UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended July 31, 2009 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to ______ |
Commission file number 0-27119
SCIVANTA MEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | 22-2436721 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) |
215 Morris Avenue, Spring Lake, New Jersey 07762
(Address of principal executive offices)
(732) 282-1620
(Issuer’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and smaller reporting company in Rule 12b-2 of the Securities Exchange Act of 1934.
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-2 of the Securities Exchange Act of 1934). Yes ¨ No x
As of September 10, 2009, there were 26,981,210 shares of the Issuer’s common stock, par value $.001 per share, outstanding.
SCIVANTA MEDICAL CORPORATION
INDEX TO FORM 10-Q
Page | ||
PART I | FINANCIAL INFORMATION | |
Item 1. | Financial Statements | 1 |
Balance Sheets as of July 31, 2009 (unaudited) and October 31, 2008 | 2 | |
Statements of Operations (unaudited) | ||
for the three and nine months ended July 31, 2009 and 2008 | 3 | |
Statements of Cash Flows (unaudited) | ||
for the nine months ended July 31, 2009 and 2008 | 4 | |
Notes to the Unaudited Financial Statements | 5 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
Item 4T. | Controls and Procedures | 26 |
PART II | OTHER INFORMATION | |
Item 1. | Legal Proceedings | 27 |
Item 1A. | Risk Factors | 27 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 |
Item 3. | Defaults Upon Senior Securities | 27 |
Item 4. | Submission of Matters to a Vote of Security Holders | 27 |
Item 5. | Other Information | 27 |
Item 6. | Exhibits | 27 |
Signatures | 28 | |
Index of Exhibits | E-1 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report on Form 10-Q and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are economic conditions generally and in the industries in which the Registrant may participate; competition within the Registrant’s chosen industries, including competition from much larger competitors; technological advances; available capital; regulatory approvals; and failure by the Registrant to successfully acquire, develop or market products and form new business relationships.
In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date this quarterly report on Form 10-Q is submitted to the Securities and Exchange Commission (the “SEC”).
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
Certain information and footnote disclosures required under U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the SEC. The accompanying unaudited financial statements of Scivanta Medical Corporation (“Scivanta” or the “Company”) have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. It is suggested that the following financial statements be read in conjunction with the financial statements and notes thereto included in the annual report on Form 10-KSB for the fiscal year ended October 31, 2008 of the Company, as amended.
The results of operations for the three and nine months ended July 31, 2009 and 2008, respectively, are not necessarily indicative of the results of the entire fiscal year or for any other period.
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Scivanta Medical Corporation
Balance Sheets
July 31, 2009 (Unaudited) | October 31, 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 242,345 | $ | 598,644 | ||||
Prepaid expenses and other | 19,261 | 33,286 | ||||||
Tax loss receivable | — | 512,354 | ||||||
Other receivables | — | 211,438 | ||||||
Total current assets | 261,606 | 1,355,722 | ||||||
Other | 3,787 | 7,568 | ||||||
Total assets | $ | 265,393 | $ | 1,363,290 | ||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 261,840 | $ | 226,909 | ||||
Accounts payable - related party | 2,807 | 2,632 | ||||||
Accrued expenses | 177,658 | 122,821 | ||||||
Notes payable | 164,104 | 34,567 | ||||||
Convertible debentures | 250,000 | — | ||||||
Total current liabilities | 856,409 | 386,929 | ||||||
Long-term liabilities: | ||||||||
Note payable | — | 158,438 | ||||||
Convertible debentures | — | 250,000 | ||||||
Total long-term liabilities | — | 408,438 | ||||||
Commitments and contingencies | ||||||||
Stockholders' (deficiency) equity | ||||||||
Common stock, $.001 par value; 100,000,000 shares authorized; 26,981,210 and 26,852,364 shares issued and outstanding, respectively | 26,981 | 26,852 | ||||||
Additional paid-in capital | 20,978,108 | 20,853,626 | ||||||
Accumulated deficit | (21,596,105 | ) | (20,312,555 | ) | ||||
Total stockholders' (deficiency) equity | (591,016 | ) | 567,923 | |||||
Total liabilities and stockholders' (deficiency) equity | $ | 265,393 | $ | 1,363,290 |
The accompanying notes are an integral part of these financial statements.
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Scivanta Medical Corporation
Statements of Operations
(Unaudited)
Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | — | ||||||||
Cost of sales | — | — | — | — | ||||||||||||
Gross profit | — | — | — | — | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development, net | 28,418 | 128,275 | 254,837 | 226,597 | ||||||||||||
General and administrative | 308,022 | 320,202 | 1,015,593 | 1,039,924 | ||||||||||||
Loss from operations | (336,440 | ) | (448,477 | ) | (1,270,430 | ) | (1,266,521 | ) | ||||||||
Interest income | 28 | 6,909 | 2,941 | 39,246 | ||||||||||||
Interest expense | (5,306 | ) | (7,675 | ) | (16,061 | ) | (23,025 | ) | ||||||||
Net loss | $ | (341,718 | ) | $ | (449,243 | ) | $ | (1,283,550 | ) | $ | (1,250,300 | ) | ||||
Net loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Weighted average number of common shares outstanding, basic and diluted | 26,981,210 | 25,850,444 | 26,931,654 | 25,794,970 |
The accompanying notes are an integral part of these financial statements.
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Scivanta Medical Corporation
Statements of Cash Flows
(Unaudited)
Nine Months Ended July 31, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,283,550 | ) | $ | (1,250,300 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 3,781 | 2,280 | ||||||
Stock based compensation expense | 104,611 | 91,941 | ||||||
Interest imputed on note payable | — | 8,025 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other | 38,731 | 24,063 | ||||||
Tax loss receivable | 512,354 | 306,803 | ||||||
Other receivables | 211,438 | (244,840 | ) | |||||
Deposit | — | 60,000 | ||||||
Accounts payable | 34,931 | 221,921 | ||||||
Accounts payable - related party | 175 | 458 | ||||||
Accrued expenses | 74,837 | (87,863 | ) | |||||
Net cash used in operating activities | (302,692 | ) | (867,512 | ) | ||||
Cash flows from financing activity: | ||||||||
Repayment of note payable | (53,607 | ) | — | |||||
Decrease in cash and cash equivalents | (356,299 | ) | (867,512 | ) | ||||
Cash and cash equivalents - beginning of period | 598,644 | 2,008,909 | ||||||
Cash and cash equivalents - end of period | $ | 242,345 | $ | 1,141,397 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 1,061 | $ | 20,000 | ||||
Cash paid for income taxes | $ | 2,415 | $ | 1,820 | ||||
Noncash operating activity: | ||||||||
Issuance of common stock as payment for consulting services | $ | — | $ | 7,000 | ||||
Noncash financing activities: | ||||||||
Issuance of note payable as payment for insurance premium | $ | 24,706 | $ | — | ||||
Issuance of 153,846 shares of common stock as payment for interest due on convertible debentures | $ | 20,000 | $ | — |
The accompanying notes are an integral part of these financial statements.
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Scivanta Medical Corporation
Notes to the Unaudited Financial Statements
1. | Organization and Description of Business |
Scivanta is a Nevada corporation headquartered in Spring Lake, New Jersey. The Company ceased selling all products during the fiscal year ended October 31, 2004 and has not had any revenue from the sale of products since the second quarter of 2003.
On November 10, 2006, the Company acquired the exclusive world-wide rights to develop, manufacture and distribute certain proprietary technologies known as the Hickey Cardiac Monitoring System (the “HCMS”), a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The HCMS will provide the primary measurements of cardiac performance, including left atrial pressure, which is a crucial measurement in monitoring cardiac challenged patients. The hardware, software and catheter components for the HCMS have been completed. Scivanta currently has a fully assembled HCMS device that has been used in initial clinical trials.
