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EX-32 - SensiVida Medical Technologies, Inc.v211700_ex32.htm
EX-31.2 - SensiVida Medical Technologies, Inc.v211700_ex31-2.htm
EX-31.1 - SensiVida Medical Technologies, Inc.v211700_ex31-1.htm
EX-10.4 - SensiVida Medical Technologies, Inc.v211700_ex10-4.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549

FORM 10-Q/A
Amendment No. 2
 
(Mark One)

x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934

For the quarterly period ended May 31, 2009
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. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
(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
 
   
77 Ridgeland Road
 
Henrietta, New York
14623
(Address of principal executive offices)
(Zip Code)

(585) 413-9080
(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  ¨      No x

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 May 31, 2009, there were outstanding 11,632,417 shares of the registrant’s common stock, $.01 par value.
 
 
 

 

Explanatory Note

On July 20, 2009, SensiVida Medical Technologies, Inc., a New Jersey corporation (“SensiVida” or the "Company") filed its quarterly report on Form 10-Q. This Amendment No. 2 to the Form 10-Q for the quarter ended May 31, 2009, hereby amends and restates the prior Form 10-Q with certain modifications as a result of comments by the SEC. There are no changes to the financial statements or the Company's financial results for the quarter ended May 31, 2009, other than the addition of Note 12.
  
This Form 10-Q/A speaks as of the original filing date of the Form 10-Q and does not reflect events that may have occurred subsequent to the original filing date.
Item 1. Financial Statements.

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009

INDEX
   
PAGE
     
PART 1.
Financial Information
 
     
Item 1.
Financial Statements
 
     
 
Consolidated Balance Sheet as of May 31, 2009 (Unaudited) and February 28, 2009 (Audited)
1
     
 
Consolidated Statement of Operations for the Three Months Ended May 31, 2009 (Unaudited) and May 31, 2008 (Unaudited)
2
     
 
Consolidated Statement of Changes in Stockholders’ Deficit for the Three Months Ended May 31, 2009 (Unaudited)
3
     
 
Consolidated Statement of Cash Flows for the Three Months Ended May 31, 2009 (Unaudited) and May 31, 2008 (Unaudited)
4
     
 
Notes to Consolidated Financial Statements
5-17
     
Item 2.
Management’s Discussion and Analysis
18-19
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
20
     
Item 4T.
Controls and Procedures
20
     
PART 11.    
Other Information
21-22
     
Item 1.
Legal Proceedings
 
     
Item 1A.
Risk Factors
21
   
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21
     
Item 3.
Defaults Upon Senior Securities
21
     
Item 4.
Submission of Matters to a Vote of Security Holders
21
     
Item 5.
Other Information
21
     
Item 6.
Exhibits
22
     
 
Signatures
23
     
 
Exhibit Index
24
     
 
Exhibits
 

 
 

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

   
May 31,
   
February 28,
 
   
2009
   
2009
 
   
(Unaudited)
   
(Audited)
 
             
ASSETS
           
             
CURRENT ASSETS
           
Cash and Cash Equivalents
  $ 20,757     $ 76,797  
Prepaid Expenses and Other Current Assets
    11,905       17,262  
Total Current Assets
    32,662       94,059  
                 
PROPERTY PLANT AND EQUIPMENT
               
Net of Accumulated Depreciation
    -       -  
                 
OTHER ASSETS
               
Intellectual Property - Net of Accumulated Amortization of $46,809 and $-0-
    2,761,754       -  
Security Deposit
    2,800       2,800  
Deferred Costs
    85,342       130,547  
                 
TOTAL ASSETS
  $ 2,882,558     $ 227,406  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
Convertible Debt, Net of Discount of $-0- and $86,036
  $ 1,656,500     $ 1,570,464  
Accounts Payable
    193,755       73,895  
Note Payable
    49,828       -  
Officer Loan
    5,524       -  
Accrued Liabilities
    2,093,421       4,140,431  
Preferred Stock Subscribed
    250,000       150,000  
Total Current Liabilities
    4,249,028       5,934,790  
                 
STOCKHOLDERS' DEFICIT
               
Convertible Preferred Stock, $.01 Par Value, 5,000 Shares Authorized; Issued and Outstanding -0- Shares May 31, 2009; -0- Shares February 28, 2009
    -       -  
Common Stock $.01 Par Value, Authorized 19,995,000 Shares; Issued and Outstanding Shares - 11,632,417 Shares May 31, 2009; 7,123,241 Shares - February 28, 2009
    116,323       71,232  
Additonal Paid-in Capital
    32,640,690       27,784,596  
Accumulated Deficit
    (34,123,483 )     (33,563,212 )
Total Stockholders' Deficit
    (1,366,470 )     (5,707,384 )
                 
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT
  $ 2,882,558     $ 227,406  

See Notes to Consolidated Financial Statements.

