UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-KSB





(Mark
One)


x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.


For the fiscal year ended October 31, 2008




OR




 ̈
            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(Name
      of small business issuer in its
charter)





Nevada
              
              22-2436721(State
      or other jurisdiction of
              
              (I.R.S.
      Employer Identification No.)incorporation
      or organization)





215 Morris Avenue, Spring Lake, New
      Jersey
              
              07762(Address
      of principal executive offices)
              
              (Zip
      Code)





(732)
282-1620


(Issuer’s
telephone number)





Securities
registered under Section 12(b) of the Exchange Act:None





Securities
registered under Section 12(g) of the Exchange Act:





Common
      Stock, par value $0.001(Title
      of class)





Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act. ̈





Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act 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   ̈









Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  x




Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes ̈Nox




Revenues for the fiscal year ended
October 31, 2008 were $0.




The aggregate market value of the
shares of the Registrant’s common stock, par value $0.001 per share, held by
non-affiliates of the Registrant, as of January 23, 2009, was approximately
$2,678,000.  The Registrant has no other class of capital stock
outstanding.




As of January 23, 2009, 26,852,364
shares of the Registrant’s common stock were outstanding.




DOCUMENTS INCORPORATED BY
REFERENCE




Part III
of this Annual Report on Form 10-KSB incorporates certain information by
reference from the Registrant's Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on April 2, 2009.  The Proxy
Statement will be filed with the Securities and Exchange Commission (the "SEC")
on or before February 28, 2009.





Transitional
Small Business Disclosure Format (check
one):  Yes    ̈  No
 x









SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS




Certain information included in this
annual report on Form 10-KSB 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 annual report on
Form 10-KSB is submitted to the SEC.









SCIVANTA
MEDICAL CORPORATION




INDEX TO FORM
10-KSB




PART IItem
      1.
                                                                                  Description
      of Business
                                                                                  
                                                                                  1Item
      2.
                                                                                  Description
      of Property
                                                                                  
                                                                                  13Item
      3.
                                                                                  Legal
      Proceedings
                                                                                  
                                                                                  13Item
      4.
                                                                                  Submission
      of Matters to a Vote of Security Holders
                                                                                  
                                                                                  13PART IIItem
      5.
                                                                                  Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities
                                                                                  
                                                                                  14Item
      6.
                                                                                  Management’s
      Discussion and Analysis or Plan of Operation
                                                                                  
                                                                                  16Item
      7.
                                                                                  Financial
      Statements
                                                                                  
                                                                                  22Item
      8.
                                                                                  Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                                                                  
                                                                                  22Item
      8A.
                                                                                  Controls
      and Procedures
                                                                                  
                                                                                  22Item
      8B.
                                                                                  Other
      Information
                                                                                  
                                                                                  23PART IIIItem
      9.*
                                                                                  Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act
                                                                                  
                                                                                  24Item
      10.*
                                                                                  Executive
      Compensation
                                                                                  
                                                                                  24Item
      11.*
                                                                                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                                                  
                                                                                  24Item
      12.*
                                                                                  Certain
      Relationships and Related Transactions, and Director
      Independence
                                                                                  
                                                                                  24Item
      13.
                                                                                  Exhibits
                                                                                  
                                                                                  24Item
      14.*
                                                                                  Principal
      Accountant Fees and Services
                                                                                  
                                                                                  24SIGNATURES
                                                                                  
                                                                                  
                                                                                  25





* The
information required under this Item is contained in the Registrant’s Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on April
2, 2009, and is incorporated herein by reference.  The Proxy Statement
will be filed with the SEC on or before February 28, 2009.









PART I




Item
1.       Description of
Business




General




Scivanta Medical Corporation
(“Scivanta”) is a Nevada corporation that is headquartered in Spring Lake, New
Jersey.On January 4, 2007, we changed our name from Medi-Hut
Co., Inc. to Scivanta Medical Corporation.




Until the
fiscal year ended October 31, 2003, our business included the distribution of
over the counter medical devices and supplies, such as condoms and alcohol
preparation pads, and generic and name brand pharmaceuticals.  Our
business also included the sale of hormone replacement therapy drugs (Syntest),
which were manufactured and supplied to us by a third party
manufacturer.  Our products generally were sold by distributors or
wholesalers to pharmacies or directly to customers through mail
order.  During this time period we also were developing the Elite
Safety Syringe and the Solo-Safe Safety Syringe.  Due to vendor
disputes, low profit margins and/or minimal market opportunities, we ceased
selling and/or developing each of these products.  We currently do not sell any products or
technologies.




On November 10, 2006, weacquired the exclusive world-wide rights to develop, manufacture and
distribute the Hickey Cardiac Monitoring System (the “HCMS”), a minimally
invasive two-balloon esophageal catheter system used to monitor cardiac
performance.The HCMS
is currently in the development stage.  See “Item 1. Description of
Business – Strategy for Business Development - HCMS.”




Strategy
for Business Development




HCMS




The HCMS
will provide the primary measurements of cardiac performance, including left
atrial pressure, which is a crucial measurement in monitoring cardiac challenged
patients.  The hardware, software and catheter components for the HCMS
have been completed.  Scivanta currently has a fully assembled HCMS
device being used in clinical trials.  The two major components
remaining in the development of the HCMS are the completion of the clinical
trials and the design and engineering of the production model of the
HCMS.




We commenced our clinical trials in
Buffalo, New York at Kaleida Health/Millard Fillmore Hospital (“Kaleida”) in
October 2008 and expect the clinical trials to continue at Kaleida and at three
to four other locations, yet to be engaged, through June 2009.  We
expect to test a minimum of 40 patients.  The length of time and the
number of patients tested in the clinical trials could change depending on the
rate of patient recruitment and the data results produced.  The design
and engineering of the production model will run concurrent with the clinical
trials and will take approximately four to six months from the date of this
report.  In addition, we must also receive the appropriate regulatory
approvals before the HCMS can be marketed in the United States or
abroad.  Scivanta will submit its 510(k) pre-market notification
clearance application for the HCMS to the United States Food and Drug
Administration (“FDA”) once it has obtained sufficient clinical data for the
HCMS.  Upon completion of the HCMS production model, we will also seek
European Union market approval (CE mark).




1




We will
not be able to complete the clinical trials or the design and engineering of the
production model of the HCMS without obtaining additional cash through an equity
and/or debt financing or corporate partnerships.  We are aggressively
pursuing potential investors and have engaged several placement agents to assist
us in this endeavor.  Scivanta currently has $925,000 of cash on hand
as of January 23, 2009, which will allow us to continue our administrative
operations and a minimum amount of our HCMS development activities for
approximately eight to ten months from the date of this report.  No
assurances can be given that we will be able to obtain sufficient capital to
finish the development of the HCMS through any corporate partnerships and/or
through equity and/or debt financing.  In addition, no assurances can
be given that if we successfully develop and market the HCMS, 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) pre-market notification clearance from the FDA for the HCMS by the end of
June 2009, which will allow Scivanta to commence sales of the HCMS in the United
States shortly thereafter.  Scivanta estimates that it will commence
European sales within three to six months following the commencement of United
States sales.




Other
Potential Product Acquisitions




In
addition to developing the HCMS, our strategy for business development, once
sufficient financing is obtained, will focus on the acquisition, through
licensing or purchasing, of technologies or products that are sold or are
capable of being sold in a specialty or niche market.  Technologies or
products of interest include, but are not limited to, medical devices,
pharmaceuticals and other proprietary technologies or patented
products.  Specialty or niche-market technologies or products, in
comparison to commodities, generally offer greater operating
margins.  These products are distributed through specialty distributor
networks or manufacturer representatives to the original equipment manufacturer
market, supplier and provider markets and to the general
marketplace.




Annual sales, if any, of the
prospective technologies and products that we will evaluate are generally less
than $5 million.  We believe that these technologies or products
generally are not attractive to larger companies because they do not represent
opportunities for revenues and earnings that would be material to those
companies.  We will consider technologies and products that generally
experience lower sales or lack of development because of inadequate distribution
channels, lack of companion products or insufficient capital.




Below is a listing of criteria we
utilize in identifying and evaluating potential technology or product
acquisitions:




·
            Whether
      the technology or product is a specialty or niche-market product which is
      distributed through specialty
distributors.




·
            Whether
      the technology or product is unique or
patented.




·
            Whether
      the technology or product has, or is capable of achieving, an attractive
      gross margin, usually in excess of
35%.




2




·
            Whether
      the prospective seller is receptive to receiving equity as part of the
      purchase price.




·
            Whether
      the market for the technology or product is expanding, but not to such a
      degree as to attract larger manufacturers or result in the technology or
      product achieving commodity status.




·
            Whether
      we can access marketing channels to market and distribute the technology
      or product.




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




Principal
Product




The HCMS is a minimally invasive
two-balloon esophageal catheter system that will provide the primary
measurements of cardiac performance, including left atrial pressure, which is a
crucial measurement in monitoring cardiac challenged patients.  The
HCMS two balloon catheter is inserted into the esophagus and capitalizes on the
anatomic relationship of the left atrium and aortic arch proximate to the
esophagus.  Once positioned, the catheter’s balloons are
inflated.  The wall motion in the left atrium and the aorta generates
pressure changes in the respective balloons.  These signals, along
with signals from an electrocardiogram, phonocardiogram and automated blood
pressure cuff, are transmitted to the monitoring system, which converts the data
into important, real-time, clinical measurements utilizing a proprietary
software algorithm.




The
current standard of care for monitoring critically ill cardiac challenged
patients suffering from various cardiovascular conditions is an invasive
procedure known as pulmonary artery catheterization.  That procedure
requires an incision into a patient’s neck or groin and the insertion of a
pulmonary artery catheter, commonly know as a Swan-Ganz catheter, into the right
atrium and ventricle of the heart, and then into a pulmonary
artery.  That procedure must be performed within a hospital’s
catheterization lab or intensive care unit.




Unlike
the Swan-Ganz catheter, the HCMS will provide the primary measurements of
cardiac performance in a minimally invasive and more cost effective manner and
is designed to be used outside of an intensive care setting.  In
addition, the HCMS also provides clinical measurements of left ventricular
contractility, left atrial transmural pressure and pleural pressure, which the
Swan–Ganz does not provide.  We believe that the measure of
contractility during isovolumic contraction is an important advance offered by
the HCMS, and is a distinct advantage over the Swan-Ganz
catheter.  Measurement of left ventricular contractility is
potentially a new standard for monitoring the treatment of congestive heart
failure.




3




The hardware, software and catheter
components for the HCMS have been completed.  Scivanta currently has a
fully assembled HCMS device being used in clinical trials.  The two
major components remaining in the development of the HCMS are the completion of
the clinical trials and the design and engineering of the production model of
the HCMS.  Scivanta commenced its clinical trials in Buffalo, New York
at Kaleida in October 2008 and expects the clinical trials to continue at
Kaleida and at three to four other locations, yet to be engaged, through June
2009.  Scivanta expects to test a minimum of 40
patients.  The length of time and the number of patients tested in the
clinical trials could change depending on the rate of patient recruitment and
the data results produced.  The design and engineering of the
production model will run concurrent with the clinical trials and will take
approximately four to six months from the date of this report.  In
addition, we must also receive the appropriate regulatory approvals before the
HCMS can be marketed in the United States or abroad.  The Company will
submit its 510(k) pre-market notification clearance application for the HCMS to
the FDA once it has obtained sufficient clinical data for the
HCMS.  Upon completion of the HCMS production model, we will also seek
European Union market approval (CE mark).




Scivanta
will not be able to complete the clinical trials or the design and engineering
of the production model of the HCMS without obtaining additional cash through an
equity and/or debt financing or corporate partnerships.  Depending
upon our ability to secure additional financing, the length of the clinical
trials and the length of the FDA’s review, Scivanta estimates that it could have
510(k) pre-market notification clearance from the FDA by the end of June 2009,
which will allow Scivanta to commence sales of the HCMS in the United States
shortly thereafter.  Scivanta estimates that it will commence European
sales within three to six months following the commencement of United States
sales.




Company
Agreements




HCMS
License Agreement




On
November 10, 2006, we entered into a technology license agreement (the “License
Agreement”) with The Research Foundation of State University of New York, for
and on behalf of the University at Buffalo (the “Foundation”), Donald D. Hickey,
M.D. (“Hickey”) and Clas E. Lundgren (“Lundgren”).  The Foundation,
Hickey and Lundgren shall be collectively referred to herein as the
“Licensor.”  The License Agreement was amended on June 29, 2007,
October 24, 2008 and January 6, 2009.  Pursuant to the License
Agreement, the Licensor granted Scivanta the exclusive world-wide rights to
develop, manufacture and distribute the HCMS, a minimally invasive two-balloon
esophageal catheter system used to monitor cardiac performance.  The
term of the License Agreement commenced on November 10, 2006 and ends on the
latter of (a) the expiration date of the last to expire patent right related to
the HCMS, which is currently June 12, 2018, or (b) ten years from the sale of
the first HCMS product.




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 and $80,000 on
October 31, 2007.  Pursuant to a second amendment to the License
Agreement dated October 24, 2008, Scivanta paid $107,490 on October 24, 2008 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; and (c) $33,822
was paid by issuing 187,900 shares of our common stock to the Foundation on
October 28, 2008.  Scivanta is required to pay the remaining $34,567
in cash to Lundgren on or before February 1, 2009.See “Item 1.
Market for Common Equity, Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities – Sale of Unregistered Securities for the Fiscal
Year Ended October 31, 2008.”




4




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 on the date that is
thirty days after the first commercial sale of a product utilizing the licensed
technology, but no later than December 31, 2009; (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.  See “Item 1. Market for Common Equity,
Related Stockholder Matters and Small Business Issuer Purchases of Equity
Securities – Sale of Unregistered Securities for the Fiscal Year Ended October
31, 2008.”




Pursuant
to the License Agreement, Scivanta is required to pay the Licensor a royalty of
5% on annual net sales, as defined in the License Agreement, subject to certain
reductions as detailed in the License Agreement.  Beginning with the
first full year of sales of the HCMS in the United States and for two years
thereafter, 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 HCMS 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
License Agreement also requires Scivanta to use commercially reasonable efforts
to commercialize and market the HCMS within certain timeframes, subject to
specified exceptions as detailed in the License Agreement and the third
amendment to the License Agreement dated January 6, 2009.  Further,
the License Agreement contains standard provisions regarding indemnification,
termination and patent prosecution.




Subcontractor
Agreement and NYSTAR Contract




On June
27, 2007, Scivanta and the Foundation entered into a subcontractor
agreement.  Pursuant to this agreement, the Foundation contracted
Scivanta to develop the software and hardware components of the HCMS outlined in
the contract awarded by the New York State Office of Science Technology and
Academic Research (“NYSTAR”) to the Foundation and the Foundation’s company
partner, Ethox International, Inc. (“Ethox”), on December 1, 2005 (the “NYSTAR
Contract”).  The initial term of the NYSTAR Contract was for a two
year period ended November 30, 2007, which was extended by NYSTAR for an
additional one year period. On November 30, 2008, the NYSTAR Contract
expired.




Pursuant
to the first amendment to the License Agreement dated June 29, 2007, the
Licensor and Ethox entered into a non-exclusive manufacturing license agreement,
dated June 29, 2007, whereby Ethox was granted the right to manufacture the
catheter component of the HCMS for Scivanta.




5




As a
result of the subcontractor agreement, the first amendment to the License
Agreement and the non-exclusive license agreement between the Licensor and
Ethox, the development of the HCMS was partially funded through the NYSTAR
Contract.  Pursuant to the terms of the NYSTAR Contract, $937,500 of
funding was available for the development of the HCMS with the State of New York
providing $750,000 of the funding and Ethox providing $187,500 of the
funding.  Ethox and Hickey also provided $535,500 and $27,000,
respectively, of in-kind contributions.  Pursuant to the development
agreement between Scivanta and Ethox dated June 29, 2007 (see Ethox Development
Agreement), Scivanta provided Ethox with the $187,500 of cash required under the
NYSTAR Contract while Ethox provided the $535,500 of in-kind contributions
(primarily contributed services).  The funding received from the
NYSTAR Contract partially supported the development of:  the catheter
component of the HCMS by Ethox (see Ethox Development Agreement); the software
component of the HCMS by Applied Sciences Group, Inc. (“ASG”) (see ASG
Development Agreement); the hardware component of the HCMS by Sparton Medical
Systems (“Sparton”) (see Sparton Development Agreement) and the related clinical
trials.  Under the terms of the subcontractor agreement between the
Foundation and Scivanta, the Foundation, utilizing the $937,500 of funding
provided under the NYSTAR Contract, will reimburse Scivanta up to $928,580 of
allowable expenditures incurred by Scivanta in connection with the development
of the software and hardware components of the HCMS and related clinical
trials.




For the
fiscal years ended October 31, 2008 and 2007, Scivanta submitted to the
Foundation for reimbursement $855,987 and $53,483, respectively, of expenses
related to the software and hardware development of the HCMS and the related
clinical trials, which amounts have been paid in full by the
Foundation.  As of October 31, 2008, $19,110 was available to Scivanta
for the reimbursement of HCMS clinical trial expenses under the NYSTAR Contract,
which amount was billed to the Foundation in November 2008.  As of
November 30, 2008, no further amounts were available for reimbursement to
Scivanta under the NYSTAR Contract.




