuant to the exercise of stock options described in footnotes
(5) and (12) below.
(2) Includes 824,500 restricted shares issued for past performance and services
rendered to the Company. see Note 8 of Notes to Consolidated Financial
Statements.
<PAGE>
(3) Includes 552,664 restricted shares issued in consideration for contractual
reduction in salary described in Note 3 of Notes to Consolidated Financial
Statements.
(4) Excludes 50,000 shares owned by Mr. Katevatis's daughter as custodian for
his grandchildren, and a total of 500,000 shares owned by his sons, as to
all of which he disclaims beneficial ownership.
(5) On December 13, 1985 the Company granted stock options at an exercise price
of $0.25 per share to the following Officers and Directors in exchange for
cancellation of certain of the Company's accrued indebtedness to such
persons, portions of which were assigned as follows: Mr. Katevatis received
options to purchase 4,400,000 shares (2,200,000 of which were assigned by
Mr. Katevatis to Mr. Kennedy); Winston Frost, a former Director, received
options to purchase 476,000 shares, 238,000 of which were assigned by Mr.
Frost to Mr. Armstrong; and Mr. Kouvatas received options to purchase
560,000 shares.
(6) Includes the issuance of a net of 1,833,333 restricted shares acquired by
Mr. Kennedy pursuant to the excercise of stock options described in
footnots (5) and (12). Also includes 100,000 shares registered in the name
of Mr. Kennedys wife
(7) Includes the issuance of a net of 65,000 restricted shares acquired by Mr.
Armstrong pursuant to the excercise of stock options described in footnotes
(5) and
(12) Also included are 6,000 shares regisered in the name of Mr. Armstrong's
wife.
(8) Includes the issuance of a net of $466,666 restricted shares acquired by
Mr. Kouvatas pursuant to the exercise of stock options describe in
footnotes (5) and (12).
Also included are; 14,000 shares owned by Mr. Kouvatas's wife; 6000 shares for
which Mr. Kouvatas is custodian for three (3) of his children and 36,000 shares
for which Mr. Kouvatas's daughter is custodian for her two children under the
New Jersey Uniform Gift to Minors Act; and 30,000 shares registered in the names
of each his children.
(9) Includes the issuance of a net of 166,666 shares acquired by Mr Krumm
pursuant to the excercise of stock options on May 1, 1997; also includes
6,000 shares registered in the name of his wife's IRA.
(10) Includes 20,000 shares which may be acquired by Mr. Culligan at $2.00 per
share pursuant to immediately excercisable stock options.
(11) Includes 44,000 shares owned by Dr. Alfano's daughter and 44,000 shares
held by Dr. Alfano's wife in trust for their minor son.
(12) In April 1996, Messrs. Katevatis, Kouvatas, Kennedy and Armstrong,
directors and shareholders of the Company, collectively exercised options
for 2,763,166 shares of the Company's common stock at no cost in
consideration for the cancelation of the remaining 452,582 options held by
these individuals. The exercise price for these options was $0.25 per share
and accordingly,the Company recorded $690,792 as additional compensation
expense.
<PAGE>
(13) Includes the shares described in notes (1), (6), (7), (8), (9) and (10)
above.
(14) Excludes 3,041,500 shares beneficially owned by Allen & Company,
Incorporated, (8.5%- includes 1,041,500 warrants) as reflected in Amendment
No. 4 to their Schedule 13G filed Febuary 11, 1998. Mr. Miller is a vice
president and a director of Allen & Company, Incorporated.
(15) See Note 3 of Notes to Consolidated Financial Statements.
The foregoing table does not include options granted to former placement agents
of the Company's securities to purchase 111,912 shares of Cmmon Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ending Febuary 28, 1989, the Company ratified and
confirmed a prior letter agreement granting Pepco Manufacturing Co. a right of
first refusal for any and all manufacturing either for or through the Company
for a ten year period ending October 29, 1997. The terms and provisions of such
arrangements will be at least as favorable to the company as would otherwise be
available from unaffiliated third parties. The Chairman of the Board of Pepco
Manufacturing Co. is John M. Kennedy, who serves as an officer and director of
the Cmpany. In the event of an opportunity for a business arrangement with a
major marketing co-developer involving manufacture as well. Pepco has consented
to relinguish its right of first refusal in the best interests of the Company.
On December 1, 1988, the Company acquired from Dr. Robert Alfano, a principle
stockholder of the Company and Chairman of the Scientific Advisory Board, all of
the issued and outstanding stock of Laser Diagnostic Instruments, Inc. whose
only asset was US patent number 4,930,516 (previously defined as "LDI") in
exchange for 1,500,000 shares of the Company's Common Stock. Additionaly, LDI is
under an obligation to pay a royalty in the aggregate amount of 1% of gross
sales from any equipment made, leased or sold which embodies the concepts
described in patent number 4,930,516 to Michelle Alfano, Dr. Alfano's daughter.
