Attached files
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EX-32 - SensiVida Medical Technologies, Inc. | v208404_ex32.htm |
EX-31.1 - SensiVida Medical Technologies, Inc. | v208404_ex31-1.htm |
EX-31.2 - SensiVida Medical Technologies, Inc. | v208404_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934
For the
quarterly period ended November 30, 2010
or
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from __________ to __________
Commission
File Number 000-07405
SENSIVIDA
MEDICAL TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
New
Jersey
|
22-1937826
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization
|
||
150
Lucius Gordon Drive, Suite 110
|
||
West
Henrietta, New York
|
14586
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(585)
214-2407
(Registrant’s
telephone number, including area code)
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 short 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
¨
Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
|
(Do
not check if a smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-c of the Act).
Yes
¨ No
x
As of
November 30, 2010, there were outstanding 15,998,112 shares of the registrant’s
common stock, $.01 par value.
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL
STATEMENTS
NOVEMBER 30,
2010
INDEX
PAGE
|
||
PART
1.
|
Financial
Information
|
|
Item
1.
|
Financial
Statements
|
|
Consolidated
Balance Sheets as of November 30, 2010 (Unaudited) and February 28, 2010
(Audited)
|
1
|
|
Consolidated
Statements of Operations for the Nine and Three Months Ended November 30,
2010 (Unaudited) and November 30, 2009 (Unaudited)
|
2
|
|
Consolidated
Statement of Changes in Stockholders’ Deficit for the Nine Months Ended
November 30, 2010 (Unaudited)
|
3
|
|
Consolidated
Statements of Cash Flows for the Nine Months Ended November 30, 2010
(Unaudited) and November 30, 2009 (Unaudited)
|
4
|
|
Notes
to Consolidated Financial Statements
|
5-14
|
|
Item
2.
|
Management’s
Discussion and Analysis
|
15-17
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
18
|
Item
4T.
|
Controls
and Procedures
|
18
|
PART
11.
|
Other
Information
|
19
|
Item
1.
|
Legal
Proceedings
|
19
|
Item
1A.
|
Risk
Factors
|
19
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
19
|
Item
3.
|
Defaults
Upon Senior Securities
|
19
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
19
|
Item
5.
|
Other
Information
|
19
|
Item
6.
|
Exhibits
|
20
|
Signatures
|
21
|
|
Exhibits
|
|
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
November 30,
2010
(Unaudited)
|
February 28,
2010
(Audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ | 14,479 | $ | 12,002 | ||||
Total
Current Assets
|
14,479 | 12,002 | ||||||
PROPERTY
AND EQUIPMENT
|
||||||||
Net
of Accumulated Depreciation of $214,342 (November 30, 2010) and $207,322
(February 28, 2010)
|
20,158 | - | ||||||
OTHER
ASSETS
|
||||||||
Intellectual
Property - Net of Accumulated Amortization of $327,665 (November 30, 2010)
and $187,237 (February 28, 2010)
|
2,480,899 | 2,621,327 | ||||||
Other
Assets
|
32,760 | 3,016 | ||||||
Restricted
Cash
|
16,691 | 18,727 | ||||||
Deferred
Costs
|
6,667 | 49,167 | ||||||
TOTAL
ASSETS
|
$ | 2,571,654 | $ | 2,704,239 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Convertible
Debt
|
$ | 401,500 | $ | 451,500 | ||||
Accounts
Payable
|
204,350 | 255,189 | ||||||
Other
Loans Payable
|
49,828 | 99,828 | ||||||
Officer
Loan
|
5,524 | 5,524 | ||||||
Accrued
Liabilities
|
2,482,362 | 2,315,680 | ||||||
Preferred
Stock Subscribed
|
- | 250,000 | ||||||
Total
Current Liabilities
|
3,143,564 | 3,377,721 | ||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Preferred
Stock, $.01 Par Value, 11,000,000 and 5,000 Shares Authorized; Issued and
Outstanding 2,021,728 Shares November 30, 2010; -0- Shares February 28,
2010
|
20,217 | - | ||||||
Common
Stock $.01 Par Value, 89,000,000 and 19,995,000 Shares Authorized; Issued
and Outstanding Shares - 15,998,112 Shares November 30, 2010; 15,980,612
Shares February 28, 2010
|
159,981 | 159,806 | ||||||
Common
Stock Subscribed
|
140,800 | 140,800 | ||||||
Additonal
Paid-in Capital
|
35,892,950 | 34,153,453 | ||||||
Accumulated
Deficit
|
(36,785,858 | ) | (35,127,541 | ) | ||||
Total
Stockholders' Deficit
|
(571,910 | ) | (673,482 | ) | ||||
TOTAL
LIABILITIES & STOCKHOLDERS' DEFICIT
|
$ | 2,571,654 | $ | 2,704,239 |
See Notes
to Consolidated Financial Statements.
1
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE NINE AND THREE
MONTHS ENDED NOVEMBER 30, 2010 AND 2009
(UNAUDITED)
NINE MONTHS
|
THREE MONTHS
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
Sales
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Cost
of Sales
|
- | - | - | - | ||||||||||||
Gross
Profit
|
- | - | - | - | ||||||||||||
General
and Administrative Expense
|
921,169 | 896,916 | 376,577 | 248,969 | ||||||||||||
Product
Development Expense
|
547,040 | 248,437 | 209,415 | 36,023 | ||||||||||||
Total
Expenses
|
1,468,209 | 1,145,353 | 585,992 | 284,992 | ||||||||||||
Other
Income
|
44 | 74 | 12 | 18 | ||||||||||||
Cancellation
of Indebtedness
|
- | 43,597 | - | - | ||||||||||||
Interest
Expense
|
(190,152 | ) | (125,049 | ) | (77,239 | ) | (24,769 | ) | ||||||||
Accretion
of Interest on Convertible Debt
|
(86,036 | ) | - | |||||||||||||
Total
Other Expense
|
(190,108 | ) | (167,414 | ) | (77,227 | ) | (24,751 | ) | ||||||||
Net
Loss
|
$ | (1,658,317 | ) | $ | (1,312,767 | ) | $ | (663,219 | ) | $ | (309,743 | ) | ||||
Basic
and Diluted Loss Per Common Share
|
$ | (0.104 | ) | $ | (0.101 | ) | $ | (0.041 | ) | $ | (0.020 | ) | ||||
Weighted
Average Common Shares Outstanding
|
15,996,757 | 13,356,671 | 15,998,112 | 15,854,733 |
See Notes
to Consolidated Financial Statements.