 
1

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 2009 AND 2008
(UNAUDITED)

   
THREE MONTHS
 
   
2009
   
2008
 
             
Net Sales
  $ -     $ -  
                 
Cost of Sales
    -       -  
                 
Gross Profit
    -       -  
                 
General and Administrative Expense
    358,308       249,683  
                 
Product Development Expense
    109,064       51,457  
                 
Total Expenses
    467,372       301,140  
                 
Other Income
    54       1,684  
                 
Cancellation of Indebtedness
    43,597       -  
                 
Interest Expense
    (50,514 )     (41,360 )
                 
Accretion of Interest on Convertible Debt
    (86,036 )     (237,840 )
                 
Total Other Income and Expense
    (92,899 )     (277,516 )
                 
Loss Before Taxes
    (560,271 )     (578,656 )
                 
Provision for Taxes
    -       -  
                 
Net Loss
  $ (560,271 )   $ (578,656 )
                 
Basic and Diluted Loss Per Common Share
  $ (0.050 )   $ (0.086 )
                 
Weighted Average Common Shares Outstanding
    11,124,117       6,725,099  

See Notes to Consolidated Financial Statements.

 
2

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MAY 31, 2009
(UNAUDITED)

   
Preferred Stock
   
Common Stock
   
Additional Paid-
   
Accumulated
 
   
Shares
   
Amount
   
Shares
   
Amount
   
In Capital
   
Deficit
 
                                     
BALANCE, FEBRUARY 28, 2009
    -     $ -       7,123,241     $ 71,232     $ 27,784,596     $ (33,563,212 )
                                                 
Common Stock Issued for Services
    -       -       3,333       33       2,633       -  
                                                 
Common Stock Issued in Acquisition of SensiVida Medical Systems, Inc.
    -       -       3,333,333       33,333       2,717,999       -  
 
                                               
Common Stock Issued in Cancellation of Shareholder Debt
    -       -       1,172,510       11,725       2,135,462       -  
                                                 
Net Loss
    -       -       -       -       -       (560,271 )
                                                 
BALANCE, MAY 31, 2009
    -     $ -       11,632,417     $ 116,323     $ 32,640,690     $ (34,123,483 )

See Notes to Consolidated Financial Statements.

 
3

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2009 AND 2008
(UNAUDITED)

   
2009
   
2008
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Adjustments to Reconcile Net Loss to Net Cash Used In
Operating Activities:
           
Net Loss
  $ (560,271 )     (578,656 )
Accretion of Interest on Convertible Debt
    86,036       237,840  
Common Stock Issued for Services
    2,666       -  
Depreciation and Amortization
    46,809       86  
Amortization of Deferred Costs
    45,205       58,028  
Subtotal
    (379,555 )     (282,702 )
Changes in Assets and Liabilities, Net of Acquisition
               
Decrease in Prepaid Expense and Other Current Assets
    5,357       20,914  
Increase (Decrease) in Accounts Payable and Other Payables
    119,860       (60,646 )
Increase in Accrued Liabilities
    98,298       69,215  
Net Cash Used for Operating Activities
    (156,040 )     (253,219 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Preferred Stock Subscribed
    100,000       -  
Proceeds from Issuance of Convertible Debt
    -       438,500  
Net Cash Provided by Financing Activities
    100,000       438,500  
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (56,040 )     185,281  
                 
CASH AND CASH EQUIVALENTS
               
Beginning Balance
    76,797       123,582  
Ending Balance
  $ 20,757       308,863  
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
               
Common Stock Issued in Acquisition of Intellectual Property and Other Liabilities
  $ 2,751,332     $ -  
Discount on Debt Due to Beneficial Conversion Option
  $ -     $ 438,500  
Common Stock Issued in Cancellation of Shareholder Debt
  $ 2,147,187     $ -  

See Notes to Consolidated Financial Statements.

