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 January 31, 2011 | |
| 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 incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 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) | ||
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 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 o No o
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 ¨ | (Do not check if a smaller reporting company) | Smaller reporting company x |
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 March 18, 2011, there were 30,064,543 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 January 31, 2011 (unaudited) and October 31, 2010 | 2 | ||
| Statements of Operations (unaudited) for the three months ended January 31, 2011 and 2010 | 3 | ||
| Statements of Cash Flows (unaudited) for the three months ended January 31, 2011 and 2010 | 4 | ||
| Notes to the Unaudited Financial Statements | 5 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 | |
| Item 4. | Controls and Procedures | 20 | |
| PART II | OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 21 | |
| 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. | (Removed and Reserved) | 21 | |
| Item 5. | Other Information | 21 | |
| Item 6. | Exhibits | 21 | |
| Signatures | 22 | ||
| 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
Our balance sheet as of January 31, 2011 and the related statements of operations and cash flows for the three months ended January 31, 2011 and 2010 included in Item 1, have been prepared by us, without audit, pursuant to the rules and regulations of the SEC. 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. In the opinion of management, the accompanying financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly our financial position and results of operations. It is suggested that the following financial statements be read in conjunction with the financial statements and notes thereto included elsewhere in this annual report on Form 10-K for the fiscal year ended October 31, 2010 of the Registrant.
The results of operations for the three months ended January 31, 2011 and 2010, 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
January 31, 2011 (Unaudited) | October 31, 2010 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 92,089 | $ | 81,365 | ||||
| Grant receivable | -- | 112,500 | ||||||
| Restricted cash – stock purchase | 50,000 | 100,000 | ||||||
| Prepaid expenses | 21,198 | 16,246 | ||||||
| Total current assets | $ | 163,287 | $ | 310,111 | ||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 259,202 | $ | 271,458 | ||||
| Accounts payable - related party | 13,621 | 34,351 | ||||||
| Accrued expenses | 90,325 | 75,324 | ||||||
| Accrued compensation | 755,935 | 659,620 | ||||||
| Deposit – stock purchase | 50,000 | 100,000 | ||||||
| Notes payable | 122,594 | 108,438 | ||||||
| Convertible debentures | 250,000 | -- | ||||||
| Total current liabilities | 1,541,677 | 1,249,191 | ||||||
| Long-term liabilities: | ||||||||
| Convertible debentures | -- | 250,000 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' deficiency | ||||||||
Common stock, $.001 par value; 100,000,000 shares authorized; 29,814,543 shares issued and outstanding | 29,814 | 29,814 | ||||||
| Additional paid-in capital | 21,299,620 | 21,291,143 | ||||||
| Accumulated deficit | (22,707,824 | ) | (22,510,037 | ) | ||||
| Total stockholders' deficiency | (1,378,390 | ) | (1,189,080 | ) | ||||
| Total liabilities and stockholders' deficiency | $ | 163,287 | $ | 310,111 | ||||
| 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 January 31, | ||||||||
| 2011 | 2010 | |||||||
| Grant revenue | $ | -- | $ | -- | ||||
| Operating expenses: | ||||||||
| Research and development | 7,705 | 9,037 | ||||||
| General and administrative | 184,962 | 293,794 | ||||||
| Loss from operations | (192,667 | ) | (302,831 | ) | ||||
| Interest expense | (5,120 | ) | (5,101 | ) | ||||
| Net loss | $ | (197,787 | ) | $ | (307,932 | ) | ||
| Net loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted average number of common shares outstanding, basic and diluted | 29,814,543 | 26,981,210 | ||||||
| The accompanying notes are an integral part of these financial statements. | ||||||||
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Scivanta Medical Corporation
Statements of Cash Flows
(Unaudited)
Three Months Ended January 31, | ||||||||
| 2011 | 2010 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (197,787 | ) | $ | (307,932 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation | -- | 1,027 | ||||||
| Stock based compensation expense | 8,477 | 17,977 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Grant receivable | 112,500 | -- | ||||||
| Prepaid expenses | 10,915 | 3,047 | ||||||
| Tax loss receivable | -- | 179,468 | ||||||
| Accounts payable | (12,256 | ) | (15,393 | ) | ||||
| Accounts payable - related party | (20,730 | ) | 163 | |||||