The two major components remaining in the development of the HCMS are the completion of the clinical trials and the design and engineering of the production model of the HCMS. The Company conducted an initial clinical trial for the HCMS in Buffalo, New York at Kaleida Health/Millard Fillmore Hospital (“Kaleida”). This initial clinical trial commenced in October 2008 and was completed in March 2009. The Company successfully tested six patients during the initial clinical trial at Kaleida. Subject to the receipt of additional funding, the Company expects to test a minimum of 40 additional patients in clinical trials at Kaleida and at three other locations, all of which have been engaged. The length of time and the number of patients tested in the clinical trials could change depending on the rate of patient recruitment and the data results produced. The design and engineering of the production model will run concurrent with the clinical trials. In addition, the Company must also receive the appropriate regulatory approvals before the HCMS can be marketed in the United States or abroad. Scivanta will submit its 510(k) premarket notification for the HCMS to the United States Food and Drug Administration (“FDA”) once it has obtained sufficient clinical data for the HCMS. Upon completion of the HCMS production model, the Company will also seek European Union market approval (CE mark).
The Company will not be able to complete the clinical trials or the design and engineering of the production model of the HCMS without obtaining additional cash through an equity and/or debt financing or through corporate partnerships. The Company is aggressively pursuing potential investors and has engaged several placement agents to assist in this endeavor. No assurances can be given that the Company will be able to obtain sufficient capital to finish the development of the HCMS through any corporate partnerships and/or through equity and/or debt financing. In addition, no assurances can be given that if the Company successfully develops and markets the HCMS, such product will become profitable.
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2. | Basis of Presentation and Continuation as a Going Concern |
The accompanying financial statements have been prepared assuming that Scivanta will continue as a going concern. The Company has incurred significant recurring operating losses, negative cash flows from operations and has an accumulated deficit of $21,596,105 as of July 31, 2009. The Company also has no lending relationships with commercial banks and is dependent on an infusion of capital through the completion of an equity and or debt financing in order to continue operations. The current economic conditions could make capital raising more difficult to achieve. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company continues to seek equity and or debt investors and has engaged several placement agents to assist the Company in this initiative. In addition, the Company is reducing operating expenses, deferring vendor payments and deferring payment of a portion of the officers’ salaries (approximately $46,000 as of July 31, 2009). While the Company is aggressively pursuing the opportunities and actions described above, there can be no assurance that the Company will be successful in its capital raising efforts. If the Company is unable to secure additional capital, it will explore strategic alternatives, including, but not limited to, the possible sale of the Company. Any additional equity financing may result in substantial dilution to the Company’s stockholders.
3. | License and Development Agreements |
HCMS License Agreement
On November 10, 2006, the Company entered into a technology license agreement (the “License Agreement”) with The Research Foundation of State University of New York, for and on behalf of the University at Buffalo (the “Foundation”), Donald D. Hickey, M.D. (“Hickey”) and Clas E. Lundgren (“Lundgren”). The Foundation, Hickey and Lundgren shall be collectively referred to herein as the “Licensor.” The License Agreement was amended on June 29, 2007, October 24, 2008 and January 6, 2009.
Pursuant to the License Agreement, the Licensor granted the Company the exclusive world-wide rights to develop, manufacture and distribute the HCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The term of the License Agreement commenced on November 10, 2006 and ends on the latter of (1) the expiration date of the last to expire patent right related to the HCMS which is currently June 12, 2018 or (2) ten years from the sale of the first HCMS product.
The Company agreed to make an initial payment to the Licensor of $264,300 which was subsequently reduced to $262,957 pursuant to the first amendment to the License Agreement dated June 29, 2007 (see Note 5 - Notes Payable - HCMS License Agreement). The Company paid $40,900 on November 16, 2006 and $80,000 on October 31, 2007 and was required to pay $142,057 on November 1, 2008. Pursuant to the second amendment to the License Agreement dated October 24, 2008, the $142,057 payment was restructured as follows: a) $39,101 was paid in cash to Hickey on October 24, 2008; b) $34,567 was paid in cash to Lundgren on October 24, 2008; c) $33,822 was paid by issuing 187,900 shares of Scivanta common stock to the Foundation on October 28, 2008; and d) $34,567 was paid in cash to Lundgren on February 4, 2009.
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Further, pursuant to the second amendment to the License Agreement dated October 24, 2008, any milestone payments that the Company was required or may have been required to pay to the Licensor under the original terms of the License Agreement were eliminated in exchange for the following: a) a one-time cash payment by the Company to Hickey of $158,438 on the date that is thirty days after the first commercial sale of a product utilizing the licensed technology, but no later than December 31, 2009 (see Note 5 - Notes Payable - Hickey); b) the issuance of 224,960 shares of the Company’s common stock to the Foundation on October 28, 2008; c) the issuance of 162,500 shares of the Company’s common stock to Hickey on October 28, 2008; and d) the issuance of 426,560 shares of the Company’s common stock to Lundgren on October 28, 2008.
The Company also is required to pay the Licensor a royalty of 5% on annual net sales, as defined in the License Agreement, subject to certain reductions as detailed in the License Agreement. Beginning with the first full year of sales of the HCMS in the United States and for two years thereafter, the Company is required to pay an annual minimum royalty of $100,000 to the Licensor against which any royalty on net sales paid in the same calendar year for sales in the United States will be credited. Further, beginning with the first full year of sales of the HCMS outside the United States and for two years thereafter, the Company is required to pay an annual minimum royalty of $100,000 to the Licensor against which any royalty on net sales paid in the same calendar year for sales outside the United States will be credited. In addition, the Company is required to pay the Licensor 25% of all sublicensing revenue received by the Company in connection with the HCMS.
Subcontractor Agreement and NYSTAR Contract
On June 27, 2007, Scivanta and the Foundation entered into a subcontractor agreement. Pursuant to this agreement, the Foundation contracted Scivanta to develop the software and hardware components of the HCMS outlined in the contract awarded by the New York State Office of Science Technology and Academic Research (“NYSTAR”) to the Foundation and the Foundation’s company partner, Ethox International, Inc. (“Ethox”), on December 1, 2005 (the “NYSTAR Contract”). On November 30, 2008, the NYSTAR Contract expired.
Pursuant to the first amendment to the License Agreement dated June 29, 2007, the Licensor and Ethox entered into a non-exclusive manufacturing license agreement, dated June 29, 2007, whereby Ethox was granted the right to manufacture the catheter component of the HCMS for Scivanta.
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As a result of the subcontractor agreement, the first amendment to the License Agreement and the non-exclusive license agreement between the Licensor and Ethox, the development of the HCMS was partially funded through the NYSTAR Contract. Pursuant to the terms of the NYSTAR Contract, $937,500 of funding was available for the development of the HCMS with the State of New York providing $750,000 and Ethox providing $187,500 of the funding. Ethox and Hickey also provided $535,500 and $27,000, respectively, of in-kind contributions. Pursuant to the development agreement between Scivanta and Ethox dated June 29, 2007 (see Ethox Development Agreement), Scivanta provided Ethox with the $187,500 of cash required under the NYSTAR Contract while Ethox provided the $562,500 of in-kind contributions (primarily contributed services). The funding received from the NYSTAR Contract partially supported the development of: the catheter component of the HCMS by Ethox (see Ethox Development Agreement); the software component of the HCMS by Applied Sciences Group, Inc. (“ASG”) (see ASG Development Agreement); the hardware component of the HCMS by Sparton Medical Systems (“Sparton”) (see Sparton Development Agreement) and the related clinical trials. Under the terms of the subcontractor agreement between the Foundation and Scivanta, the Foundation, utilizing the $937,500 of funding provided under the NYSTAR Contract, reimbursed Scivanta $928,580 of allowable expenditures incurred by Scivanta in connection with the development of the software and hardware components of the HCMS and related clinical trials.
As of November 30, 2008, no further amounts were available for reimbursement to Scivanta under the NYSTAR Contract. For the three and nine months ended July 31, 2009, Scivanta submitted to the Foundation for reimbursement $0 and $19,110, respectively, of expenses related to the software and hardware development of the HCMS and the related clinical trials, which were recorded by the Company as a reduction to research and development expenses. For the three and nine months ended July 31, 2008, Scivanta submitted to the Foundation for reimbursement $388,746 and $632,960, respectively, of expenses related to the software and hardware development of the HCMS and the related clinical trials, which were recorded by the Company as a reduction to research and development expenses.