Ethox
Development Agreement




On June
29, 2007, Scivanta and Ethox entered into a development agreement whereby Ethox
will provide Scivanta engineering and development support for the catheter
component of the HCMS in exchange for the rights to manufacture the component
upon regulatory approval and commercialization of the HCMS.  Pursuant
to the development agreement, Scivanta paid $187,500 to Ethox in connection with
the NYSTAR Contract funding discussed above.  The cash payment of
$187,500 was paid in $46,875 installments by Scivanta on each of September 12,
2007, February 13, 2008, June 16, 2008 and August 27, 2008.




The
development agreement has a two year term which may be extended up to six
additional months.  The services to be provided by Ethox
include:  (1) the management of project costs and schedule, (2) the
development of system functional specifications based on marketing inputs, (3)
the development of disposable catheter specifications to achieve functional
requirements, (4) the manufacturing of disposable catheters in accordance with
applicable requirements for clinical trials, and (5) the provision of regulatory
resources for the management of clinical submissions for marketing approval from
the FDA.  Pursuant to the development agreement, Scivanta is
responsible for the selection and costs of all raw materials and for the
packaging design.  During the term of the development agreement and
for a period of twelve months thereafter, Ethox will not participate in the
design, development, creation or production of a double balloon catheter to be
used as part of a cardiac monitoring system.  The development
agreement also contains standard provisions regarding indemnification and
termination.




6




Terms for
the manufacturing of the catheter component of the HCMS are contained in a
supply agreement which will be entered into by Scivanta and Ethox upon
regulatory approval of the HCMS.  The form of the supply agreement has
been attached as a schedule to the development agreement.  The supply
agreement will have a four year term commencing on the date of the first
commercial production of the catheter component of the HCMS, and thereafter
shall renew on an annual basis unless terminated by either party in accordance
with the supply agreement.  The supply agreement will also contain a
minimum order requirement, a pricing schedule and will provide for an additional
payment to Ethox of up to $535,000, which will be paid to Ethox over the term of
the supply agreement on a per unit basis based on the minimum number of units
that Scivanta is required to order under the supply agreement.




During
the fiscal year ended October 31, 2008, the Company submitted to Ethox for
reimbursement $119,874 of expenses related to the software and hardware
development of the HCMS, which amounts have been paid in full by
Ethox.




ASG
Development Agreement




On July
2, 2007, Scivanta entered into a development agreement with
ASG.  Pursuant to the terms of this agreement, ASG will provide
software engineering services to Scivanta on the continuing development of the
HCMS.  It is estimated that up to $500,000 could be billed by ASG for
services and materials under the development agreement.  Scivanta can
terminate the agreement at any time upon written notification.  For
the fiscal years October 31, 2008 and 2007, Scivanta was billed $374,540 and
$44,453, respectively, for services and materials under this development
agreement.




Sparton
Development Agreement




On August
22, 2007, Scivanta and Sparton entered into a development agreement whereby
Sparton provided Scivanta engineering and development support for the hardware
component of the HCMS.  The services provided by Sparton
included:  (1) planning and development of design control documents,
(2) concept development, including mechanical, electrical and software design,
(3) completion of a detailed design and an engineering model, (4) assembly of
proto-type models and preliminary design verification testing, (5) the
production of “pilot” devices using formal drawings and validated processes, and
(6) design verification testing on the “pilot” units.




On
September 6, 2007, pursuant to the development agreement, Scivanta made a
deposit of $60,000.  During the fiscal year ended October 31, 2008,
the deposit was applied, in its entirety, to the payment of material costs and
fees owed by Scivanta under the development agreement.




The
development agreement initially had a one year term which was extended for an
additional year.  On October 1, 2008, Scivanta terminated the
development agreement with Sparton.  For the fiscal years October 31,
2008 and 2007, Scivanta was billed $608,630 and $9,030, respectively, for
services and materials under this development agreement.




7




Rivertek
Service Agreement




On
February 1, 2008, Scivanta and Rivertek Medical Systems, Inc. (“Rivertek”)
entered into a service agreement whereby Rivertek will provide Scivanta with
project management services related to the development of the
HCMS.  The service agreement was amended on April 28,
2008.  Pursuant to the service agreement, Rivertek will assist
Scivanta in the management of the development of the hardware, software and
catheter components of the HCMS.  The service agreement has a one year
term expiring on January 29, 2009 that can be terminated earlier by either party
upon three days written notice.  The services rendered to Scivanta
under this contract are to be billed on a time and material basis.




During
the fiscal year ended October 31, 2008, Scivanta was billed $143,115 for
services and materials under the service agreement.  In addition, on
April 28, 2008, Scivanta issued a warrant to purchase 125,000 shares of its
common stock to Rivertek as partial consideration for services rendered under
the service agreement.  The warrant has a five year term and is
exercisable at $0.13 per share.  The shares of common stock underlying
the warrant vest as follows:  10,417 shares vest on the twenty-eighth
day of each month commencing May 28, 2008 through March 28, 2009 and the
remaining 10,413 shares vest on April 28, 2009.




Patents
and Copyrights




The HCMS
is the subject of 11 United States patents and corresponding patents in major
international markets, including Canada, the European Union, Japan and
India.  The patents cover the important facets of the HCMS, including
catheter design and construction, catheter positioning, monitor design,
algorithms and balloon inflation techniques.  The United States
patents include United States Patent and Trademark Office numbers: 5,048,532;
5,181,517; 5,263,485; 5,398,692; 5,551,439; 5,570,671; 5,697,375; 5,921,935;
6,120,442; 6,238,349; and 6,432,059.  In addition, the software that
converts the pressure signals into useful clinical information is the subject of
copyright.




Manufacturing
and Principal Suppliers




We currently intend to outsource the
manufacturing of the components for the HCMS.  We recently entered
into a development agreement with Ethox whereby Ethox will assist in the
development of the catheter component of the HCMS and will manufacture the
catheter component of the HCMS (see Company Developments – Ethox Development
Agreement).  No other formal manufacturing agreements have been
entered into at this time.




Distribution,
Sales and Marketing




We currently do not maintain a
dedicated sales force and currently do not sell any products.  We
currently intend to outsource the distribution and sales requirements related to
the HCMS.  No formal distribution or sales agreements have been
entered into at this time.




8




Competition




There are
four primary types of devices that are used to measure cardiac performance and
it is anticipated that such devices would compete with the HCMS for market
share.  The four types are:  (a) pulmonary artery catheter
(e.g. Swan-Ganz catheter); (b) trans-esophageal echocardiography; (c) pulsed
doppler sonography; and (d) impedance cardiography.




The
pulmonary artery catheter, otherwise known as the Swan-Ganz catheter, is the
established tool for monitoring cardiac performance and left atrial
pressure.  The Swan-Ganz catheter is inserted through a vein into the
right atrium and ventricle of the heart, and threaded into the pulmonary
artery.  Due to the invasive nature of the Swan-Ganz catheter, it must
be inserted within a hospital’s catheterization lab or intensive care unit and
is not recommended for long-term cardiac monitoring.  Major
distributors of the Swan-Ganz catheter are Edwards Lifesciences Corporation and
Hospira Inc.





Trans-esophageal
echocardiography, pulsed doppler sonography and impedance cardiography are all
considered to be non-invasive or minimally invasive methods to measure cardiac
performance.  None of these products have been as successful as the
Swan-Ganz catheter primarily due to the fact that these devices cannot provide
cardiac measurements as precisely as a Swan-Ganz catheter.





Trans-esophageal
echocardiography devices measure the aortic diameter and the movement of red
blood cells to determine the velocity and direction of blood flow to calculate
stroke volume and thus cardiac performance.  Trans-esophageal
echocardiography is thought to generate inconsistent results, is dependent on
technician skill and technique, is limited in the kinds of patients it can
address and is time intensive.  Trans-esophageal echocardiography is
an imaging modality, and, accordingly, is not generally used as a device for
monitoring cardiac performance.  Major distributors of
echocardiography devices include Siemens Medical Solutions Inc. and Philips
Medical Systems.





Pulsed
doppler sonography utilizing a doppler transducer have been utilized to generate
echocardiographic images from an extracorporeal position in close proximity to
the heart.  This method also has not met with widespread clinical
acceptance for reasons of accuracy and clinical value of the data
generated.  This device is not a monitoring technology, but rather an
imaging technology.  Arrow International, Inc. markets this type of
device.





Impedance
cardiography uses the heart’s electrical characteristics in order to measure the
heart’s mechanical, or blood flow, characteristics.  The procedure is
inaccurate in many circumstances, such as in patients with septic shock and/or
severe aortic valve regurgitation and/or irregular heartbeats.  In
addition, measurements can be inaccurate if the patient moves excessively while
monitoring.  CardioDynamics International Corporation markets this
type of device.




9




Government
Regulation




As a developer and possible future
distributor of medical devices, we are subject to regulation by, among other
governmental entities, the FDA, and the corresponding agencies of the states and
foreign countries in which we may sell its products.  These
regulations govern the introduction of new medical devices, the observance of
certain standards with respect to the manufacture, testing and labeling of such
devices, the maintenance of certain records, the tracking of devices, and other
matters. These regulations could have a material impact on our future operations
in the event we successfully develop the HCMS and implement our strategy for
business development and acquire or develop additional medical devices and
related products.




All medical device manufacturing
establishments are required to be registered with the FDA.  Similarly,
all categories of medical devices marketed by a company in the United States are
required to be listed.  This listing information must be updated
pursuant to FDA regulations.  The FDA can take regulatory action
against a company that does not provide or update its registration and listing
information.  Pursuant to the Food, Drug and Cosmetic Act (the “FDC
Act”), medical devices intended for human use are classified into three
categories, Classes I, II and III, on the basis of the controls deemed necessary
by the FDA to reasonably assure their safety and effectiveness.  Class
I devices are subject to general controls (for example, labeling, pre-market
notification and adherence to good manufacturing practice regulations) and Class
II devices are subject to general and special controls (for example, performance
standards, post-market surveillance, patient registries, and FDA
guidelines).  Generally, Class III devices are those which must
receive pre-market approval (“PMA”) from the FDA to ensure their safety and
effectiveness (for example, life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices).




Some Class I devices and most Class II
devices require pre-market notification (510(k)) clearance pursuant to Section
510(k) of the FDC Act.  Most Class III devices are required to have an
approved PMA application.  Obtaining PMA approval can take up to
several years or more and involve preclinical studies and clinical
testing.  In contrast, the process of obtaining a 510(k) pre-market
notification clearance typically requires the submission of substantially less
data and generally involves a shorter review period.  A 510(k)
pre-market notification clearance indicates that the FDA agrees with an
applicant’s determination that the product for which clearance has been sought
is substantially equivalent in terms of safety and effectiveness to another
medical device that has been previously marketed, but does not indicate that the
product is safe and effective.




In addition to requiring clearance or
approval for new products, the FDA may require clearance or approval prior to
marketing products that are modifications of existing products.  FDA
regulations provide that new 510(k) pre-market notification clearances are
required when, among other things, there is a major change or modification in
the intended use of the device or a change or modification to a legally marketed
device that could significantly affect its safety or
effectiveness.  The developer and/or manufacturer is expected to make
the initial determination as to whether a proposed change to a cleared device or
to its intended use is of a kind that would necessitate the filing of a new
510(k) pre-market notification.




10




In order
to conduct clinical trials of an uncleared or unapproved device, companies
generally are required to comply with the FDA’s Investigational Device
Exemptions regulations.  For significant risk devices, the
Investigational Device Exemptions regulations require FDA approval of an
investigational device before a clinical study may begin.  In its
approval letter for significant risk investigational device studies, the agency
may limit the number of patients that may be treated with the device and/or the
number of institutions at which the device may be used.  Device
studies subject to the Investigational Device Exemption regulations, including
both significant risk and non-significant risk device studies, are subject to
various restrictions imposed by the FDA.  Patients must give informed
consent to be treated with an investigational device.  The
institutional review board of each institution where a study is being conducted
must also approve the clinical study.  The device generally may not be
advertised or otherwise promoted.  Unexpected adverse experiences must
be reported to the FDA.  The company sponsoring the investigation must
ensure that the investigation is being conducted in accordance with the
Investigational Device Exemptions regulations.




Pursuant
to the FDA’s Good Manufacturing Practices under the Quality System Regulations,
a medical device manufacturer must manufacture products and maintain records in
a prescribed manner with respect to manufacturing, testing and control
activities.  Further, the manufacturer, distributor and/or owner of a
medical device are required to comply with FDA requirements for labeling and
promotion of its medical devices.  For example, the FDA prohibits
cleared or approved devices from being marketed or promoted for uncleared or
unapproved uses.  The medical device reporting regulations require
that a company provide information to the FDA whenever there is evidence to
reasonably suggest that one of the company’s devices may have caused or
contributed to a death or serious injury, or that there has occurred a
malfunction that would be likely to cause or contribute to a death or serious
injury if the malfunction were to recur.  Additionally, the FDA
imposes other requirements on medical device manufacturers, including reporting
and record keeping requirements for device corrections and removals
(recalls).




Medical
device manufacturers and distributors are generally subject to periodic
inspections by the FDA.  If the FDA determines that a company is not
in compliance with applicable laws and regulations, it can, among other things,
issue a warning letter apprising the company of violative conduct, detain or
seize products, issue a recall, enjoin future violations and assess civil and
criminal penalties against the company, its officers or its
employees.  In addition, it is possible that clearances or approvals
could be withdrawn in certain circumstances.  Failure to comply with
regulatory requirements or any adverse regulatory action could have a material
adverse effect on our future business, financial condition and results of
operations.




Medical
device laws and regulations are also in effect in many of the countries in which
we may conduct business outside the United States.  These range from
comprehensive device approval requirements for certain medical device products
to simple requests for product data or certifications.  The number and
scope of these requirements are increasing.  Medical device laws and
regulations are also in effect in many of the states in which we may conduct
business in the future.  State and foreign medical device laws and
regulations may have a material impact on us.  In addition,
international sales of certain medical devices manufactured in the United
States, but not cleared or approved by the FDA for distribution in the United
States, are subject to the FDA export requirements and policies, including a
policy whereby we provide a statement to the FDA certifying that the product to
be exported meets certain criteria and FDA issues a certificate to facilitate
device export.




11




Federal,
state and foreign laws and regulations regarding the manufacture, sale and
distribution of medical devices are subject to future changes.  For
example, Congress enacted the Medical Device User Fee and Modernization Act of
2002, which included several significant amendments to the prior law governing
medical devices.  Additionally, the FDA made significant changes to
its Good Manufacturing Practices under the Quality System Regulations in 1996
and may make changes to other regulations as well.  We cannot predict
what impact, if any, such changes might have on our future business; however,
such changes could have a material impact on us and our business, financial
condition and operating results.




If the
FDA does not grant us a 510(k) pre-market notification clearance for the HCMS,
we would be required to apply for a PMA from the FDA which could significantly
increase the amount of time required to receive the FDA’s approval to market the
HCMS.  No assurance can be given that the FDA will ultimately approve
the HCMS for sale. See “Item 1. Description of Business – Strategy for Business
Development - HCMS.”




When offering for sale medical devices,
we may also have to comply with federal and state anti-kickback and other
healthcare fraud and abuse laws.  Moreover, approval may be required
for a medical device by comparable governmental regulatory authorities in
foreign countries prior to the commencement of clinical trials and subsequent
marketing of such medical device in those countries.  The approval
procedure varies from country to country, and the time required may be longer or
shorter than that required for FDA approval.




The regulatory policies of the FDA and
other regulatory bodies may change and additional governmental regulations may
be enacted which could prevent or delay regulatory approval of the products we
may distribute in the future.  We cannot predict the likelihood,
nature or extent of adverse governmental regulation that might arise from future
legislative or administrative action, within the United States or
abroad.




Insurance




We
maintain insurance in such amounts and against such risks as we deem prudent,
although no assurance can be given that such insurance will be sufficient under
all circumstances to protect us against significant claims for
damages.  The occurrence of a significant event not fully-insured
could materially and adversely affect our business, financial condition and
results of operations.  Moreover, no assurance can be given that we
will be able to maintain adequate insurance in the future at commercially
reasonable rates or on acceptable terms.




Employees




We currently have three full-time
employees, including David R. LaVance, President and Chief Executive Officer,
and Thomas S. Gifford, Executive Vice President, Chief Financial Officer and
Secretary.  We have not experienced any work stoppages to date and we
believe that our relationship with these employees is good.




12




Item
2.       Description of
Property




Effective February 1, 2007, Scivanta
and Century Capital Associates LLC (“Century Capital”) entered into a Sublease
Agreement whereby Scivanta rents office space approximating 2,000 square feet
inside Century Capital’s existing offices.  In addition, Scivanta
rents office furniture and other equipment from Century Capital.  This
agreement has a month to month term that requires sixty days written notice to
terminate and a monthly rental fee of $5,000.  Scivanta is responsible
for all operating costs associated with the office space, including utilities,
maintenance and property taxes.  See “Item 7.  Financial
Statements – Note 6.”




Item
3.       Legal
Proceedings




None.




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




No matters were submitted to a vote of
the Scivanta’s stockholders during the fourth quarter of fiscal
2008.




13




PART II




Item
      5.
            Market for Common
      Equity, Related Stockholder Matters and Small Business Issuer Purchases of
      Equity Securities




Our
common stock commenced trading on the NASDAQ OTC Bulletin Board under the ticker
symbol “SCVM” on August 2, 2007.  Prior to that date, no established
public trading market existed for our common stock and shares of our common
stock were neither listed on any national securities exchange, or traded on any
public stock exchange nor in any other public market.  During this
period, quotations for shares of our common stock were available through the
Pink Sheets maintained by Pink Sheets LLC.  Since secondary market
activity for shares of our common stock has been limited and sporadic, such
quotations may not actually reflect the price or prices at which purchasers and
sellers would currently be willing to purchase or sell such shares.