| Accrued expenses | 15,001 | 14,899 | ||||||
| Accrued compensation | 96,315 | 135,083 | ||||||
| Net cash provided by operating activities | 12,435 | 28,339 | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of notes payable | (1,711 | ) | (1,615 | ) | ||||
| Refund of proceeds from deposit on stock purchase | (50,000 | ) | -- | |||||
| Restricted cash – stock purchase | 50,000 | -- | ||||||
| Net cash used in financing activities | (1,711 | ) | (1,615 | ) | ||||
| Increase in cash and cash equivalents | 10,724 | 26,724 | ||||||
| Cash and cash equivalents - beginning of period | 81,365 | 97,415 | ||||||
| Cash and cash equivalents - end of period | $ | 92,089 | $ | 124,139 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 120 | $ | 102 | ||||
| Noncash financing activity: | ||||||||
| Issuance of note payable as payment for insurance premium | $ | 15,867 | $ | 27,025 | ||||
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 Medical Corporation (“Scivanta” or the “Company”), originally incorporated in New Jersey on November 29, 1982, is currently a Nevada corporation headquartered in Spring Lake, New Jersey. The Company ceased selling all products during the fiscal year ended October 31, 2004.
On November 10, 2006, the Company acquired the exclusive world-wide rights to develop, manufacture and distribute certain proprietary technologies known as the Scivanta Cardiac Monitoring System (the “SCMS”), a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The SCMS will provide the primary measurements of cardiac performance, including left atrial pressure, which is a crucial measurement in monitoring cardiac challenged patients. The essential hardware, software and catheter components for the SCMS have been completed. Scivanta currently has a fully assembled SCMS device that has been used in initial clinical trials. The two major items remaining in the development of the SCMS are the completion of the clinical trials and the design and engineering of the production model of the SCMS.
The Company will not be able to complete the clinical trials or the design and engineering of the production model of the SCMS without obtaining additional cash through an equity and/or debt financing or through corporate partnerships. The Company is actively pursuing potential investors and continues to engage 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 SCMS 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 SCMS, such product will become profitable.
| 2. | Basis of Presentation |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant recurring operating losses, negative cash flows from operations (excluding the grant receivable), has a working capital deficiency and an accumulated deficit of $22,707,824 as of January 31, 2011. The Company also has no lending relationships with commercial banks and is dependent on the completion of a financing in order to continue operations. The current economic slowdown has made financing more difficult to obtain. 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 continues to engage several placement agents to assist the Company in this initiative. The Company has reduced and deferred the payment of operating expenses, including the reduction of the salaries of the officers, the reduction and deferral of vendor payments, the deferral of fees due to the directors, the deferral of the payment of the accrued officers’ salaries ($641,672 as of January 31, 2011) and the deferral of the payment of bonus awards for fiscal 2008 ($87,500 as of January 31, 2011, of which $82,500 is due to officers). 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.
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| 3. | License and Development Agreements |
SCMS License Agreement
On November 10, 2006, Scivanta 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, January 6, 2009 and October 29, 2009. Pursuant to the License Agreement, the Licensor granted Scivanta the exclusive world-wide rights to develop, manufacture and distribute the SCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance.
Scivanta agreed to make an initial payment of $264,300 which was subsequently reduced to $262,957 pursuant to the first amendment to the License Agreement dated June 29, 2007. Scivanta paid $40,900 on November 16, 2006, $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 our common stock to the Foundation on October 28, 2008; and (d) $34,567 was paid in cash to Lundgren on February 4, 2009.
Further, pursuant to the second amendment to the License Agreement dated October 24, 2008, any milestone payments that Scivanta 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 Scivanta to Hickey of $158,438 due on December 31, 2009; (b) the issuance of 224,960 shares of our common stock to the Foundation on October 28, 2008; (c) the issuance of 162,500 shares of our common stock to Hickey on October 28, 2008 and (d) the issuance of 426,560 shares of our common stock to Lundgren on October 28, 2008.