2
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS’ EQUITY DEFICIT
FOR THE NINE MONTHS ENDED
NOVEMBER 30, 2010
Series
A Convertible
|
||||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Additional Paid-
|
Common Stock
|
Accumulated
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
In
Capital
|
Subscribed
|
Deficit
|
||||||||||||||||||||||
BALANCE,
FEBRUARY 28, 2010 (Audited)
|
- | $ | - | 15,980,612 | $ | 159,806 | $ | 34,153,453 | $ | 140,800 | $ | (35,127,541 | ) | |||||||||||||||
Common
Stock Issued for Services
|
- | - | 17,500 | 175 | 8,925 | - | - | |||||||||||||||||||||
Series
A Preferred Stock - Net of
|
||||||||||||||||||||||||||||
Expenses
of $254,714
|
2,021,728 | 20,217 | - | - | 1,718,312 | - | - | |||||||||||||||||||||
Fair
Value of Employee Stock Option Grants
|
- | - | - | - | 12,260 | - | - | |||||||||||||||||||||
Net
Loss
|
- | - | - | - | - | - | (1,658,317 | ) | ||||||||||||||||||||
BALANCE,
NOVEMBER 30, 2010 (Unaudited)
|
2,021,728 | $ | 20,217 | 15,998,112 | $ | 159,981 | $ | 35,892,950 | $ | 140,800 | $ | (36,785,858 | ) |
See Notes
to Consolidated Financial Statements.
3
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE NINE MONTHS ENDED
NOVEMBER 30, 2010 AND 2009
(UNAUDITED)
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Adjustments
to Reconcile Net Loss to Net Cash Used In Operating
Activities:
|
||||||||
Net
Loss
|
$ | (1,658,317 | ) | $ | (1,312,767 | ) | ||
Fair
Value of Options Issued in Exchange for Services
|
12,260 | - | ||||||
Accretion
of Interest on Convertible Debt
|
- | 86,036 | ||||||
Common
Stock Issued for Services
|
9,100 | 19,586 | ||||||
Depreciation
and Amortization
|
147,448 | 140,428 | ||||||
Amortization
of Deferred Costs
|
42,500 | 138,672 | ||||||
Subtotal
|
(1,447,009 | ) | (928,045 | ) | ||||
Changes
in Assets and Liabilities, Net of Acquisition
|
||||||||
(Increase)
Decrease in Other Assets and Restricted Cash
|
(27,708 | ) | 16,072 | |||||
Increase
(Decrease) in Accounts Payable
|
(50,839 | ) | 199,286 | |||||
Increase
in Accrued Liabilities
|
267,960 | 437,517 | ||||||
Net
Cash Used for Operating Activities
|
(1,257,596 | ) | (275,170 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition
of Property and Equipment
|
(27,178 | ) | - | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Increase
in Loan Payable
|
- | 50,000 | ||||||
Common
Stock Subscribed
|
- | 90,800 | ||||||
Redemption
of Convertible Debt
|
(50,000 | ) | - | |||||
Preferred
Stock Subscribed
|
- | 100,000 | ||||||
Net
Proceeds from Issuance of Series A Preferred Stock
|
1,337,251 | - | ||||||
Net
Cash Provided by Financing Activities
|
1,287,251 | 240,800 | ||||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
2,477 | (34,370 | ) | |||||
CASH
AND CASH EQUIVALENTS
|
||||||||
Beginning
Balance
|
12,002 | 76,797 | ||||||
Ending
Balance
|
$ | 14,479 | $ | 42,427 | ||||
SUPPLEMENTAL
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
|
||||||||
Common
Stock Issued in Acquisition of Intellectual Property and Other
Liabilities
|
$ | - | $ | 2,751,332 | ||||
Common
Stock Issued in Cancellation of Shareholder Debt
|
$ | - | $ | 2,147,187 | ||||
Preferred
Stock Issued in Cancellation of Preferred Stock
Subscription
|
$ | 250,000 | $ | - | ||||
Preferred
Stock Issued in Cancellation of Other Loans Payable
|
$ | 50,000 | $ | - | ||||
Preferred
Stock Issued in Cancellation of Accrued Liabilities
|
$ | 101,278 | $ | - | ||||
Common
Stock Issued for Future Services
|
$ | - | $ | 37,500 | ||||
Common
Stock Issued in Conversion of Debt and Accrued Interest
|
$ | - | $ | 1,454,325 |
See Notes
to Consolidated Financial Statements.
4
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of the
Business
The
consolidated financial statements include the accounts of SensiVida Medical
Technologies, Inc. and its wholly-owned subsidiaries, Laser Diagnostic
Instruments, Inc. (“Laser”), Photonics for Women’s Oncology, LLC (“Photonics”),
Mediphotonics Development, LLC (“Mediphotonics”), and Bioscopix, Inc.
(“Bioscopix”), (collectively the “Company”). All significant
intercompany transactions and balances have been eliminated in
consolidation. All wholly-owned subsidiaries are currently
inactive.
The
Company had operated in one business segment encompassing 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. Effective March 3, 2009, with the merger of SensiVida
Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix,
Inc., the Company’s technology has primarily focused on the automation of
analysis and data acquisition for allergy testing, glucose monitoring, blood
coagulation testing, new tuberculosis testing, and cholesterol
monitoring.
The
consolidated financial statements as of and for the nine and three month periods
ended November 30, 2010 and 2009 are unaudited and are presented pursuant to the
rules and regulations of the Securities and Exchange
Commission. Certain financial information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the accompanying
disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included and have been prepared on a consistent basis using the accounting
policies described in the Summary of Accounting Policies included in the Annual
Report of Form 10-K for the fiscal year ended February 28, 2010. The
interim operating results for the nine months ended November 30, 2010 may not
necessarily be indicative of the operating results expected for the full
year.
Management’s
Plan
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. Substantial additional financing is needed by
the Company.
The
Company has no revenues, incurred significant losses from operations, has an
accumulated deficit and a highly leveraged position that raises substantial
doubt about the Company’s ability to continue as a going concern. The
consolidated financial statements do not include any adjustments relating to
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company expects to incur
substantial expenditures to further the development and commercialization of its
products. To achieve this, on October 1, 2010 management entered into
an agreement with a financial consulting firm to be an advisor and placement
agent for the Company to 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. The
financial consulting firm has done an extensive Due Diligence Process which is
nearing completion as of January 14, 2011. A Private Placement
Memorandum (“PPM”) has been drafted but not yet approved by both
companies. Financing activities will not commence until the financial
consulting firm finishes its Due Diligence Process, deems it to be acceptable,
and a PPM document is agreed to and signed by both parties.
5
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Equipment and Leasehold
Improvements
Equipment
and leasehold improvements are stated at cost. Depreciation is
computed using the straight-line method over an estimated useful life of five
years for equipment and the shorter of the lease term or fifteen years for
leasehold improvements. Depreciation expense was $7,020 and $-0- for
the nine months and $6,239 and $-0- for the three months ended November 30, 2010
and 2009, respectively.