Ethox Development Agreement
On June 29, 2007, the Company and Ethox entered into a development agreement whereby Ethox will provide Scivanta engineering and development support for the catheter component of the HCMS in exchange for the rights to manufacture the component upon regulatory approval and commercialization of the HCMS. Pursuant to the development agreement, the Company paid $187,500 to Ethox in connection with the NYSTAR Contract funding discussed above (see Subcontractor Agreement and NYSTAR Contract). The cash payment of $187,500 was paid in $46,875 installments by the Company on each of September 12, 2007, February 13, 2008, June 16, 2008 and August 27, 2008. These payments were recorded as a prepaid expense by the Company and were fully recognized as research and development expense during the fiscal years ended October 31, 2008 and 2007 on a pro-rata basis as the HCMS was developed pursuant to the NYSTAR Contract. During the three and nine months ended July 31, 2008, the Company recorded $77,972 and $119,479, respectively, of research and development expense related to the NYSTAR Contract payment.
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The development agreement had a two year term that expired on June 29, 2009. The services provided by Ethox included: (1) the management of project costs and schedule, (2) the development of system functional specifications based on marketing inputs, (3) the development of disposable catheter specifications to achieve functional requirements, (4) the manufacturing of disposable catheters in accordance with applicable requirements for clinical trials, and (5) the provision of regulatory resources for the management of clinical submissions for marketing approval from the FDA. Pursuant to the development agreement, Scivanta is responsible for the selection and costs of all raw materials and for the packaging design. During the term of the development agreement and for a period of twelve months thereafter, Ethox will not participate in the design, development, creation or production of a double balloon catheter to be used as part of a cardiac monitoring system. The development agreement also contained standard provisions regarding indemnification and termination. The Company and Ethox are currently negotiating an extension of the development agreement. Ethox is continuing to provide services under the development agreement during the negotiations.
Terms for the manufacturing of the catheter component of the HCMS are contained in a supply agreement which will be entered into by Scivanta and Ethox upon regulatory approval of the HCMS. The supply agreement will have a four year term commencing on the date of the first commercial production of the catheter component of the HCMS, and thereafter shall renew on an annual basis unless terminated by either party in accordance with the supply agreement. The supply agreement will also contain a minimum order requirement, a pricing schedule and will provide for an additional payment to Ethox of up to $535,000, which will be paid to Ethox over the term of the supply agreement on a per unit basis based on the minimum number of units that the Company is required to order under the supply agreement.
The Company did not record any research and development expense related to this development agreement during the three and nine months ended July 31, 2009 and 2008.
ASG Development Agreement
On July 2, 2007, the Company entered into a development agreement with ASG. Pursuant to the terms of this agreement, ASG will provide software engineering services to Scivanta on the continuing development of the HCMS. Scivanta can terminate the agreement at any time upon written notification. For the three and nine months ended July 31, 2009, the Company recorded $0 and $103,569, respectively, of research and development expense for services and materials provided under this development agreement. For the three and nine months ended July 31, 2008, the Company recorded $131,114 and $222,504, respectively, of research and development expense for services and materials provided under this development agreement.
Sparton Development Agreement
On August 22, 2007, Scivanta and Sparton, a business group of Sparton Electronics Florida, Inc., entered into a development agreement whereby Sparton provided Scivanta engineering and development support for the hardware component of the HCMS. On October 1, 2008, the Company terminated the development agreement with Sparton. For the three and nine months ended July 31, 2008, the Company recorded $257,632 and $410,456, respectively, of research and development expense for services and materials provided under the development agreement.
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Rivertek Service Agreement
On February 1, 2008, Scivanta and Rivertek Medical Systems, Inc. (“Rivertek”) entered into a service agreement, which was amended on April 28, 2008, whereby Rivertek provided Scivanta with project management services related to the development of the HCMS. The service agreement was amended and restated on February 5, 2009. Pursuant to the amended and restated service agreement, Rivertek will assist Scivanta in the development of the hardware component of the HCMS and will continue to assist in the management of the development of the software and catheter components of the HCMS. The amended and restated service agreement will expire on December 31, 2010 and can be terminated earlier by either party upon three days written notice. The services rendered to Scivanta provided under this contract are to be billed on a time and material basis.
On April 28, 2008, Scivanta issued a warrant to purchase 125,000 shares of its common stock to Rivertek as partial consideration for services rendered under the service agreement. During the three and nine months ended July 31, 2009, Scivanta recorded $1,600 and $110,638, respectively, of research and development expense for services and materials provided under both the service agreement and the amended and restated service agreement. During the three and nine months ended July 31, 2008, Scivanta recorded $25,074 and $48,072, respectively, of research and development expense for services and materials provided under both the service agreement and the amended and restated service agreement.
4. | Related Party Transactions |
David R. LaVance, the Company’s Chairman, President and Chief Executive Officer, and Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial Officer and Secretary, are Principals of Century Capital Associates LLC (“Century Capital”), a consulting firm. Effective February 1, 2007, the Company and Century Capital entered into a Sublease Agreement pursuant to which the Company rents office space approximating 2,000 square feet inside Century Capital’s existing offices. In addition, the Company rents office furniture and other equipment from Century Capital. This agreement has a month to month term that requires sixty days written notice to terminate and a monthly rental fee of $5,000. The Company is responsible for all operating costs associated with the office space, including utilities, maintenance and property taxes.
During the three and nine months ended July 31, 2009, the Company was billed $17,001 and $53,678, respectively, pursuant to the terms of the Sublease Agreement. As of July 31, 2009, the Company owed Century Capital $1,899 for expenses due under the Sublease Agreement and $908 for other expenses, which amounts are included in accounts payable – related party and were paid by the Company subsequent to July 31, 2009. During the three and nine months ended July 31, 2008, the Company was billed $18,012 and $53,008, respectively, pursuant to the terms of the Sublease Agreement.
5. | Notes Payable |
Note Payable – HCMS License Agreement
Pursuant to the terms of the HCMS License Agreement, as amended (see Note 3 – HCMS License Agreement), the Company was required to make a payment to the Licensor of $262,957. This payment obligation was non-interest bearing. The Company paid $40,900 on November 16, 2006 and $80,000 on October 31, 2007. Pursuant to a second amendment to the License Agreement dated October 24, 2008, the Company paid $73,668 in cash ($39,101 to Hickey and $34,567 to Lundgren) on October 24, 2008, paid $33,822 by issuing 187,900 shares of its common stock to the Foundation on October 28, 2008 and paid $34,567 in cash to Lundgren on February 4, 2009.
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The Company recorded a note payable on November 10, 2006 of $235,557 based on the present value of the original payment obligation, as amended, with a corresponding discount rate of 8%. The difference between the present value of the original payment obligation, as amended ($235,557), and the face value of the original payment obligation, as amended ($262,957), was accreted as interest expense through November 1, 2008, the original maturity date of the payment obligation (total imputed interest of $27,400). For the three and nine months ended July 31, 2008, the Company recognized $2,675 and $8,025, respectively, of interest expense related to the note payable.
Note Payable – Hickey
Pursuant to the second amendment to the License Agreement dated October 24, 2008, the Company is required to make a one-time cash payment to Hickey of $158,438. This payment is due on the date that is thirty days after the first commercial sale of a product utilizing the licensed technology, but no later than December 31, 2009.
Note Payable – Insurance
On January 9, 2009, the Company entered into a finance agreement with AICCO, Inc. (“AICCO”). Pursuant to the terms of this agreement, AICCO loaned the Company the principal amount of $24,706, which amount would accrue interest at a rate of 10.93% per annum, in order to partially fund the payment of the premium of the Company’s director and officer liability insurance. The agreement requires the Company to make nine monthly payments of $2,872, including interest. The first payment was made by the Company on January 20, 2009. For the three and nine months ended July 31, 2009, the Company recorded a total of $307 and $1,061, respectively, of interest expense related to this finance agreement. As of July 31, 2009, the outstanding principal balance related to this finance agreement was $5,666.
6. | Convertible Debentures |
On February 8, 2007, the Company closed on a private placement of 8% convertible debentures dated February 1, 2007 (the “February 2007 Debentures”). The gross proceeds received in connection with this private placement were $250,000, which was used for working capital purposes, including the development of the HCMS. The February 2007 Debentures have a three year term, maturing on January 31, 2010, and bear interest at a rate of 8% per annum. Interest is payable in annual installments, beginning on February 1, 2008, in cash or, at the option of the Company, in shares of the Company’s common stock. If the Company elects to pay the interest in shares of the Company’s common stock, the number of shares issued as payment will be equal to the quotient of the unpaid interest divided by the market price of the Company’s common stock as defined in the February 2007 Debentures.