Pursuant to the fourth amendment to the License Agreement, the payment of $158,438 that was due to Hickey on December 31, 2009 was restructured as follows: (a) a cash payment of $50,000 was made to Hickey on February 28, 2010 and (b) a cash payment of $108,438 was due to Hickey on October 31, 2010. The cash payment of $108,438 due to Hickey on October 31, 2010 was increased and restructured pursuant to an amended and restated technology license agreement dated February 14, 2011, which replaced the License Agreement, as discussed below.
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Amended and Restated SCMS License Agreement
On February 14, 2011, the Company entered into an Amended and Restated technology license agreement (the “Amended and Restated License Agreement”) with Licensor. The Amended and Restated License Agreement replaced the License Agreement.
Pursuant to the Amended and Restated License Agreement, the Licensor granted Scivanta the exclusive world-wide rights to develop, manufacture and distribute the SCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The term of the Amended and Restated License Agreement ends on the later of (a) the expiration date of the last to expire patent right related to the SCMS, which is currently May 1, 2027, or (b) 17 years from the sale of the first licensed product on a country by country basis.
Scivanta was obligated to pay Hickey $108,438 on October 31, 2010 under the License Agreement. Pursuant to the Amended and Restated License Agreement, the $108,438 payment due to Hickey was increased by $26,562 and the payment terms were restructured. The Company is now required to pay Hickey $135,000 as follows: (a) a cash payment of $30,000 is due to Hickey on or before April 30, 2011 and (b) a cash payment of $105,000 is due to Hickey on the date that is thirty (30) days after the first commercial sale of a product utilizing the licensed technology, but no later than July 31, 2012.
Pursuant to the Amended and Restated License Agreement, Scivanta is required to pay the Licensor a royalty of 5% on annual net sales, as defined in the Amended and Restated License Agreement, subject to certain reductions as detailed in the Amended and Restated License Agreement. Beginning with the first full year of sales of the SCMS in the United States and for two years thereafter, Scivanta 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 SCMS outside the United States and for two years thereafter, Scivanta 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. The Company is also required to pay the Licensor 25% of all sublicensing revenue, as defined in the Amended and Restated License Agreement, received by the Company in connection with the Company’s sublicense of the rights granted to the Company under the Amended and Restated License Agreement.
The Amended and Restated License Agreement also requires Scivanta to use commercially reasonable efforts to develop and market the SCMS within certain timeframes, subject to specified exceptions. Further, the Amended and Restated License Agreement contains standard provisions regarding indemnification, termination and patent prosecution.
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Ethox Development Agreement
On June 29, 2007, Scivanta and Ethox International, Inc. (“Ethox”) entered into a development agreement whereby Ethox provided Scivanta engineering and development support for the catheter component of the SCMS in exchange for the rights to manufacture the component upon regulatory approval and commercialization of the SCMS. The development agreement had a two year term that expired on June 29, 2009. The development agreement also contained standard provisions regarding indemnification and termination. Subject to Scivanta raising additional capital, Scivanta and Ethox intend to negotiate an extension of the development agreement. During the three months ended January 31, 2011 and 2010, the Company did not record any research and development expense for services and materials related to this agreement.
ASG Development Agreement
On July 2, 2007, the Company entered into a development agreement with Applied Sciences Group, Inc. (“ASG”). Pursuant to the terms of this agreement, ASG will provide software engineering services to Scivanta on the continuing development of the SCMS. Scivanta can terminate the agreement at any time upon written notification. During the three months ended January 31, 2011 and 2010, the Company did not record any research and development expense for services and materials related to this development agreement.