In April, 1992 the Company entered into a five (5) year Consulting Agreement
with Dr. Alfano. By letter Agreement, dated August 5, 1995, the Company extended
his Employment Agreement to March 5, 2002 under the same terms and conditions.
Pursuant to the terms of such Consulting Agreement, Dr. Alfano is to be paid a
consulting fee of no less that $150,000 per annum in exchange for services to be
rendered for approximately fifty (50) days per annum in connection with the
Company's medical photonics business.. The Consulting Agreement further provides
that Dr. Alfano is to paid a bonus and fringe benefits in accordance with
policies and formulas applied to the key executives of the Company.
Ronald Krumm, resigned from the Board of Directors effective August 18, 1998.
Herbert L. Hugill terminated his tenure as President /CEO January 31, 1998,
whereupon Mr. Katevatis re-assumed those responsibilities, and Mr. Hugill
resigned from the Board of Directors effective March 6, 1998.
Peter Katevatis Pres/CEO and Dr. Alfano principle scientific advisor have agreed
to forbear any and all collection action against Mediscience for accrued salary
and related contractually entitled items including forgiveness of interest in
exchange for the option of coverting such accrued debts into MTC common stock on
the basis of (0.25 cents), which is above the average High Bid price on June 9
through the 12th 1998, which was 0.15 cents. Said option to be unlimited in
duration. Should MTC receive funding Katevatis and Alfano may elect to receive
all or part of such accrued debt in cash/shares. This right shall be assignable
in whole or in part without condition to any assignee or heirs and in no way is
intended to negate the corporate debt accrued and owing to Katevatis/Alfano.
This offer by Katevatis/Alfano was unanimously accepted by the Board of
Directors December 4, 1998.
<PAGE>
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.01 Employment Agreement dated May 1, 1992 between the registrant and Peter
Katevatis. (1)
10.02 Consulting Agreement dated April 21, 1992 between the Registrant and Dr.
Robert R. Alfano (2)
10.03 Extension Agreement between the Registrant and City College of the City of
New York (3)
10.04 Research Proposal to Registrant submitted jointly by the City Colloge of
the City University of New York and the Research Foundation of the City
University of New York (4)
10.07 Agreement dated December 1, 1988 by and among the Registrant, Laser
Diagnosis and Robert Alfano, as amended and modified on October 24, 1988 (7)
10.08 Research Agreement between the Research Foundation of the City University
of New York and the Registrant dated as of June 1, 1992 (9)
10.10 License Agreement between Virginia Commenwealth University and the
Registrant (10)
10.11 Letter Agreement between Memorial Hospital for Cancer and Allied Diseases
and the Registrant dated March 30, 1993amending Clinical Trial Agreement dated
June 1, 1992 (11)
10.12 Amendment No. 3 to Agreement between the Registrant and City College of
the
City University of New York
10.13 Research Agreement effective July 1, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research (12)
10.14 License Agreement between Yale University and the Registrant dated May 4,
1993
10.15 License Agreement between Yale University and the Registrant dated
November 30, 1993
10.16 Research Agreement effective July 1,1994 between thr Registrant and the
Trustees of Columbia University in the City of New York (13)
10.17 Research Agreement effective July 1, 1994 between Registrant and the Free
University, Amsterdam N.V. (14)
10.18 Microbial Detection protocal dated August 15,1994 between and the
Registrant and Merck & Co. (15)
10.19 Collaborative Research Agreement effective September 23, 1994 btween the
Registrant and General Electric Company (16)
10.20 SBIR Grant Award effective September September 30,1994 between the
Registrant and the National Institutes of Health (17)
<PAGE>
10.21 Award/Contract effective September 30, 1994 between the Registrant and the
U.S. Army Medical Research Acquisition Activity (18)
10.22 Clinical Trial Agreement effective December 1, 1994 between the Registrant
and the General Hospital Corporation, d.b.a.Massachusetts General Hospital (19)
10.23 Investment Banking Agreement effective August 8, 1995 between the
Registrant and Allen & Company Incorporated (20)
10.24 Employment Agreement between the Registrant and H.L Hugill effective
January 18, 1996 (21)
10.25 Collaborative Research Agreement effective June 15, 1996 between the
Registrant, Mallinckrodt Medical Inc. and the Research Foundation of the City
University of New York (22)
10.26 Investigational Device Exemption ganted January 3, 1997 by the U.S Food
and Drug Administration (FDA) (23)
10.27 Employment Agreement Extension efective January 17, 1997 between the
Regisrant and H.L.Hugill (24)
10.28 Research Agreement effective April 21, 1997 among the Registrant, General
Electric Co, and the Research Foundation of the City University of New York (25)
(b) Reports on Form 8-K
See Exhibit 10.25
Collaborative Research Agreement effective June 15, 1996 between the Registrant,
Mallinckrodt Medical Inc. and the Research Foundation of the City University of
New York. (22)
See Exhibit 10.26
Investigational Device Exemption granted January 6, 1997 by the U.S. Food and
Drug Administration (FDA) (23)
See Exhibit 10.27
Employment Agreement effective January 17, 1997 between the Registrant and H.L.