Intellectual
Property
Intellectual
property consists of technology with patents pending approval that was included
in the acquisition of SensiVida Medical Systems, Inc. and is stated at
cost. Amortization is computed using the straight-line method over an
estimated useful life of fifteen years. Amortization expense was
$140,428 and $140,428 for the nine months and $46,809 and $46,809 for the three
months ended November 30, 2010 and 2009, respectively.
Income
Taxes
The
Company accounts for income taxes under FASB ASC 740, Income Taxes, which requires
an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for temporary differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Research and
Development
Research
and development costs are charged to operations when incurred as product
development expenses.
Loss per Common
Share
In
accordance with FASB ASC 260, Earnings per Share, basic and
diluted net loss per share is computed using net income or loss divided by the
weighted average number of shares of common stock outstanding for the period
presented. Because the Company reported a net loss for the nine and
three months ended November 30, 2010 and 2009, common stock equivalents
consisting of options and warrants were anti-dilutive; therefore, the basic and
diluted net loss per share were the same.
Accounting for Stock-Based
Compensation
FASB ASC
718, Share-Based
Payment requires measurement of all employee stock-based compensation
awards using a fair value method and the recording of such expense in the
consolidated financial statements. In addition, this topic requires
additional accounting related to the income tax effects and additional
disclosure regarding the cash flow effects resulting from share-based payment
arrangements. See Note 8 regarding issuance of options associated
with new employment agreements.
Concentration of Credit Risk
Involving Cash
The
Company may have deposits with major financial institutions which exceed Federal
Deposit Insurance limits during the year.
Reclassifications
The 2009
financial statements have been reclassified to conform to the 2010 financial
statement presentation.
6
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
Recently Adopted Accounting
Pronouncements
As of
November 30, 2010 and for the period then ended, there were no recently adopted
accounting pronouncements that had a material effect on the Company’s financial
statement.
Recently Issued Accounting
Pronouncements Not Yet Adopted
As of
November 30, 2010 there are no recently issued accounting standards not yet
adopted which would have a material effect on the Company’s financial
statements.
As of
November 30, 2010, the FASB has issued Accounting Standards Update (ASU) through
No. 2010-26. None of the ASUs have had a material impact on the
Company’s financial statements.
NOTE
2 - RELATED PARTY TRANSACTIONS
Legal
services rendered by Mr. Peter Katevatis amounted to $-0- and $45,000 for the
nine months and $-0- and $15,000 for the three months ended November 30, 2010
and 2009, respectively. These amounts are recorded in general and
administrative expense. Effective November 2008, Mr. Katevatis’ legal
service agreement was amended to $60,000 per year. On February 3,
2010 the legal service agreement with Mr. Katevatis terminated and was not
renewed by the Company.
See Note
8 for details regarding the Company’s consulting agreement with one of its
principal stockholders and Note 4 for related party loans and accrued
liabilities.
NOTE
3 – DEFERRED CHARGES
Expected
future amortization of deferred charges is as follows:
Years Ending
|
||||
February
28, 2011
|
$ | 6,667 |
NOTE
4 – ACCRUED LIABILITIES
Accrued
liabilities consist of the following:
November 30, 2010
|
February 28, 2010
|
|||||||
Legal
and professional fees
|
$ | 245,246 | $ | 301,247 | ||||
Consulting
and university fees
|
1,397,019 | 1,397,019 | ||||||
Salaries
and wages
|
435,916 | 346,500 | ||||||
Accrued
Interest
|
311,946 | 178,479 | ||||||
Expense
Reimbursements and Other
|
92,235 | 92,435 | ||||||
Totals
|
$ | 2,482,362 | $ | 2,315,680 |
Accrued
legal and professional fees include services rendered by Mr. Peter
Katevatis. The amount of the accrual was $2,500 and $65,000 as of
November 30, 2010 and February 28, 2010, respectively (Note 2). During the nine
months ended, Mr. Katevatis converted $62,500 of accrued professional fees into
62,500 shares of Series A preferred stock.
Accrued
consulting and university fees include costs owed for Dr. Robert R. Alfano, a
principal stockholder and former chairman of the Company’s Scientific Advisory
Board (Note 8), with respect to his prior consulting agreement, of $1,397,019 as
of November 30, 2010 and February 28, 2010, which fees the Company is contesting
in litigation between Dr. Alfano and the Company.
7
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
4 – ACCRUED LIABILITIES (CONT.)
Accrued
expense reimbursements of $92,235 were due to Dr. Alfano at November 30, 2010
and February 28, 2010. The Company has accrued these costs in
conjunction with Dr. Alfano’s prior consulting agreement.
Accrued
salaries and wages include amounts due to Frank D. Benick, Chief Financial
Officer, of $15,500 and $29,000 as of November 30, 2010 and February 28, 2010,
respectively.
Accrued
salaries and wages include amounts due to Kamal Sarbadhikari, former Chief
Executive Officer, of $66,250 and $106,250 as of November 30, 2010 and February
28, 2010, respectively.
Accrued
salaries and wages include amounts due to Jose Mir, President of $212,500 and
$131,250 as of November 30, 2010 and February 28, 2010,
respectively.
Accrued
salaries and wages include amounts due to David R. Smith, Chairman of the Board,
of $100,000 and $80,000 as of November 30, 2010 and February 28, 2010,
respectively.
Accrued
salaries and wages include amounts due to Margaret Lydon, Chief Operating
Officer of $20,833 and John Spoonhower, Chief Technical Officer of $20, 833 as
of November 30, 2010.
Accrued
interest includes interest accrued on convertible debt of $161,617 (see Note 5),
and $141,431 as of November 30, 2010 and February 28, 2010,
respectively.
Accrued
interest on the Series A preferred stock was $143,054 and $0 as of November 30,
2010 and February 28, 2010, respectively.
Accrued
interest on other debt was $7,275 and $4,286 as of November 30, 2010 and
February 28, 2010, respectively.