 
4

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009

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. f/k/a Mediscience Technology Corp. (“SensiVida”) and its wholly-owned subsidiaries, Laser Diagnostic Instruments, Inc. (“Laser”), Photonics for Women’s Oncology, LLC (“Photonics”) and 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 has operated in one business segment and continues to be 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.  Effective March 3, 2009, with the merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix, Inc. (Note 10), the Company’s technology will also focus 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 three month periods ended May 31, 2009 and 2008 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-KSB for the fiscal years ended February 29, 2009.  The interim operating results for the three months ended May 31, 2009 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, management will seek to enter into an agreement with a consulting firm to be an advisor and explore options for the Company to commercialize its technology, 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.

 
5

 
 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
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
Equipment is stated at cost.  Depreciation is computed using the straight-line method over an estimated useful life of five years.  Depreciation expense was $-0- and $86 for the three months ended May 31, 2009 and 2008, respectively.

Intellectual Property
Intellectual property is stated at cost.  Amortization is computed using the straight-line method over an estimated useful life of fifteen years.  Amortization expense was $46,809 and $-0- for the three months ended May 31, 2009 and 2008, respectively.

Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for 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.  The amounts charged to expense were $109,064 and $51,457 for the three months ended May 31, 2009 and 2008, respectively.

Loss per Common Share
In accordance with SFAS No. 128, Earnings per Share, basic and diluted net income or loss per share was 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 quarter ended May 31, 2009 and 2008, 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
In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment.  SFAS No. 123R 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, the adoption of SFAS No. 123R requires additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements.  There were no employee stock options issued during the three months ended May 31, 2009 and 2008.

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 February 28, 2009 financial statements have been reclassified to conform to the 2010 financial statement presentation.

 
6

 
 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.  SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The changes to current practice resulting from the application of this statement relate to the definition of fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.  SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.   In February 2008, the FASB issued FSP No. SFAS 157-2, Effective Date of FASB Statement No. 157, which provides a one-year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually.  Therefore the Company has adopted on March 1, 2008, the provisions of SFAS No. 157 with respect to its financial assets and liabilities only.  The Company adopted the statement for nonfinancial assets and nonfinancial liabilities on March 1, 2009.  The adoption of this statement did not have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”).  SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired.  SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.  This statement is effective for the Company starting March 1, 2009 and will change the accounting for business combinations on a prospective basis.

On December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements (SFAS No. 160).  SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements.  The statement establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation and expands disclosures in the consolidated financial statements.  SFAS No. 160 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years.  SFAS No. 160 is not currently applicable to the Company.

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities which is effective January 1, 2009.  SFAS 161 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance and cash flows.  Among other things, SFAS 161 requires disclosures of the fair values of derivative instruments and associated gains and losses in a tabular formant.  SFAS 161 is not currently applicable to the Company since the Company does not have derivative instruments or hedging activity.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets.  This Staff Position is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  Early adoption is prohibited.   FSP No. 142-3 is not currently applicable to the Company.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.  This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.  The Company does not currently have any share-based awards that would qualify as participating securities.

 
7

 
 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
  
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (“FSP 14-1”).  FSP 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008.  The FSP includes guidance that convertible debt instruments that may be settled in cash upon conversion should be separated between the liability and equity components, with each component being accounted for in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods.  FSP 14-1 is currently not applicable to the Company.

In June 2008, the FASB issued EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (“EITF Issue No. 07-5”) which is effective for financial statements for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  The Issue addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which is the first part of the scope exception in Paragraph 11(a) of SFAS No. 133 for the purpose of determining whether the instrument is classified as an equity instrument or accounted for as a derivative instrument which would be recognized either as an asset or liability and measured at fair value.  The guidance shall be applied to outstanding instruments as of the beginning of the fiscal year in which this Issue is initially applied.  Any debt discount that was recognized when the conversion option was initially bifurcated from the convertible debt instrument shall continue to be amortized.  The cumulative effect of the change in accounting principles shall be recognized as an adjustment to the opening balance of retained earnings.  The standard is not currently applicable to the Company.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In April 2009, the FASB issued FASB Staff Position No. 107-1 (“FSP FAS 107-1”) and APB 28-1 (“APB 28-1”), which amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments and APB Opinion No. 28, Interim Financial Reporting, to require disclosures about the fair value of financial instruments for interim reporting periods.  FSP FAS 107-1 and APB 28-1 will be effective for interim reporting periods ending after June 15, 2009.  The adoption of this staff position will not have a material impact on the Company’s financial statements.