The following table shows the range of
high and low closing bid prices for our common stock for the period commencing
November 1, 2006 through August 1, 2007 as reported by the Pink Sheets and from
August 2, 2007 through October 31, 2008 as reported by the OTC Bulletin
Board.  For the period commencing November 1, 2006 through January 19,
2007, our common stock traded under the ticker symbol “MHUT.”  In
connection with the change of our name to Scivanta Medical Corporation,
effective January 22, 2007, our ticker symbol changed to
“SCVM.”  These quotations represent prices between dealers and may not
include retail markups, markdowns or commissions and may not necessarily
represent actual transactions.




Year
      Ended October 31, 2008
                
                High
                
                
                LowFirst
      Quarter
                
                $
                0.15
                
                
                $
                0.09Second
      Quarter
                
                
                0.16
                
                
                
                0.10Third
      Quarter
                
                
                0.17
                
                
                
                0.12Fourth
      Quarter
                
                
                0.23
                
                
                
                0.07





Year
      Ended October 31, 2007
                
                High
                
                
                LowFirst
      Quarter
                
                $
                0.29
                
                
                $
                0.02Second
      Quarter
                
                
                0.50
                
                
                
                0.19Third
      Quarter
                
                
                0.25
                
                
                
                0.16Fourth
      Quarter
                
                
                0.24
                
                
                
                0.09





The
NASDAQ OTC Bulletin Board is generally considered to be a less active and
efficient market than the NASDAQ Global Market, the NASDAQ Capital Market or any
national exchange and will not provide investors with the liquidity that the
NASDAQ Global Market, the NASDAQ Capital Market or a national exchange would
offer.  As of January 23, 2009, the following were market makers for
our common stock:  Buckman, Buckman and Reid, Inc., Hill Thompson
Magid and Co., Inc., Domestic Securities, Inc., Hudson Securities, Inc. and
Knight Equity Markets L.P.




14




Stockholders




As of
January 23, 2009, the approximate number of registered holders of our common
stock was 425; the number of issued and outstanding shares of our common stock
was 26,852,364; and there were 1,838,350 shares of common stock subject to
outstanding warrants, 2,537,000 shares of common stock subject to outstanding
stock options, and 1,041,668 shares of common stock subject to outstanding
convertible debentures.




Dividends




It is
anticipated that cash dividends will not be declared on our common stock in the
foreseeable future.  Our dividend policy is subject to the discretion
of our board of directors and depends upon a number of factors, including
operating results, financial condition and general business
conditions.  Holders of our common stock are entitled to receive
dividends as, if and when declared by our board of directors out of funds
legally available therefor.  We may pay cash dividends if net income
available to stockholders fully funds the proposed dividends, and the expected
rate of earnings retention is consistent with capital needs, asset quality and
overall financial condition.




Sales
of Unregistered Securities for the Fiscal Year Ended October 31,
2008




There
were no sales of unregistered securities during the fiscal year ended October
31, 2008, other than those set forth below or otherwise reported on Forms 10-QSB
and/or 8-K filed by the Company during the fiscal year ended October 31,
2008.





On
October 28, 2008, Scivanta issued 412,860 shares of its common stock to the
Foundation pursuant to the second amendment to the License Agreement dated
October 24, 2008.  These shares had a fair market value of $74,315
($0.18 per share) on the date the Company agreed to issue the shares (October
24, 2008).  In connection with the issuance of the 412,860 shares of
common stock to the Foundation, the Company relied on the exemption from
registration for a private transaction not involving a public distribution
provided by Section 4(2) of the Securities Act.




On
October 28, 2008, Scivanta issued 162,500 shares of its common stock to Hickey
pursuant to the second amendment to the License Agreement dated October 24,
2008.  These shares had a fair market value of $29,250 ($0.18 per
share) on the date the Company agreed to issue the shares (October 24,
2008).  In connection with the issuance of the 162,500 shares of
common stock to Hickey, the Company relied on the exemption from registration
for a private transaction not involving a public distribution provided by
Section 4(2) of the Securities Act.




On
October 28, 2008, Scivanta issued an aggregate of 426,560 shares of its common
stock to Lundgren pursuant to the second amendment to the License Agreement
dated October 24, 2008.  These shares had a fair market value of
$76,781 ($0.18 per share) on the date the Company agreed to issue the shares
(October 24, 2008).  In connection with the issuance of the 426,560
shares of common stock to Lundgren, the Company relied on the exemption from
registration for a private transaction not involving a public distribution
provided by Section 4(2) of the Securities Act.




15




Repurchases
of Securities




We did
not repurchase any securities within the fourth quarter of the fiscal year
covered by this report.




Item
6.       Management’s Discussion and
Analysis or Plan of Operation




We have
provided below information about Scivanta’s financial condition and results of
operations for the fiscal years ended October 31, 2008 and 2007.  This
information should be read in conjunction with Scivanta’s audited financial
statements for the fiscal years ended October 31, 2008 and 2007 and the related
notes thereto, which are included on pages F-1 through F-32 of this
report.




Background




Scivanta
is a Nevada corporation headquartered in Spring Lake, New Jersey.  On
January 4, 2007, we changed our name from Medi-Hut Co., Inc. to Scivanta Medical
Corporation.




Scivanta currently does not have any
revenue from any sources.  On November 10, 2006, pursuant to the
License Agreement, weacquired from the Licensor the exclusive world-wide
rights to develop, manufacture and distribute the HCMS, a minimally invasive
two-balloon esophageal catheter system used to monitor cardiac performance.The HCMS is currently in
the development stage.    See “Item 1. Description of
Business – Strategy for Business Development - HCMS.”




Critical
Accounting Policies




The
discussion and analysis of our financial condition is based upon the financial
statements contained elsewhere herein, which have been prepared in accordance
with U.S. generally accepted accounting principles.  The preparation
of these financial statements required us to make estimates and judgments that
affect the reported amounts of assets, liabilities, 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.  Scivanta based its 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.




We
believe the following critical accounting policies affect the more significant
judgments and estimates used in preparation of the financial statements
contained elsewhere herein.




16




Income
Taxes




Scivanta
accounts for income taxes under the Financial Accounting Standards Board
(“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109,
“Accounting for Income Taxes” (“SFAS 109”).  This statement requires
that we recognize a current tax liability or asset for current taxes payable or
refundable and a deferred tax liability or asset for the estimated future tax
effects of temporary differences and carryforwards to the extent they are
realizable.  We record a valuation allowance to reduce our deferred
tax assets to the amount that is more likely than not to be
realized.  While Scivanta has considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, in the event we were to determine that we would be able
to realize the deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made.  Likewise, deferred tax assets are
reduced by a valuation allowance, when in our opinion, it is more likely than
not that some portion or all of the deferred tax asset will not be
realized.




On
November 1, 2007, we adopted the FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”
(“FIN 48”).   FIN 48 clarifies the criteria for recognizing tax
benefits related to uncertain tax positions under SFAS 109 and requires
additional financial statement disclosure.  FIN 48 requires that the
Company recognizes in its financial statements the impact of a tax position if
that position is more likely than not to be sustained upon examination, based on
the technical merits of the position.  Adoption of FIN 48 had no net
impact on the Company’s results of operations and financial
position.





Stock
Based Compensation




On
November 1, 2006, the Company adopted SFAS No. 123R “Share-Based Payment” (“SFAS
123R”) using the modified prospective method which allows the Company to
implement the provisions of SFAS 123R on all stock-based awards granted after
the date of adoption.  SFAS 123R requires companies to recognize
compensation expense in an amount equal to the fair value of all share-based
payments granted to employees.  The Company calculates the fair value
of option and warrant grants utilizing the Black-Scholes pricing
model.  In addition, SFAS 123R requires the Company to estimate
forfeiture rates for all unvested awards when calculating the expense for the
period.  In estimating the forfeiture rate, the Company monitors both
option and warrant exercises as well as employee termination
patterns.  The Company accounts for options and warrants granted to
non-employees under SFAS 123Rand Emerging Issues Task
Force Consensus No. 96-18, “Accounting for Equity Investments that are Issued to
Other than Employees for Acquiring, or in Conjunction with Selling Goods or
Services.”




The
resulting stock-based compensation expense is recorded over the service period
in which the employee or non-employee provides services to the Company, to the
extent the options or warrants do not vest at the grant date and are not subject
to forfeiture.  Options and warrants issued to employees and
non-employees that are subject to forfeiture are expensed on the vesting
date.




17




Legal
Contingencies




During
the fiscal year ended October 31, 2007, Scivanta was involved in certain legal
proceedings.  These legal proceedings against us were settled as of
October 31, 2007.  During the period when these legal proceedings were
active, management periodically reviewed estimates of potential costs to be
incurred in conjunction with the adjudication or settlement, if any, of the
proceedings.  Estimates were developed in consultation with outside
counsel and were based on an analysis of potential litigation outcomes and
settlement strategies.  In accordance with FASB Statement No. 5,
“Accounting for Contingencies”, loss contingencies are accrued if, in the
opinion of management, an adverse outcome is probable and such outcome can be
reasonably estimated.  We do not believe that there are any
proceedings that could have a material adverse effect on our financial position;
however, it is possible that future results for any particular quarter or annual
period may be materially affected by changes in management’s assumptions or the
effectiveness of our strategies relating to any legal proceedings.




Recent
Accounting Pronouncements Applicable to Scivanta




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”).  SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosure requirements regarding fair value
measurement. Where applicable, SFAS 157 simplifies and codifies fair value
related guidance previously issued within U.S. generally accepted accounting
principles.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  Scivanta does not expect SFAS 157 to have a material
impact on its results of operations or financial condition when adopted during
the fiscal year ending October 31, 2009.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115” (“SFAS 159”).  SFAS 159 provides companies with an
option to measure, at specified election dates, certain financial instruments
and other items at fair value that are not currently measured at fair
value.  A company that adopts SFAS 159 will report unrealized gains
and losses on items for which the fair value option has been elected in its
financial results during each subsequent reporting date.  SFAS 159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities.  SFAS 159 is effective for
fiscal years beginning after November 15, 2007.  Scivanta does not
expect SFAS 159 to have a material impact on its results of operations or
financial condition when adopted during the fiscal year ending October 31,
2009.





In
June 2007, the FASB ratified the consensus reached by the Emerging Issues
Task Force (“EITF”) in EITF Issue No. 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities” (“EITF 07-3”), which requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities be deferred and
amortized over the period that the goods are delivered or the related services
are performed, subject to an assessment of recoverability.  EITF 07-3
is effective for fiscal years beginning after December 15,
2007.  Scivanta does not expect EITF 07-3 to have a material impact on
its results of operations or financial condition when adopted during the fiscal
year ending October 31, 2009.




In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
110”).  SAB 110 expresses the views of the staff regarding the use of a
“simplified” method, as discussed in SAB No. 107, in developing an estimate of
the expected term of “plain vanilla” share options in accordance with SFAS No.
123 (revised 2004).  SAB 110 did not have a material impact on Scivanta’s
results of operations or financial condition.




18




In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”).  SFAS 162 sets forth the level of authority to a given
accounting pronouncement or document by category.  Where there might
be conflicting guidance between two categories, the more authoritative category
will prevail.  SFAS 162 became effective November 15, 2008 and
Scivanta does not expect SFAS 162 to have a material impact on its results of
operations or financial condition or its current practices when adopted during
the fiscal year ending October 31, 2009.





In June
2008, the FASB issued EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”).  EITF 07-5
provides guidance in assessing whether an equity-linked financial instrument (or
embedded feature) is indexed to an entity’s own stock for purposes of
determining whether the appropriate accounting treatment falls under the scope
of SFAS 133, “Accounting For Derivative Instruments and Hedging Activities”
and/or EITF 00-19, “Accounting For Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company’s Own Stock”.  EITF 07-5 is effective
for financial statements issued for fiscal years beginning after December 15,
2008 and early application is not permitted.   We have not yet
determined what, if any, affect EITF 07-5 will have on our results of operations
or financial condition.





We are
not aware of any other recently issued but not yet effective accounting
standard, that if currently adopted, would have a material effect on our results
of operations or financial condition.





Results
of Operations




Net
Sales.  Scivanta discontinued all product sales during the
fiscal year ended October 31, 2004 and currently does not have any recurring
revenue.  On November 10, 2006, we acquired the exclusive world-wide
rights to develop, manufacture and distribute the HCMS, a minimally invasive
two-balloon esophageal catheter system used to monitor cardiac
performance.  The HCMS is currently in the development
stage.  See “Item 1. Description of Business – Strategy for Business
Development - HCMS.”





Research and
Development.For the fiscal year ended October 31, 2008,
research and development expenses, on a net basis, were $718,183, which
consisted of gross research and development expenses of $1,694,044 offset by
$855,987 of research and development expenses reimbursed by the Foundation and
$119,874 of research and development expenses reimbursed by
Ethox.  For the fiscal year ended October 31, 2007, research and
development expenses, on a net basis, were $276,098, which consisted of gross
research and development expenses of $329,581 offset by $53,483 of research and
development expenses reimbursed by the Foundation.  The $442,085, or
160%, increase in research and development expenses, on a net basis, for the
fiscal year ended October 31, 2008 was primarily due to a $68,062 increase in
license costs related to the HCMS, a $1,140,434 increase in software and
hardware development costs for the HCMS and a $103,212 increase in consulting
expenses related to the development of the HCMS, offset by a $922,378 increase
in the reimbursement of software, hardware and clinical trial expenses by the
Foundation and Ethox.




19




The
amount of research and development expense to be incurred by us during the
fiscal year ending October 31, 2009 will depend upon our ability to secure
additional cash through an equity and/or debt financing or corporate
partnerships.  In the event that we are able to obtain additional cash
sufficient to fund our research and development program, we would expect
research and development expenses for the fiscal year ending October 31, 2009:
(a) on a gross basis, to remain consistent with gross research and development
expenses incurred during the fiscal year ended October 31, 2008 as we continue
to develop the HCMS and (b) on a net basis, to significantly increase from net
research and development expenses incurred during the fiscal year ended October
31, 2008 since the term of the NYSTAR Contract has expired and Scivanta will no
longer be reimbursed by the Foundation for research and development
expenses.  If we are unable to obtain additional cash sufficient to
fund our research and development program, we would expect research and
development expenses for the fiscal year ending October 31, 2009, on both a
gross and net basis, to significantly decrease as we reduce our research and
development activities.





General and
Administrative.For the fiscal year ended October 31, 2008,
general and administrative expenses were $1,463,561, as compared to $1,726,166
for the fiscal year ended October 31, 2007.  The $262,605, or 15%,
decrease in general and administrative expenses for the fiscal year ended
October 31, 2008 was primarily due to a $146,928 decrease in legal expenses due
to a decrease in costs associated with litigation, securities reporting and the
registration of securities, a $9,393 decrease in expenses related to Scivanta’s
annual meeting, a $72,879 decrease in consulting expense for investor relations,
a $9,485 decrease in the cost of director and officer liability insurance and a
$71,755 decrease in stock based compensation expense primarily due to a
reduction in stock based compensation to consultants.  These decreases
in general and administrative expenses for the fiscal year ended October 31,
2008 were partially offset by a $41,500 increase in director fees and a $7,500
increase in rent expense.





The
amount of general and administrative expense to be incurred by us during the
fiscal year ending October 31, 2009 will depend upon our ability to secure
additional cash through an equity and/or debt financing or corporate
partnerships.  In the event that we are able to obtain additional cash
sufficient to fund our development and marketing of the HCMS, we would expect
general and administrative expenses for the fiscal year ending October 31, 2009
to increase as we build the administrative infrastructure necessary to support
the development and marketing of the HCMS.  If we are unable to obtain
additional cash sufficient to fund our development and marketing of the HCMS, we
would expect general and administrative expenses for the fiscal year ending
October 31, 2009 to decrease as we reduce our operating activities.





Other Income
(Expenses).  During the fiscal year ended October 31, 2007, we
recorded $3,100,000 of other income related to the settlement of the litigation
with Syntho Pharmaceuticals, Inc. and its principal owner, Muhammed Malik
(collectively, the “Syntho Group”).





During
the fiscal years ended October 31, 2008 and 2007, we incurred interest expense
of $30,700 and $44,016, respectively.  The $13,316, or 30%, decrease
in interest expense for the fiscal year ended October 31, 2008 was primarily due
to a decrease in interest expense associated with convertible debentures that
matured and were either repaid or converted in May 2007.




20




Interest
income for the fiscal years ended October 31, 2008 and 2007 was $43,598 and
$73,856, respectively.  The $30,258, or 41%, decrease in interest
income for the fiscal year ended October 31, 2008 was primarily due to a
decrease in cash and cash equivalents and a decrease in interest
rates.





Income Tax
Benefit.  During the fiscal years ended October 31, 2008 and
2007, we recorded an income tax benefit of $512,354 and $306,803, respectively,
related to the sale of a portion of our unused net operating loss carryovers for
the State of New Jersey to a third party through the NJEDA Technology Business
Tax Certificate Transfer Program.





Net (Loss)
Income.For the fiscal year ended October 31, 2008, we
reported a net loss of $1,656,492 or $0.06 per share (basic and diluted), as
compared to net income of $1,414,379 or $0.06 per share (basic and diluted) for
the fiscal year ended October 31, 2007.  The change to a net loss
during the fiscal year ended October 31, 2008 was primarily attributable to a
$3,100,000 decrease in other income related to the settlement of the litigation
with the Syntho Group and a $442,085 increase in research and development
expenses, on a net basis, offset by a $205,551 increase in income tax benefit
related to the sale of a portion of our unused net operating loss carryovers for
the State of New Jersey and a $262,605 decrease in general and administrative
expenses.