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 SCMS. The service agreement was amended and restated on February 5, 2009. Pursuant to the amended and restated service agreement, Rivertek assisted Scivanta in the development of the hardware component of the SCMS and assisted in the management of the development of the software and catheter components of the SCMS. The amended and restated service agreement expired on December 31, 2010. The services rendered to Scivanta under this contract were billed on a time and material basis. Subject to Scivanta raising additional capital, Scivanta and Rivertek intend to negotiate an extension of the amended and restated services agreement. During the three months ended January 31, 2011 and 2010, the Company did not record any research and development expense for services and materials related to this agreement.
| 4. | Grant Receivable |
On October 29, 2010, the Company was awarded a Qualifying Therapeutic Discovery Project (“QTDP”) grant pursuant to a program created by the U.S. Patient Protection and Affordable Care Act of 2010. The entire grant is expected to approximate $244,479 over a two year period. The Company was awarded an initial amount of $112,500 for its fiscal year ended October 31, 2010 and expects to be awarded the remainder of the grant, amounting to $131,979, during its fiscal year ending October 31, 2011. The Company recorded a grant receivable of $112,500 at October 31, 2010, which amount was received by the Company during the three months ended January 31, 2011. The Company has no further performance obligations to meet relating to the $112,500 award.
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| 5. | 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”). 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. The sublease 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 months ended January 31, 2011, the Company was billed $18,896 pursuant to the terms of the sublease agreement. As of January 31, 2011, the Company owed Century Capital $10,000 for rent and $1,907 for expenses due under the sublease agreement and $1,714 for other expenses, which amounts are included in accounts payable – related party. During the three months ended January 31, 2010, the Company was billed $21,164 pursuant to the terms of the sublease agreement.
| 6. | Notes Payable |
Note Payable – Hickey
Pursuant to the fourth amendment to the License Agreement, the Company was required to make a cash payment of $108,438 to Hickey on October 31, 2010. This cash payment was increased and restructured pursuant to the Amended and Restated License Agreement dated February 14, 2011 (see Note 3). As of January 31, 2011 and October 31, 2010, the Company recorded the $108,438 due to Hickey as a note payable.
Note Payable – Insurance
On January 3, 2011, the Company entered into a finance agreement with Imperial Credit Corporation (“Imperial”). Pursuant to the terms of this finance agreement, Imperial loaned the Company the principal amount of $15,867, which amount would accrue interest at a rate of 9.05% per annum, in order to partially fund the payment of the premium of the Company’s director and officer liability insurance. The finance agreement requires the Company to make nine monthly payments of $1,830, including interest, with the first payment due on January 31, 2011. For the three months ended January 31, 2011, the Company recorded a total of $120 of interest expense related to this finance agreement. As of January 31, 2011, the outstanding principal balance related to this finance agreement was $14,156.
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| 7. | 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. The February 2007 Debentures originally had a three year term, maturing on January 31, 2010. In January 2010, the holders agreed to amend the February 2007 Debentures. Pursuant to this amendment, the holders agreed to a new maturity date of January 31, 2012, extending the term of the February 2007 Debentures an additional two years. The February 2007 Debentures 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.
Up to 50% of the aggregate principal amount of the February 2007 Debentures is 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 is 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 also 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.
Effective February 1, 2010, the Company issued 333,333 shares of its common stock to the February 2007 Debenture holders in satisfaction of $20,000 of interest due for the period February 1, 2009 through January 31, 2010. The number of shares issued as payment of the interest due was calculated based on the market price of the Company’s common stock ($0.06 per share) as defined in the February 2007 Debentures.
For each of the three months ended January 31, 2011 and 2010, the Company recorded a total of $5,000 of interest expense related to the February 2007 Debentures. As of January 31, 2011, $20,000 of interest due on the February 2007 Debentures was accrued and is included as a component of accrued expense. The Company expects to settle this interest obligation through the issuance of shares of the Company’s common stock or the payment of cash or a combination thereof.
| 8. | Stock-Based Compensation |
The Company accounts for stock-based payments to employees in accordance with Accounting Standards Codification 718, “Stock Compensation” (“ASC 718”). The Company accounts for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.”
