FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended November 30, 1998 Commission File Number 0-7405
MEDISCIENCE TECHNOLOGY CORP.
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(Exact Name of Registrant as Specified in its Certificate of Incorporation)
New Jersey
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(State or other jurisdiction on incorporation or organization)
22-1937826
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(I.R.S. Employer Identification Number)
1235 Folkstone Way, Cherry Hill, New Jersey 08034
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(Address of principal executive offices)
(Registrant's telephone number, including area code) 609-428-7952
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Registrant has not been involved in bankruptcy proceedings during the preceding
five years.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 30, 1998.
Title of Class Number of Shares Outstanding
-------------- ----------------------------
Common Stock, par value 35,143,618
$.01, per share
Preferred Stock, par value 2,074
$.01 per share
<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
NOVEMBER 30, 1998
INDEX
PAGE
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets as at November 30, 1998 (Unaudited) and 1
February 28, 1998
Statement of Operations for the Nine and Three Months ended 2
November 30, 1998 (Unaudited) and November 30, 1997
(Unaudited)
Statement of Cash Flows for the Nine Months ended November 3
30, 1998 (Unaudited) and November 30, 1997 (Unaudited)
Statement of Stockholders' Equity for the Nine Months ended 4
November 30, 1998 (Unaudited)
Exhibit to Statements of Operations 5
Notes to Financial Statements 6
Item 2. Management's Plan of Operation 7 - 8
PART II. Other Information 8
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
BALANCE SHEETS
ASSETS
November 30, 1998
(Unaudited) February 28, 1998
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ -- $ 21,240
Other Assets 2,192 17,123
------------ ------------
Total Current Assets 2,192 38,363
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Net of Accumulated Depreciation $186,572 17,406 26,404
November 30, 1998; $177,574 - February 28, 1998
------------ ------------
TOTAL ASSETS $ 19,598 $ 64,767
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 57,025 $ 30,860
Other Accrued Liabilities 1,517,033 897,926
------------ ------------
Total Current Liabilities 1,574,058 928,786
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock - $.01 Par Value; Authorized 21 21
50,000 Shrs; Outstanding 2,074 Shrs;
(Preference on Liquidation $20,740)
Common Stock $.01 Par Value, Authorized 351,436 349,436
39,950,000 Shares; Outstanding 35,143,618 Shares
Additional Paid-in Capital 17,632,496 17,573,096
Accumulated Deficit (19,538,413) (18,786,572)
------------ ------------
Total Stockholders' Equity (Deficiency) (1,554,460) (864,019)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 19,598 $ 64,767
============ ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
NINE MONTHS THREE MONTHS
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ -- $ -- $ -- $ --
Cost of Sales -- -- -- --
------------ ------------ ------------ ------------
Gross Profit -- -- -- --
General and Administrative Expense 515,417 572,183 182,411 176,148
Product Development Expense 189,840 337,230 22,583 89,863
Advertising, Travel and Marketing 35,252 77,168 20,211 17,844
------------ ------------ ------------ ------------
Total Expenses 740,509 986,581 225,205 283,855
------------ ------------ ------------ ------------
Other Income (Expense) (11,332) 212,674 (11,400) 205,244
------------ ------------ ------------ ------------
Net (Loss) $ (751,841) $ (773,907) $ (236,605) $ (78,611)
============ ============ ============ ============
Net Loss Per Common Share $ (0.02) $ (0.02) $ (0.01) $ --
============ ============ ============ ============
Weighted Average Number of
Shares of Common Stock
Outstanding 35,032,507 34,880,470 35,143,618 34,935,285
============ ============ ============ ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(751,841) $(773,907)
Adjustment for Item Not Requiring Cash Outlay
Depreciation 8,998 19,834
Amortization -- 19,206
Stock Issued for Services -- 98,750
Stock Issued Upon Exercise of Stock Options at No Cost -- 41,666
Issuance of Warranties 11,400 --
--------- ---------
Subtotal (731,443) (594,451)
Changes in Assets and Liabilities:
(Increase) in Prepaid Expenses -- (17,362)
Decrease (Increase) in Other Assets 14,931 29,472
(Increase) Decrease in Deferred Charges -- 8
Increase (Decrease) in Accounts Payable 26,165 (65,497)
Increase (Decrease) in Other Accrued Liabilities 619,107 144,370
--------- ---------
Net Cash Flows Provided by (Used for) Operating Activities (71,240) (503,460)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment -- (12,882)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Issuance of Common Stock 50,000 --
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,240) (516,342)
CASH AND CASH EQUIVALENTS
Beginning Balance 21,240 678,397
--------- ---------
Ending Balance $ -- $ 162,055
========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MEDISCIENCE TECHNOLOGY CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998
(UNAUDITED)
Preferred Stock Preferred Common Stock Common Additional Paid Accumulated
Number of Shares Stock Number of Shares Stock in Capital Deficit
---------------- --------- ---------------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance February 28, 1998 $2,074 $21 $34,943,618 $349,436 $17,573,096 $(18,786,572)
Issuance of Common Stock for
Cash - - 200,000 2,000 48,000
Issuance of Warrants 11,400
Net Loss for the Nine
Months Ended November 30, 1998 (751,841)
---------------- --------- ---------------- -------- --------------- ------------
Balance November 30, 1998 $2,074 $21 $35,143,618 $351,436 $17,632,496 $(19,538,413)
================ ========= ================ ======== =============== ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT TO STATEMENTS OF OPERATIONS
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Common Stock Weighted
$.01 Par Value Number of Average Number
Issued and Common Stock Shares of Shares
Outstanding Equivalents Outstanding Outstanding
------------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
March 1998 34,943,618 - 34,943,618
April 1998 34,943,618 - 34,943,618
May 1998 34,943,618 - 34,943,618
June 1998 34,943,618 - 34,943,618
July 1998 34,943,618 - 34,943,618
August 1998 35,143,618 - 35,143,618
September 1998 35,143,618 - 35,143,618
October 1998 35,143,618 - 35,143,618
November 1998 35,143,618 - 35,143,618 35,032,507
</TABLE>
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<PAGE>
MEDISCIENCE TECHNOLOGY CORP.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
(UNAUDITED)
NOTE 1 RESULTS OF OPERATIONS
The financial statements, in the opinion of management, include all
adjustments and accruals necessary for a fair presentation.