NOTE
5 – CONVERTIBLE DEBT AND OTHER LOANS PAYABLE
On
January 10, 2007, the Company commenced a Private Placement Offering for
$2,000,000 of 12% convertible promissory notes (“the Notes”) in amounts of not
less than $25,000. The Notes shall be due and payable, together with
accrued and unpaid interest, on the earlier of April 15, 2008 for the first
$1,000,000 tranche and April 15, 2009 for the second $1,000,000 tranche (of
which $656,500 had been raised as of February 28, 2009) or three months after
the completion of the initial public offering (“the IPO”) of the shares of
BioScopix (now SensiVida Medical Technologies, Inc. as a result of the merger of
BioScopix into Mediscience Technology Corp. and subsequent name changes of the
Company to BioScopix and then SensiVida Medical Technologies, Inc. (SensiVida),
after the merger of BioScopix and SensiVida Medical Technologies, Inc. Holders
of the Notes may convert the notes into (i) cash in the amount of the principal
and accrued and unpaid interest due and a warrant exercisable until April 15,
2009 to purchase shares of BioScopix (now SensiVida) in an amount equal to 50%
of the principal of the Notes at an exercise price of 120% of the five day
volume weighted average preceding the effective date of the IPO of SensiVida or
(ii) shares of SensiVida at a price equal to 50% of the IPO price of the
SensiVida shares of common stock in an amount equal to the principal and accrued
and unpaid interest due on the Notes. In accordance with EITF 00-27
(codified in FASB ASC 470.2), under option (ii), the carrying value of the Notes
was reduced by the intrinsic value of the beneficial conversion option resulting
in a carrying value of $-0-. On January 29, 2008, the Notes were
modified to provide for two additional options. In addition to
options (i) and (ii), holders of the notes may now also convert the notes into
(iii) SensiVida stock with a six month lockup in the amount of principal and
accrued interest and receive 50% warrant coverage at 75% of the SensiVida stock
IPO price and (iv) combination of alternatives (ii) and (iii). The
additional options did not require an adjustment to the value of the
Notes.
As of May
31, 2009, the notes have been accreted to their maturity
value. Accretion of discount on convertible debt amounted to $-0- and
$86,036 for the nine months and $-0- and $-0- for the three months ended
November 30, 2010 and 2009, respectively.
8
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
5 – CONVERTIBLE DEBT AND OTHER LOANS PAYABLE (CONT.)
Accrued
interest payable on the notes as of November 30, 2010 and February 28, 2010 was
$161,617 and $141,431, respectively. Interest expense was $37,774 and
$114,757 for the nine months and $12,013 and $13,509 for the three months ended
November 30, 2010 and 2009, respectively.
Effective
April 15, 2008, the first $1,000,000 tranche of the Notes were in
default. Under the terms of the Notes, in the event of default, the
entire principal and unpaid accrued interest is immediately due and payable. The
January 29, 2008 modification of the Notes provided two additional options of
the Note holders as compensation for the delay of the IPO which was expected to
take place prior to April 15, 2009.
Effective
April 15, 2009, the second tranche of the Notes in the amount of $656,500 were
in default. Under the terms of the Notes, in the event of default,
the entire principal and unpaid accrued interest is immediately due and
payable.
On July
31, 2009, certain note holders converted the note and accrued interest through
July 31, 2009 into common stock of the Company at the net price of $.35 per
share which represents 50% of the opening market value of the stock on this
date. Principal of $1,205,000 and accrued interest of $249,325
were converted into 4,155,222 shares of the Company’s common stock.
As of May
19, 2010, one convertible note holder demanded repayment of principal of $50,000
with a subsequent demand for accrued interest approximating
$17,588. As of June 1, 2010, both principal and interest
had been satisfied. The remaining notes are in default.
Other Loans
Payable
On
September 1, 2005, SensiVida issued a $50,000 convertible subordinated note to
the order of Excell Partners, Inc. (Holder). Principal and accrued
interest was due and payable in one installment on September 1, 2008, the
maturity date. Interest was accruable at 2% per annum on the
unpaid principal amount of the Note. Upon any default of this Note,
the Holder has the right to convert the Note to common stock of
SensiVida. The number of shares of common stock would be determined
by dividing the outstanding principal and accrued interest to the date of
conversion by the conversion price or fair market value paid in a most recent
Qualified Transaction by SensiVida. The note was in default upon
acquisition (by the Company) and was amended as of December 1,
2009. Commencing January 1, 2010, interest accrues on the balance at
a rate of 8% compounded annually. The Note has a maturity date of
January 1, 2011. If the entire unpaid balance of the note is not paid
when due, then the amount unpaid shall bear interest at the current rate plus 1%
and such rate shall increase by an additional one percent each year until the
note is paid in full. The amount drawn on the note at November 30,
2010 and February 28, 2010 was $49,828. Interest accrued on the note was $7,275
and $4,286 as of November 30, 2010 and February 28, 2010,
respectively.
On
September 1, 2009, the Company borrowed $50,000 from a
shareholder. The loan called for interest at 12% per
annum. The principal and accrued interest was convertible into the
company’s common stock at $.66 per share after six months at the discretion of
the note holder. Proceeds of the loan were to be used for the
company’s patient allergy clinical trial and related clinical
expenses. As of November 30, 2010, $16,691 of the original loan
remains in a restricted cash account for its intended use as approved by the
lender. In April 2010, the terms of the loan were modified to provide
for an option to convert principal and accrued interest into Series A Preferred
stock which was completed on May 1, 2010. Principal of $50,000 and
accrued interest of $3,929 were converted to 53,929 shares of Series A Preferred
stock.
NOTE
6 - PREFERRED STOCK SUBSCRIBED
Preferred Stock
Subscribed
During
February 2009, a current shareholder advanced $150,000 plus an additional
$100,000 received in March 2009 in exchange for 2,500 of Series A Preferred
stock having a par value of $100 (the shares). Each Series A
Preferred share is convertible into 150 shares of common stock for a total of
375,000 shares of common stock together with warrants to purchase up to 50,000
shares of common stock with an exercise price of $1.00. Because the
Company did not have the required authorized Preferred Stock to execute this
transaction, the Company had recorded the advances as a
liability.
9
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
6 - PREFERRED STOCK SUBSCRIBED (CONT.)
On April
13, 2010, the Company and the preferred stock subscriber mutually agreed to
revised terms on the prior $250,000 unissued preferred stock subscription
agreement. The new terms call for a “ratcheted” conversion to common
stock, at a price of $0.35 from $0.66. In addition, accrued interest
of $34,849 as of May 1, 2010, on the $250,000 subscription, the subscription,
plus a 10% premium of $28,485 on the principal and accrued interest all totaling
$313,334, were available at the option of subscriber to roll over the total into
the Company’s current Series A subscription agreement. On May 1,
2010, principal of $250,000, interest of $34,849 plus the premium of $28,485
were converted to 313,334 shares of Series A Preferred stock.
NOTE
7 - INCOME TAXES
There is
no income tax benefit for the losses for the nine and three months ended
November 30, 2010 and 2009 because the Company has determined that the
realization of the net deferred tax asset is not assured. The Company
has created a valuation allowance for the entire amount of
such. There was no change in unrecognized tax benefits during the
period ended November 30, 2010 and there was no accrual for uncertain tax
positions as of November 30, 2010.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Dr. Robert R.
Alfano
The
Company had a consulting agreement (the “Agreement”) through March 2007 with Dr.