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During the three months ended January 31, 2011 and 2010, the Company recorded employee stock-based compensation expense as follows:
Three Months Ended January 31, | ||||||||
| 2011 | 2010 | |||||||
| Research and development | $ | -- | $ | -- | ||||
| General and administrative | 8,477 | 17,977 | ||||||
| Total | $ | 8,477 | $ | 17,977 | ||||
| 9. | 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 months ended January 31, 2011, diluted net loss per share did not include the effect of 2,495,332 shares of common stock issuable upon the exercise of outstanding options, 3,796,750 shares of common stock issuable upon the exercise of outstanding warrants and 1,041,677 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.
For the three months ended January 31, 2010, diluted net loss per share did not include the effect of 2,537,000 shares of common stock issuable upon the exercise of outstanding 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 convertible debt, as their effect would be anti-dilutive.
| 10. | Income Taxes |
In December 2009, the Company was approved by the New Jersey Economic Development Authority (the “NJEDA”) to participate in the 2009 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 January 20, 2010, the Company received $179,468 of net proceeds ($206,782 gross proceeds less $27,314 of expenses incurred) from a third party related to the sale of approximately $2,298,000 of the Company’s unused net operating loss carryovers for the state of New Jersey. The Company used these proceeds for working capital purposes.
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| 11. | 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 (collectively, the “Equity Incentive Plans”). 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 January 31, 2011, 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.
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 the Company’s common stock and to promote these individual’s 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 January 31, 2011, options to purchase 1,025,332 shares of the Company’s common stock were outstanding under the 2007 Equity Incentive Plan and up to 1,974,668 additional shares of the Company’s common stock can be awarded under the 2007 Equity Incentive Plan.
Stock option awards under the Equity Incentive Plans were granted at prices as determined by the Company’s compensation committee, but such prices were not less than the fair market value of the Company's common stock on the date of grant. Stock options granted and outstanding include only non-qualified options and vest over a period of up to five years and have a maximum term of ten years from the date of grant.
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A summary of stock option transactions for employees and directors under the Equity Incentive Plans during the three months ended January 31, 2011 is as follows:
Stock Option Shares | Weighted Average Exercise Price Per Common Share | Aggregate Intrinsic Value | ||||||||||
| Outstanding at October 31, 2010 | 2,537,000 | $ | 0.16 | $ | 350 | |||||||
| Granted during the period | -- | -- | ||||||||||
| Exercised during the period | -- | -- | ||||||||||
| Terminated during the period | (41,668 | ) | $ | 0.14 | ||||||||
| Outstanding at January 31, 2011 | 2,495,332 | $ | 0.16 | $ | 350 | |||||||
| Exercisable at January 31, 2011 | 2,328,664 | $ | 0.16 | $ | 350 | |||||||
| Exercisable at October 31, 2010 | 2,036,996 | $ | 0.16 | $ | 350 | |||||||
Information with respect to outstanding options and options exercisable as of January 31, 2011 that were granted to employees is as follows:
| Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||||
Exercise Price | Number of Shares Available Under Outstanding Stock Options | Weighted Average Exercise Price Per Common Share | Weighted Average Remaining Contractual Life (Years) | 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 | $ | 0.02 | 3.9 | 35,000 | $ | 0.02 | 3.9 | |||||||||||||||||
| $ | 0.08 | 335,000 | $ | 0.08 | 3.6 | 335,000 | $ | 0.08 | 3.6 | |||||||||||||||||
| $ | 0.14 | 1,025,332 | $ | 0.14 | 6.7 | 858,664 | $ | 0.14 | 6.5 | |||||||||||||||||
| $ | 0.20 | 1,100,000 | $ | 0.20 | 6.0 | 1,100,000 | $ | 0.20 | 6.0 | |||||||||||||||||
| 2,495,332 | $ | 0.16 | 5.9 | 2,328,664 | $ | 0.16 | 5.8 | |||||||||||||||||||
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A summary of the nonvested shares subject to options granted under the Equity Incentive Plans as of January 31, 2011 is as follows:
Stock Option Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
| Nonvested at October 31, 2010 | 500,004 | $ | 0.09 | |||||
| Granted during the period | -- | -- | ||||||
| Vested during the period | (291,668 | ) | $ | 0.09 | ||||
| Terminated during the period | (41,668 | ) | $ | 0.10 | ||||
| Nonvested at January 31, 2011 | 166,668 | $ | 0.10 | |||||
As of January 31, 2011, there was $16,238 of total unrecognized compensation cost related to nonvested share based compensation arrangements granted under the Equity Incentive Plans. That cost is expected to be recognized over a weighted average period of eleven months.