Liquidity
and Capital Resources




As of
October 31, 2008, Scivanta had working capital of $968,793 and cash and cash
equivalents on hand of $598,644.  The $1,410,265 decrease in cash on
hand from October 31, 2007 was primarily due to Scivanta’s continuing operating
expenses offset by the receipt of $306,803 of net proceeds related to the sale
of a portion of its unused net operating loss carryovers for the State of New
Jersey to a third party through the 2007 NJEDA Technology Business Tax
Certificate Transfer Program.





During
the past several years, Scivanta has generally sustained recurring losses and
negative cash flows from operations.  We currently do not generate any
revenue from operations.  Our operations most recently have been
funded through a combination of the sale of our convertible debentures and
common stock, proceeds received from the settlement of litigation and the sale
of our State of New Jersey tax losses.





On
December 18, 2008, we received $512,354 of net proceeds related to the sale of a
portion of our unused net operating loss carryovers for the State of New Jersey
to a third party through the 2008 NJEDA Technology Business Tax Certificate
Transfer Program.  We will use these proceeds to continue the
development of the HCMS and for working capital purposes.




As of
January 23, 2009, our cash position was approximately $925,000.  Based
on this, without any additional financing, we will be able to continue our
administrative operations and a very small amount of our HCMS development
activities for approximately eight to ten months from the date of this
report.  As a result of our current liquidity position, our auditors
have expressed substantial doubt that we can continue as a going
concern.  Our financial statements do not include any adjustments
related to this uncertainty.




21




We
currently do not have any lending relationships with commercial banks and do not
anticipate establishing such relationships in the foreseeable future due to our
limited operations and assets.   We believe that our focus should
be on obtaining additional capital through the private placement of our
securities. We are aggressively pursuing potential investors and have engaged
several placement agents to assist us in this endeavor.  In addition,
we are reducing operating expenses and we have been able to finance our
operations through an increase in accounts payable.  While we are
aggressively pursuing the opportunities and actions described above, there can
be no assurance that we will be successful in our efforts. If we are unable to
secure additional capital, we will explore other strategic alternatives,
including, but not limited to, the sale of the company.  Any
additional equity financing may involve substantial dilution to our
then-existing stockholders.




Expenditures under our development
agreements with Ethox, ASG and Rivertek are at our
discretion.  Assuming that we are successful in obtaining additional
financing, we estimate that we could potentially spend up to $400,000 related to
these agreements over the next four to six months.





Inflation
and Seasonality





Inflation has had no material effect on
the operations or financial condition of our business.  In addition,
our operations are not considered seasonal in nature.




Item
7.       Financial
Statements




The financial statements of the Company
called for by this item are submitted under a separate section of this
report.  Reference is made to the Index of Financial Statements
contained on page F-1 hereof.




Item
8.       Changes In and Disagreements
With Accountants on Accounting andFinancial
Disclosure




None.




Item
8A.    Controls and
Procedures




As
required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this Annual Report on Form 10-KSB, 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 management, including
the Company's President and Chief Executive Officer and the Company's Chief
Financial Officer and Secretary, who concluded that the Company's disclosure
controls and procedures are effective.  There has been no change in
the Company’s internal control over financial reporting during the Company’s
last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.




22




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in the Company's 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 the Company's reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.




Item
8B.    Other
Information





None.




23




PART
III




Item
      9.
            Directors, Executive
      Officers, Promoters, Control Persons and Corporate Governance; Compliance
      With Section 16(a) of the Exchange
Act




The
information required by this Item with respect to Scivanta's directors and
executive officers is contained in Scivanta's Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on April 2, 2009, under the
captions "Election of Directors," "Compliance with Section 16(a) of the
Securities Exchange Act" and "Executive Officers," and is incorporated herein by
reference.





Item
10.     Executive
Compensation




The
information required by this Item with respect to executive compensation is
contained in Scivanta's Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held on April 2, 2009, under the captions "Executive
Compensation" and "Director Compensation," and is incorporated herein by
reference.





Item
      11.
            Security Ownership of
      Certain Beneficial Owners and Management and Related Stockholder
      Matters




The
information required by this Item is contained in Scivanta's Proxy Statement for
the Annual Meeting of Stockholders scheduled to be held on April 2, 2009, under
the captions "Securities Authorized for Issuance under Equity Compensation Plan"
and "Principal Stockholders and Security Ownership of Management," and is
incorporated herein by reference.





Item
12.     Certain Relationships and
Related Transactions and Director Independence




The
information required by this Item is contained in Scivanta's Proxy Statement for
the Annual Meeting of Stockholders scheduled to be held on April 2, 2009, under
the caption "Certain Relationships and Related Transactions" and "Director
Independence," and is incorporated herein by reference.





Item
13.     Exhibits




Reference is made to the Index of
Exhibits beginning on page E-1 herein.




Item
14.     Principal Accountant Fees
and Services




The
information required by this Item is contained in Scivanta's Proxy Statement for
the Annual Meeting of Stockholders scheduled to be held on April 2, 2009, under
the caption "Principal Accountant Fees and Services," and is incorporated herein
by reference.





24




SIGNATURES





In accordance with Section 13 or 15(d)
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 CORPORATIONJanuary
      28, 2009
                  By:
                  /s/  David
      R. LaVanceDavid
      R. LaVanceChairman
      of the Board of Directors,President
      and Chief Executive
Officer





In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.





Signatures
                                
                                Title
                                
                                Date/s/  David R.
    LaVance
                                
                                Chairman
      of the Board of
                                
                                January
      28, 2009David
      R. LaVance
                                
                                Directors,
      President andChief
      Executive Officer/s/  Thomas S.
      Gifford
                                
                                Executive
      Vice President,
                                
                                January
      28, 2009Thomas
      S. Gifford
                                
                                Chief
      Financial Officer,Secretary
      and Director/s/  Richard E.
    Otto
                                
                                Director
                                
                                January
      28, 2009Richard
      E. Otto/s/  Lawrence M.
    Levy
                                
                                Director
                                
                                January
      28, 2009Lawrence
      M. Levy/s/  Anthony Giordano,
      III
                                
                                Director
                                
                                January
      28, 2009Anthony
      Giordano, III





25





Scivanta
Medical Corporation





Financial
Statements





Contents





Report of Independent Registered Public Accounting
      Firm
                  
                  F-2Balance
      Sheets as of October 31, 2008 and 2007
                  
                  F-3Statements
      of Operations for the Years Ended October 31, 2008 and
2007
                  
                  F-4Statements
      of Stockholders’ Equity (Deficiency) for the Years EndedOctober
      31, 2008 and 2007
                  
                  F-5Statements of Cash Flows for the Years Ended October 31, 2008
      and 2007
                  
                  F-6Notes
      to the Financial Statements
                  
                  F-7





F-1





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of Scivanta Medical Corporation





We have
audited the accompanying balance sheets of Scivanta Medical Corporation (the
“Company”), as of October 31, 2008 and 2007 and the related statements of
operations, stockholders’ equity (deficiency) and cash flows for the years then
ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based upon our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Scivanta Medical Corporation as of
October 31, 2008 and 2007 and the results of its operations and its cash flows
for the years then ended in conformity with U.S.  generally accepted
accounting principles.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 2 to the
financial statements, the Company has incurred significant recurring operating
losses and negative cash flows from operations.  The Company also has
no lending relationships with commercial banks and is dependent on the
completion of a financing in order to continue operations.  These
factors raise substantial doubt about the Company’s ability to continue as a
going concern.  Management’s plans in regard to these matters are also
described in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





/s/
Weiser LLP





New York,
New York


January
28, 2009




F-2




Scivanta
Medical Corporation


Balance
Sheets





October
      31,
                      2008
                    
                    
                    October
      31,
                      2007AssetsCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    598,644
                    
                    
                    $
                    2,008,909Prepaid
      expenses and other
                    
                    
                    33,286
                    
                    
                    
                    54,984Tax
      loss receivable
                    
                    
                    512,354
                    
                    
                    
                    306,803Other
      receivables
                    
                    
                    211,438
                    
                    
                    
                    53,483Deposit
                    
                    
                    —
                    
                    
                    
                    60,000Total
      current assets
                    
                    
                    1,355,722
                    
                    
                    
                    2,484,179Other
                    
                    
                    7,568
                    
                    
                    
                    6,608Total
      assets
                    
                    $
                    1,363,290
                    
                    
                    $
                    2,490,787LiabilitiesCurrent
      liabilities:Accounts
      payable
                    
                    $
                    226,909
                    
                    
                    $
                    85,961Accounts
      payable - related party
                    
                    
                    2,632
                    
                    
                    
                    2,423Accrued
      expenses
                    
                    
                    122,821
                    
                    
                    
                    122,552Note
      payable
                    
                    
                    34,567
                    
                    
                    
                    —Total
      current liabilities
                    
                    
                    386,929
                    
                    
                    
                    210,936Long-term
      liabilities:Note
      payable
                    
                    
                    158,438
                    
                    
                    
                    131,357Convertible
      debentures
                    
                    
                    250,000
                    
                    
                    
                    250,000Total
      long-term liabilities
                    
                    
                    408,438
                    
                    
                    
                    381,357Commitments
      and contingenciesStockholders'
      equityCommon
      stock, $.001 par value; 100,000,000 shares authorized; 26,852,364 and
      25,750,444 shares issued and outstanding, respectively
                    
                    
                    26,852
                    
                    
                    
                    25,750Additional
      paid-in capital
                    
                    
                    20,853,626
                    
                    
                    
                    20,528,807Accumulated
      deficit
                    
                    
                    (20,312,555
                    )
                    
                    
                    (18,656,063
                    )Total
      stockholders' equity
                    
                    
                    567,923
                    
                    
                    
                    1,898,494Total
      liabilities and stockholders' equity
                    
                    $
                    1,363,290
                    
                    
                    $
                    2,490,787





The
accompanying notes are an integral part of these financial
statements.





F-3




Scivanta
Medical Corporation


Statements
of Operations





Years
      Ended
                    October
      31,2008
                  
                  
                  2007Net
      sales
                  
                  $
                  —
                  
                  
                  $
                  —Cost
      of sales
                  
                  
                  —
                  
                  
                  
                  —Gross
      profit
                  
                  
                  —
                  
                  
                  
                  —Operating
      expenses:Research
      and development, net
                  
                  
                  718,183
                  
                  
                  
                  276,098General
      and administrative
                  
                  
                  1,463,561
                  
                  
                  
                  1,726,166Loss
      from operations
                  
                  
                  (2,181,744
                  )
                  
                  
                  (2,002,264
                  )Other
      income (expense):Proceeds
      from settlement of litigation
                  
                  
                  —
                  
                  
                  
                  3,100,000Interest
      income
                  
                  
                  43,598
                  
                  
                  
                  73,856Interest
      expense
                  
                  
                  (30,700
                  )
                  
                  
                  (44,016
                  )Settlement
      of litigation
                  
                  
                  —
                  
                  
                  
                  (20,000
                  )(Loss)
      income before income tax benefit
                  
                  
                  (2,168,846
                  )
                  
                  
                  1,107,576Income
      tax benefit
                  
                  
                  512,354
                  
                  
                  
                  306,803Net
      (loss) income
                  
                  $
                  (1,656,492
                  )
                  
                  $
                  1,414,379Net
      (loss) income per common share:Basic
                  
                  $
                  (0.06
                  )
                  
                  $
                  0.06Diluted
                  
                  $
                  (0.06
                  )
                  
                  $
                  0.06Weighted
      average number of common shares outstanding:Basic
                  
                  
                  25,833,551
                  
                  
                  
                  23,986,163Diluted
                  
                  
                  25,833,551
                  
                  
                  
                  25,396,859





The
accompanying notes are an integral part of these financial
statements.




F-4




Scivanta
Medical Corporation


Statements
of Stockholders’ Equity (Deficiency)


For
the Years Ended October 31, 2008 and 2007




TotalCommon
      Stock
                                                                
                                                                
                                                                Additional
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                Stockholders'Number
                                                                
                                                                
                                                                $0.001
                                                                
                                                                
                                                                Paid-in
                                                                
                                                                
                                                                Deferred
                                                                
                                                                
                                                                Accumulated
                                                                
                                                                
                                                                Equityof Shares
                                                                
                                                                
                                                                Par
      Value
                                                                
                                                                
                                                                Capital
                                                                
                                                                
                                                                Compensation
                                                                
                                                                
                                                                Deficit
                                                                
                                                                
                                                                (Deficiency)Balance
      at October 31, 2006
                                                                
                                                                
                                                                21,276,090
                                                                
                                                                
                                                                $
                                                                21,276
                                                                
                                                                
                                                                $
                                                                19,766,486
                                                                
                                                                
                                                                $
                                                                (18,947
                                                                )
                                                                
                                                                $
                                                                (20,070,442
                                                                )
                                                                
                                                                $
                                                                (301,627
                                                                )Shares
      issued to Century Capital upon partial exercises of warrants dated May 14,
      2004 and February 25, 2005
                                                                
                                                                
                                                                425,000
                                                                
                                                                
                                                                
                                                                425
                                                                
                                                                
                                                                
                                                                15,325
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                15,750Shares
      issued to Century Capital as payment of monthly consulting fees that had
      been deferred for payment
                                                                
                                                                
                                                                1,250,000
                                                                
                                                                
                                                                
                                                                1,250
                                                                
                                                                
                                                                
                                                                248,750
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                250,000Shares
      issued to James G. Aaron upon partial exercise of warrant dated July 24,
      2003
                                                                
                                                                
                                                                66,666
                                                                
                                                                
                                                                
                                                                67
                                                                
                                                                
                                                                
                                                                17,267
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                17,334Shares
      issued to John A. Moore upon partial exercises of warrants dated May 14,
      2004 and February 25, 2005
                                                                
                                                                
                                                                233,400
                                                                
                                                                
                                                                
                                                                233
                                                                
                                                                
                                                                
                                                                8,103
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                8,336Shares
      issued as payment of accounts payable
                                                                
                                                                
                                                                50,000
                                                                
                                                                
                                                                
                                                                50
                                                                
                                                                
                                                                
                                                                9,950
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                10,000Shares
      issued upon conversion of the May 1, 2005 convertible
      debentures
                                                                
                                                                
                                                                2,125,000
                                                                
                                                                
                                                                
                                                                2,125
                                                                
                                                                
                                                                
                                                                272,875
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                275,000Shares
      issued as payment of interest due on the May 1, 2005 convertible
      debentures
                                                                
                                                                
                                                                114,288
                                                                
                                                                
                                                                
                                                                114
                                                                
                                                                
                                                                
                                                                23,886
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                24,000Shares
      issued to consultants as payment for services rendered
                                                                
                                                                
                                                                210,000
                                                                
                                                                
                                                                
                                                                210
                                                                
                                                                
                                                                
                                                                33,590
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                33,800Stock
      based compensation
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                151,522
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                151,522Elimination
      of deferred compensation as a result of adoption of SFAS
    123R
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (18,947
                                                                )
                                                                
                                                                
                                                                18,947
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                —Net
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                1,414,379
                                                                
                                                                
                                                                
                                                                1,414,379Balance
      at October 31, 2007
                                                                
                                                                
                                                                25,750,444
                                                                
                                                                
                                                                
                                                                25,750
                                                                
                                                                
                                                                
                                                                20,528,807
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (18,656,063
                                                                )
                                                                
                                                                
                                                                1,898,494Shares
      issued to consultants as payment for services rendered
                                                                
                                                                
                                                                100,000
                                                                
                                                                
                                                                
                                                                100
                                                                
                                                                
                                                                
                                                                3,400
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                3,500Shares
      issued as additional consideration under technology license
      agreement
                                                                
                                                                
                                                                814,020
                                                                
                                                                
                                                                
                                                                814
                                                                
                                                                
                                                                
                                                                145,710
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                146,524Shares
      issued as partial payment of note payable
                                                                
                                                                
                                                                187,900
                                                                
                                                                
                                                                
                                                                188
                                                                
                                                                
                                                                
                                                                33,634
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                33,822Stock
      based compensation
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                142,075
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                142,075Net
      loss
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (1,656,492
                                                                )
                                                                
                                                                
                                                                (1,656,492
                                                                )Balance
      at October 31, 2008
                                                                
                                                                
                                                                26,852,364
                                                                
                                                                
                                                                $
                                                                26,852
                                                                
                                                                
                                                                $
                                                                20,853,626
                                                                
                                                                
                                                                $
                                                                —
                                                                
                                                                
                                                                $
                                                                (20,312,555
                                                                )
                                                                
                                                                $
                                                                567,923





The
      accompanying notes are an integral part of these financial
      statements.