Robert R. Alfano, a principal stockholder of the Company and prior Chairman of
its Scientific Advisory Board. Pursuant to the terms of the
Agreement, Dr. Alfano was paid a consulting fee of not less than $150,000 per
annum in exchange for services to be rendered for approximately fifty days per
annum in connection with the company’s medical photonics
business. The Agreement further provided that Dr. Alfano was to be
paid a bonus and fringe benefits in accordance with policies and formulas
provided to key executives of the Company. The agreement expired on
March 5, 2007.
In
October 2009, a civil action was entered against the Company by Dr. Robert
Alfano, alleging that he is owed $1,487,053 in consulting fees and
expenses. The Company had accrued the consulting fees and expenses in
conjunction with a consulting agreement (Note 4). In addition, Dr.
Alfano is contesting the termination of his anti-dilution rights and claims the
Company owes him 132,000 shares of common stock (Note 9). The Company
does not believe the case has merit and has filed a motion to
dismiss. The Company intends to vigorously defend against these
claims.
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. Since there has been no revenue, no amounts have
been paid during the nine and three months ended November 30, 2010 and
2009.
Other
Royalties
The
Company obtained worldwide licensing rights for patents from Yale University and
has agreed to pay royalties based on net sales of all products generated from
the patents and fifty percent of any income received from sublicensing of the
patents. The Company has not recorded any revenues since the
inception of this agreement and therefore has not recorded or paid any royalties
during the nine and three months ended November 30, 2010 and 2009.
Employment
Agreements
On
November 15, 2005, the Company entered into a two year employment agreement with
Frank D. Benick as Chief Financial Officer. Mr. Benick will be paid a
monthly salary of $3,000 per month for the first two months, then increasing to
$4,000 per month for the remaining term of the agreement and received an option
to purchase 30,000 shares of common stock at $10.00 per share. This
agreement has not been formally updated. Mr. Benick’s employment is continuing
under the terms of the expired agreement.
10
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
8 – COMMITMENTS AND CONTINGENCIES (CONT.)
On
November 5, 2008, the Company entered into a three year employment contracts
with Kamal Sarbadhikari as Chief Executive Officer and Jose Mir as Chief
Technical Officer. Mr. Sarbadhikari and Mr. Mir will each be paid a
base salary of $150,000 per annum. On November 2, 2009, Mr. Kamal
Sarbadhikari resigned for health reasons effective December 31,
2009. Jose Mir has been appointed interim President effective
December 31, 2009.
On
November 10, 2008, the Company entered into a three year employment contract
with David R. Smith as Chairman of the Board. Mr. Smith will be paid
$60,000 per annum.
On August
15, 2010, the Company entered into three year employment contracts with Margaret
Lydon as Chief Operating Officer and John P. Spoonhower as Chief Technology
Officer. Ms. Lydon and Mr. Spoonhower will each be paid a base salary
of $125,000 per annum. Both Ms. Lydon and Mr. Spoonhower were each
granted 400,000 options, for a total of 800,000 options, to acquire 400,000
shares each, of the company’s common stock over a three year vesting period with
an exercise price of $0.36. The Company uses the Black-Scholes option
pricing model to calculate the grant-date fair value of the options, with the
following assumptions: no dividend yield, expected volatility of 28.6%, risk
free interest rate of 2.68% and expected option life of three
years. The total estimated employer cost associated with these
options approximates $126,100, which is being amortized over the life of the
employment agreements. In the interim vesting period, the Company’s
1999 stock incentive plan will require revision as the plan previously had a
limitation on the aggregate number of shares it may issue.
The
Company entered into a lease agreement for office space in West Henrietta,
NY. The term of the lease runs from July 2010 to June
2011. Base rent and expenses total $1819 per month. The
Company also entered into a lease agreement for laboratory space in Rochester,
NY. The term of the lease runs from October 2010 to September
2011. The rental is approximately $1,053 per
month. Previously the Company renewed its Henrietta office space on a
month to month basis for the period May 2010 to February 2013 at $1,100 per
month. The agreement has been terminated as of September 30,
2010.
NOTE
9 – STOCKHOLDERS’ DEFICIT
Reverse Stock
Split
The
consolidated balance sheets, statements of changes in stockholders’ equity
(deficit), and related notes to consolidated financial statements have been
adjusted to reflect a 10 for 1 reverse stock split that was effective May 18,
2009.
Preferred
Stock
The
Company was previously authorized to issue 5,000 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 stockholders. Any preferred stock issued will have
preferences with respect to dividends, liquidation and other rights, but will
not have preemptive rights.
On March
1, 2010, the Company amended its Certificate of Incorporation to provide for
10,000,000 shares of Series A convertible preferred stock and 1,000,000 shares
of preferred stock with preferences and characteristics to be determined by the
board of Directors. See Note 10 - Amendment of Certificate of
Incorporation.
Series A Convertible
Preferred Stock Offering
During
March 2010, the Company began an offering of a maximum of $10,000,000 of Series
A Preferred stock at $1.00 per share. The Series A Preferred stock is
convertible into shares of the Company’s common stock, par value $.01 per share
at $0.35 per share for a period of three years from the date of issuance and
bears interest at 12% per annum, such interest to accrue and be paid in cash at
the end of three years from the date of issuance of the Series A Preferred stock
or in shares of common stock if the investor elects to convert the Series A
Preferred stock. The investor also will receive warrants to acquire
shares of common stock in an amount equal to 50% of the number of shares of
common stock into which the Series A Preferred stock converts. The
exercise price of the warrant is at $1.00 per share. As of November
30, 2010, 2,888,182 warrants were granted.
Common
Stock
On March
1, 2010, the Company amended its Certificate of Incorporation to provide for
89,000,000 shares of common stock, $.01 par value.
11
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
9 – STOCKHOLDERS’ DEFICIT (CONT.)
Common Stock Issued for
Services
During
March 2010, the Company issued 17,500 restricted shares of its common stock with
a value of $9,100 to two consultants in exchange for professional services, as
per their agreements. The transactions were recognized based on the
fair market value of the services rendered.
Common Stock Issued in
Acquisition of SensiVida Medical Systems, Inc.
On March
3, 2009, the Company (formerly known as Mediscience Technology Corp.) and
SensiVida Medical Systems, Inc. completed a merger of the two companies, with
Mediscience changing its name to SensiVida Medical Technologies,
Inc. As consideration for the merger, the Company issued 3,333,333
shares of the Company’s common stock, valued at $2,751,332 to the three
stockholders of SensiVida Medical Systems, Inc. as consideration for the
transaction.
Common Stock Issued in
Cancellation of Shareholder Debt
In March
2009, the Company issued 1,172,510 shares of its common stock to Mr. Katevatis
in settlement of all his accrued fees and salary to include termination of his
employment agreement as Chief Executive Officer and Chairman, along with
cancellation of his anti-dilution rights.