Warrants to Purchase Common Stock
A summary of warrant transactions during the three months ended January 31, 2011 is as follows:
Warrant Shares | Weighted Average Exercise Price Per Common Share | Aggregate Intrinsic Value | ||||||||||
| Outstanding at October 31, 2010 | 3,796,750 | $ | 0.13 | $ | -- | |||||||
| Issued during the period | -- | -- | ||||||||||
| Exercised during the period | -- | -- | ||||||||||
| Terminated during the period | -- | -- | ||||||||||
| Outstanding at January 31, 2011 | 3,796,750 | $ | 0.13 | $ | -- | |||||||
| Exercisable at January 31, 2011 | 3,796,750 | $ | 0.13 | $ | -- | |||||||
| Exercisable at October 31, 2010 | 3,736,750 | $ | 0.12 | $ | -- | |||||||
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Information with respect to outstanding warrants and warrants exercisable at January 31, 2011 is as follows:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Shares Available Under Outstanding Warrants | Weighted Average Exercise Price Per Common Share | Weighted Average Remaining Contractual Life (Years) | Number of Shares Available for Purchase Under Outstanding Warrants | Weighted Average Exercise Price Per Common Share | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||||
| $ | 0.04 | 200,000 | $ | 0.04 | 3.3 | 200,000 | $ | 0.04 | 3.3 | |||||||||||||||||
| $ | 0.10 - 0.13 | 2,785,000 | $ | 0.10 | 1.5 | 2,785,000 | $ | 0.10 | 1.5 | |||||||||||||||||
| $ | 0.20 - 0.25 | 811,750 | $ | 0.22 | 1.4 | 811,750 | $ | 0.22 | 1.4 | |||||||||||||||||
| 3,796,750 | $ | 0.13 | 1.5 | 3,796,750 | $ | 0.13 | 1.5 | |||||||||||||||||||
A summary of the nonvested shares subject to warrants as of January 31, 2011 is as follows:
| Warrant Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
| Nonvested at October 31, 2010 | 60,000 | $ | 0.22 | |||||
| Issued during the period | -- | -- | ||||||
| Vested during the period | (60,000 | ) | $ | 0.22 | ||||
| Terminated during the period | -- | -- | ||||||
| Nonvested at January 31, 2011 | -- | -- | ||||||
Stock Purchase Deposit
During the fiscal year ended October 31, 2010, the Company received $100,000 related to potential stock purchases from investors who had elected to participate in the Company’s on-going private placement of common stock units. During the three months ended January 31, 2011, the Company returned $50,000 to an investor who decided not to participate in the private placement. The remaining $50,000 potential stock purchase consists of 500,000 shares of the Company’s common stock and a warrant to purchase 500,000 shares of the Company’s common stock. The warrant has a two year term, is exercisable at $0.10 per share and will be fully vested at the date of issuance. The Company intends to close on this potential stock purchase when funding for the private placement, on a cumulative basis, reaches $1,500,000 of gross proceeds ($250,000 was closed on June 18, 2010), otherwise the proceeds will be returned by the Company to the potential investor. As of January 31, 2011, the $50,000 has been recorded as restricted cash - stock purchase with a corresponding liability of $50,000 as deposit - stock purchase.
15
| 12. | 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 ended on December 31, 2010, but could be renewed for successive one year periods unless terminated as provided in the Employment Agreements. The term of each of the Employment Agreements was renewed for one year ending on December 31, 2011. Both Messrs. 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. Effective February 1, 2010, each of Messrs. LaVance and Gifford agreed to reduce the annual base salary due to each of them to $200,000, which reduction will remain in effect until the Company is able to raise sufficient capital that will enable the Company to compensate them at the original annual base salary amount. In addition, both Messrs. 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.
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.