F-5




Scivanta
Medical Corporation


Statements
of Cash Flows




Years
      Ended
                    October
      31,2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      (loss) income
                  
                  $
                  (1,656,492
                  )
                  
                  $
                  1,414,379Adjustments
      to reconcile net (loss) income to net cash (used in) provided by operating
      activities:Depreciation
                  
                  
                  3,040
                  
                  
                  
                  2,575Stock
      based compensation expense
                  
                  
                  145,575
                  
                  
                  
                  185,322License
      expense
                  
                  
                  304,962
                  
                  
                  
                  235,557Interest
      imputed on note payable
                  
                  
                  10,700
                  
                  
                  
                  16,700Changes
      in operating assets and liabilities:Prepaid
      expenses
                  
                  
                  21,698
                  
                  
                  
                  (41,979
                  )Tax
      loss receivable
                  
                  
                  (205,551
                  )
                  
                  
                  (306,803
                  )Other
      receivables
                  
                  
                  (157,955
                  )
                  
                  
                  (53,483
                  )Deposit
                  
                  
                  60,000
                  
                  
                  
                  (60,000
                  )Accounts
      payable
                  
                  
                  140,948
                  
                  
                  
                  (83,348
                  )Accounts
      payable - related party
                  
                  
                  209
                  
                  
                  
                  (213,283
                  )Accrued
      expenses
                  
                  
                  269
                  
                  
                  
                  36,513Accrued
      expenses - related party
                  
                  
                  —
                  
                  
                  
                  (75,000
                  )Net
      cash (used in) provided by operating activities
                  
                  
                  (1,332,597
                  )
                  
                  
                  1,057,150Cash
      flows from investing activities:Proceeds
      from sale of distribution rights
                  
                  
                  —
                  
                  
                  
                  150,000Purchase
      of fixed assets
                  
                  
                  (4,000
                  )
                  
                  
                  (8,392
                  )Net
      cash (used in) provided by investing activities
                  
                  
                  (4,000
                  )
                  
                  
                  141,608Cash
      flows from financing activities:Repayment
      of note payable
                  
                  
                  (73,668
                  )
                  
                  
                  (120,900
                  )Proceeds
      from exercise of warrants
                  
                  
                  —
                  
                  
                  
                  25,670Proceeds
      from issuance of convertible debentures
                  
                  
                  —
                  
                  
                  
                  250,000Repayment
      of convertible debentures
                  
                  
                  —
                  
                  
                  
                  (25,000
                  )Net
      cash (used in) provided by financing activities
                  
                  
                  (73,668
                  )
                  
                  
                  129,770(Decrease)
      increase in cash and cash equivalents
                  
                  
                  (1,410,265
                  )
                  
                  
                  1,328,528Cash
      and cash equivalents - beginning of period
                  
                  
                  2,008,909
                  
                  
                  
                  680,381Cash
      and cash equivalents - end of period
                  
                  $
                  598,644
                  
                  
                  $
                  2,008,909Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                  
                  $
                  20,000
                  
                  
                  $
                  24,413Cash
      paid for income taxes
                  
                  $
                  1,820
                  
                  
                  $
                  2,530Noncash
      operating activities:Issuance
      of common stock as payment of amounts due to related party
                  
                  $
                  —
                  
                  
                  $
                  265,750Issuance
      of common stock as payment of accounts payable and consulting
      services
                  
                  $
                  10,125
                  
                  
                  $
                  43,800Noncash
      financing activities:Issuance
      of note payable in exchange for technology license, net of imputed
      interest of $27,400
                  
                  $
                  —
                  
                  
                  $
                  235,557Issuance
      of 2,239,288 shares of common stock as payment of principal and interest
      on convertible debentures
                  
                  $
                  —
                  
                  
                  $
                  299,000Issuance
      of 187,900 shares of common stock as partial payment of note payable
      related to technology license
                  
                  $
                  33,822
                  
                  
                  $
                  —Issuance
      of note payable as additional payment for technology
    license
                  
                  $
                  158,438
                  
                  
                  $
                  —




The
accompanying notes are an integral part of these financial
statements.




F-6




Scivanta
Medical Corporation


Notes
to the Financial Statements





1.
            Organization
      and Description of Business




Scivanta
Medical Corporation (“Scivanta” or the “Company”) is a Nevada corporation
headquartered in Spring Lake, New Jersey.  The Company ceased selling
all products during the fiscal year ended October 31, 2004 and has not had any
revenue from the sale of products since the second quarter of 2003.




On
November 10, 2006, the Company acquired the exclusive world-wide rights to
develop, manufacture and distribute certain proprietary technologies known as
the Hickey Cardiac Monitoring System (the “HCMS”), a minimally invasive
two-balloon esophageal catheter system used to monitor cardiac
performance.  The HCMS will provide the primary measurements of
cardiac performance, including left atrial pressure, which is a crucial
measurement in monitoring cardiac challenged patients.  The hardware,
software and catheter components for the HCMS have been
completed.  Scivanta currently has a fully assembled HCMS device being
used in clinical trials.




The two major components remaining in
the development of the HCMS are the completion of the clinical trials and the
design and engineering of the production model of the HCMS.  The
Company commenced the clinical trials in Buffalo, New York at Kaleida
Health/Millard Fillmore Hospital (“Kaleida”) in October 2008 and expects the
clinical trials to continue at Kaleida and at three to four other locations, yet
to be engaged.  The Company expects to test a minimum of 40
patients.  The length of time and the number of patients tested in the
clinical trials could change depending on the rate of patient recruitment and
the data results produced.  The design and engineering of the
production model will run concurrent with the clinical trials.  In
addition, the Company must also receive the appropriate regulatory approvals
before the HCMS can be marketed in the United States or
abroad.  Scivanta will submit its 510(k) premarket notification for
the HCMS to the United States Food and Drug Administration (“FDA”) once it has
obtained sufficient clinical data for the HCMS.  Upon completion of
the HCMS production model, the Company will also seek European Union market
approval (CE mark).




The
Company will not be able to complete the clinical trials or the design and
engineering of the production model of the HCMS without obtaining additional
cash through an equity and/or debt financing or corporate
partnerships.  The Company is aggressively pursuing potential
investors and has engaged several placement agents to assist in this
endeavor.  No assurances can be given that the Company will be able to
obtain sufficient capital to finish the development of the HCMS through any
corporate partnerships and/or through equity and/or debt
financing.  In addition, no assurances can be given that if the
Company successfully develops and markets the HCMS, such product will become
profitable.




2.
            Basis
      of Presentation




The
accompanying financial statements have been prepared assuming that Scivanta will
continue as a going concern.  The Company has incurred significant
recurring operating losses, negative cash flows from operations and has an
accumulated deficit of $20,312,555 as of October 31, 2008.  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 could make 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.




F-7




The
Company continues to seek financing from equity investors and it has engaged
investment banks to assist the Company in this endeavor.  In addition,
the Company is reducing operating expenses and has been able to finance
operations through an increase in accounts payable.  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 efforts. If the
Company is unable to secure additional capital, it will explore other strategic
alternatives, including but not limited to, the sale of the
Company.  Any additional equity financing may involve substantial
dilution to the Company’s then-existing stockholders.




3.
            Summary
      of Significant Accounting Policies




Use
of Estimates




The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.




Although
the Company regularly assesses these estimates, actual results could differ
materially from these estimates. Changes in estimates are recorded in the period
in which they become known.  The Company based its estimates on
historical experience and various other assumptions that it believes to be
reasonable under the circumstances.  Actual results may differ from
management’s estimates if past experience or other assumptions do not turn out
to be substantially accurate.




Fair
Value of Financial Instruments




The
carrying amounts of the Company’s financial instruments, which include cash and
cash equivalents, tax loss receivable, other receivables, accounts payable and
accrued expenses, approximate their fair values due to their short
maturities.




The fair
value of the convertible debentures and the notes payable approximate the
unamortized portion of the principal amounts thereof, as such investments are at
market rates currently available to the Company.




Cash
and Cash Equivalents




The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.  Cash and cash
equivalents consist of cash on deposit with banks and money market
instruments.  The Company places its cash and cash equivalents with
established United States of America financial institutions.




F-8




Concentration
of Credit Risk




The
Company has no significant off balance sheet risk such as foreign exchange
contracts, option contracts or other foreign hedging
arrangements.  The Company’s financial instruments that are exposed to
concentration of credit risks consist primarily of cash and cash
equivalents.  The Company maintains its cash and cash equivalents in
bank accounts which, at times, exceed federally-insured limits.  The
Company invests its cash in high-quality money market instruments andhas not experienced any
losses in such accounts and, accordingly, believes it is not exposed to
significant credit risk on cash and cash equivalents.




Property
and Equipment




Property
and equipment are stated at cost, less accumulated
depreciation.  Depreciation is computed using the straight-line method
over the estimated useful lives of the respective assets which average from
three to seven years. Leasehold improvements are amortized over the lesser of
the lease term or the estimated useful lives of the related
assets.  Expenditures for repairs and maintenance are expensed as
incurred.  Gross assets as of October 31, 2008 and 2007 amounted to
$14,095 and $10,095, respectively, and accumulated depreciation amounted to
$6,527 and $3,487, respectively.  The net book value as of October 31,
2008 and 2007 of $7,568 and $6,608, respectively, represents the entire balance
of other assets.




Income
Taxes




The
Company provides for deferred income taxes in accordance with the Financial
Accounting Standards Board (“FASB”) with Statement of Financial Accounting
Standards (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS
109”).  SFAS 109 requires an asset and liability approach for
financial accounting and reporting for income taxes based on tax effects of
differences between the financial statement and tax bases of assets and
liabilities, based on enacted rates expected to be in effect when such basis
differences reverse in future periods.  Deferred tax assets are
reduced by a valuation allowance, when in the opinion of management, it is more
likely than not that some portion or all of the deferred tax asset will not be
realized.  Valuation allowances are recorded when realizability of
deferred tax assets is not likely.




On
November 1, 2007, the Company adopted the FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement No. 109” (“FIN 48”).   FIN 48 clarifies the criteria
for recognizing tax benefits related to uncertain tax positions under SFAS 109
and requires additional financial statement disclosure.  FIN 48
requires that the Company recognizes in its financial statements the impact of a
tax position if that position is more likely than not to be sustained upon
examination, based on the technical merits of the position.  Adoption
of FIN 48 had no net impact on the Company’s results of operations and financial
position.





Research
and Development




The
Company expenses research and development costs as incurred.  Advance
payments related to development agreements are recorded as prepaid expenses and
expensed as the work is performed.  Initial and milestone payments
made to third parties in connection with technology license agreements are also
expensed as incurred as research and development costs, up to the point of
regulatory approval.  Payments made to third parties subsequent to
regulatory approval will be capitalized and amortized over the estimated
remaining useful life of the related product.  The HCMS is currently
in the development stage and has not received regulatory approval.




F-9




Stock
Based Compensation




On
November 1, 2006, the Company adopted SFAS No. 123R “Share-Based Payment” (“SFAS
123R”) using the modified prospective method which allows the Company to
implement the provisions of SFAS 123R on all stock-based awards granted after
the date of adoption.  SFAS 123R requires companies to recognize
compensation expense in an amount equal to the fair value of all share-based
payments granted to employees.  The Company calculates the fair value
of option and warrant grants utilizing the Black-Scholes pricing
model.  In addition, SFAS 123R requires the Company to estimate
forfeiture rates for all unvested awards when calculating the expense for the
period.  In estimating the forfeiture rate, the Company monitors both
option and warrant exercises as well as employee termination
patterns.  The Company accounts for options and warrants granted to
non-employees under SFAS 123Rand Emerging Issues Task
Force Consensus No. 96-18, “Accounting for Equity Investments that are Issued to
Other than Employees for Acquiring, or in Conjunction with Selling Goods or
Services.”




The
resulting stock-based compensation expense is recorded over the service period
in which the employee or non-employee provides services to the Company, to the
extent the options or warrants do not vest at the grant date and are not subject
to forfeiture.  Options and warrants issued to employees and
non-employees that are subject to forfeiture are expensed on the vesting
date.




During
the fiscal years ended October 31, 2008 and 2007, the Company recorded
stock-based compensation expense as follows:





Year
      Ended
                      October
      31,2008
                    
                    
                    2007Research
      and development
                    
                    $
                    32,009
                    
                    
                    $
                    —General
      and administrative
                    
                    
                    113,566
                    
                    
                    
                    185,322Total
                    
                    $
                    145,575
                    
                    
                    $
                    185,322





Stock-based
compensation expense for non-employees during the fiscal years ended October 31,
2008 and 2007 amounted to $50,827 and $94,961, respectively (see Note 7 for
information regarding the valuation of options and warrants issued during the
fiscal years ended October 31, 2008 and 2007).





During
the fiscal year ended October 31, 2008, the Company granted 250,000 options to
its employees (estimated value of $17,498 at the date of grant) and granted
81,000 options to its directors (estimated value of $5,670 at the date of
grant).  During the fiscal year ended October 31, 2008, the Company
issued warrants to purchase 555,000 shares of common stock of the Company to
consultants (see Note 7).





During
the fiscal year ended October 31, 2007, the Company granted 1,100,000 options to
its employees (estimated value of $211,647 at the date of grant).  In
addition, during the fiscal year ended October 31, 2007, the Company issued
warrants to purchase 648,000 shares of common stock of the Company (estimated
value of $137,549 at the date of issuance) to the Company’s current directors
other than Messers. LaVance and Gifford, to a former director of the Company and
to a consultant (see Note 7).




F-10




Net
(Loss) Income Per Common Share





Basic net
(loss) income per share is computed by dividing net (loss) income 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
fiscal year ended October 31, 2008, diluted net loss per share did not include
the effect of 1,801,000 shares of common stock issuable upon the exercise of
outstanding options, 1,838,350 shares of common stock issuable upon the exercise
of outstanding warrants and 1,041,677 shares of common stock issuable upon the
conversion of convertible debt, as their effect would be anti-dilutive (see
Notes 7 and 8).




For the
fiscal year ended October 31, 2007, diluted net income per share did not include
the effect of 1,100,000 shares of common stock issuable upon the exercise of
outstanding options, 1,181,332 shares of common stock issuable upon the exercise
of outstanding warrants and 1,041,667 shares of common stock issuable upon the
conversion of convertible debt as their effect would be anti-dilutive (see Notes
7 and 8).




Recent
Accounting Pronouncements Applicable to the Company




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”).  SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosure requirements regarding fair value
measurement. Where applicable, SFAS 157 simplifies and codifies fair value
related guidance previously issued within U.S. generally accepted accounting
principles.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  The Company does not expect SFAS 157 to have a material
impact on its results of operations or financial condition when adopted during
the fiscal year ending October 31, 2009.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115” (“SFAS 159”).  SFAS 159 provides companies with an
option to measure, at specified election dates, certain financial instruments
and other items at fair value that are not currently measured at fair
value.  A company that adopts SFAS 159 will report unrealized gains
and losses on items for which the fair value option has been elected in its
financial results during each subsequent reporting date.  SFAS 159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities.  SFAS 159 is effective for
fiscal years beginning after November 15, 2007.  The Company does not
expect SFAS 159 to have a material impact on its results of operations or
financial condition when adopted during the fiscal year ending October 31,
2009.




F-11




In
June 2007, the FASB ratified the consensus reached by the Emerging Issues
Task Force (“EITF”) in EITF Issue No. 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities” (“EITF 07-3”), which requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities be deferred and
amortized over the period that the goods are delivered or the related services
are performed, subject to an assessment of recoverability.  EITF 07-3
is effective for fiscal years beginning after December 15, 2007.  The
Company does not expect EITF 07-3 to have a material impact on its results of
operations or financial condition when adopted during the fiscal year ending
October 31, 2009.




In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
110”).  SAB 110 expresses the views of the staff regarding the use of a
“simplified” method, as discussed in SAB No. 107, in developing an estimate of
the expected term of “plain vanilla” share options in accordance with SFAS No.
123 (revised 2004).  SAB 110 did not have a material impact on the
Company’s results of operations or financial condition.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”).  SFAS 162 sets forth the level of
authority to a given accounting pronouncement or document by
category.  Where there might be conflicting guidance between two
categories, the more authoritative category will prevail.  SFAS 162
became effective November 15, 2008 and the Company does not expect SFAS 162 to
have a material impact on its results of operations or financial condition or
current practices when adopted during the fiscal year ending October 31,
2009.





In June
2008 the FASB issued EITF 07-5, “Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”).  EITF 07-5
provides guidance in assessing whether an equity-linked financial instrument (or
embedded feature) is indexed to an entity’s own stock for purposes of
determining whether the appropriate accounting treatment falls under the scope
of SFAS 133, “Accounting For Derivative Instruments and Hedging Activities”
and/or EITF 00-19, “Accounting For Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company’s Own Stock”.  EITF 07-5 is effective
for financial statements issued for fiscal years beginning after December 15,
2008 and early application is not permitted.  The Company has not yet
determined what, if any, affect EITF 07-5 will have on the results of operations
or financial condition.





The
Company is not aware of any other recently issued but not yet effective
accounting standard, that if currently adopted, would have a material effect on
its results of operations or financial condition.





4.
            License
      and Development Agreements




HCMS
License Agreement




On
November 10, 2006, the Company entered into a technology license agreement (the
“License Agreement”) with The Research Foundation of State University of New
York, for and on behalf of the University at Buffalo (the “Foundation”), Donald
D. Hickey, M.D. (“Hickey”) and Clas E. Lundgren (“Lundgren”).  The
Foundation, Hickey and Lundgren shall be collectively referred to herein as the
“Licensor.”  The License Agreement was amended on June 29, 2007,
October 24, 2008 and January 6, 2009.




F-12




Pursuant
to the License Agreement, the Licensor granted the Company the exclusive
world-wide rights to develop, manufacture and distribute the HCMS, a minimally
invasive two-balloon esophageal catheter system used to monitor cardiac
performance.  The term of the License Agreement commenced on November
10, 2006 and ends on the latter of (1) the expiration date of the last to expire
patent right related to the HCMS which is currently June 12, 2018 or (2) ten
years from the sale of the first HCMS product.