Common Stock
Subscribed
In August
2009, the Company received $30,000 for 30,000 shares of the Company’s common
stock. As of November 30, 2010, the shares have not yet been
issued. The Company anticipates the shares to be issued in January
2011.
In
December 2009, the Company received $110,800 for 221,600 shares of the company’s
common stock. As of November 30, 2010, the shares have not yet been
issued. The Company anticipates the shares to be issued in January
2011.
2003 Consultants Stock
Plan
The Board
of Directors previously adopted, subject to stockholder approval, a 2003
Consultants Stock Plan (“Consultants Plan”). The Consultants Plan was
subsequently approved by the stockholders on February 17, 2004. The
aggregate number of shares that may be issued under the options shall not exceed
700,000. No options were issued prior to stockholder approval and no
options were outstanding under this plan as of November 30, 2010 and
2009.
1999 Incentive Stock Option
Plan
The Board
of Directors previously adopted, subject to stockholder approval, a 1999
Incentive Stock Option Plan (the “Plan”) for officers and employees of the
Company. The stockholders subsequently approved the Plan on February
17, 2004. Accordingly awards issued under the Plan prior to February
17, 2004 were deemed not to be granted until that date. The aggregate
number of shares that may be issued under the options shall not exceed 300,000,
however, the plan will require revision to accommodate the granting of options
to Mrs. Lydon and Mr. Spoohhower.
Stock
Options
Activity
related to stock options during the nine months ended November 30, 2010 is as
follows:
Exercise
|
Weighted
|
|||||||||||
Price
|
Avg.
Exercise
|
|||||||||||
Shares
|
Range
|
Price
|
||||||||||
Outstanding,
February 28, 2010
|
30,000 | $ | 10.00 | $ | 10.00 | |||||||
Granted
|
800,000 | 0.36 | 0.36 | |||||||||
Exercised
|
- | |||||||||||
Forfeited
or Expired
|
(30,000 | ) | (10.00 | ) | $ | (10.00 | ) | |||||
Outstanding,
November 30, 2010
|
800,000 | $ | 0.36 | $ | 0.36 |
Weighted
average remaining life of options approximates 2.71 years at November 30,
2010.
Options
issued in November 2005 expired November 15, 2010.
12
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
9 – STOCKHOLDERS’ DEFICIT (CONT.)
Stock
Warrants
Stock
warrant activity during the nine months ended November 30, 2010 was as
follows:
Exercise
|
Weighted
|
||||||||||
Shares
|
Price
|
Avg. Exercise
|
|||||||||
Outstanding
|
Range
|
Price
|
|||||||||
Outstanding,
February 28, 2010
|
595,733 |
$.60
- 30.00
|
$ | 6.32 | |||||||
Granted
|
2,895,682 |
1.00
|
|||||||||
Exercised
|
- |
-
|
|||||||||
Forfeited
|
(100,000 | ) |
30.00
|
||||||||
Outstanding
and Exercisable, November 30, 2010
|
3,391,415 |
$.60 - $2.50
|
$ | 1.08 |
Stock
warrants issued in 2004 expired in November 2010.
Weighted
average remaining life of warrants approximates 2.41 years at November 30,
2010.
Anti-Dilution
Rights
The
Company and Dr. Robert Alfano had an anti-dilution rights agreement which
provided that Dr. Alfano’s ownership interest would at all times represent 4% of
the issued and outstanding shares of the Company. The anti-dilution
rights were exercisable at Dr. Alfano’s sole discretion. As of
February 28, 2007, the Company was obligated to issue an additional 1,400 shares
to Dr. Alfano in connection with the anti-dilution rights. As a
result of the completion of Dr. Alfano’s consulting agreement as of March 5,
2007, the anti-dilution rights terminated. Subsequent to March 5,
2007, Dr. Alfano was issued 6,400 shares of the Company’s common stock in
connection with the anti-dilution rights of which 5,000 shares were issued in
error. The Company has placed a stop order and requested the 5,000
shares be returned by Dr. Alfano for cancellation. Dr. Alfano’s
anti-dilution rights are currently in the process of litigation along with
amounts owed to him for consulting and related expenses.
NOTE
10 – AMENDMENT OF CERTIFICATE OF INCORPORATION
On March
1, 2010, the Board of Directors approved and on March 1, 2010, the holders of a
majority of the voting capital stock approved an amendment to restate the
Certificate of Incorporation to provide for the increase in the total number of
authorized shares of the Company’s common and preferred stock.
The
aggregate number of shares which the Company shall have authority to issue is
100,000,000, 89,000,000 of which shall be common stock, $.01 par value per share
and 11,000,000 of which shall be preferred stock, $.01 par value per
share. 10,000,000 shares of preferred stock are designated Series A,
convertible preferred stock and 1,000,000 shares of preferred stock shall have
all preferences and characteristics to be determined by the Company’s Board of
Directors on a case-by-case basis, prior to issuance.
The
Series A Preferred stock shall have the following relative rights, preferences
and limitations:
a). The
Series A Preferred stock shall bear interest at 12% per annum, such interest to
accrue and be paid in cash at the end of three years from the date of issuance
of the Series A Preferred stock or in shares of common stock if the holder of
the Series A Preferred stock elects to convert the Series A Preferred
stock.
b). The
holders of the Series A Preferred stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefore, dividends, whether in cash or stock, in preference to the holders of
common stock.
c). The
holders of the Series A Preferred stock shall be entitled to a preference over
holders of common stock with regard to distribution of assets in the event of
any liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary.
d). The
shares of Series A Preferred stock shall not entitle the holder thereof to have
any right to vote or to receive any notice of any meeting of the holders of the
Company’s stock or to exercise any voting power.
13
SENSIVIDA MEDICAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOVEMBER 30,
2010
NOTE
10 – AMENDMENT OF CERTIFICATE OF INCORPORATION (CONT.)
e). The
Series A Preferred stock may, at any time for a period of three years
from the date of its issuance, at the option of the holders thereof, be
converted into common stock at a price of $0.35 per share (as adjusted for
subsequent stock dividends, stock splits, combinations, recapitalizations or the
like).
NOTE
11 - RETIREMENT PLAN
During
July 2010, the Company adopted a 401-K plan for its employees. As of
November 30, 2010, the Company has not recognized any employer retirement costs
associated with the plan.
NOTE
12 - SUBSEQUENT EVENTS
The
Company entered into a placement agent agreement with J.P. Turner & Company,
LLC (agent) to serve as exclusive placement agent and financial advisor in
connection with the best efforts sale of new securities of the Company for
purposes of execution of its business plan. The term of the agreement
shall continue for twelve months. The agreement requires a $50,000
non-refundable retainer to cover pre-offering expenses. The Company
has agreed to replenish the retainer should expenses exceed the
retainer. Upon the initial closing, which consists of the placement
agent’s sale of securities, the Company shall issue to agent a non-refundable
retainer warrant to purchase up to 450,000 common shares with an exercise price
equal to the initial conversion price of the securities issued in the offering
for a term of five years from the date of issuance.