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Up to 50% of the aggregate principal amount of the February 2007 Debentures are convertible into shares of the Company’s common stock at the option of the holders at a conversion price of $0.20 per share. The remaining 50% of the aggregate principal amount of the February 2007 Debentures are convertible at the option of the holders at a conversion price of $0.30 per share. The fair value of the Company’s common stock as of February 1, 2007 was $0.20 per share. An aggregate amount of 1,041,667 shares of common stock can be issued pursuant to the February 2007 Debentures. The February 2007 Debentures contain demand registration rights upon the request of the holders of more than 50% of the aggregate principal amount of the then outstanding February 2007 Debentures or the securities issuable upon the conversion of the February 2007 Debentures. The Company has determined that the value attributable to the demand registration rights is de minimis.
On February 1, 2009, the Company issued 153,846 shares of its common stock to the February 2007 Debenture holders as payment for $20,000 of interest due for the period commencing February 1, 2008 and ending January 31, 2009. The number of shares issued as payment of the interest due was calculated based on the market price of the Company’s common stock ($0.13 per share) as defined in the February 2007 Debentures.
For the three and nine months ended July 31, 2009, the Company recorded a total of $5,000 and $15,000, respectively, of interest expense related to the February 2007 Debentures. As of July 31, 2009, $10,000 of interest due on the February 2007 Debentures was accrued. For the three and nine months ended July 31, 2008, the Company recorded a total of $5,000 and $15,000, respectively, of interest expense related to the February 2007 Debentures.
7. | Stock-Based Compensation |
The Company accounts for stock options issued to employees in accordance with the Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS 123R”). The Company accounts for stock options and warrants granted to non-employees under SFAS 123R and Emerging Issues Task Force Consensus No. 96-18, “Accounting for Equity Investments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services.” The Company recorded stock-based compensation expense as follows:
Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Research and development | $ | — | $ | 1,434 | $ | (3,871 | ) | $ | 4,875 | |||||||
General and administrative | 30,612 | 23,978 | 108,482 | 87,066 | ||||||||||||
Total | $ | 30,612 | $ | 25,412 | $ | 104,611 | $ | 91,941 |
For the three months ended July 31, 2009, the Company did not record any stock-based compensation expense related to warrants issued to non-employees. For the nine months ended July 31, 2009, the Company recorded a reduction of $3,871 to stock-based compensation expense related to warrants issued to non-employees. This reduction resulted from the variable accounting treatment associated with these warrants. Stock-based compensation expense for non-employees during the three and nine months ended July 31, 2008 amounted to $7,832 and $14,773, respectively.
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During the three months ended July 31, 2009, the Company did not grant any stock options to employees. During the nine months ended July 31, 2009, the Company granted 625,000 stock options to its employees (estimated fair value of $62,788 at the date of grant) and granted 111,000 stock options to its directors (estimated fair value of $11,151 at the date of grant).
During the three months ended July 31, 2008, the Company did not grant any stock options to its employees or issue any stock options or warrants to consultants. During the nine months ended July 31, 2008, the Company granted 250,000 stock options to its employees (estimated value of $17,498 at the date of grant), granted 81,000 stock options to its directors (estimated value of $5,670 at the date of grant) and issued warrants to purchase 435,000 shares of common stock of the Company to consultants.
8. | Net Loss Per Common Share |
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt. The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method.
For the three and nine months ended July 31, 2009, diluted net loss per share did not include the effect of 2,537,000 shares of common stock issuable upon the exercise of outstanding stock options, 1,496,750 shares of common stock issuable upon the exercise of outstanding warrants and 1,041,677 shares of common stock issuable upon the conversion of the February 2007 Debentures, as their effect would be anti-dilutive.
For the three and nine months ended July 31, 2008, diluted net loss per share did not include the effect of 1,801,000 shares of common stock issuable upon the exercise of outstanding stock options, 1,718,350 shares of common stock issuable upon the exercise of outstanding warrants and 1,041,677 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.
9. | Income Taxes |
The Company has approximately $14,635,000 and $3,513,000 in federal and state net operating loss carryovers, respectively, which were generated through October 31, 2008 and are available to offset future taxable income in fiscal years 2009 through 2028. The net operating losses for federal income tax purposes begin to expire in 2022 and for state income tax purposes begin to expire in 2013.
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The tax effects of temporary differences and carryforwards that give rise to deferred taxes consist of the following:
July 31, 2009 | October 31, 2008 | |||||||
Net operating loss | $ | 5,493,004 | $ | 5,012,956 | ||||
Write-down of impaired assets | 77,883 | 77,883 | ||||||
Depreciation and amortization | 60,358 | 59,467 | ||||||
License and patent costs | 192,205 | 203,061 | ||||||
Stock based compensation | 160,442 | 118,660 | ||||||
Other | 5,076 | 5,076 | ||||||
Total gross deferred tax assets | 5,988,968 | 5,477,103 | ||||||
Valuation allowance | (5,988,968 | ) | (5,477,103 | ) | ||||
Net deferred tax assets | $ | — | $ | — |
The deferred tax asset is fully offset by a valuation allowance as it was determined by the Company that the realization of the deferred tax assets were not likely to occur in the foreseeable future. The valuation allowance increased $511,865 during the nine months ended July 31, 2009, attributable primarily to the non-realizability of the Company’s net operating losses.
In November 2008, the Company was approved by the New Jersey Economic Development Authority (the “NJEDA”) to participate in the 2008 NJEDA Technology Business Tax Certificate Transfer Program. This program enables approved, unprofitable technology companies based in the State of New Jersey to sell their unused net operating loss carryovers and unused research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey for at least 75% of the value of the tax benefits. On December 18, 2008, the Company received $512,354 of net proceeds ($585,061 gross proceeds less $72,707 of expenses incurred) from a third party related to the sale of approximately $6,500,000 of the Company’s unused net operating loss carryovers for the State of New Jersey. The Company has used these proceeds to continue the development of the HCMS and for working capital purposes.
10. | Stockholders’ Equity |
Stock Option Plans
The Company currently has two stock option plans in place: the 2002 Equity Incentive Plan and the 2007 Equity Incentive Plan. The 2002 Equity Incentive Plan was approved by the stockholders on July 5, 2002. The aggregate number of shares of common stock which could have been awarded under the 2002 Equity Incentive Plan was 2,000,000. As of July 31, 2009, stock options to purchase 1,470,000 shares of the Company’s common stock were outstanding under the 2002 Equity Incentive Plan. As a result of the adoption of the Company’s 2007 Equity Incentive Plan, no further awards are permitted under the 2002 Equity Incentive Plan.
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On May 31, 2007, the stockholders approved the Company’s 2007 Equity Incentive Plan. The 2007 Equity Incentive Plan was placed into effect in order to encourage and enable employees and directors of the Company to acquire or increase their holdings of common stock and to promote these individuals’ interests in the Company, thereby enhancing the efficiency, soundness, profitability, growth and stockholder value of the Company. The 2007 Equity Incentive Plan provides for awards in the form of restricted shares, incentive stock options, non-qualified stock options and stock appreciation rights. The aggregate number of shares of common stock which may be awarded under the 2007 Equity Incentive Plan is 3,000,000, subject to adjustment as provided in the 2007 Equity Incentive Plan. As of July 31, 2009, stock options to purchase 1,067,000 shares of the Company’s common stock were outstanding under the 2007 Equity Incentive Plan and up to 1,933,000 additional shares of the Company’s common stock could be awarded under the 2007 Equity Incentive Plan.
Stock Options Granted to Executive Officers
On January 21, 2009, the Company granted a non-qualified stock option to purchase 250,000 shares of common stock under the 2007 Equity Incentive Plan to each of Messers. LaVance and Gifford. An aggregate of 500,000 shares of common stock could be purchased pursuant to these stock options. Each stock option has a ten year term and is exercisable at $0.14 per share. The shares of common stock underlying the stock options vest as follows: 166,666 shares vest on December 31, 2009; 166,666 shares vest on December 31, 2010; and 166,668 shares vest on December 31, 2011. In the event of a change in control of the Company, as defined in the 2007 Equity Incentive Plan, each of the stock options becomes fully vested as of ten days prior to the change in control.