In April 2009, the FASB issued FASB Staff Position No. 157-4 (“FSP FAS 157-4”), which provides additional guidance in accordance with FASB No. 157 Fair Value Measurements, when the volume and level of activity for the asset or liability has significantly decreased.  FSP FAS 157-4 shall be effective for interim and annual reporting periods ending after June 15, 2009.  The Company is currently evaluating the potential impact the adoption of this staff position will have on its financial statements.

In April 2009, the FASB issued FASB Staff Position No. 115-2 (“FSP FAS 115-2”) and FASB Staff Position No. 124-2 (“FSP FAS 124-2”), which amends the other-than-temporary impairment guidance for debt and equity securities.  FSP FAS 115-2 and FSP FAS 124-2 shall be effective for interim and annual reporting periods ending after June 15, 2009.  The Company is currently evaluating the potential impact the adoption of this staff position will have on its financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which is effective for the interim or annual financial periods ending after June 15, 2009.  SFAS No. 165 establishes general standards of accounting and disclosure of events that occur after the balance sheet but before financial statements are issued or are available to be issued.  However, since the company is a public entity, management is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued.  SFAS No. 165 will be adopted for its interim period ending August 31, 2009.
 
8

 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
  
NOTE 2 – RELATED PARTY TRANSACTIONS

Legal services rendered by Mr. Peter Katevatis amounted to $15,000 and $12,500 for the three months ended May 31, 2009 and 2008, 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.

As part of Mr. Katevatis’ prior employment agreement, the Company paid property taxes and certain operating expenses on the home of Mr. Katevatis in lieu of rent, since the Company’s operations were located in Mr. Katevatis’ home through November 2008.  Expenses recognized were $-0- and $6,039 for the three months ended May 31, 2009 and 2008, respectively, and are recorded in general and administrative expense.  In December 2008, the Company leased an office in Henrietta, New York.

See Note 7 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, 2010
  $ 85,342  

 
NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities consist of the following:

   
May 31, 2009
   
February 28, 2009
 
Legal and professional fees
  $ 186,247     $ 182,826  
Consulting and university fees
    1,397,019       1,440,615  
Salaries and wages
    84,000       2,148,786  
Accrued Interest
    326,068       275,969  
Other
    100,087       92,235  
Totals
  $ 2,093,421     $ 4,140,431  

Accrued legal and professional fees include services rendered by Mr. Peter Katevatis.  The amount of the accrual was $25,000 and $46,901 as of May 31, 2009 and February 28, 2009, respectively (Note 2).

Accrued consulting and university fees include costs owed to Dr. Robert R. Alfano, a principal stockholder and former chairman of the Company’s Scientific Advisory Board (Note 7), with respect to his prior consulting agreement, of $1,397,019 as of May 31, 2009 and February 28, 2009,

Accrued expense reimbursements of $92,235 were due to Dr. Alfano at May 31, 2009 and February 28, 2009.  The Company has accrued these costs in conjunction with Dr. Alfano’s prior consulting agreement.

Accrued salaries and wages include amounts due to Mr. Katevatis of $-0- and $2,110,286 as of May 31, 2009 and February 28, 2009, respectively.
 
 
9

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 4 – ACCRUED LIABILITIES (CONT.)

Mr. Katevatis and Dr. Robert Alfano have agreed to forebear any and all collection action for accrued fees and, in the case of Mr. Katevatis, his salary, including forgiveness of interest, in exchange for the option of converting any such accrued salary and fees into the Company’s common stock at $2.50 per share.  The option is unlimited in duration.  If the Company were to receive financing, either may elect to receive all or part of such accrued salary or fees in cash or common stock.  As of May 31, 2009, accrued consulting fees and expenses amounted to $1,489,254 for Dr. Alfano.

On March 23, 2009 Mr. Katevatis exercised his option to convert all outstanding salary and fees accrued through November 3, 2008 totaling $2,147,187, along with the termination of his employment agreement and anti-dilution rights in exchange for 1,172,510, shares of the Company’s common stock.

Accrued salaries and wages include amounts due to Frank D. Benick, Chief Financial Officer, of $11,500 and $6,000, as of May 31, 2009 and February 28, 2009, respectively.

Accrued salaries and wages also include amounts due to Kamal Sarbadhikari, Chief Executive Officer, and Jose Mir, Chief Technical Officer of $18,750 and $6,250 each as of May 31, 2009 and February 28, 2009, respectively.