The results of operations for each interim period are not necessarily
indicative of results to be expected for the year due to the
unpredictability of market factors, product development, competition
and sales in general.
NOTE 2 OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
Legal and Professional Fees $385,350
Research & Development 458,000
Salaries, Consulting and Other 673,683
----------
$1,517,033
==========
NOTE 3 CANCELLATION OF STOCK OPTIONS
In May 1997 a director of the Company exercised options for 166,666
shares of the Company's common stock at no cost in consideration for
the cancellation of the remaining 33,334 options held by this
individual. The exercise price for these options was $0.25 per share
and accordingly, the Company recorded $41,666 as additional
compensation expense.
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<PAGE>
MANAGEMENT'S PLAN OF OPERATION
The Company's mission is to discover, develop and market novel and effective
photonic technologies for the early detection of cancer. The focus of
Mediscience's devices is aimed toward less invasive, faster, more accurate and
more cost effective cancer diagnosis.
Mediscience's primary area of concentration is on development and
commercialization of its patented Tissue Fluorescence Spectroscopy technology
which uses light for non-invasive and minimally invasive detection of cancer in
humans, in vivo (in the body). Its secondary focus is on research and
development of its Optical Imaging technology which uses laser light to image
dense tissue without exposing the body to harmful ionizing irradiation.
The Company has successfully conducted pre clinical investigations with tissue
from the upper aerodigestive tract, the cervix, the breast and the colon. A
human clinical feasibility study was successfully completed for the upper
aerodigestive tract and additional human clinical feasibility studies are
scheduled for the breast and esophagus. Other possible application opportunities
will be evaluated during 1998 and pre clinical evaluations are expected to be
undertaken for the more promising opportunities before moving on to human
clinical studies.
The Phase I clinical feasibility 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 native tissue fluorescence spectroscopy 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. The clinical
feasibility study will be sponsored by Mediscience and will be partially funded
by the United States Army Medical Research Acquisition Activity. The second,
planned, phase I clinical feasibility study will be done at New York Hospital's
Cornell Medical Center to assess the potential utility of Mediscience's CD
Ratiometer with fiberoptic probe adapted to a flexible endoscope furnished by
Pentax Precision Instrument Corporation for monitoring Barrett's Esophagus.
In addition to working on its own, Mediscience is also seeking one or more
corporate alliance arrangements to jointly develop specific end use applications
for its technologies. The Company is also selectively considering other
non-medical applications of its technology through possible partnering
arrangements.
Mediscience subcontracts its research and development through an arrangement
with the City University of New York. Dr. Robert Alfano, a consultant to the
Company, distinguished professor of science and engineering at CUNY and the
inventor of the technology, supervises the Company's research as CUNY's
Principal Investigator. As a result of the contract research relationship with
CUNY, the Company has exclusive rights to 14 patents and optional rights to 25
pending patents. Mediscience also licensed 3 other patents from two other
institutions.
The Company has a research agreement with Memorial Sloan-Kettering Hospital for
investigation of its Tissue Fluorescence Spectroscopy technology and maintains
close working relationships with Columbia Presbyterian Hospital, New York
Hospital's Cornell Medical Center and Massachusetts General Hospital. The
Company had developed three prototype products that employ the technology for
cancer diagnosis. They include Cancer Detection Scan, CD Ratiometer and CD Map.
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. 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 probe designs is expected to be the preferred product
for the medical
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<PAGE>
practitioners 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.
The Company's ability to maintain its operations throughout its history has been
dependent upon the periodic infusion of capital and the willingness of its
creditors to accept payment beyond normal terms.
The 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 governmental 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-promotion 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 resource 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.
-8-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
MEDISCIENCE TECHNOLOGY CORP.
----------------------------
(REGISTRANT)
DATE: January , 2000 By: /s/PETER KATEVATIS
-------------------------------
PETER KATEVATIS
Chairman/CEO
By: /s/JOHN M. KENNEDY
-------------------------------
JOHN M. KENNEDY
Treasurer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> NOV-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2
<PP&E> 204
<DEPRECIATION> 187
<TOTAL-ASSETS> 19
<CURRENT-LIABILITIES> 1,574
<BONDS> 0
0
0
<COMMON> 351
<OTHER-SE> (1,906)
<TOTAL-LIABILITY-AND-EQUITY> 19
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (751)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