The value of each of the stock options was estimated on the date of grant using the Black-Scholes pricing model with the following weighted average assumptions: dividend yield of 0%; risk free interest of 1.60%; volatility of 93.86%; and an expected life of five years. The stock options had an aggregate value of approximately $50,230 at the date of grant.
Stock Options Granted to Non-Executive Officer
On January 21, 2009, the Company granted a non-qualified stock option to purchase 125,000 shares of common stock under the 2007 Equity Incentive Plan to Allan J. Jones, the Company’s controller. The stock option has a ten year term and is exercisable at $0.14 per share. The shares of common stock underlying the stock option vest as follows: 41,666 shares vest on December 31, 2009; 41,666 shares vest on December 31, 2010; and 41,668 shares vest on December 31, 2011. In the event of a change in control of the Company, as defined in the 2007 Equity Inventive Plan, the stock option becomes fully vested as of ten days prior to the change in control.
The value of the stock option was estimated on the date of grant using the Black-Scholes pricing model with the following weighted average assumptions: dividend yield of 0%; risk free interest of 1.60%; volatility of 93.86%; and an expected life of five years. The stock option had a value of approximately $12,558 at the date of grant.
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Stock Options Granted to Directors
On January 21, 2009, the Company granted non-qualified stock options to purchase an aggregate of 111,000 shares of common stock under the 2007 Equity Incentive Plan to Richard E. Otto, Lawrence M. Levy and Anthony Giordano, III. The stock options were granted as partial consideration for Messers. Otto, Levy and Giordano’s continuing service in 2009 as members of the Company’s board of directors and related committees. Each of the stock options has a five year term and is exercisable at $0.14 per share. The shares of common stock underlying the stock options vest or vested as follows: 27,750 shares vested on each of March 31, 2009 and June 30, 2009 and 27,750 shares vest on each of September 30, 2009 and December 31, 2009. In the event of a change in control of Scivanta, as defined in the 2007 Equity Inventive Plan, the stock options become fully vested as of ten days prior to the change in control.
The value of each of the stock options was estimated on the date of issuance using the Black-Scholes pricing model with the following weighted average assumptions: dividend yield of 0%; risk free interest of 1.60%; volatility of 93.86%; and an expected life of five years. The stock options had an aggregate value of approximately $11,151 at the date of grant.
Summary of Stock Options
Stock option transactions for employees and directors under the 2002 Equity Incentive Plan and the 2007 Equity Incentive Plan as of and during the nine months ended July 31, 2009 were as follows:
Stock Option Shares | Weighted Average Exercise Price Per Common Share | Aggregate Intrinsic Value | ||||||||||
Outstanding at October 31, 2008 | 1,801,000 | $ | 0.16 | $ | 52,340 | |||||||
Granted during the period | 736,000 | $ | 0.14 | |||||||||
Exercised during the period | — | — | ||||||||||
Terminated during the period | — | — | ||||||||||
Outstanding at July 31, 2009 | 2,537,000 | $ | 0.16 | $ | 9,500 | |||||||
Exercisable at July 31, 2009 | 1,546,498 | $ | 0.16 | $ | 9,500 | |||||||
Exercisable at October 31, 2008 | 1,077,083 | $ | 0.16 | $ | 45,673 |
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Information with respect to outstanding stock options and stock options exercisable as of July 31, 2009 that were granted to employees and directors is as follows:
Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||||
Exercise Price | Number of Shares Available Under Outstanding Stock Options | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Common Share | Number of Shares Available for Purchase Under Outstanding Stock Options | Weighted Average Exercise Price Per Common Share | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||||
$ | 0.02 | 35,000 | 5.4 | $ | 0.02 | 35,000 | $ | 0.02 | 5.4 | |||||||||||||||||
$ | 0.08 | 335,000 | 5.1 | $ | 0.08 | 335,000 | $ | 0.08 | 5.1 | |||||||||||||||||
$ | 0.14 | 1,067,000 | 8.2 | $ | 0.14 | 219,832 | $ | 0.14 | 6.8 | |||||||||||||||||
$ | 0.20 | 1,100,000 | 7.5 | $ | 0.20 | 956,666 | $ | 0.20 | 7.5 | |||||||||||||||||
2,537,000 | 7.4 | $ | 0.16 | 1,546,498 | $ | 0.16 | 6.8 |
A summary of the nonvested shares subject to stock options granted under the 2002 Equity Incentive Plan and the 2007 Equity Incentive Plan as of and during the nine months ended July 31, 2009 is as follows:
Stock Option Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested at October 31, 2008 | 723,917 | $ | 0.14 | |||||
Granted during the period | 736,000 | $ | 0.10 | |||||
Vested during the period | (469,415 | ) | $ | 0.15 | ||||
Terminated during the period | — | — | ||||||
Nonvested at July 31, 2009 | 990,502 | $ | 0.11 |
As of July 31, 2009, there was $89,442 of total unrecognized compensation cost related to nonvested share based compensation arrangements granted under the 2002 Equity Incentive Plan and the 2007 Equity Incentive Plan. That cost is expected to be recognized over a weighted average period of eleven months.
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Warrants to Purchase Common Stock
Warrant transactions as of and during the nine months ended July 31, 2009 were as follows:
Warrant Shares | Weighted Average Exercise Price Per Common Share | Aggregate Intrinsic Value | ||||||||||
Outstanding at October 31, 2008 | 1,838,350 | $ | 0.14 | $ | 109,574 | |||||||
Issued during the period | — | — | ||||||||||
Exercised during the period | — | — | ||||||||||
Terminated during the period | (341,600 | ) | $ | 0.10 | ||||||||
Outstanding at July 31, 2009 | 1,496,750 | $ | 0.15 | $ | 26,000 | |||||||
Exercisable at July 31, 2009 | 1,376,750 | $ | 0.15 | $ | 26,000 | |||||||
Exercisable at October 31, 2008 | 1,488,852 | $ | 0.13 | $ | 104,849 |
Information with respect to outstanding warrants and warrants exercisable at July 31, 2009 is as follows:
Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Shares Available Under Outstanding Warrants | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Common Share | Number of Shares Available for Purchase Under Outstanding Warrants | Weighted Average Exercise Price Per Common Share | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||||
$ | 0.03 - 0.04 | 400,000 | 2.8 | $ | 0.04 | 400,000 | $ | 0.04 | 2.8 | |||||||||||||||||
$ | 0.13 | 285,000 | 3.5 | $ | 0.13 | 285,000 | $ | 0.13 | 3.5 | |||||||||||||||||
$ | 0.20 - 0.25 | 811,750 | 2.9 | $ | 0.22 | 691,750 | $ | 0.22 | 2.9 | |||||||||||||||||
1,496,750 | 3.0 | $ | 0.15 | 1,376,750 | $ | 0.15 | 3.0 |
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A summary of the nonvested shares subject to warrants as of and during the nine months ended July 31, 2009 is as follows:
Warrant Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested at October 31, 2008 | 349,498 | $ | 0.14 | |||||
Issued during the period | — | — | ||||||
Vested during the period | (154,498 | ) | $ | 0.13 | ||||
Terminated during the period | (75,000 | ) | $ | 0.03 | ||||
Nonvested at July 31, 2009 | 120,000 | $ | 0.22 |
As of July 31, 2009, there was $18,851 of total unrecognized compensation cost related to nonvested share based compensation arrangements involving warrants. That cost is expected to be recognized over a weighted average period of eleven months.
Cancellation of Common Stock and Warrants to Purchase Common Stock
On November 26, 2008, in connection with the termination of the consulting agreement with Catalyst Financial Resources LLC (“Catalyst”) dated April 1, 2008, the Company cancelled 25,000 shares of restricted common stock issued on April 1, 2008 pursuant to the consulting agreement. In addition, the Company cancelled 75,000 shares underlying the warrant issued to Catalyst on April 1, 2008.