Accrued salaries and wages include amounts due to David R. Smith, Chairman of the Board, of $35,000 and $20,000 as of May 31, 2009 and February 28, 2009, respectively.

NOTE 5 – CONVERTIBLE DEBT AND NOTE PAYABLE

Convertible Debt
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 April 15, 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 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, and February 28, 2009, $1,656,500 and $1,656,500 of Notes have been issued with related discounts of $1,656,500 and $1,656,500, respectively.  The Notes have been accreted to their maturity value over the term of the Notes.  Accretion of discount on convertible debt amounted to $86,036 and $237,840 for the three months ended May 31, 2009 and 2008, respectively.

Accrued interest payable as of May 31, 2009 and February 28, 2009 was $326,068 and $275,969, respectively.  Interest expense for the three months ended May 31, 2009 and 2008 was $50,514 and $41,214 respectively.

 
10

 
 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 5 – CONVERTIBLE DEBT AND NOTE PAYABLE (CONT.)

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 to the Note holders as compensation for the delay of the IPO which was 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 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 thru 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 $249,326 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.

Note Payable
On September 1, 2005, SensiVida Medical Systems, Inc. (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. This note was assumed in the acquisition of SensiVida Medical Systems, Inc. (Note 10).  The note is presently in default.  The amount drawn on the note at May 31, 2009 and February 28, 2009 was $49,828 and $-0-, respectively.  Interest accrued on the note was $2,852 and $-0- as of May 31, 2009 and February 28, 2009, respectively.

NOTE 6 - 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 B Preferred stock having a par value of $100 (the shares).  Each Series B 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 has recorded the advances as a liability.

On April 13, 2010, the Company and a current preferred stock subscriber mutually agreed to revised terms on a 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, are available at the option of subscriber to roll over the total into the Company’s current Series A subscription agreement.  Also the $50,000 loan (see Note 5) plus accrued interest of $3,929 as of May 1, 2010 for a total of $53,929, can also be rolled over into the current Series A subscription agreement at the option of the subscriber.  In addition, warrants to purchase 50,000 shares of common stock have been “ratcheted” downward from $0.66666 to $0.35, resulting in a proportional increase in the warrants to purchase 95,237 common shares.

 
11

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 7 - INCOME TAXES

There is no income tax benefit for the losses for the three months ended May 31, 2009 and 2008 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 May 31, 2009 and there was no accrual for uncertain tax positions as of May 31, 2009.

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 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 three months ended May 31, 2009 and May 31, 2008.

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 three months ended May 31, 2009 and May 31, 2008.

Employment Agreements
Mr. Peter Katevatis, the Chief Executive Officer, Chairman and a stockholder of the Company, had an employment agreement.  The prior agreement was renewed on March 5, 2007 which increased his salary from $200,000 to $250,000 per year. The agreement also provided for a bonus and fringe benefits in accordance with policies and formulas mutually agreed upon by Mr. Katevatis and the Board of Directors.  The contract was due to expire on March 5, 2015.  In November 2008, Mr. Katevatis terminated his employment agreement as Chief Executive Officer and Chairman along with his anti-dilution rights and exercised his option to convert all outstanding salary and fees accrued thru November 2008 in exchange for 1,172,510 shares of the Company’s common stock.

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.

On November 5, 2008, the Company entered into a three (3) year employment contract with Kamal Sarbadhikari as Chief Executive Officer and Jose Mir as Chief Technical Officer.  Mr. Sarbadhikari and Mr. Mir will be paid a base salary of $150,000 per annum.

On November 10, 2008, the Company entered into a three (3) year employment contract with David R. Smith as Chairman of the Board.  Mr. Smith will be paid $60,000 per annum.

 
12

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 9 – STOCKHOLDERS’ DEFICIT

Reverse Stock Split
The consolidated balance sheets, statements of changes in stockholders’ 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 is 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.

Holders of series A preferred stock are entitled to a preference of $100 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 Issued for Services
During May 2009, the company issued 3,333 restricted shares of its common stock with a value of $2,666 to a group of consultants in exchange for professional services, as per their agreement.  The transaction was recognized based on the fair market value of the shares issued (the closing price of the Company’s common stock of the date of agreement).

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 $2,751,000 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.

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 May 31, 2009 and May 31, 2008.

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.

 
13

 
 
SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
  
NOTE 9 – STOCKHOLDERS’ DEFICIT (CONT.)