As of January 31, 2011, the Company had accrued $724,172 of compensation payments related to the Employment Agreements. Of this amount, $641,672 related to salary payments due to Messrs. LaVance and Gifford and $82,500 related to bonus payments due to Messrs. LaVance and Gifford for the fiscal year ended October 31, 2008.
16
| 13. | Subsequent Event |
Issuance of Common Stock and Warrants to Purchase Common Stock
On February 9, 2011, the Company closed on a private placement of a common stock unit that consisted of 250,000 shares of the Company’s common stock and warrants to purchase 250,000 shares of the Company’s common stock. The gross proceeds received in connection with this private placement were $25,000. The warrants have a two year term, are exercisable at $0.10 per share and were fully vested at the date of issuance.
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. Scivanta currently does not sell any products or technologies.
On November 10, 2006, we acquired the exclusive world-wide rights to develop, manufacture and distribute the SCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The SCMS is currently in the development stage.
The SCMS will provide the primary measurements of cardiac performance, including left atrial pressure, which is a crucial measurement in monitoring cardiac challenged patients. The essential hardware, software and catheter components for the SCMS have been completed. Scivanta currently has a fully assembled SCMS device that has been used in the initial clinical trial. The two major items remaining in the development of the SCMS are the completion of the clinical trials and the design and engineering of the production model of the SCMS.
We will not be able to complete the clinical trials or the design and engineering of the production model of the SCMS without obtaining additional cash through an equity and/or debt financing or through corporate partnerships. We continue to pursue potential investors and have engaged several placement agents to assist in this endeavor. No assurances can be given that we will be able to obtain sufficient capital to finish the development of the SCMS through any corporate partnerships and/or through equity and/or debt financing. In addition, no assurances can be given that if we successfully develop and market the SCMS, such product will become profitable.
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) premarket notification clearance from the FDA for the SCMS by the end of January 2012, which will allow Scivanta to commence sales of the SCMS in the United States shortly thereafter. Scivanta estimates that it will commence European sales within three months following the commencement of sales in the United States.
17
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 of Financial Condition and Results of Operations and in the Notes to the Financial Statements included in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2010. There have been no material changes to the critical accounting policies.
Results of Operations
Research and Development. For the three months ended January 31, 2011, research and development expenses were $7,705, as compared to $9,037 for the three months ended January 31, 2010. The $1,332, or 15%, decrease in research and development expense for the three months ended January 31, 2011 was due to a decrease in patent costs.
The amount of research and development expense to be incurred by us during the fiscal year ending October 31, 2011 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, 2011 to increase. 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, 2011 to remain at current levels.
General and Administrative. For the three months ended January 31, 2011, general and administrative expenses were $184,962, as compared to $293,794 for the three months ended January 31, 2010. The $108,832, or 37%, decrease in general and administrative expenses for the three months ended January 31, 2011 was primarily due to a $94,227 decrease in employee payroll and related tax and benefit costs primarily related to salary reductions, a $9,500 decrease in stock based compensation expense primarily related to stock options granted to employees and directors and a $5,087 decrease in legal expenses due to a decrease in costs associated with securities reporting and other corporate activities.
18
The amount of general and administrative expense to be incurred by us during the fiscal year ending October 31, 2011 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 SCMS, we would expect general and administrative expenses for the fiscal year ending October 31, 2011 to increase as we build the administrative infrastructure necessary to support the development and marketing of the SCMS. If we are unable to obtain additional capital sufficient to fund our development and marketing of the SCMS, we would expect general and administrative expenses for the fiscal year ending October 31, 2011 to decrease as we continue to reduce our operating activities.
Interest Expense. During the three months ended January 31, 2011 and 2010, we incurred interest expense of $5,120 and $5,101, respectively, related to the February 2007 Debentures and the notes payable related to insurance premiums.
Net Loss. For the three months ended January 31, 2011, Scivanta had a net loss of $197,787, or $0.01 per share (basic and diluted), as compared to a net loss of $307,932, or $0.01 per share (basic and diluted), for the three months ended January 31, 2010. The decrease in the net loss was primarily attributable to a $108,832 decrease in general and administrative expenses.