The
Company agreed to make an initial payment to the Licensor of $264,300 which was
subsequently reduced to $262,957 pursuant to the first amendment to the License
Agreement dated June 29, 2007 (see Note 9).  The Company paid $40,900
on November 16, 2006 and $80,000 on October 31, 2007 and was required to pay
$142,057 on or before November 1, 2008.  Pursuant to the second
amendment to the License Agreement dated October 24, 2008, the payment of the
$142,057 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 will be paid in cash to
Lundgren on or before February 1, 2009.




Further,
pursuant to the second amendment to the License Agreement dated October 24,
2008, any milestone payments that the Company was required or may have been
required to pay to the Licensor under the original terms of the License
Agreement were eliminated in exchange for the following:  a) a
one-time cash payment by the Company to Hickey of $158,438 on the date that is
thirty days after the first commercial sale of a product utilizing the licensed
technology, but no later than December 31, 2009; b) the issuance of 224,960
shares of the Company’s common stock to the Foundation on October 28, 2008;
c)  the issuance of 162,500 shares of the Company’s common stock to
Hickey on October 28, 2008; and d) the issuance of 426,560 shares of the
Company’s common stock to Lundgren on October 28, 2008.




During
the fiscal years ended October 31, 2008 and 2007, the Company recorded $304,962
and $235,557, respectively, of research and development expense related to
licensing costs associated with the License Agreement.




The
Company also is required to pay the Licensor a royalty of 5% on annual net
sales, as defined in the License Agreement, subject to certain reductions as
detailed in the License Agreement.  Beginning with the first full year
of sales of the HCMS in the United States and for two years thereafter, the
Company is required to pay an annual minimum royalty of $100,000 to the Licensor
against which any royalty on net sales paid in the same calendar year for sales
in the United States will be credited.  Further, beginning with the
first full year of sales of the HCMS outside the United States and for two years
thereafter, the Company is required to pay an annual minimum royalty of $100,000
to the Licensor against which any royalty on net sales paid in the same calendar
year for sales outside the United States will be credited.  In
addition, the Company is required to pay the Licensor 25% of all sublicensing
revenue received by the Company in connection with the HCMS.




Subcontractor
Agreement and NYSTAR Contract




On June
27, 2007, Scivanta and the Foundation entered into a subcontractor
agreement.  Pursuant to this agreement, the Foundation contracted
Scivanta to develop the software and hardware components of the HCMS outlined in
the contract awarded by the New York State Office of Science Technology and
Academic Research (“NYSTAR”) to the Foundation and the Foundation’s company
partner, Ethox International, Inc. (“Ethox”), on December 1, 2005 (the “NYSTAR
Contract”).  The initial term of the NYSTAR Contract was for a two
year period ended November 30, 2007, which was extended by NYSTAR for an
additional one year period. On November 30, 2008, the NYSTAR Contract
expired.




F-13




Pursuant
to the first amendment to the License Agreement dated June 29, 2007, the
Licensor and Ethox entered into a non-exclusive manufacturing license agreement,
dated June 29, 2007, whereby Ethox was granted the right to manufacture the
catheter component of the HCMS for Scivanta.




As a
result of the subcontractor agreement, the first amendment to the License
Agreement and the non-exclusive license agreement between the Licensor and
Ethox, the development of the HCMS was partially funded through the NYSTAR
Contract.  Pursuant to the terms of the NYSTAR Contract, $937,500 of
funding was available for the development of the HCMS with the State of New York
providing $750,000 of the funding and Ethox providing $187,500 of the
funding.  Ethox and Hickey also provided $535,500 and $27,000,
respectively, of in-kind contributions.  Pursuant to the development
agreement between Scivanta and Ethox dated June 29, 2007 (see Ethox Development
Agreement), Scivanta provided Ethox with the $187,500 of cash required under the
NYSTAR Contract while Ethox provided the $562,500 of in-kind contributions
(primarily contributed services).  The funding received from the
NYSTAR Contract partially supported the development of:  the catheter
component of the HCMS by Ethox (see Ethox Development Agreement); the software
component of the HCMS by Applied Sciences Group, Inc. (“ASG”) (see ASG
Development Agreement); the hardware component of the HCMS by Sparton Medical
Systems (“Sparton”) (see Sparton Development Agreement) and the related clinical
trials.  Under the terms of the subcontractor agreement between the
Foundation and Scivanta, the Foundation, utilizing the $937,500 of funding
provided under the NYSTAR Contract, will reimburse Scivanta up to $928,580 of
allowable expenditures incurred by Scivanta in connection with the development
of the software and hardware components of the HCMS and related clinical
trials.




For the
fiscal years ended October 31, 2008 and 2007, Scivanta submitted to the
Foundation for reimbursement $855,987 and $53,483, respectively, of expenses
related to the software and hardware development of the HCMS and the related
clinical trials, which were recorded by the Company as a reduction to research
and development expenses.  As of October 31, 2008, the Company
recorded $91,564 as other receivables related to the expenses submitted to the
Foundation, which amount was received by the Company subsequent to October 31,
2008.  As of October 31, 2008, $19,110 was available to Scivanta for
the reimbursement of HCMS clinical trial expenses under the NYSTAR Contract,
which amount was billed to the Foundation in November 2008.  As of
November 30, 2008, no further amounts were available for reimbursement to
Scivanta under the NYSTAR Contract.




Ethox
Development Agreement




On June
29, 2007, the Company and Ethox entered into a development agreement whereby
Ethox will provide Scivanta engineering and development support for the catheter
component of the HCMS in exchange for the rights to manufacture the component
upon regulatory approval and commercialization of the HCMS.  Pursuant
to the development agreement, the Company paid $187,500 to Ethox in connection
with the NYSTAR Contract funding discussed above (see Note 4 – Subcontractor
Agreement and NYSTAR Contract).  The cash payment of $187,500 was paid
in $46,875 installments by the Company on each of September 12, 2007, February
13, 2008, June 16, 2008 and August 27, 2008.  These payments were
recorded as a prepaid expense by the Company and were expensed as research and
development on a pro-rata basis as the HCMS was developed pursuant to the NYSTAR
Contract.  During the fiscal years ended October 31, 2008 and 2007,
the Company recorded $169,690 and $17,810, respectively, of research and
development expense related to the NYSTAR Contract payment.  As of
October 31, 2008, the balance of the prepaid expense related to the NYSTAR
Contract payment was $0.




F-14




The
development agreement has a two year term which may be extended up to six
additional months.  The services to be provided by Ethox
include:  (1) the management of project costs and schedule, (2) the
development of system functional specifications based on marketing inputs, (3)
the development of disposable catheter specifications to achieve functional
requirements, (4) the manufacturing of disposable catheters in accordance with
applicable requirements for clinical trials, and (5) the provision of regulatory
resources for the management of clinical submissions for marketing approval from
the United States Food and Drug Administration.  Pursuant to the
development agreement, Scivanta is responsible for the selection and costs of
all raw materials and for the packaging design.  During the term of
the development agreement and for a period of twelve months thereafter, Ethox
will not participate in the design, development, creation or production of a
double balloon catheter to be used as part of a cardiac monitoring
system.  The development agreement also contains standard provisions
regarding indemnification and termination.




Terms for
the manufacturing of the catheter component of the HCMS are contained in a
supply agreement which will be entered into by Scivanta and Ethox upon
regulatory approval of the HCMS.  The supply agreement will have a
four year term commencing on the date of the first commercial production of the
catheter component of the HCMS, and thereafter shall renew on an annual basis
unless terminated by either party in accordance with the supply
agreement.  The supply agreement will also contain a minimum order
requirement, a pricing schedule and will provide for an additional payment to
Ethox of up to $535,000, which will be paid to Ethox over the term of the supply
agreement on a per unit basis based on the minimum number of units that the
Company is required to order under the supply agreement.




During
the fiscal year ended October 31, 2008, the Company submitted to Ethox for
reimbursement $119,874 of expenses related to the software and hardware
development of the HCMS.  This amount is included in other receivables
as of October 31, 2008 and was recorded by the Company during the fiscal year
ended October 31, 2008 as a reduction to research and development
expenses.  The reimbursement was received by the Company subsequent to
October 31, 2008.  The Company did not record any research and
development expense related to this development agreement during the fiscal
years ended October 31, 2008 and 2007.




ASG
Development Agreement




On July
2, 2007, the Company entered into a development agreement with
ASG.  Pursuant to the terms of this agreement, ASG will provide
software engineering services to Scivanta on the continuing development of the
HCMS.  It is estimated that up to $500,000 could be billed by ASG for
services and materials under the development agreement.  Scivanta can
terminate the agreement at any time upon written notification.  For
the fiscal years October 31, 2008 and 2007, the Company recorded $374,540 and
$44,453, respectively, of research and development expense for services and
materials under this development agreement.




F-15




Sparton
Development Agreement




On August
22, 2007, Scivanta and Sparton, a business group of Sparton Electronics Florida,
Inc., entered into a development agreement whereby Sparton will provide Scivanta
engineering and development support for the hardware component of the
HCMS.  The development agreement has a one year term and may be
extended for additional one year terms.  The development agreement can
be terminated at any time by either party upon the delivery of written notice to
the other party.  The services to be provided by Sparton
include:  (1) planning and development of design control documents,
(2) concept development, including mechanical, electrical and software design,
(3) completion of a detailed design and an engineering model, (4) assembly of
proto-type models and preliminary design verification testing, (5) the
production of “pilot” devices using formal drawings and validated processes, and
(6) design verification testing on the “pilot” units.  The development
agreement initially had a one year term which was extended for an additional
year.




On
September 6, 2007, pursuant to the development agreement, the Company made a
deposit of $60,000.  During the fiscal year ended October 31, 2008,
the deposit was applied, in its entirety, to the payment of material costs and
fees owed by the Company under the development agreement.




On
October 1, 2008, the Company terminated the development agreement with
Sparton.  For the fiscal years October 31, 2008 and 2007, the Company
recorded $608,630 and $9,030, respectively, of research and development expense
for services and materials under to this development agreement.




Rivertek
Service Agreement




On
February 1, 2008, Scivanta and Rivertek Medical Systems, Inc. (“Rivertek”)
entered into a service agreement whereby Rivertek will provide Scivanta with
project management services related to the development of the
HCMS.  The service agreement was amended on April 28,
2008.  Pursuant to the service agreement, Rivertek will assist
Scivanta in the management of the development of the hardware, software and
catheter components of the HCMS.  The service agreement has a one year
term expiring on January 29, 2009 that can be terminated earlier by either party
upon three days written notice.  The services rendered to Scivanta
under this contract are to be billed on a time and material basis.




During
the fiscal year ended October 31, 2008, Scivanta recorded $143,115 of research
and development expense for services and materials under to this service
agreement.  In addition, on April 28, 2008, Scivanta issued a warrant
to purchase 125,000 shares of its common stock to Rivertek as partial
consideration for services rendered under the service agreement (see Note
8).  During the fiscal year ended October 31, 2008, the Company
recorded $7,207 of research and development expense related to this stock based
compensation arrangement (see Note 3 – Stock Based Compensation).




5.
            Income
      Taxes




Significant
components of the Company’s deferred tax assets as of October 31, 2008 and 2007
are shown below.  In determining the realizability of the Company’s
deferred tax assets, the Company considered numerous factors, including
historical profitability, estimated future taxable income and the industry in
which it operates.  As of October 31, 2008 and 2007, a valuation
allowance was recorded to fully offset the net deferred tax asset, as it was
determined by management that the realization of the deferred tax asset was not
likely to occur in the foreseeable future.  The valuation allowance
increased $272,700 during the fiscal year ended October 31, 2008, attributable
primarily to the non-realizability of the Company’s net operating
losses.




F-16




The tax
effects of temporary differences and carryforwards that give rise to deferred
taxes consist of the following:




Years
      Ended
                    October
      31,2008
                  
                  
                  2007Net
      operating loss
                  
                  $
                  5,012,956
                  
                  
                  $
                  4,913,691Write-down
      of impaired assets
                  
                  
                  77,883
                  
                  
                  
                  77,883Depreciation
      and amortization
                  
                  
                  59,467
                  
                  
                  
                  59,364License
      and patent costs
                  
                  
                  203,061
                  
                  
                  
                  87,872Stock
      based compensation
                  
                  
                  118,660
                  
                  
                  
                  60,517Other
                  
                  
                  5,076
                  
                  
                  
                  5,076Total
      gross deferred tax assets
                  
                  
                  5,477,103
                  
                  
                  
                  5,204,403Valuation
      allowance
                  
                  
                  (5,477,103
                  )
                  
                  
                  (5,204,403
                  )Net
      deferred tax assets
                  
                  $
                  —
                  
                  
                  $
                  —





In
November 2008, the Company was approved by the New Jersey Economic Development
Authority (the “NJEDA”) to participate in the 2008 NJEDA Technology Business Tax
Certificate Transfer Program.  This program enables approved,
unprofitable technology companies based in the State of New Jersey to sell their
unused net operating loss carryovers and unused research and development tax
credits to unaffiliated, profitable corporate taxpayers in the State of New
Jersey for at least 75% of the value of the tax benefits.  On December
18, 2008, the Company received $512,354 of net proceeds ($585,061 gross proceeds
less $72,707 of expenses incurred) from a third party related to the sale of
approximately $6,500,000 of our unused net operating loss carryovers for the
State of New Jersey.  The Company will use these proceeds to continue
the development of the HCMS and for working capital purposes.




In
October 2007, the Company was approved by the NJEDA to participate in the 2007
NJEDA Technology Business Tax Certificate Transfer Program.  On
December 19, 2007, the Company received $306,803 of net proceeds ($348,640 gross
proceeds less $41,837 of expenses incurred) from a third party related to the
sale of approximately $3,874,000 of its unused net operating loss carryovers for
the State of New Jersey.




During
the fiscal year ended October 31, 2008, the effective tax rate differed from the
statutory tax rate as a result of the sale of the state net operating
losses.  During the fiscal year ended October 31, 2007, the effective
tax rate differed from the statutory tax rate primarily as the result of the
utilization of federal and state net operating loss carryovers to offset current
taxable income.  The income tax benefit recorded during the fiscal
years ended October 31, 2008 and 2007 are attributable solely to the sale of net
operating loss carryovers for the State of New Jersey.





During
the fiscal year ended October 31, 2007, in addition to the sale of approximately
$3,874,000 of its unused net operating loss carryovers for the State of New
Jersey, the Company utilized approximately $1,764,000 of federal net operating
losses and approximately $1,767,000 of state net operating losses to offset
current taxable income and forfeited approximately $969,000 of state operating
losses due to a prior change in domicile.




F-17




As of
October 31, 2008, the Company had federal and state operating losses of
$14,635,412 and $3,512,911, respectively, which will expire as
follows:




Federal
                    
                    StateYear
                        Expiring
                    
                    Amount
                    
                    Year
                        Expiring
                    
                    Amount2022
                    
                    $
                    589,960
                    
                    2009
                    
                    $
                    —2023
                    
                    
                    2,745,837
                    
                    2010
                    
                    
                    —2024
                    
                    
                    2,955,050
                    
                    2011
                    
                    
                    —2025
                    
                    
                    2,584,960
                    
                    2012
                    
                    
                    —2026
                    
                    
                    4,544,269
                    
                    2013
                    
                    
                    2,297,5752028
                    
                    
                    1,215,336
                    
                    2015
                    
                    
                    1,215,336$
                    14,635,412
                    
                    
                    
                    $
                    3,512,911





Utilization
of the net operating loss carryforwards may be subject to a substantial annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”), and similar
state provisions.  The Company has not performed a detailed analysis
to determine whether an ownership change under Section 382 of the Internal
Revenue Code occurred.  The effect of an ownership change would be the
imposition of an annual limitation on the use of net operating loss
carryforwards attributable to periods before the change.




6.
            Related
      Party Transactions




Consulting
Services Agreement with Century Capital




David R.
LaVance, the Company’s Chairman, President and Chief Executive Officer, and
Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial
Officer and Secretary, are Principals of Century Capital Associates LLC
(“Century Capital”), a consulting firm.   Effective February 1,
2007, the Consulting Services Agreement, as amended and restated, between the
Company and Century Capital terminated and Messers. LaVance and Gifford became
employees of the Company.  Effective January 1, 2008, the Company
entered into an executive employment agreement with each of Messers. LaVance and
Gifford (see Note 10).




For the
fiscal year ended October 31, 2007, the Company was billed $150,000 for
consulting services rendered by Century Capital and the Company recorded $25,000
of consulting expense related to the annual bonus due to Century Capital for the
one year period commencing February 1, 2006 and ending January 31,
2007.  The Company also reimbursed Century Capital for expenses
incurred in conjunction with performing the consulting services.




Shared
Services Agreement and Sublease Agreement with Century Capital




On May 1,
2004, the Company and Century Capital entered into a Shared Services Agreement
whereby the Company rented three fully furnished, business equipped offices
approximating 340 square feet inside Century Capital’s existing
offices.  This agreement had a month to month term that required sixty
days written notice to terminate and a monthly rental fee of
$2,500.  Effective February 1, 2007, the Shared Services Agreement
between the Company and Century Capital was terminated and replaced with a
Sublease Agreement.  Pursuant to the Sublease Agreement, the Company
rents office space approximating 2,000 square feet inside Century Capital’s
existing offices.  In addition, the Company rents office furniture and
other equipment from Century Capital.  This agreement has a month to
month term that requires sixty days written notice to terminate and a monthly
rental fee of $5,000.  The Company is responsible for all operating
costs associated with the office space, including utilities, maintenance and
property taxes.