11. | Commitments and Contingencies |
Executive Employment Agreements
On January 1, 2008, the Company entered into an executive employment agreement with each of David R. LaVance, the Company’s President and Chief Executive Officer, and Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial Officer and Secretary (collectively, the “Employment Agreements”). The term of each of the Employment Agreements commenced on January 1, 2008 and ends on December 31, 2010, but can be renewed for successive one year periods unless terminated as provided in the Employment Agreements. Both Messers. LaVance and Gifford shall be paid an annual base salary of $275,000, which may be increased by the compensation committee of the Company’s board of directors. In addition, both Messers. LaVance and Gifford shall participate in the Company’s benefit programs and shall be eligible to receive an annual performance bonus based on the achievement of certain performance objectives as determined by the compensation committee of the Company’s board of directors.
In the event that Mr. LaVance or Mr. Gifford is terminated without Good Cause (as defined in the Employment Agreements and used herein), or Mr. LaVance or Mr. Gifford terminates his employment for Good Reason (as defined in the Employment Agreements and used herein), Mr. LaVance or Mr. Gifford, as the case may be, will be entitled to receive a severance payment equal to his annual base salary in effect on the date of termination.
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In addition, in the event that within one-hundred eighty days of a Change of Control (as defined in the Employment Agreements and used herein) of the Company, the employment of Mr. LaVance or Mr. Gifford is terminated by the Company or its successor without Good Cause, or Mr. LaVance or Mr. Gifford terminates his employment with the Company or its successor for Good Reason, Mr. LaVance or Mr. Gifford, as the case may be, shall be paid a severance payment; provided, however, that if the termination of employment occurs prior to the Change of Control, the Change of Control must have been considered by the Company at the time of termination for Mr. LaVance or Mr. Gifford to be entitled to the severance payment. The amount of the severance payment will be equal to two times the sum of Mr. LaVance’s or Mr. Gifford’s annual base salary in effect immediately prior to the termination of Mr. LaVance’s or Mr. Gifford’s employment and an amount which is the lesser of (1) $150,000 and (2) the aggregate amount of any bonuses paid to Mr. LaVance or Mr. Gifford during the twelve months prior to the earlier of (A) the effective date of the Change of Control and (B) the date Mr. LaVance’s or Mr. Gifford’s employment terminates with the Company.
12. | Recent Accounting Pronouncements Applicable to the Company |
On May 28, 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No.165, “Subsequent Events.” The standard does not require significant changes regarding recognition or disclosure of subsequent events, but does require disclosure of the date through which subsequent events have been evaluated for disclosure and recognition. The standard is effective for financial statements issued after June 15, 2009. The Company has evaluated events subsequent to July 31, 2009 and through September 14, 2009, the filing date for this Form 10-Q.
On June 3, 2009, the FASB approved the “FASB Accounting Standards Codification” (“Codification”), which officially launched on July 1, 2009, and will be effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Codification is not expected to change U. S. GAAP, but will combine all authoritative standards into a comprehensive, topically organized online database. The Company expects to adopt the use of the Codification for the year ended October 31, 2009. The Company is currently evaluating the potential effect of the Codification on its financial statements.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Background
Scivanta is a Nevada corporation headquartered in Spring Lake, New Jersey. On January 4, 2007, we changed our name from Medi-Hut Co., Inc. to Scivanta Medical Corporation. Scivanta currently does not generate revenue from any sources.
On November 10, 2006, the Company acquired the exclusive world-wide rights to develop, manufacture and distribute the HCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The HCMS will provide the primary measurements of cardiac performance, including left atrial pressure, which is a crucial measurement in monitoring cardiac challenged patients. The hardware, software and catheter components for the HCMS have been completed. Scivanta currently has a fully assembled HCMS device that has been used in initial clinical trials. The two major components remaining in the development of the HCMS are the completion of the clinical trials and the design and engineering of the production model of the HCMS.
We conducted an initial clinical trial for the HCMS in Buffalo, New York at Kaleida. This initial clinical trial commenced in October 2008 and was completed in March 2009. The Company successfully tested six patients during the initial clinical trial at Kaleida. Subject to the receipt of additional funding, the Company expects to test a minimum of 40 additional patients in clinical trials at Kaleida and at three other locations, all of which have been engaged. The length of time and the number of patients tested in the clinical trials could change depending on the rate of patient recruitment and the data results produced. The design and engineering of the production model will run concurrent with the clinical trials and will take approximately five to six months from the date that the Company secures sufficient additional financing. In addition, we must also receive the appropriate regulatory approvals before the HCMS can be marketed in the United States or abroad. Scivanta will submit its 510(k) pre-market notification clearance application for the HCMS to the FDA once it has obtained sufficient clinical data for the HCMS. Upon completion of the HCMS production model, we will also seek European Union market approval (CE mark).
We will not be able to complete the clinical trials or the design and engineering of the production model of the HCMS without obtaining additional cash through an equity and/or debt financing or corporate partnerships. We are aggressively pursuing potential investors and have engaged several placement agents to assist us in this endeavor. Scivanta had approximately $190,000 of cash on hand as of September 10, 2009, which will allow us to continue our administrative operations for approximately three to five months from the filing date of this Form 10-Q. We are reducing operating expenses, deferring vendor payments and deferring payment of a portion of the officers’ salaries (approximately $46,000 as of July 31, 2009). If we are unable to secure additional capital, we will explore strategic alternatives, including, but not limited to, the possible sale of the Company. No assurances can be given that we will be able to obtain sufficient capital to finish the development of the HCMS through any corporate partnerships and/or through equity and/or debt financing. The current economic conditions could make financing more difficult to obtain. In addition, no assurances can be given that if we successfully develop and market the HCMS, such product will become profitable.
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Depending upon our ability to secure additional financing, the length of the clinical trials and the length of the FDA’s review, Scivanta estimates that it could have 510(k) pre-market notification clearance from the FDA for the HCMS by the end of January 2010, which will allow Scivanta to commence sales of the HCMS in the United States shortly thereafter. Scivanta estimates that it will commence European sales within three to six months following the commencement of United States sales.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and results of operations are based upon the interim financial statements contained elsewhere herein, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, income taxes, contingencies and litigation. We based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting estimates that we believe affect the more significant judgments and estimates used in preparation of the financial statements contained elsewhere herein are described in the Management’s Discussion and Analysis or Plan of Operation and in the Notes to the Financial Statements included in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2008. There have been no material changes to the critical accounting policies.
Results of Operations
Net Sales. Scivanta discontinued all product sales during the fiscal year ended October 31, 2004 and currently does not have any recurring revenue.
Research and Development. For the three months ended July 31, 2009, research and development expenses, on a gross and net basis, were $28,418. For the three months ended July 31, 2008, research and development expenses, on a net basis, were $128,275, which consisted of gross research and development expenses of $517,022 offset by $388,747 of research and development expenses reimbursed by the Foundation. The $99,857, or 78%, decrease in research and development expenses, on a net basis, for the three months ended July 31, 2009 was primarily due to a $465,118 decrease in software and hardware development costs for the HCMS and a $29,640 decrease in consulting expenses related to the development of the HCMS resulting from the Company’s decision to slowdown the remaining development of the HCMS as it seeks additional capital. These decreases to research and development expense, on a net basis, for the three months ended July 31, 2009 were partially offset by a $4,500 increase in clinical trial costs and a $388,746 decrease in the reimbursement of software, hardware and clinical trial expenses by the Foundation resulting from the expiration of the NYSTAR Contract.
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For the nine months ended July 31, 2009, research and development expenses, on a net basis, were $254,837, which consisted of gross research and development expenses of $274,447 offset by $19,610 of research and development expenses reimbursed by the Foundation. For the nine months ended July 31, 2008, research and development expenses, on a net basis, were $226,597, which consisted of gross research and development expenses of $859,557 offset by $632,960 of research and development expenses reimbursed by the Foundation. The $28,240, or 12%, increase in research and development expenses, on a net basis, for the nine months ended July 31, 2009 was primarily due to a $25,000 increase in clinical trial costs and a $613,350 decrease in the reimbursement of software, hardware and clinical trial expenses by the Foundation resulting from the expiration of the NYSTAR Contract. These increases to research and development expense, on a net basis, for the nine months ended July 31, 2009 were partially offset by a $561,080 decrease in software and hardware development costs for the HCMS and a $44,185 decrease in consulting expenses related to the development of the HCMS resulting from the Company’s decision to slowdown development of the HCMS as it seeks additional capital.