Stock Options
Activity related to stock options during the three months ended May 31, 2009 is as follows:

         
Exercise
   
Weighted
 
         
Price
   
Avg. Exercise
 
   
Shares
   
Range
   
Price
 
                   
Outstanding, February 28, 2010
    30,000     $ 10.00     $ 10.00  
Granted
    -                  
Forfeited
    -                  
Outstanding, May 31, 2010
    30,000     $ 10.00     $ 10.00  

Stock Warrants
Stock warrant activity during the three months ended May 31, 2009 was as follows:

         
Exercise
   
Weighted
 
   
Shares
   
Price
   
Avg. Exercise
 
   
Available
   
Range
   
Price
 
Outstanding, February 28, 2009
    399,933    
$1.00 - 30.00
    $ 9.00  
Granted
    50,000    
1.00
         
Exercised
    -    
-
         
Forfeited
    -    
-
         
Outstanding, May 31, 2009
    449,933    
$1.00 - $30.00
    $ 9.11  

In conjunction with the Preferred Stock Subscription, the Company granted warrants to purchase 50,000 shares of common stock at an exercise price of $1.00 per share.  The warrants have a five year term.

Anti-Dilution Rights
The Company and Mr. Peter Katevatis had an anti-dilution rights agreement which provided that Mr. Katevatis’ ownership interest would at all times represent 17% of the issued and outstanding shares of the Company.  The anti-dilution rights were exercisable at Mr. Katevatis’ sole discretion.  In November 2008, Mr. Katevatis terminated his employment agreement as Chief Executive Officer and Chairman along with his anti-dilution rights and on March 23, 2009, exercised his option to convert all outstanding salary and fees accrued thru November 2008 in exchange for 1,172,510 shares (post reversal stock split) of the Company’s common stock.

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.

 
14

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 10 - ACQUISITION OF SENSIVIDA MEDICAL SYSTEMS, INC.

On November 5, 2008, Mediscience Technology Corp., a New Jersey corporation (“Mediscience”) entered into an agreement and plan of reorganization (the “Merger Agreement”) with SensiVida Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Mediscience (“Merger Sub”), and SensiVida Medical Systems, Inc., a Delaware corporation (“SensiVida”), pursuant to which Merger Sub will be merged into SensiVida and thereafter SensiVida will be merged with and into Mediscience (the “Merger”).  As a condition precedent to completing the Merger, on January 29, 2009, BioScopix, Inc., a Delaware corporation and wholly-owned subsidiary of Mediscience, merged with and into Mediscience, with the surviving corporation changing its name to BioScopix, Inc. (such surviving corporation hereafter referred to as the “Company”).

On March 3, 2009, the Company and SensiVida completed the Merger and the Company changed 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, par value $.01 per share (the “Common Stock”) to the three stockholders of SensiVida as consideration for the transaction.  In addition, the Company issued 1,172,510 shares of its Common Stock to Mr. Katevatis in settlement of all of his accrued claims and salary, to include termination of his employment agreement as Chief Executive Officer and Chairman, along with cancellation of his anti-dilution rights.

The merger will be accounted for under the acquisition method in accordance with SFAS 141(R), Business Combination.  The merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix, Inc. will enable the Company to focus on the automation of analysis and data acquisition for allergy testing, glucose monitoring, blood coagulation testing, new tuberculosis testing, and cholesterol monitoring.  The fair value of the consideration was approximately $2,751,000, the value of the 3,333,333 shares on March 3, 2009, which includes the assumption of various liabilities totaling approximately $58,000.  The Company has completed its valuation of the identifiable assets acquired and liabilities assumed at their acquisition date fair values as follows:

Cash
  $ 558  
Technology with Patents Pending Approval
    2,808,563  
Note Payable
    (49,828 )
Accrued Expenses
    (2,437 )
Officer Loan
    (5,524 )
    $ 2,751,332  

The Company engaged the services of a valuation firm to estimate the fair value of SensiVida Medical Systems, Inc.  Based on the valuation report, the acquisition date fair values of the assets acquired and the liabilities assumed ranged from $591,000 to $7,740,000.  Due to the wide range in valuation amounts and uncertainty of realizing the probabilities employed in the valuation, the Company has used the fair value of the common stock issued, $2,751,000, as it approximates the fair value of the assets acquired and liabilities assumed.