F-18




During
the fiscal year ended October 31, 2008, the Company was billed $70,120 pursuant
to the terms of the Sublease Agreement.  As of October 31, 2008, the
Company owed Century Capital $900 for expenses due under the Sublease Agreement
and $1,732 for other expenses, which amounts are included in accounts payable –
related party and were paid by the Company subsequent to October 31,
2008.  During the fiscal year ended October 31, 2007, the Company was
billed $58,232 pursuant to the terms of the Sublease Agreement and the Shared
Services Agreement.




7.
            Stockholders’
      Equity




Stock
Option Plans




The
Company currently has two stock option plans in place:  the 2002
Equity Incentive Plan and the 2007 Equity Incentive Plan.  The 2002
Equity Incentive Plan was approved by the stockholders on July 5,
2002.  The aggregate number of shares of common stock which could have
been awarded under the 2002 Equity Incentive Plan was 2,000,000.  As
of October 31, 2008, 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 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 October 31,
2008, options to purchase 331,000 shares of the Company’s common stock were
outstanding under the 2007 Equity Incentive Plan and up to 2,669,000 additional
shares of the Company’s common stock can be awarded under the 2007 Equity
Incentive Plan.




Options
Granted to Executive Officers




Options Granted February 5,
2007




On
February 5, 2007, the Company granted a non-qualified stock option to purchase
500,000 shares of common stock pursuant to the Company’s 2002 Equity Incentive
Plan to each of Messers. LaVance and Gifford.  An aggregate amount of
1,000,000 shares of common stock could be granted pursuant to these
options.  Each option has a ten year term and is exercisable at $0.20
per share.




F-19




The
shares of common stock underlying each option vest as follows:  14,000
shares vest on the last day of each month commencing February 28, 2007 through
December 31, 2009 and the remaining 10,000 shares vest on January 31,
2010.  The vesting of 275,000 shares underlying each option will be
accelerated as follows:  (a)  25,000 shares upon execution
of a Board-approved agreement between the Company and a medical device company
for the purpose of collaboration on the development of the HCMS or the
distribution of the HCMS;  (b)  100,000 shares upon the
Company’s receipt of approval from the United States Food and Drug
Administration to market the HCMS; (c)  50,000 shares upon the
Company’s receipt of cash in the amount of $2,000,000 (whether by debt, equity
or otherwise) for use in the development and/or marketing of the HCMS, the
payment of general and administrative expenses and for other purposes;
(d)  50,000 shares upon the Company’s acquisition of a product or
technology other than the HCMS; and (e)  50,000 shares upon the
Company’s receipt of cash in the amount of $3,000,000 (whether by debt, equity
or otherwise) for use in the development and/or marketing of the HCMS or any
other acquired product, the payment of general and administrative expenses and
for other purposes.




On June
29, 2007, 25,000 shares of common stock underlying each option vested due to the
Company’s execution of its development agreement with Ethox (see Note 4 – Ethox
Development Agreement).  As a result of this accelerated vesting, the
remaining unvested shares of common stock underlying each option vest as
follows:  14,000 shares vest on the last day of each month through
October 31, 2009 and the remaining 13,000 shares vest on November 30,
2009.  In the event of a change in control of the Company, as defined
in the options, each of the options becomes fully vested as of ten days prior to
the change in control.




The value
of each of the options was estimated on the date of grant using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 4.80%;
volatility of 181.17%; and an expected life of five years.  The
options had an aggregate value of approximately $192,406 at the date of grant
(see Note 3 – Stock Based Compensation).




Options Granted January 1,
2008




On
January 1, 2008, the Company granted a non-qualified stock option to purchase
100,000 shares of common stock under the 2007 Equity Incentive Plan to each of
Messers. LaVance and Gifford.  An aggregate of 200,000 shares of
common stock could be purchased pursuant to these options.  Each
option has a ten year term and is exercisable at $0.14 per share.  The
shares of common stock underlying each option vest or vested as
follows:  33,333 shares vested on December 31, 2008; 33,333 shares
vest on December 31, 2009; and 33,334 shares vest on December 31,
2010.    In the event of a change in control of the Company,
as defined in the 2007 Equity Incentive Plan, each of the options becomes fully
vested as of ten days prior to the change in control.




The value
of each of the options was estimated on the date of grant using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 3.45%;
volatility of 53.90%; and an expected life of five years.  The options
had an aggregate value of approximately $13,998 at the date of grant (see Note 3
– Stock Based Compensation).




F-20




Stock
Options Granted to Non-Executive Officer




Option Granted February 5,
2007




On
February 5, 2007, the Company granted a non-qualified stock option to purchase
100,000 shares of common stock pursuant to the Company’s 2002 Equity Incentive
Plan to Allan J. Jones, the Company’s controller.  The option has a
ten year term and is exercisable at $0.20 per share.  The shares of
common stock underlying the option vest or vested as follows:  33,333
shares vested on December 31, 2007; 33,333 shares vest on December 31, 2008 and
33,334 shares vest on December 31, 2009.  In the event of a change in
control of the Company, as defined in the option, the option becomes fully
vested as of ten days prior to the change in control.




The value
the option was estimated on the date of grant using the Black-Scholes pricing
model with the following weighted average assumptions:  dividend yield
of 0%; risk free interest of 4.80%; volatility of 181.17%; and an expected life
of five years.  The option had a value of approximately $19,241 at the
date of grant (see Note 3 – Stock Based Compensation).




Option Granted January 1,
2008




On
January 1, 2008, the Company granted a non-qualified stock option to purchase
50,000 shares of common stock under the 2007 Equity Incentive Plan to Allan J.
Jones, the Company’s controller.  The option has a ten year term and
is exercisable at $0.14 per share.  The shares of common stock
underlying the option vest or vested as follows:  16,666 shares vested
on December 31, 2008; 16,666 shares vest on December 31, 2009; and 16,668 shares
vest on December 31, 2010.  In the event of a change in control of the
Company, as defined in the 2007 Equity Inventive Plan, the option becomes fully
vested as of ten days prior to the change in control.




The value
of the option was estimated on the date of grant using the Black-Scholes pricing
model with the following weighted average assumptions:  dividend yield
of 0%; risk free interest of 3.45%; volatility of 53.90%; and an expected life
of five years.  The option had a value of approximately $3,500 at the
date of grant (see Note 3 – Stock Based Compensation).




Options
Granted to Directors




On
January 1, 2008, the Company granted non-qualified stock options to purchase an
aggregate of 81,000 shares of common stock under the 2007 Equity Incentive Plan
to Richard E. Otto, Lawrence M. Levy and Anthony Giordano, III.  The
options were granted as partial consideration for Messers. Otto, Levy and
Giordano’s service in 2008 as members of the Company’s board of directors and
related committees.  Each of the options has a five year term and is
exercisable at $0.14 per share.  The shares of common stock underlying
the options vested as follows:  20,250 shares vested on each of March
31, 2008, June 30, 2008, September 30, 2008; and December 31, 2008.




The value
of each of the options was estimated on the date of grant using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 3.45%;
volatility of 53.90%; and an expected life of five years.  The options
had an aggregate value of approximately $5,670 at the date of grant (see Note 3
– Stock Based Compensation).




F-21


Summary
of Stock Options




Option
transactions for employees and directors under the 2002 Equity Incentive Plan
and the 2007 Equity Incentive Plan during the fiscal years ended October 31,
2008 and 2007 were as follows:




Option
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
      Per
                      Common
                      Share
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding
      at October 31, 2006
                    
                    
                    370,000
                    
                    
                    $
                    0.07
                    
                    
                    $
                    47,600Granted
      during the period
                    
                    
                    1,100,000
                    
                    
                    $
                    0.20Exercised
      during the period
                    
                    
                    —
                    
                    
                    
                    —Terminated
      during the period
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at October 31, 2007
                    
                    
                    1,470,000
                    
                    
                    $
                    0.17
                    
                    
                    $
                    13,200Granted
      during the period
                    
                    
                    331,000
                    
                    
                    $
                    0.14Exercised
      during the period
                    
                    
                    —
                    
                    
                    
                    —Terminated
      during the period
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at October 31, 2008
                    
                    
                    1,801,000
                    
                    
                    $
                    0.16
                    
                    
                    $
                    98,680Exercisable
      at October 31, 2008
                    
                    
                    1,077,083
                    
                    
                    $
                    0.16
                    
                    
                    $
                    47,535Exercisable
      at October 31, 2007
                    
                    
                    622,000
                    
                    
                    $
                    0.13
                    
                    
                    $
                    11,700





Information
with respect to outstanding options and options exercisable as of October 31,
2008 that were granted to employees is as follows:





Options
      Outstanding
                            
                            
                            Options
      ExercisableExercise
                                Price
                            
                            
                            Number
      of
                                Shares
                                Available
                                Under
                                Outstanding
                                Options
                            
                            
                            Weighted
                                Average
                                Remaining
                                Contractual
                                Life
      (Years)
                            
                            
                            Weighted
                                Average
                                Exercise
                                Price
      Per
                                Common
                                Share
                            
                            
                            Number
      of
                                Shares
                                Available
                                for
                                Purchase
                                Under
                                Outstanding
                                Options
                            
                            
                            Weighted
                                Average
                                Exercise
                                Price
      Per
                                Common
                                Share
                            
                            
                            Weighted
                                Average
                                Remaining
                                Contractual
                                Life
      (Years)$
                            0.02
                            
                            
                            
                            35,000
                            
                            
                            
                            6.2
                            
                            
                            $
                            0.02
                            
                            
                            
                            35,000
                            
                            
                            $
                            0.02
                            
                            
                            
                            6.2$
                            0.08
                            
                            
                            
                            335,000
                            
                            
                            
                            5.8
                            
                            
                            $
                            0.08
                            
                            
                            
                            310,000
                            
                            
                            $
                            0.08
                            
                            
                            
                            5.7$
                            0.14
                            
                            
                            
                            331,000
                            
                            
                            
                            7.9
                            
                            
                            $
                            0.14
                            
                            
                            
                            60,750
                            
                            
                            $
                            0.14
                            
                            
                            
                            4.2$
                            0.20
                            
                            
                            
                            1,100,000
                            
                            
                            
                            8.3
                            
                            
                            $
                            0.20
                            
                            
                            
                            671,333
                            
                            
                            $
                            0.20
                            
                            
                            
                            8.31,801,000
                            
                            
                            
                            7.7
                            
                            
                            $
                            0.16
                            
                            
                            
                            1,077,083
                            
                            
                            $
                            0.16
                            
                            
                            
                            7.2




F-22




A summary
of the nonvested shares subject to options granted under the 2002 Equity
Incentive Plan and the 2007 Equity Incentive Plan as of October 31, 2008 and
2007 is as follows:





Option
                        Shares
                      
                      
                      Weighted
                        Average
                        Grant
      Date
                        Fair
      Value
                        Per
      ShareNonvested
      at October 31, 2006
                      
                      
                      100,000
                      
                      
                      $
                      0.08Granted
      during the period
                      
                      
                      1,100,000
                      
                      
                      $
                      0.20Vested
      during the period
                      
                      
                      (352,000
                      )
                      
                      $
                      0.18Terminated
      during the period
                      
                      
                      —
                      
                      
                      
                      —Nonvested
      at October 31, 2007
                      
                      
                      848,000
                      
                      
                      $
                      0.19Granted
      during the period
                      
                      
                      331,000
                      
                      
                      $
                      0.14Vested
      during the period
                      
                      
                      (455,083
                      )
                      
                      $
                      0.19Terminated
      during the period
                      
                      
                      —
                      
                      
                      
                      —Nonvested
      at October 31, 2008
                      
                      
                      723,917
                      
                      
                      $
                      0.17





As of
October 31, 2008, there was $102,924 of total unrecognized compensation cost
related to nonvested share based compensation arrangements granted under the
2002 Equity Incentive Plan and the 2007 Equity Incentive Plan.  That
cost is expected to be recognized over a weighted average period of
approximately ten months.





Warrants
to Purchase Common Stock




Warrant
Issued to Consultant Dated January 1, 2007




On
January 1, 2007, the Company issued a warrant to purchase 125,000 shares of the
Company’s common stock to the principal owner of the Investors Relations Group
in connection with an investor relations and public relations consulting
agreement entered into by the Company and the Investors Relations
Group.  The warrant has a five year term and is exercisable at $0.25
per share until December 31, 2012.  The shares of common stock
underlying the warrant vested as follows:  31,250 shares vested on
March 31, 2007, 31,250 shares vested on June 30, 2007; and 31,250 shares vested
on September 30, 2007.  On November 30, 2007, in connection with the
termination of the consulting agreement with the Investors Relations Group,
31,250 shares underlying the warrant were cancelled.




The value
of the warrant was estimated on the date of issuance using the Black-Scholes
pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 4.70%;
volatility of 338.02%; and an expected life of five years.  The
warrant had a value of approximately $27,496 at the date of issuance (see Note 3
– Stock Based Compensation).




F-23




Warrants
Issued to Directors




Warrant Dated February 5,
2007.  On February 5, 2007, the Company issued a warrant to
purchase 209,000 shares of the Company’s common stock to Richard E. Otto, a
member of the board of directors of the Company, as consideration for his
service to the Company in 2006 and his continued service through
2007.  The warrant has a five year term and is exercisable at $0.20
per share.  The shares of common stock underlying the warrant vest or
vested as follows:  100,000 shares vested immediately on February 5,
2007; 7,250 shares vested on March 31, 2007; 7,250 shares vested on June 30,
2007; 7,250 shares vested on September 30, 2007; 27,250 shares vest on December
31, 2007; 20,000 shares vested on December 31, 2008; 20,000 shares vest on
December 31, 2009; and 20,000 shares vest on December 31, 2010.  In
the event of a change in control of the Company, as defined in the warrant, the
warrant becomes fully vested as of ten days prior to the change in
control.




The value
of the warrant was estimated on the date of issuance using the Black-Scholes
pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 4.80%;
volatility of 181.17%; and an expected life of five years.  The
warrant had a value of approximately $40,213 at the date of issuance (see Note 3
– Stock Based Compensation).




Warrants Dated March 15,
2007.  On March 15, 2007, the Company issued warrants to
purchase an aggregate of 214,000 shares of the Company’s common stock to
Lawrence M. Levy and Anthony Giordano, III as consideration for their service as
a members of the Company’s board of directors and related committees in
2007.  Each of the warrants has a five year term and is exercisable at
$0.25 per share.  The shares of common stock underlying the warrants
vest or vested as follows:  13,500 shares vested on each of March 31,
2007, June 30, 2007 and September 30, 2007; 53,500 shares vested on December 31,
2007; 40,000 shares vested on December 31, 2008; and 40,000 shares vest on each
of December 31, 2009 and December 31, 2010.  In the event of a change
in control of the Company, as defined in the warrants, the warrants become fully
vested as of ten days prior to the change in control.




The value
of each of the warrants was estimated on the date of issuance using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 4.46%;
volatility of 167.82%; and an expected life of five years.  The
warrants had an aggregate value of approximately $50,599 at the date of issuance
(see Note 3 – Stock Based Compensation).




Warrant
Issued to Former Director




On
February 5, 2007, the Company issued a warrant to purchase 100,000 shares of the
Company’s common stock to John A. Moore, a former member of the Board of
Directors of the Company, as consideration for his service to the Company in
2006.  The warrant has a five year term and is exercisable at $0.20
per share.  All shares of common stock underlying the warrant vested
on February 5, 2007.




The value
of the warrant was estimated on the date of issuance using the Black-Scholes
pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 4.80%;
volatility of 181.17%; and an expected life of five years.  The
warrant had a value of approximately $19,241 at the date of issuance (see Note 3
– Stock Based Compensation).




Warrants
Issued to Consultants Dated November 1, 2007




On
November 1, 2007, the Company issued warrants to purchase an aggregate of
160,000 shares of the Company’s common stock to Harvey Sacks, MD, Andrew D.
Shaw, MD and Paul Sierzenski, MD as partial consideration for their service as
medical consultants to the Company.  Each of the warrants has a five
year term and is exercisable at $0.13 per share.  The shares of common
stock underlying the warrants vest or vested as follows:  32,000
shares vested on each of January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008; and 32,000 shares vest on January 31, 2009.  In the
event of a change in control of the Company, as defined in the warrants, the
warrants become fully vested as of ten days prior to the change in
control.




F-24




The value
of each of the warrants was estimated on October 31, 2008 using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 2.30%;
volatility of 69.77%; and an expected life of four years (see Note 3 – Stock
Based Compensation).





Warrant
Issued to Consultant Dated April 1, 2008




On April
1, 2008, the Company issued a warrant to purchase 150,000 shares of the
Company’s common stock to Catalyst Financial Resources LLC (“Catalyst”) as
partial consideration for the services to be provided by Catalyst to the Company
as an investor relations consultant.  The warrant has a five year term
and the shares of common stock underlying the warrant vested as
follows:  37,500 shares, exercisable at $0.20 per share, vested on
July 1, 2008; and 37,500 shares, exercisable at $0.25 per share, vested on
October 1, 2008.  On November 26, 2008, in connection with the
termination of the consulting agreement with Catalyst, 70,000 shares of common
stock underlying the warrant were cancelled.




The value
of the warrant was estimated on October 31, 2008 using the Black-Scholes pricing
model with the following weighted average assumptions:  dividend yield
of 0%; risk free interest of 2.80%; volatility of 69.77%; and an expected life
of four and one-half years (see Note 3 – Stock Based Compensation).




