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SCVM > SEC Filings for SCVM > Form 10-Q on 16-Sep-2013All Recent SEC Filings

Show all filings for SCIVANTA MEDICAL CORP

Form 10-Q for SCIVANTA MEDICAL CORP


16-Sep-2013

Quarterly Report


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, technologies or services.

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; however, since the end of fiscal 2009 all development activity has ceased as we attempt to raise additional financing.

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 equity and/or debt financing or through corporate partnerships. We continue to pursue potential investors and from time to time engage placement agents to assist us 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.

In addition to developing the SCMS, our strategy for business development, if sufficient funding is obtained, will focus on the acquisition, through licensing or purchasing, of technologies, products or businesses that are sold or are capable of being sold in a specialty or niche market. Technologies, products or businesses of interest include, but are not limited to, medical devices, pharmaceuticals and other proprietary technologies, patented products or businesses. The Company believes that specialty or niche-market technologies, products or businesses generally offer attractive operating margins. These products are distributed through specialty distributor networks, manufacturer representatives or other specialized channels to the original equipment manufacturer market, supplier and provider markets and to the general marketplace.

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 income taxes and 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, 2012. There have been no material changes to the critical accounting policies.


Results of Operations

Research and Development. For the three months ended July 31, 2013, research and development expenses were $3,115, as compared to $5,540, for the three months ended July 31, 2012. The $2,425, or 44%, decrease in research and development expenses for the three months ended July 31, 2013 was due to a decrease in patent costs. For the nine months ended July 31, 2013, research and development expenses were $3,115, as compared to $14,430 for the nine months ended July 31, 2012. The $11,315, or 78%, decrease in research and development expense for the nine months ended July 31, 2013 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, 2013 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, 2013 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, 2013 to remain at the current level.

General and Administrative. For the three months ended July 31, 2013, general and administrative expenses were $65,389, as compared to $62,209 for the three months ended July 31, 2012. The $3,180, or 5%, increase in general and administrative expenses for the three months ended July 31, 2013 was primarily due to a $7,225 increase in office maintenance expenses, offset by a $5,000 decrease in audit related fees.

For the nine months ended July 31, 2013, general and administrative expenses were $260,551, as compared to $180,562 for the nine months ended July 31, 2012. The $79,989, or 44%, increase in general and administrative expenses for the nine months ended July 31, 2013 was primarily due to a $57,730 increase in legal expenses related to the Company's amendment to its Restated Articles of Incorporation and our review of potential acquisitions, a $17,000 increase in consulting fees related to our review of potential acquisitions and financings and a $10,063 increase in costs associated with mailings to stockholders and related SEC filings regarding the amendment to our Restated Articles of Incorporation, offset by a $10,000 decrease in audit related fees.

The amount of general and administrative expense to be incurred by us during the fiscal year ending October 31, 2013 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 and to pursue the acquisition of other technologies, products or businesses, we would expect general and administrative expenses for the fiscal year ending October 31, 2013 to increase as we build the administrative infrastructure necessary to support the development and marketing of the SCMS and any other technology, product or business acquired by us. If we are unable to obtain additional capital sufficient to fund our development and marketing of the SCMS or to acquire other technologies, products or businesses, we would expect general and administrative expenses for the fiscal year ending October 31, 2013 to decrease as we continue to reduce our operating activities.


Interest Expense. For the three months ended July 31, 2013, interest expense was $8,296, as compared to $6,217 for the three months ended July 31, 2012. The $2,079, or 33%, increase in interest expense for the three months ended July 31, 2013 was primarily due to $2,017 of interest associated with the August 2012 Debenture.

For the nine months ended July 31, 2013, interest expense was $24,429, as compared to $19,349 for the nine months ended July 31, 2012. The $5,080, or 26%, increase in interest expense for the nine months ended July 31, 2013 was primarily due to $6,051 of interest associated with the August 2012 Debenture, offset by a $897 decrease in interest associated with the February 2007 Debentures resulting from the conversion to common stock of a portion of the outstanding aggregate principal of the February 2007 Debentures in January 2012.

Loss on Conversion of Convertible Debentures. During the nine months ended July 31, 2012, we recognized a loss of $21,750 on the conversion of certain February 2007 Debentures resulting from a reduction in the conversion price.

Net Loss. For the three months ended July 31, 2013, our net loss was $76,800, or $0.01 per share (basic and diluted), as compared to a net loss of $73,966, or $0.02 per share (basic and diluted), for the three months ended July 31, 2012. The $2,834, or 4%, increase in the net loss for the three months ended July 31, 2013 was primarily attributable to a $3,180 increase in general and administrative expenses and a $2,079 increase in interest expense, offset by a $2,425 decrease in research and development expenses.

For the nine months ended July 31, 2013, our net loss was $288,095, or $0.06 per share (basic and diluted), as compared to a net loss of $236,091, or $0.08 per share (basic and diluted), for the nine months ended July 31, 2012. The $52,004, or 22%, increase in the net loss for the nine months ended July 31, 2013 was primarily attributable to a $79,989 increase in general and administrative expenses and a $5,080 increase interest expense, offset by a $21,750 decrease in the loss on conversion of convertible debentures and a $11,315 decrease in research and development expenses.

Liquidity and Capital Resources

As of July 31, 2013, the Company had a working capital deficiency of $623,916 and cash on hand of $36,073. The $28,252 decrease in cash on hand from October 31, 2012 was primarily due to the Company's continuing operating expenses, offset by the receipt of $120,000 of net proceeds in connection with the sale of an aggregate of 1,136,362 shares of the Company's common stock that occurred in January and April 2013.

During the past several years, the Company has generally sustained recurring losses and negative cash flows from operations. We currently do not generate any revenue from operations. The Company's operations most recently have been funded through a combination of the sale of our convertible debentures and common stock and through the issuance of our common stock in exchange for services.


On January 23, 2013, the Company issued an aggregate of 588,236 shares of its common stock as settlement of $225,627 of accrued compensation due through October 31, 2011 to its officers and other related costs, issued an aggregate of 50,000 shares of its common stock as settlement of $17,000 of fees owed through October 31, 2011 to its current independent directors and a former independent director and issued 279,412 shares of its common stock to Century Capital as settlement of $95,000 of office rent owed by the Company through January 31, 2013 ($80,000 accrued as of October 31, 2012).

As of September 13, 2013, our cash position was approximately $26,000. Without any additional financing, we will only be able to continue our administrative operations, on a limited basis, for approximately four months from the filing date of this quarterly report on Form 10-Q. We have reduced operating expenses and effective November 1, 2011, Scivanta's officers agreed to waive the annual base salary due to them and Scivanta's directors agreed to waive the annual retainer and meeting fees due to them until Scivanta is able to raise sufficient capital that would provide Scivanta with the ability to pay cash compensation to its officers and directors. Scivanta has also deferred certain vendor payments until it secures sufficient additional financing. Our independent registered public accounting firm included an emphasis of a matter paragraph in its report included in our annual report on Form 10-K for the fiscal year ended October 31, 2012, 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 pursuing potential equity and/or debt investors and have from time to time engaged placement agents to assist us in this initiative. While we are 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 twelve month period following the financing.


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