Hugill (24)
See Exhibit 10.28
Research Agreement effective April 21, 1997 with General Electric Company and
the Research Foundation ofthe City University of New York (25)
- ------------------
(1) Filed as Exhibit 10.1 to Registrant's Annual Reort on Form 10-K for the
fiscal year ended February 28, 1993
(2) Filed as Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1993
(3) Filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28,1993
(4) Filed as Exhibit 10.1 to registrant's Annual Report 10-K for the fiscal year
ended February 28, 1989 and incorporated by reference thereto.
(5) Filed as Exhibit 10.3 to Registrant's registration Statement on Form S-1
filed on July 5, 1991 and incorporated herein by reference thereto.
<PAGE>
(6) Filed as Exhibit 10.3 to Registrant's Annual Reporton Form 10-K for the
fiscal year ended February 28, 1987 and incorporated by reference thereto.
(7) Filed as Exhibit 10.5 to Registrant's Registration Statement on Form S-1
filed on July 5,1991 and incorporated herein by reference thereto.
(8) Filed as Exhibit 10.8 to Registrant's Registration Statement on Form S-1
filed on August 24,1992 and incorporated by reference hereto.
(9) Filed as Exhibit 10.9 to Registrant's Registration Statement on Form S-1
filed on August 24, 1992 and incorporated herein by reference hereto.
(10) Filed as Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1993.
(11) Filed as exhibit 10.11 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1993.
(12) Filed as Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 195.
(13) Filed as Exhibit 10.16 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995.
(14) Filed as Exhbit 10.17 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995.
(15) Filed as Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995.
(16) Filed as Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the
fiscal yearended February 28, 1995.
(17) Filed as Exhibit 10.20 to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995.
(18) Filed as Exhibit 10.21 to Registrant's Annual Report on Form 10-K for the
fiscal year February 28, 1995.
(19) Filed as Exhibit 10.22 to Registrants Annual Report on Form 10-K for the
fiscal year February 28, 1995.
(20) Filed as Exhibit A to Registrant's current report on Form 10-K dated
September 23, 1995.
(21) Filed as Exhibit A to Registrant's current report on Form 10-K dated April
23, 1996.
(22) Filed as Exibit A to Registrant's curent report on Form 8-K dated June 15,
1996.
(23) Filed as Exhibit A to Registrant's current report on Form 8-K dated January
6, 1997.
(24) Filed as Exhibit A to Registrant's current report on Form 8-K dated Jan 13,
1997
(25) Filed as Exhibit A to Registrants current report on Form 8-K dated January
28, 1997
(26) Filed as Exhibit A to Registrant's current report on Form 8-K dated April
21, 1997.
(27) Filed as Exhibit A to Registrant's current report on Form 8-K dated May
16.1997
(28) Filed as Exhibit A to Registrant's current report on Form 8-K dated Oct 21,
1997
(29) Filed as Exhibit A to Registrant's current report on Form SC13G dated Feb
12, 1998
(30) Filed as Exhibit A to Registrant's current report on Form 8-K dated April
8, 1998
(31) Filed as Exhibit A to Registrant's current report on Form 8-K dated May 29,
1998
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities 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.
Date: December 1998 By: Peter Katevatis, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Mediscience Technology Corp.
hereby severally constitute and appoint Peter Katevatis, our true and lawful
attorney, with full power to sign for us and in our names in the capacities
indicated below, any amendments to this report on form 10-KSB, and generally to
do all things in our names and on our behalf in such capacities to enable
Mediscience Technology Corp. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all the requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of section 13 or 15(d) of the Securities and
Exchange Act of 1934, this report has been signed below by the following persons
on bealf of the Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Peter Katevatis Chairman of the Board,Principle Officer
Peter Katevatis, Esq. and Financial Officer December 10, 1998
/s/William Armstrong
William Armstrong Director December 10, 1998
/s/Mathew J. Culligan
Mathew J. Culligan Director December 10, 1998
/s/John M. Kennedy
John M. Kennedy Director December 10, 1998
/s/ Michael N. Kouvatas
Michael N. Kouvatas, Esq. Director December 10, 1998
/s/John P, Matheu
John P.Matheu Director December 10, 1998
/s/Clarence Z. Wurts
Clarence Z. Wurts Director December 1998
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 21,240
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,363
<PP&E> 203,978
<DEPRECIATION> 177,574
<TOTAL-ASSETS> (64,767)
<CURRENT-LIABILITIES> (928,786)
<BONDS> 0
0
(21)
<COMMON> (349,436)
<OTHER-SE> 1,213,476
<TOTAL-LIABILITY-AND-EQUITY> (64,767)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,539,192)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,539,192)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,539,192)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,539,192)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