The operating results of the acquired company have been included in the consolidated financials statements from the date of acquisition, effective as of March 1, 2009 for accounting purposes.  The following table provides the unaudited proforma results of operations as if the acquisition had occurred as of March 1, 2008:

Net Sales
  $ -0-  
Net Loss
  $ (579,312 )
Basic and Diluted Lose Per Common Share
  $ (0.086 )

 
15

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 11 - SUBSEQUENT EVENTS

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.

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).

Series A Convertible Preferred Stock Offering
Subsequent to the Company’s February 28, 2010 fiscal year end, 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 also at $1.00 per share.  Series A Preferred stock subscriptions to date have exceeded $1,000,000.

NOTE 12 - CORRECTION OF AN ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company has amended its quarterly report as a result of the review of its financial statements by its independent accounting firm.  Originally the Company incorrectly classified the cancellation of certain related party debt as income of $1,209,179.  Upon subsequent review, the cancellation of the debt was reclassified to additional paid in capital.

 
16

 

SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
f/k/a MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
 
NOTE 12 - CORRECTION OF AN ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONT’D).

In addition, the Company recorded additional general and administrative costs of $56,932.  The correction was primarily composed of $46,809 of initial amortization of the intellectual property that was acquired during the first quarter.  Also approximately $10,123 of various consulting costs were invoiced by various vendors after the quarterly report was filed.  Product development costs were also increased $4,960 because various vendors had delayed their invoicing until after the quarterly report was filed.  Interest expense was also corrected from $40,586 to $50,514, because of an error in tabulating various columns from the accrual worksheet.

The above corrections resulted in a reduction of income totaling $1,280,999 and the correction of reporting income per share from $0.07 to a loss of ($0.05) per share.  Since the cancellation of debt was reclassified to additional paid in capital, the summary of corrections increased the shareholders deficit approximately $71,800.

The independent review of the financial statements also resulted in the reclassification within the balance sheet of $250,000 of preferred stock subscribed from the equity section to a current liability.
 
 
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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operation

Results of Operations

Three Months Ending May 31, 2009 Compared to
Three Months Ending May 31, 2008

Revenues

We had no revenues during the three months ending May 31, 2009 and May 31, 2008.  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 will also focus 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 $109,000, or 43%, during the current three month period ended May 31, 2009 as compared to the three month period ended May 31, 2008.  The increase was the net of increases and decreases in major expense components.  Salaries, wages and related expenses approximating $102,000 increased approximately $28,000 over the prior year period, as a result of the employment agreements of the new CEO, CTO and Chairman of the Board.  This increase was partially offset by the voluntary termination of Mr. Katevatis’ employment agreement.  In addition, professional fees increased approximately $109,000 during the current period, primarily to the increased professional activities associated with the merger and related matters.  Also adding to the increase in general and administrative expense was approximately $47,000 of amortization costs associated with the Company’s intellectual property.  As an offset to the increases, consulting costs decreased approximately $15,000, due to a decrease in amortization of deferred costs, plus there was a decrease in financial service (bridge fees and related costs) totaling $53,000.  In addition, all other general and administrative expenses decreased approximately $7,000.

Product Development Expense

Product development expense increased approximately $58,000, or 112%, during the current three month period ended May 31, 2009 when compared to the prior three month period ended May 31, 2008.  The increase is due to allergy research being conducted in Rochester, NY, by the Company and its consultants.

Cancellation of Indebtedness

The Company has 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 May 31, 2009 of approximately $4,216,000 compared to a deficiency of approximately $5,841,000 at February 28, 2009 representing a decrease in the deficiency of approximately $1,625,000 for the current three month period ended May 31, 2009.  The decrease in the deficiency consisted of a decrease of approximately $61,000 in current assets, consisting of cash and prepaid expenses, and an offsetting decrease of approximately $1,686,000 in current liabilities.  The principal reason for the decline in accrued liabilities is the cancellation of approximately $2,147,000 of obligations to Mr. Katevatis who terminated his employment agreement as Chief Executive Officer and Chairman along with his anti-dilution rights and exercised his option to convert an outstanding salary and fees accrued thru November 2008 in exchange for 1,172,510 shares of the Company’s common stock.  The current deficiency in working capital is primarily represented by accruals for professional fees, consulting, salaries and wages and convertible debt.

 
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Our ability to continue our operations is largely dependent upon obtaining regulatory approval for the commercialization of our allergy testing 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, 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.

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.

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.

