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SCVM > SEC Filings for SCVM > Form 10-Q on 13-Jun-2014All Recent SEC Filings

Show all filings for SCIVANTA MEDICAL CORP

Form 10-Q for SCIVANTA MEDICAL CORP


13-Jun-2014

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.

Scivanta is currently operating on a limited basis as we continue to seek additional financing that will allow us to either continue the development of the SCMS or will allow us to acquire a new technology, product or service. Our business development strategy will depend upon our ability to secure additional financing.

In the event that we decide to continue the development of the SCMS and receive additional funding for such development, we would need to complete clinical trials and receive appropriate regulatory approvals prior to commencing sales of the SCMS. No assurances can be given that the Company will finish the development of the SCMS. In addition, no assurances can be given that if the Company successfully develops and markets the SCMS, such product will become profitable.

In the event that we decide to acquire a new technology, product or service, no assurances can be given that we will have the financial and other resources necessary for us to acquire additional technologies, products or services. In addition, no assurances can be given that any technology, product or service that we acquire as part of our business development strategy will be profitable.


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, 2013. There have been no material changes to the critical accounting policies.

Results of Operations

Research and Development. For each of the three and six months ended April 30, 2014 and 2013, we did not incur any research and development expenses.

The amount of research and development expense to be incurred by us during the fiscal year ending October 31, 2014 will depend upon our ability to secure additional capital through an equity and/or debt financing or corporate partnerships. In the event that we decide to continue the development of the SCMS, and are able to obtain additional capital to fund such development, we would expect research and development expenses for the fiscal year ending October 31, 2014 to significantly increase. If we do not continue the development of the SCMS, we would expect research and development expenses for the fiscal year ending October 31, 2014 to remain at the current level.

General and Administrative. For the three months ended April 30, 2014, general and administrative expenses were $116,446, as compared to $128,198 for the three months ended April 30, 2013. The $11,752, or 9%, decrease in general and administrative expenses for the three months ended April 30, 2014 was primarily due to a $34,407 decrease in legal fees and a $8,430 decrease in SEC filing costs and mailings to stockholders primarily related to the Company's amendment to its Restated Articles of Incorporation that occurred during the quarter ended April 30, 2013 and a $4,724 decrease in stock based compensation to consultants, offset by an $18,000 increase in consulting expenses and a $17,421 increase in travel costs related to the Company's fundraising efforts and evaluation of potential acquisitions.


For the six months ended April 30, 2014, general and administrative expenses were $245,559, as compared to $195,162 for the six months ended April 30, 2013. The $50,397, or 26%, increase in general and administrative expenses for the six months ended April 30, 2014 was primarily due to a $25,950 increase in travel costs and a $18,000 increase in consulting expenses primarily related to the Company's fundraising efforts and evaluation of potential acquisitions and a $27,608 increase in stock based compensation to consultants, offset by a $16,376 decrease in legal fees and a $7,301 decrease in SEC filing costs and mailings to stockholders primarily related to the Company's amendment to its Restated Articles of Incorporation that occurred during the quarter ended April 30, 2013.

The amount of general and administrative expense to be incurred by us during the fiscal year ending October 31, 2014 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 the continued development of the SCMS or to acquire a product, technology or service, we would expect general and administrative expenses for the fiscal year ending October 31, 2014 to increase as we build the administrative infrastructure necessary to support the continued development of the SCMS or development or sale of a new product, technology or service. If we are unable to obtain additional capital sufficient to fund the continued development of the SCMS or to acquire a new product, technology or service, we would expect general and administrative expenses for the fiscal year ending October 31, 2014 to decrease as we continue to reduce our operating activities.

Gain on Settlement of Accounts Payable. For the three and six months ended April 30, 2014, we recognized a gain on the settlement of accounts payable related to certain vendor obligations of $0 and $80,656, respectively.

Interest Expense. For the three months ended April 30, 2014, interest expense was $19,080 as compared to $8,167 for the three months ended April 30, 2013. The $10,913, or 134%, increase in interest expense for the three months ended April 30, 2014 was primarily due to a $4,198 increase in interest expense related to the Debentures and a $7,002 increase in accreted interest related to the debt discount associated with the Debentures.

For the six months ended April 30, 2014, interest expense was $32,843 as compared to $16,133 for the six months ended April 30, 2013. The $16,710, or 104%, increase in interest expense for the six months ended April 30, 2013 was primarily due to a $6,445 increase in interest expense related to the Debentures and a $10,508 increase in accreted interest related to the debt discount associated with the Debentures.

Net Loss. For the three months ended April 30, 2014, Scivanta had a net loss of $135,526, or $0.02 per share (basic and diluted), as compared to a net loss of $136,365, or $0.03 per share (basic and diluted), for the three months ended April 30, 2013. The decrease in the net loss for the three months ended April 30, 2014 was due to a $11,752 decrease in general and administrative expenses, offset by a $10,913 increase in interest expense.

For the six months ended April 30, 2014, Scivanta had a net loss of $197,746, or $0.03 per share (basic and diluted), as compared to a net loss of $211,295, or $0.05 per share (basic and diluted), for the six months ended April 30, 2013. The decrease in the net loss for the six months ended April 30, 2014 was primarily due to an $80,656 gain on the settlement of accounts payable, offset by a $50,397 increase in general and administrative expenses and a $16,710 increase in interest expense.


Liquidity and Capital Resources

As of April 30, 2014, we had a working capital deficiency of $532,937 and cash on hand of $78,829. The $58,921 increase in cash on hand from October 31, 2013 was primarily due to the receipt of $225,000 of gross proceeds from the Debentures, offset by our continuing operating expenses.

During the past several years, we 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 and through the issuance of our common stock in exchange for services.

On January 8, 2014, we issued 230,769 shares of our common stock as payment of $30,000 of accounts payable to a third party service provider and we issued 461,538 shares of our common stock to Century Capital as settlement of $60,000 of office rent owed by us for the period commencing February 1, 2013 through January 31, 2014.

On January 8, 2014, we issued 57,143 shares of our common stock to the May 2011 Debenture holder in satisfaction of $8,000 of interest due for the period May 20, 2012 through May 19, 2013 and we issued 57,143 shares of our common stock to the August 2012 Debenture holder in satisfaction of $8,000 of interest due for the period August 15, 2012 through August 15, 2013.

On April 30, 2014, we issued 123,078 shares of our common stock to the holders of the February 2007 Debentures in satisfaction of $16,000 of interest due for the period February 1, 2013 through January 31, 2014.

As of June 11, 2014, our cash position was approximately $63,000. 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. 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. We did not make $200,000 of principal payments due on the February 2007 Debentures and, as a result, these obligations can be placed in default by the holders. 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, 2013, 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.

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