The amount of research and development expense to be incurred by us during the fiscal year ending October 31, 2009 will depend upon our ability to secure additional capital through an equity and/or debt financing or corporate partnerships. In the event that we are able to obtain additional capital sufficient to fund our research and development program, we would expect research and development expenses for the fiscal year ending October 31, 2009: (a) on a gross basis, to remain consistent with gross research and development expenses incurred during the fiscal year ended October 31, 2008 as we continue to develop the HCMS and (b) on a net basis, to significantly increase from net research and development expenses incurred during the fiscal year ended October 31, 2008 since the term of the NYSTAR Contract has expired and Scivanta will no longer be reimbursed by the Foundation for research and development expenses. If we are unable to obtain additional capital sufficient to fund our research and development program, we would expect research and development expenses for the fiscal year ending October 31, 2009, on both a gross and net basis, to significantly decrease as we reduce our research and development activities.
General and Administrative. For the three months ended July 31, 2009, general and administrative expenses were $308,022, as compared to $320,202 for the three months ended July 31, 2008. The $12,180, or 4%, decrease in general and administrative expenses for the three months ended July 31, 2009 was primarily due to a $18,689 decrease in consulting expense for investor relations and a $6,000 decrease in consulting expenses primarily related to business development. These decreases in general and administrative expenses for the three months ended July 31, 2009 were partially offset by a $3,727 increase in employee payroll tax and benefit costs, a $3,400 increase in accounting and auditing fees and a $6,634 increase in stock based compensation expense primarily related to stock options granted to employees and directors.
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For the nine months ended July 31, 2009, general and administrative expenses were $1,015,593, as compared to $1,039,924 for the nine months ended July 31, 2008. The $24,331, or 2%, decrease in general and administrative expenses for the nine months ended July 31, 2009 was primarily due a $15,785 decrease in legal expenses due to a decrease in costs associated with securities reporting and other corporate activities, a $37,015 decrease in consulting expense for investor relations, a $5,685 decrease in travel costs and a $3,497 decrease in the cost of director and officer liability insurance. These decreases in general and administrative expenses for the nine months ended July 31, 2009 were partially offset by a $6,223 increase in director fees and expenses, a $3,370 increase in employee payroll and related tax and benefit costs and a $21,416 increase in stock based compensation expense primarily related to stock options granted to employees and directors.
The amount of general and administrative expense to be incurred by us during the fiscal year ending October 31, 2009 will depend upon our ability to secure additional capital through an equity and/or debt financing or corporate partnerships. In the event that we are able to obtain additional capital sufficient to fund our development and marketing of the HCMS, we would expect general and administrative expenses for the fiscal year ending October 31, 2009 to increase as we build the administrative infrastructure necessary to support the development and marketing of the HCMS. If we are unable to obtain additional capital sufficient to fund our development and marketing of the HCMS, we would expect general and administrative expenses for the fiscal year ending October 31, 2009 to decrease as we reduce our operating activities.
Other Income (Expenses). During the three months ended July 31, 2009 and 2008, we incurred interest expense of $5,306 and $7,675, respectively. During the nine months ended July 31, 2009 and 2008, we incurred interest expense of $16,061 and $23,025, respectively. The $2,369, or 31%, decrease in interest expense for the three months ended July 31, 2009, and the $6,964, or 30%, decrease in interest expense for the nine months ended July 31, 2009, was primarily due to a decrease in interest associated with the note payable related to the License Agreement.
Interest income for the three months ended July 31, 2009 and 2008 was $28 and $6,909, respectively. Interest income for the nine months ended July 31, 2009 and 2008 was $2,941 and $39,246, respectively. The $6,881, or approximately 100%, decrease in interest income for the three months ended July 31, 2009 and the $36,305, or 93%, decrease in interest income for the nine months ended July 31, 2009 was due to a decrease in cash and cash equivalents and a decrease in interest rates.
Net Loss. For the three months ended July 31, 2009, the Company had a net loss of $341,718, or $0.01 per share (basic and diluted), as compared to a net loss of $449,243, or $0.02 per share (basic and diluted), for the three months ended July 31, 2008. The decrease in the net loss was primarily attributable to a $99,857 decrease in research and development expenses, on a net basis, and a $12,180 decrease in general and administrative expenses, offset by a $6,881 decrease in interest income.
24
For the nine months ended July 31, 2009, the Company had a net loss of $1,283,550, or $0.05 per share (basic and diluted), as compared to a net loss of $1,250,300, or $0.05 per share (basic and diluted), for the nine months ended July 31, 2008. The increase in the net loss was primarily attributable to a $28,240 increase in research and development expenses, on a net basis, and a $29,396 decrease in interest income, offset by a $24,331 decrease in general and administrative expenses.
Liquidity and Capital Resources
As of July 31, 2009, Scivanta had working capital deficiency of $594,803 and cash and cash equivalents on hand of $242,345. The $356,299 decrease in cash on hand from October 31, 2008 was primarily due to our continuing operating expenses offset by the receipt of $512,354 of net proceeds related to the sale of a portion of our unused net operating loss carryovers for the State of New Jersey to a third party through the 2008 NJEDA Technology Business Tax Certificate Transfer Program and the receipt of $211,438 of receivables due from the Foundation and Ethox.
During the past several years, Scivanta has generally sustained recurring losses and negative cash flows from operations. We currently do not generate any revenue from operations. Our operations most recently have been funded through a combination of the sale of our convertible debentures and common stock, proceeds received from the settlement of litigation and the sale of our State of New Jersey tax losses.
As of September 10, 2009, our cash position was approximately $190,000. Without any additional financing, we will only be able to continue our administrative operations for approximately three to five months from the filing date of this Form 10-Q. We are reducing operating expenses, deferring vendor payments and deferring payment of a portion of the officers’ salaries (approximately $46,000 as of July 31, 2009). If we are unable to secure additional capital, we will explore strategic alternatives, including, but not limited to, the possible sale of the Company. Our independent registered public accounting firm included an emphasis of a matter paragraph in their report included in our annual report on Form 10-KSB for the fiscal year ended October 31, 2008, as amended, which expressed substantial doubt about our ability to continue as a going concern. Our financial statements included herein do not include any adjustments related to this uncertainty.
We currently do not have any lending relationships with commercial banks and do not anticipate establishing such relationships in the foreseeable future due to our limited operations and assets. We believe that our focus should be on obtaining additional capital through the private placement of our securities. We are aggressively pursuing potential equity and or debt investors and have engaged several placement agents to assist us in this initiative. In addition, we are reducing operating expenses. While we are aggressively pursuing the opportunities and actions described above, there can be no assurance that we will be successful in our efforts. If we are unable to secure additional capital, we will explore other strategic alternatives, including, but not limited to, the sale of the company. Any additional equity financing may result in substantial dilution to our stockholders.
Expenditures under our development agreements with Ethox, ASG and Rivertek are at our discretion. Assuming that we are successful in obtaining additional financing, we estimate that we could potentially spend approximately $900,000 related to these agreements over the next five to six months.
25
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Scivanta is a smaller reporting company and is therefore not required to provide this information.
Item 4T. | Controls and Procedures |
As required by Rule 13a-15 under the Exchange Act, as of the end of the Company’s last fiscal quarter, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s President and Chief Executive Officer and the Company’s Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), who concluded that the Company’s disclosure controls and procedures are effective. During the Company’s last fiscal quarter, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and the Chief Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.
26
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
None.
Item 1A. | Risk Factors |
Scivanta is a smaller reporting company and is therefore not required to provide this information.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
Not Applicable.
Item 4. | Submission of Matters to a Vote of Security Holders |
None.
Item 5. | Other Information |
None.
Item 6. | Exhibits |
See Index of Exhibits Commencing on Page E-1.