Liquidity and Capital Resources
As of January 31, 2011, Scivanta had working capital deficiency of $1,378,390 and cash and cash equivalents on hand of $92,089. The $10,724 increase in cash on hand from October 31, 2010 was primarily due to the receipt of $112,500 of gross proceeds for the QTDP grant, offset by our continuing operating expenses
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, the sale of our state of New Jersey tax losses and proceeds received from the QTDP grant.
On November 26, 2010 and January 31, 2011, we received $50,000 and $62,500, respectively, of proceeds related to the QTDP grant. On February 9, 2011, we received $25,000 of gross proceeds from the private placement of a common stock unit.
As of March 18, 2011, our cash position was approximately $98,000. Without any additional financing, we will only be able to continue our administrative operations, on a limited basis, for approximately five months from the filing date of this quarterly report on Form 10-Q. We have reduced and deferred the payment of operating expenses, including the reduction of the salaries of the officers/employees, the reduction and deferral of vendor payments, the deferral of fees due to the directors, the deferral of the payment of accrued officers’ salaries ($641,672 as of January 31, 2011) and the deferral of the payment of bonus awards for fiscal 2008 ($87,500 as of January 31, 2011, of which $82,500 is due to officers). We are exploring strategic alternatives, including, but not limited to, the possible sale of Scivanta. Our independent registered public accounting firm included an emphasis of a matter paragraph in their report included in our annual report on Form 10-K for the fiscal year ended October 31, 2010, 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.
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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 actively pursuing potential equity and/or debt investors and have engaged several placement agents to assist us in this initiative. In addition, we have reduced and deferred the payment of operating expenses. While we are actively 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 Scivanta. Any additional equity financing may result in substantial dilution to our stockholders.
Expenditures related to the development of the SCMS are at our discretion. Assuming that we are successful in obtaining additional financing, we estimate that we could potentially spend approximately $1,000,000 related to the development of the SCMS over the next seven to nine months.
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 4. 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.
20
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. Removed and Reserved
Item 5. Other Information
None.
Item 6. Exhibits
See Index of Exhibits Commencing on Page E-1.
21
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 | ||
| March 22, 2011 | By: | /s/ David R. LaVance | |
David R. LaVance President and Chief Executive Officer | |||
| March 22, 2011 | By: | /s/ Thomas S. Gifford | |
Thomas S. Gifford Executive Vice President, Chief Financial Officer and Secretary | |||
22
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 as of 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). |
| 4.3 | Form of Addendum to Convertible Debenture, dated as of January 31, 2010, issued to the persons set forth in Exhibit 4.2 (Incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009, filed with the SEC on January 29, 2010). |
| 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 | Fourth 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 29, 2009 (Incorporated by reference to Exhibit 10.31 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 30, 2008). |
| 10.8 | Amended and Restated 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 February 14, 2011 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2010, filed with the SEC on February 15, 2011). |
| 10.9 | 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). |
| 10.10 | 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). |
E-2
Exhibit No | Description of Exhibit |
| 10.10 | 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). |
| 10.11 | 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). |
| 10.12 | 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). |
| 10.13 | 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). |
| 10.14 | 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). |
| 10.15 | 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). |
| 10.16 | 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). |
| 10.17 | 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). |
E-3
Exhibit No | Description of Exhibit |
| 10.18 | 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). |
| 10.19 | 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). |
| 10.20 | 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). |
| 10.21 | 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). |
| 10.22 | 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). |
| 10.23 | 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). |
| 10.24 | Amendment No. 1 dated as of June 18, 2010 to the Executive Employment Agreement, dated as of January 1, 2008, between the Registrant and David R. LaVance (Incorporated by reference to Exhibit 10.27 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2010, filed with the SEC on June 21, 2010). |
| 10.25 | Amendment No. 1 dated as of June 18, 2010 to the Executive Employment Agreement, dated as of January 1, 2008, between the Registrant and Thomas S. Gifford (Incorporated by reference to Exhibit 10.28 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2010, filed with the SEC on June 21, 2010). |
E-4
Exhibit No | Description of Exhibit |
| 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). |
| 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