Additional
terms call for an offering fee of 16% of the gross proceeds of the offering,
plus a warrant to purchase a number of the Company’s shares of common stock
equal to 16% of the gross proceeds provided by the offering at an exercise price
equal to the initial conversion price of the securities issued in the
offering. In addition, the Company shall also pay the placement agent
a cash fee equal to 7% of the gross proceeds as received by the Company from
exercising of the investors’ warrants. The financial consulting firm
has done an extensive Due Diligence Process which is nearing completion as of
January 14, 2011. A Private Placement Memorandum (“PPM”) has been
drafted but not yet approved by both companies. Financing activities
will not commence until the financial consulting firm finishes its Due Diligence
Process, deems it to be acceptable, and a PPM document is agreed to and signed
by both parties.
14
Item
2. Managements Discussion and Analysis of
Financial Condition and Results of Operation
Results of
Operations
Nine and Three Months Ending
November 30, 2010 Compared to
Nine and Three Months Ending
November 30, 2009
Revenues
We had no
revenues during the nine and three months ending November 30, 2010 and November
30, 2009. Previously, our primary focus was our continued development
of our light-based technology. Effective March 3, 2009, with the
merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned
subsidiary BioScopix, Inc., the Company’s technology has focused on the
automation of analysis and data acquisition for allergy testing, glucose
monitoring, blood coagulation testing, tuberculosis testing, and cholesterol
monitoring.
General and Administrative
Expense
General
and administrative expenses increased approximately $24,000, or 3%, during the
current nine month period ended November 30, 2010 as compared to the nine month
period ended November 30, 2009. The increase was the net of increases
and decreases in major expense components. Salaries, wages and
related expenses approximating $293,000 decreased approximately $17,000 from the
prior year period, primarily as a result of the resignation of the former CEO,
Kamal Sarbadhikari effective December 31, 2009. The decrease in
salary and related costs was offset with the recent hiring of Ms. Margaret Lydon
as Chief Operating Officer and Mr. John P. Spoonhower as Chief Technology
Officer with salaries to date approximating $73,000 plus stock option costs of
$12,000. In addition, professional fees decreased approximately
$90,000 during the current nine month period. In the prior year nine
month period there was increased professional activities associated with the
merger of the Company and SensiVida Medical Systems, Inc. on March 3, 2009 and
related matters. In October 2009, a civil action was entered against the company
by Dr. Robert Alfano. The litigation centers around payment for
accrued consulting fees and expenses totaling approximately
$1,490,000. In addition, Dr. Alfano is contesting the termination of
his anti-dilution rights and the transfer of his former Mediscience Technology
Corp. stock into SensiVida Medical Technologies, Inc. stock. The
Company does not believe the case has merit and has filed a motion to
dismiss. The Company intends to vigorously contest these
claims. As an offset to the above decreases in general and
administrative expenses, consulting and marketing expenses increased
approximately $47,000 over the prior nine month period. These costs
represent investor and media public relations along with strategic corporate
development and financing. Placement agent fees and fund raising
consultant costs increased approximately $75,000 during the current nine month
period ended November 30, 2010 when compared to the prior nine month period
ended November 30, 2009. Also, adding to the increase in general and
administrative expense was approximately $9,000 in all other general and
administrative expenses.
General
and administrative expenses increased approximately $127,000 or 51% during the
current three month period ended November 30, 2010 as compared to the three
month period ended November 30, 2009. The increase was the net of
increases and decreases in major expense components. Salaries, wages
and related expenses approximating $144,000 increased approximately $42,000 over
the prior year three month period. With the resignation of the former
CEO, Kamal Sarbadhikari effective December 31, 2009, the increase in salary
related costs is associated with the recent hiring of Ms. Margaret Lydon as
Chief Operating Officer and Mr. John P. Spoonhower as Chief Technology
Officer. In addition, professional fees increased approximately
$31,000 during the current three month period. The increase was
primarily associated with the costs associated with the engagement of a new
placement agent for the Company’s securities. Placement agent fees
and fund raising consultant costs increased approximately $53,000 during the
current three month period ended November 30, 2010 when compared to the prior
three month period ended November 30, 2009. Also, adding to the net
increase in general and administrative expense was approximately $1,000 in all
other general and administrative expenses.
Product Development
Expense
Product
development expense increased approximately $299,000, or 120%, during the
current nine month period ended November 30, 2010 when compared to the prior
nine month period ended November 30, 2009. The increase is net of an
increase of approximately $399,000 in costs for product design and development
plus clinical studies for allergy research being conducted in Rochester, NY by
the Company and its consultants, less a decrease of approximately $100,000 of
deferred charges amortized during the current nine month period, as compared to
the nine month period ended November 30, 2009.
15
Product
development expense increased approximately $173,000 or 481% during the current
three month period ended November 30, 2010 when compared to the prior three
month period ended November 30, 2009. The increase is net of an
increase of approximately $198,000 in costs for product design and development
by the Company and its consultants, less a decrease of approximately $25,000 of
deferred charges amortized during the current three month period, as compared to
the three month period ended November 30, 2009.
Cancellation of
Indebtedness
The
Company in the prior year had written off certain accrued outside consulting
fees totaling $43,597 that had been outstanding for a number of years due to
lack of completion of the engagement by the consultant.
Liquidity and Capital
Resources
We had a
deficiency in working capital as of November 30, 2010 of approximately
$3,131,000 compared to a deficiency of approximately $3,365,000 at February 28,
2010 representing a decrease in the deficiency of approximately $234,000 for the
current nine month period ended November 30, 2010. The decrease in the
deficiency consisted of an increase of approximately $2,000 in cash and a
decrease of approximately $232,000 in current liabilities. The
principal reason for the increase in cash is during March 2010, the Company
began an offering of a maximum of $10,000,000 of Series A Preferred stock at
$1.00 per share. The Series A Preferred stock is convertible into
shares of the Company’s common stock, par value $.01 per share at $0.35 per
share for a period of three years from the date of issuance and bears interest
at 12% per annum, such interest to accrue and be paid in cash at the end of
three years from the date of issuance of the Series A Preferred stock or in
shares of common stock if the investor elects to convert the Series A Preferred
stock. The investor also will receive warrants to acquire shares of
common stock in an amount equal to 50% of the number of shares of common stock
into which the Series A Preferred stock converts. The exercise price
of the warrant is $1.00 per share. Series A Preferred stock
subscriptions to date have exceeded approximately $1,738,000, net of expenses
approximating $255,000. The principal reason for a decline in current
liabilities of approximately $232,000 was the result of the payment of trade
payables approximating $51,000, the redemption of a convertible noteholder of
$50,000 and conversion of a prior preferred stock subscription of $250,000, a
related loan of $50,000, plus accrued interest of approximately $39,000 during
the quarter ended May 31, 2010. In addition, $62,500 of accrued
liabilities were converted to Series A preferred stock during the
year. The decline was offset by a net increase of approximately
$270,000 of accrued liabilities.