 
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Item 3. 
Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4T. 
Controls and Procedures

 
Evaluation of Disclosure Controls and Procedures

Our Chief Executive Office and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of May 31, 2009, the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of May 31, 2009, the end of the period covered by this report are not effective due to the existence of material weaknesses in our internal control over financial reporting, discussed below.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our system of internal control over financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail,

i.  We do not have an independent board of directors or audit committee to oversee our internal control over financial reporting.

ii. We have a limited number of personnel and as a result, there is limited segregation of duties amongst the Company's employees with respect to preparation and review of the Company's financial statements.

iii.   We have limited ability to account for complex equity transactions, such that our controls relating to disclosure and related assertions in the financial statements in the area of non-routine transactions were not adequate.

iv.   We have informal policies and procedures and we lack a formal budgeting process.

These material weaknesses may affect management's ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with generally accepted accounting principles.

Changes in Internal Control Over Financial Reporting

During the last fiscal quarter, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


 
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PART II - OTHER INFORMATION

Item 1. 
Legal Proceedings

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 filed a response to his action.  The matter is pending.

Item 1A.
Risk Factors

Not Applicable

Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds

 
During May 2009, the company issued 3,333 restricted shares of its common stock with a value of $2,633 to a group of consultants in exchange for professional services, as per their agreement.  The transaction was recognized based on the fair market value of the shares issued (the closing price of the Company’s common stock on the date of agreement).

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 July 15, 2009, there have been no demands for repayment by the Note holders.

The Company acquired a $50,000 convertible subordinated note as part of its recent acquisition of SensiVida Medical Systems, Inc.  The note was in default upon acquisition and continues to remain in default.  The Company is currently in the process of negotiating a settlement.

Item 4. 
Submission of Matters to a Vote of Security Holders

None

Item 5. 
Other Information

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, par value $.01 per share to the three stockholders of SensiVida Medical Systems, Inc. as consideration for the transaction.  The transaction was recognized based on the fair market value of the shares issued (the closing weighted average price of the Company’s common stock for a period prior and after the merger date).

 
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Common Stock Issued in Cancellation of 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.

Subscription for Convertible Debt
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 B Preferred stock having a par value of $1.00 (the shares).  Each Series B 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.

Reverse Stock Split
In addition to the name change on March 19, 2009, the Company’s Board of Directors, the holders of a majority of the Company’s voting capital stock, approved an amendment to the Company’s Restated Certificate of Incorporation to provide for the reduction of the total number of authorized, issued and outstanding shares of the Company’s common stock, par value $.01 per share (“Common Stock”) and its preferred stock, par value $.01 per share (“Preferred Stock”), by exchanging each ten (10) shares of such authorized, issued and outstanding shares of Common Stock and Preferred Stock for one (1) share of Common Stock or Preferred Stock, respectively (such exchange, the “Reverse Split”).  The Reverse Split became effective on May 18, 2009.  All references to number of shares and per share amounts in the consolidated financial statements and notes have been adjusted to give retroactive effect to the reverse stock split.

Item 6. 
Exhibits

 
10.1
Notification that as of March 3, 2009, the Company and SensiVida completed the merger and the Company changed its name to SensiVida Medical Technologies, Inc.*
 
 
10.2
Notification that the Company completed the merger and certain financial information has been presented and attached as Exhibits.*
 
 
10.3
Agreement dated as of July 3, 2009 between the Company and Dr. John Condemi to engage in consultation on product development and clinical matters.*
 
 
10.4
Review Report of Independent Registered Public Accounting Firm.
 
 
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

*  Previously filed

 
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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.
 
(Registrant)
   
February 16, 2011
By:  /s/ Jose Mir
   
 
Jose Mir
 
President
   
February 16, 2011
/s/ Frank D. Benick
   
 
Frank D. Benick, CPA
 
Chief Financial Officer
 
Principal Financial and Accounting Officer

 
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EXHIBIT INDEX

EXHIBIT NO.
   
DESCRIPTION
     
10.1
 
Notification that as of March 3, 2009, the Company and SensiVida completed the merger and the Company changed its name to SensiVida Medical Technologies, Inc.*
     
10.2
 
Notification that the Company completed the merger and certain financial information has been presented and attached as Exhibits.*
     
10.3
 
Agreement dated as of July 3, 2009 between the Company and Dr. John Condemi to engage in consultation on product development and clinical matters.*
     
10.4
 
Review Report of Independent Registered Public Accounting Firm.
     
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

*  Previously filed

 
24