27
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: | SCIVANTA MEDICAL CORPORATION | |
September 14, 2009 | By: | /s/ David R. LaVance |
David R. LaVance | ||
President and Chief Executive Officer | ||
September 14, 2009 | By: | /s/ Thomas S. Gifford |
Thomas S. Gifford | ||
Executive Vice President, | ||
Chief Financial Officer and Secretary |
28
INDEX OF EXHIBITS
Exhibit No. | Description of Exhibit | |
3.1 | Restated Articles of Incorporation of Scivanta Medical Corporation, formerly Medi-Hut Co., Inc. (the “Registrant”), which was filed in the Office of the Secretary of State of the State of Nevada on January 23, 2007 (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2006, filed with the Securities and Exchange Commission (the “SEC”) on January 29, 2007). | |
3.2 | Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2006, filed with the SEC on January 29, 2007). | |
4.1 | Specimen stock certificate representing the Registrant’s common stock (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2006, filed with the SEC on January 29, 2007). | |
4.2 | Form of Convertible Debenture, dated February 1, 2007, issued to the following persons and in the following amounts: Jesse H. Austin, III ($50,000); Andrew O. Whiteman and Gwen C. Whiteman, JTWROS ($25,000); Alan Eicoff ($25,000); Jack W. Cumming ($25,000); Scott C. Withrow ($25,000); Terrence McQuade ($25,000); Steven J. Olsen ($25,000); Robert P. Reynolds ($12,500); Chartwell Partners, LLP ($12,500); and Marc G. Robinson and Joshua Goldfarb ($25,000) (Incorporated by reference to Exhibit 4.8 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2007, filed with the SEC on March 14, 2007). | |
10.1 | The Registrant’s 2002 Equity Incentive Plan, adopted and effective January 1, 2002 (Incorporated by reference to Exhibit B of the Registrant’s definitive proxy statement, filed with the SEC on June 10, 2002). | |
10.2 | Sublease Agreement, dated February 1, 2007, between the Registrant and Century Capital Associates LLC (Incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2007, filed with the SEC on March 14, 2007). | |
10.3 | Technology License Agreement between the Registrant and The Research Foundation of State University of New York for and on behalf of University of Buffalo, and Donald D. Hickey, M.D. and Clas E. Lundgren dated November 10, 2006 (Incorporated by reference to Exhibit 10.24 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 14, 2006). |
E-1
Exhibit No. | Description of Exhibit | |
10.4 | Addendum to the Technology License Agreement, dated November 10, 2006, between the Registrant and The Research Foundation of State University of New York, for and on behalf of the University at Buffalo, and Donald D. Hickey, M.D. and Clas E. Lundgren, dated June 29, 2007 (Incorporated by reference to Exhibit 10.18 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 3, 2007). | |
10.5 | Second Addendum to the Technology License Agreement dated November 10, 2006, between the Registrant and The Research Foundation of State University of New York, for and on behalf of the University at Buffalo, and Donald D. Hickey, M.D. and Clas E. Lundgren, dated October 24, 2007 (Incorporated by reference to Exhibit 10.25 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 28, 2008). | |
10.6 | Third Addendum to the Technology License Agreement dated November 10, 2006, between the Registrant and The Research Foundation of State University of New York, for and on behalf of the University at Buffalo, and Donald D. Hickey, M.D. and Clas E. Lundgren, dated December 10, 2008 (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.7 | Stock Option Agreement and Notice of Grant, dated February 5, 2007, pursuant to which David R. LaVance was granted a non-qualified stock option to purchase up to 500,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2007, filed with the SEC on March 14, 2007). | |
10.8 | Stock Option Agreement and Notice of Grant, dated February 5, 2007, pursuant to which Thomas S. Gifford was granted a non-qualified stock option to purchase up to 500,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2007, filed with the SEC on March 14, 2007). | |
10.9 | Warrant to purchase 209,000 shares of common stock of the Registrant, dated February 5, 2007, issued to Richard E. Otto (Incorporated by reference to Exhibit 10.18 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended January 31, 2007, filed with the SEC on March 14, 2007). | |
10.10 | Warrant to purchase 105,000 shares of common stock of the Registrant, dated March 15, 2007, issued to Lawrence M. Levy (Incorporated by reference to Exhibit 10.19 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2007). |
E-2
Exhibit No. | Description of Exhibit | |
10.11 | Warrant to purchase 109,000 shares of common stock of the Registrant, dated March 15, 2007, issued to Anthony Giordano, III (Incorporated by reference to Exhibit 10.19 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2007). | |
10.12 | The Registrant’s 2007 Equity Incentive Plan, adopted and effective May 31, 2007 (Incorporated by reference to Appendix to the Registrant’s definitive proxy statement, filed with the SEC on April 27, 2007). | |
10.13 | Product Development Agreement, dated June 29, 2007, between the Registrant and Ethox International, Inc. including Schedule 2.4 – Form of Agreement to Manufacture Disposable Catheters. Upon the request of the SEC, the Registrant agrees to furnish copies of each of the following schedules: Schedule 2.1 – Project Costs and Schedule; Schedule 2.2 – System Hardware and Software Specifications; and Schedule 2.3 – Disposable Catheter Specifications (Incorporated by reference to Exhibit 10.17 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 3, 2007). | |
10.14 | Software Engineering Agreement, dated July 2, 2007, between the Registrant and Applied Sciences Group, Inc. (Incorporated by reference to Exhibit 10.19 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 3, 2007). | |
10.15 | Product Development Agreement, dated August 23, 2007, between the Registrant and Sparton Medical Systems, a business group of Sparton Electronics Florida, Inc., including Exhibit B – Change Approval Form and Exhibit D – Payment Terms. Upon the request of the SEC, the Registrant agrees to furnish copies of each of the following exhibits: Exhibit A – Statement of Work; and Exhibit C – Sparton Medical Systems Labor Rates (Incorporated by reference to Exhibit 10.20 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 23, 2007). | |
10.16 | Service Agreement, dated February 1, 2008, between the Registrant and Rivertek Medical Systems, Inc. (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.17 | Amendment No. 1 to the Service Agreement dated February 1, 2008 between the Registrant and Rivertek Medical Systems, Inc., dated April 28, 2008. (Incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.18 | Amended and Restated Service Agreement dated February 5, 2009 between the Registrant and Rivertek Medical Systems, Inc. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009, filed with the SEC on March 17, 2009). |
E-3
Exhibit No. | Description of Exhibit | |
10.19 | Stock Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to which David R. LaVance was granted a non-qualified stock option to purchase up to 100,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.21 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.20 | Stock Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to which Thomas S. Gifford was granted a non-qualified stock option to purchase up to 100,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.22 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.21 | Stock Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to which Richard E. Otto was granted a non-qualified stock option to purchase up to 27,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.23 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.22 | Stock Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to which Lawrence M. Levy was granted a non-qualified stock option to purchase up to 25,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.24 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.23 | Stock Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to which Anthony Giordano, III was granted a non-qualified stock option to purchase up to 29,000 shares of common stock of the Registrant (Incorporated by reference to Exhibit 10.25 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.24 | Executive Employment Agreement, dated as of January 1, 2008, between the Registrant and David R. LaVance (Incorporated by reference to Exhibit 10.26 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.25 | Executive Employment Agreement, dated as of January 1, 2008, between the Registrant and Thomas S. Gifford (Incorporated by reference to Exhibit 10.27 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 2, 2008). | |
10.26 | Stock Option Agreement and Notice of Grant, dated January 21, 2009, pursuant to which David R. LaVance was granted a non-qualified stock option to purchase up to 250,000 shares of common stock of the Registrant. (Incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). |
E-4
Exhibit No. | Description of Exhibit | |
10.27 | Stock Option Agreement and Notice of Grant, dated January 21, 2009, pursuant to which Thomas S. Gifford was granted a non-qualified stock option to purchase up to 250,000 shares of common stock of the Registrant. (Incorporated by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.28 | Stock Option Agreement and Notice of Grant, dated January 21, 2009, pursuant to which Richard E. Otto was granted a non-qualified stock option to purchase up to 37,000 shares of common stock of the Registrant. (Incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.29 | Stock Option Agreement and Notice of Grant, dated January 21, 2009, pursuant to which Lawrence M. Levy was granted a non-qualified stock option to purchase up to 35,000 shares of common stock of the Registrant. (Incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
10.30 | Stock Option Agreement and Notice of Grant, dated January 21, 2009, pursuant to which Anthony Giordano, III was granted a non-qualified stock option to purchase up to 39,000 shares of common stock of the Registrant. (Incorporated by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2008, filed with the SEC on January 29, 2009). | |
31.1 | Section 302 Certification of Chief Executive Officer. | |
31.2 | Section 302 Certification of Chief Financial Officer. | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
E-5