Our
ability to continue our operations is largely dependent upon obtaining
regulatory approval for the commercialization of our diagnostic technology for
allergy testing, glucose monitoring, blood coagulation testing, tuberculosis
testing and cholesterol monitoring. 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, if granted. We intend to
defray the costs of obtaining regulatory approval for the commercialization of
such technology by the establishment of clinical trial arrangements with medical
institutions. We intend to continue to pursue the establishment of
co-promotional arrangements for the marketing, distribution and commercial
exploitation of our technology. Such arrangements, if established,
may include up-front payments, sharing of sales revenues after deduction of
certain expenses, and/or product development funding. Our management
anticipates that substantial resources will be committed to a continuation of
our research and development efforts and to finance government regulatory
applications. While management believes that we will obtain
sufficient funds to satisfy our liquidity and capital resources needs for the
short term from the private placement of our securities and short term
borrowings, 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, if at all. In the absence of the availability of
financing on a timely basis, we may be forced to materially curtail or cease our
operations. Our 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 our products; (iv) the amount of resources which we devote to
clinical evaluation and the establishment of marketing and sales capabilities;
and (v) our success in entering into, and cash flows derived from, co-promotion
arrangements.
16
Off-Balance Sheet
Arrangements
We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Recent Accounting
Pronouncement
Reference
is made to the summary or significant accounting policies included in the
consolidated financial statements for a discussion and analysis of recently
issued accounting pronouncements and their impact on the Company.
Critical Accounting
Policies
The
preparation of financial statements requires management to make estimates and
assumptions that affect amounts reported herein. The most significant
of these involve the use of estimates. In each situation, management
is required to make estimates about the effects of matters or future events that
are inherently uncertain.
The
financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America, and, as such, include
amounts based on informed estimates and judgments of management, such
as:
|
Ø
|
Determining
accruals and contingencies;
|
|
Ø
|
Valuing
options and other equity
instruments;
|
|
Ø
|
Reviewing
the realization/recoverability of deferred costs resulting from the
issuance of common stock to acquire certain consulting services to be
rendered in future periods.
|
|
Ø
|
Deferred
tax valuation allowance.
|
|
Ø
|
Measurement
of effects on business
combinations.
|
The
Company used what it believes are reasonable assumptions where applicable,
established valuation techniques in making its estimates. Actual
results could differ from those estimates.
17
Item
3. Quantitative and Qualitative Disclosures
About Market Risk
Not Applicable
Item
4T. Controls and Procedures
|
Based
on an evaluation of our disclosure controls and procedures as of the end
of the quarterly period covered by this report (and the financial
statements contained in the report), our President and Chief Financial
Officer have determined that our current disclosure controls and
procedures are effective.
|
|
There
have not been any changes in our internal control over financial reporting
(as such terms is defined in Rules 13a-15(f) under the Exchange Act)
during our most recently completed fiscal quarter which is the subject of
this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
|
18
PART II - OTHER
INFORMATION
Item
1. Legal
Proceedings
In
October 2009, a civil action was entered against the Company by Dr. Robert
Alfano, alleging that he is owed approximately $1,490,000 in consulting fees and
expenses. The Company had accrued the consulting fees in conjunction
with a consulting agreement. In addition, Dr. Alfano is contesting
the termination of his anti-dilution rights and claims the Company owes him
132,000 shares of common stock. The Company does not believe the case
has merit and has filed a motion to dismiss. The Company intends to
vigorously contest these claims.
Item
1A. Risk
Factors
Not Applicable
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds
|
Series A Convertible
Preferred Stock Offering
|
|
During
March 2010, the Company began an offering of a maximum of $10,000,000 of
Series A Preferred stock at $1.00 per
share. The Series A Preferred stock is convertible
into shares of the Company’s common stock, par value $.01 per share, at
$0.35 per share for a period of three years from the date of issuance and
bears interest at 12% per annum, such interest to accrue and be paid in
cash at the end of three years from the date of issuance of the Series A
Preferred stock or in shares of common stock if the investor elects to
convert the Series A Preferred stock. The investor will also
receive warrants to acquire shares of common stock in an amount equal to
50% of the number of shares of common stock into which the Series A
Preferred stock converts. The exercise price of the warrant is
$1.00 per share. The Company received gross proceeds of
$1,591,965 and $-0- in Series A preferred stock subscriptions during the
nine and three month periods ended November 30, 2010,
respectively. Proceeds from the offering will assist the
Company in its current business
plan.
|
Item
3. Defaults Upon Senior
Securities
Effective
April 15, 2008, the first $1,000,000 tranche of the Company’s 12% convertible
promissory notes (the “Notes”) were in default. Under the terms of
the Notes, in the event of default, the entire principal and unpaid accrued
interest is immediately due and payable. The January 29, 2008
modification of the Notes provided two additional options to the Note holders as
compensation for the delay of the secondary offering which is expected to take
place prior to April 15, 2009. As of July 15, 2009, there have been
no demands for repayment by the Note holders.
Effective
April 15, 2009, the second tranche of the Notes in the amount of $656,500 were
also in default. Under the terms of the Notes, in the event of
default, the entire principal and unpaid accrued interest is immediately due and
payable. As of May 19, 2010, one convertible note holder demanded
repayment of principal of $50,000 with a subsequent demand for accrual interest
approximating $17,588. As of June 1, 2010, both principal and
interest had been satisfied. The remaining notes are in
default.
Item
4. Submission of Matters to a
Vote of Security Holders
Not
Applicable
Item
5. Other
Information
Not
Applicable
19
Item
6. Exhibits
31.1 Certification of
the President required by Rule 13a-14(a) or Rule 15d-14(a)
31.2 Certification of
the Chief Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a)
|
32
|
Certification
of the President and Chief Financial Officer required by Rule 13a-14(b) or
Rule 15d-14(b) and 18 U.S.C. 1350
|
20
SIGNATURES
Pursuant
to the requirements of Section 13 or 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.
SENSIVIDA
MEDICAL TECHNOLOGIES, INC.
|
||
January
18, 2011
|
/s/
Jose Mir
|
|
|
||
Jose
Mir
|
||
President
|
||
January
18, 2011
|
/s/
Frank D. Benick
|
|
|
||
Frank
D. Benick, CPA
|
||
Chief
Financial Officer
|
||
Principal
Financial and Accounting
Officer
|
21