Warrant
Issued to Consultant Dated April 28, 2008




On April
28, 2008, the Company issued a warrant to purchase 125,000 shares of the
Company’s common stock to Rivertek Medical Systems, Inc. as partial
consideration for its services as a product development consultant to the
Company.  The warrant has a five year term and is exercisable at $0.13
per share.  The shares of common stock underlying the warrant vest as
follows:  10,417 shares vest on the twenty-eighth day of each month
commencing May 28, 2008 through March 28, 2009 and the remaining 10,413 shares
vest on April 28, 2009.  In the event of a change in control of the
Company, as defined in the warrant, the warrant becomes fully vested as of ten
days prior to the change in control.




The value
of the warrant was estimated on October 31, 2008 using the Black-Scholes pricing
model with the following weighted average assumptions:  dividend yield
of 0%; risk free interest of 2.80%; volatility of 69.77%; and an expected life
of four and one-half years (see Note 3 – Stock Based Compensation).




Warrants
Issued to Consultants Dated October 23, 2008




On
October 23, 2008, the Company issued warrants to purchase and aggregate of
120,000 shares of the Company’s common stock to Donald D. Hickey, M.D. and Clas
E. Lundgren, M.D., Ph.D. as consideration for their service as product
development consultants to the Company.  Each of the warrants has a
five year term and is exercisable at $0.20 per share.  All shares of
common stock underlying the warrants vested on October 23, 2008.




F-25




The value
of each of the warrants was estimated on the date of issuance using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 2.57%;
volatility of 70.66%; and an expected life of five years.  The
warrants had an aggregate value of approximately $12,396 at the date of issuance
(see Note 3 – Stock Based Compensation).




Common
Stock Issued Upon Exercise of Warrants




On
February 19, 2007, James G. Aaron, a former director of the Company, exercised
his right to purchase 66,666 shares of the Company’s common stock underlying the
warrant issued to him on July 24, 2003.  The Company received $17,334
($0.26/share) in connection with the issuance of these shares.




On April
20, 2007, John A. Moore, a former director of the Company, exercised his right
to purchase 133,400 shares of the Company’s common stock underlying the warrant
issued to him on May 14, 2004.  The Company received $5,336
($0.04/share) in connection with the issuance of these shares.  In
addition, on April 20, 2007, Mr. Moore exercised his right to purchase 100,000
shares of the Company’s common stock underlying the warrant issued to him on
February 25, 2005.  The Company received $3,000 ($0.03/share) in
connection with the issuance of these shares.




Summary
of Warrants




Stock
warrant transactions during the fiscal years ended October 31, 2008 and 2007
were as follows:




Warrant
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
      Per
                      Common
                      Share
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding
      at October 31, 2006
                    
                    
                    1,924,998
                    
                    
                    $
                    0.11
                    
                    
                    $
                    242,750Issued
      during the period
                    
                    
                    648,000
                    
                    
                    $
                    0.23Exercised
      during the period
                    
                    
                    (725,066
                    )
                    
                    $
                    0.06Terminated
      during the period
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at October 31, 2007
                    
                    
                    1,847,932
                    
                    
                    $
                    0.17
                    
                    
                    $
                    48,662Issued
      during the period
                    
                    
                    555,000
                    
                    
                    $
                    0.18Exercised
      during the period
                    
                    
                    —
                    
                    
                    
                    —Terminated
      during the period
                    
                    
                    (564,582
                    )
                    
                    $
                    0.26Outstanding
      at October 31, 2008
                    
                    
                    1,838,350
                    
                    
                    $
                    0.14
                    
                    
                    $
                    109,574Exercisable
      at October 31, 2008
                    
                    
                    1,488,852
                    
                    
                    $
                    0.13
                    
                    
                    $
                    104,849Exercisable
      at October 31, 2007
                    
                    
                    1,555,932
                    
                    
                    $
                    0.16
                    
                    
                    $
                    48,662




F-26




Information
with respect to outstanding warrants and warrants exercisable at October 31,
2008 is as follows:




Warrants
      Outstanding
                            
                            
                            Warrants
      ExercisableRange
      of
                                Exercise
                                Prices
                            
                            
                            Number
      of
                                Shares
                                Available
                                Under
                                Outstanding
                                Warrants
                            
                            
                            Weighted
                                Average
                                Remaining
                                Contractual
                                Life
      (Years)
                            
                            
                            Weighted
                                Average
                                Exercise
                                Price
      Per
                                Common
                                Share
                            
                            
                            Number
      of
                                Shares
                                Available
                                for
                                Purchase
                                Under
                                Outstanding
                                Warrants
                            
                            
                            Weighted
                                Average
                                Exercise
                                Price
      Per
                                Common
                                Share
                            
                            
                            Weighted
                                Average
                                Remaining
                                Contractual
                                Life
      (Years)$
                            0.03
      - 0.04
                            
                            
                            
                            666,600
                            
                            
                            
                            2.3
                            
                            
                            $
                            0.04
                            
                            
                            
                            666,600
                            
                            
                            $
                            0.04
                            
                            
                            
                            2.3$
                            0.13
                            
                            
                            
                            285,000
                            
                            
                            
                            4.2
                            
                            
                            $
                            0.13
                            
                            
                            
                            190,502
                            
                            
                            $
                            0.13
                            
                            
                            
                            4.2$
                            0.20
      - 0.26
                            
                            
                            
                            886,750
                            
                            
                            
                            3.7
                            
                            
                            $
                            0.23
                            
                            
                            
                            631,750
                            
                            
                            $
                            0.22
                            
                            
                            
                            3.71,838,350
                            
                            
                            
                            3.3
                            
                            
                            $
                            0.14
                            
                            
                            
                            1,488,852
                            
                            
                            $
                            0.13
                            
                            
                            
                            3.1





A summary
of the nonvested shares subject to warrants as of October 31, 2008 and 2007 is
as follows:





Warrant
                      Shares
                    
                    
                    Weighted
                      Average
                      Grant
      Date
                      Fair
      Value
                      Per
      ShareNonvested
      at October 31, 2006
                    
                    
                    300,000
                    
                    
                    $
                    0.04Issued
      during the period
                    
                    
                    648,000
                    
                    
                    $
                    0.23Vested
      during the period
                    
                    
                    (656,000
                    )
                    
                    $
                    0.14Terminated
      during the period
                    
                    
                    —
                    
                    
                    
                    —Nonvested
      at October 31, 2007
                    
                    
                    292,000
                    
                    
                    $
                    0.24Issued
      during the period
                    
                    
                    555,000
                    
                    
                    $
                    0.18Vested
      during the period
                    
                    
                    (466,252
                    )
                    
                    $
                    0.18Terminated
      during the period
                    
                    
                    (31,250
                    )
                    
                    $
                    0.25Nonvested
      at October 31, 2008
                    
                    
                    349,498
                    
                    
                    $
                    0.23





As of
October 31, 2008, there was $56,503 of total unrecognized compensation cost
related to nonvested share based compensation arrangements involving
warrants.  That cost is expected to be recognized over a weighted
average period of ten months.





Common
Stock Issued as Payment for Consulting Services




On
February 5, 2007, the Company issued 625,000 shares of its common stock to Mr.
LaVance, a principal of Century Capital and the President and Chief Executive
Officer of the Company and 625,000 shares of its common stock to Mr. Gifford, a
principal of Century Capital and the Executive Vice President, Chief Financial
Officer and Secretary of the Company.  An aggregate amount of
1,250,000 shares were issued as payment of $250,000 ($0.20 per share) of monthly
consulting fees due to Century Capital that had been deferred for
payment.




F-27




On
February 5, 2007, the Company issued 50,000 shares of its common stock to
Georgia Capital Management, Inc.  These shares were issued as payment
of $10,000 ($0.20 per share) of accounts payable related to consulting fees due
to Georgia Capital Management, Inc.




On August
21, 2007, Scivanta issued 200,000 shares of its common stock to Buckman, Buckman
& Reid, Inc. as consideration for investment banking and consulting
services.  Scivanta did not receive any proceeds from this
issuance.  These shares had a fair market value of $32,000 ($0.16 per
share) on the date the Company agreed to issue the shares (August 15,
2007).




On August
21, 2007, Scivanta issued 10,000 shares of its common stock to Red Bank Capital,
LLC as consideration for consulting services.  Scivanta did not
receive any proceeds from this issuance.  These shares had a fair
market value of $1,800 ($0.18 per share) on the date the Company agreed to issue
the shares (August 21, 2007).




On April
1, 2008, Scivanta issued 100,000 shares of its common stock to Catalyst as
partial consideration for the services to be provided by Catalyst to the Company
as an investor relations consultant.  The 100,000 shares of common
stock are restricted and vested as follows:  25,000 shares vested on
April 1, 2008; 25,000 shares vested on July 1, 2008; and 25,000 shares vested on
October 1, 2008.  In connection with the termination of the consulting
agreement with Catalyst on November 26, 2008, the Company cancelled the
remaining 25,000 shares of restricted common stock issued pursuant to the
consulting agreement.  For the fiscal year ended October 31, 2008, the
Company recorded a total of $10,125 of stock based compensation expense related
to this stock issuance.




Common
Stock Issued Pursuant to License Agreement




On
October 28, 2008, pursuant to the Second Addendum to the License Agreement dated
October 24, 2008, the Company issued an aggregate of 1,001,920 shares of its
common stock to the Licensor.   Of this amount, 187,900 shares of
the Company’s common stock were issued to the Foundation as partial payment of
$33,822 on a note payable due on November 1, 2008 for licensing fees (see Note
9).  The remaining 814,020 shares of the Company’s common stock were
issued in exchange for the elimination of any milestone payments that may be due
under the License Agreement as follows:  (a) 224,960 shares of the
Company’s common stock were issued to the Foundation; b) 162,500 shares of the
Company’s common stock were issued to Hickey; and c) 426,560 shares of the
Company’s common stock were issued to Lundgren.During the fiscal year
ended October 31, 2008, the Company recorded $146,524 of research and
development expense related to the issuance of the 1,001,920 shares of its
common stock to the Licensor.




8.   
      Convertible Debentures




May
2005 Convertible Debentures




On May
26, 2005, the Company closed on a private placement of 8% convertible debentures
(the “May 2005 Debentures”).  The gross proceeds received in
connection with this private placement were $300,000.  The May 2005
Debentures had a two year term maturing on April 30, 2007, and bore interest at
a rate of 8% per annum.  Interest was payable in annual installments,
beginning on May 1, 2006, in cash or, at the option of the Company, in shares of
the Company’s common stock.  If the Company elected to pay the
interest in shares of the Company’s common stock, the number of shares issued as
payment would be equal to the quotient of the unpaid interest divided by the
market price of the Company’s common stock as defined in the May 2005
Debentures.  Up to 50% of the aggregate principal amount of the May
2005 Debentures were convertible into the Company’s common stock, at the option
of the holders, at a conversion price of $0.10 per share.  The
remaining 50% of the aggregate principal amount of the May 2005 Debentures were
convertible into the Company’s common stock, at the option of the holders, at a
conversion price of $0.20 per share.




F-28




On May
10, 2007, the holders of the May 2005 Debentures, which matured on April 30,
2007, elected to convert $275,000 of the outstanding principal balance into
shares of the Company’s common stock.  As a result, pursuant to the
terms of the May 2005 Debentures, the Company issued 2,125,000 shares of its
common stock and repaid the balance of $25,000 in cash.  In addition,
the Company issued 114,288 shares of its common stock to the May 2005 Debenture
holders as payment of $24,000 of interest due on the May 2005 Debentures for the
period commencing May 1, 2006 and ending April 30, 2007.  The number
of shares issued as payment of the interest due was calculated based on the fair
market value of the Company’s common stock ($0.21 per share) on April 30,
2007.  For the fiscal year ended October 31, 2007, the Company
recorded a total of $11,903 of interest expense related to the May 2005
Debentures.




February
2007 Convertible Debentures




On
February 8, 2007, the Company closed on a private placement of 8% convertible
debentures dated February 1, 2007 (the “February 2007
Debentures”).  The gross proceeds received in connection with this
private placement were $250,000, which was used for working capital purposes,
including the development of the HCMS.  The February 2007 Debentures
have a three year term, maturing on January 31, 2010, and bear interest at a
rate of 8% per annum.  Interest is payable in annual installments,
beginning on February 1, 2008, in cash or, at the option of the Company, in
shares of the Company’s common stock.  If the Company elects to pay
the interest in shares of the Company’s common stock, the number of shares
issued as payment will be equal to the quotient of the unpaid interest divided
by the market price of the Company’s common stock as defined in the February
2007 Debentures.




Up to 50%
of the aggregate principal amount of the February 2007 Debentures are
convertible into shares of the Company’s common stock at the option of the
holders at a conversion price of $0.20 per share.  The remaining 50%
of the aggregate principal amount of the February 2007 Debentures are
convertible at the option of the holders at a conversion price of $0.30 per
share.  The fair value of the Company’s common stock as of February 1,
2007 was $0.20 per share.  An aggregate amount of 1,041,667 shares of
common stock can be issued pursuant to the February 2007
Debentures.  The February 2007 Debentures contain demand registration
rights upon the request of the holders of more than 50% of the aggregate
principal amount of the then outstanding February 2007 Debentures or the
securities issuable upon the conversion of the February 2007
Debentures.  The Company has determined that the value attributable to
the demand registration rights is de minimis.




For the
fiscal years ended October 31, 2008 and 2007, the Company recorded a total of
$20,000 and $15,000, respectively, of interest expense related to the February
2007 Debentures.  As of October 31, 2008, $15,000 of interest due on
the February 2007 Debentures was accrued.




F-29




9.           Note
Payable




Pursuant
to the terms of the HCMS License Agreement, as amended (see Note 4 – HCMS
License Agreement), the Company is required to make a payment to the Licensor of
$262,957.  This payment obligation is non-interest
bearing.  The Company paid $40,900 on November 16, 2006 and $80,000 on
October 31, 2007.   Pursuant to a second amendment to the License
Agreement dated October 24, 2008, the Company paid $73,668 in cash ($39,101 to
Hickey and $34,567 to Lundgren) on October 24, 2008, paid $33,822 by issuing
187,900 shares of its common stock to the Foundation on October 28, 2008 and is
required to pay $34,567 to Lundgren on or before February 1, 2009.




The
Company recorded a note payable of $235,557 based on the present value of the
original payment obligation, as amended, with a corresponding discount rate of
8%.  The difference between the present value of the original payment
obligation, as amended ($235,557), and the face value of the original payment
obligation, as amended ($262,957), is being accreted as interest expense through
the maturity date of the payment obligation (total imputed interest of
$27,400).  During the fiscal years ended October 31, 2008 and 2007,
the Company recognized $10,700 and $16,700, respectively, of interest expense
related to the note payable.





10.        Commitments
and Contingencies




Executive
Employment Agreements




On
January 1, 2008, the Company entered into an executive employment agreement with
each of David R. LaVance, the Company’s President and Chief Executive Officer,
and Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial
Officer and Secretary (collectively, the “Employment
Agreements”).  The term of each of the Employment Agreements commenced
on January 1, 2008 and ends on December 31, 2010, but can be renewed for
successive one year periods unless terminated as provided in the Employment
Agreements.  Both Messers. LaVance and Gifford shall be paid an annual
base salary of $275,000, which may be increased by the compensation committee of
the Company’s board of directors.  In addition, both Messers. LaVance
and Gifford shall participate in the Company’s benefit programs and shall be
eligible to receive an annual performance bonus based on the achievement of
certain performance objectives as determined by the compensation committee of
the Company’s board of directors.




In the
event that Mr. LaVance or Mr. Gifford is terminated without Good Cause (as
defined in the Employment Agreements and used herein), or Mr. LaVance or Mr.
Gifford terminates his employment for Good Reason (as defined in the Employment
Agreements and used herein), Mr. LaVance or Mr. Gifford, as the case may be,
will be entitled to receive a severance payment equal to his annual base salary
in effect on the date of termination.




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.




F-30




11.        Litigation




Syntest
Litigation




On
November 22, 2006, the Company, Century Capital, David R. LaVance and Thomas S.
Gifford entered into a settlement agreement and release with Syntho
Pharmaceuticals Inc. (the “Syntho Group”) and Intermax Pharmaceuticals, Inc.
(“Intermax”) relating to the Company’s exclusive right to distribute the hormone
replacement therapy drug, Syntest.  Pursuant to the settlement
agreement, the Company and the Syntho Group agreed to dismiss with prejudice the
actions against each other which were pending in the United States District
Court for the Eastern District of New York and in the Superior Court of New
Jersey.  In addition, the Syntho Group agreed to dismiss with
prejudice the related actions against Century Capital, David R. LaVance and
Thomas S. Gifford which were pending in the United States District Court for the
Eastern District of New York and the Company and Intermax agreed to dismiss with
prejudice the related actions against each other which were pending in the
United States District Court for the Eastern District of New York and in the
Superior Court of New Jersey.  As part of the settlement reached by
the parties, the Syntho Group paid the Company an aggregate of $3,100,000 as
follows:  (1) $250,000 was paid upon the execution of the settlement
agreement; (2) $100,000 was paid on or about the 27th day of
each month for a three month period commencing on December 27, 2006 and ending
on February 27, 2007 and (3) $2,550,000 was paid on March 27,
2007.  As of March 27, 2007, all amounts due the purchase and
settlement agreement had been received by the Company.




Loures
Lawsuit




On
December 28, 2004, an action was commenced in the Superior Court of New Jersey
by James J. Loures, Jr. and his wife, Christine Loures (collectively, the
“Loures”), against Scivanta and certain of its former officers and
directors.  The Loures alleged that Scivanta, its former officers and
certain of its former directors engaged in a scheme to inflate Scivanta’s
revenues and earnings through a series of accounting irregularities and
fraudulent financial disclosures during the period June 2001 through March 2003
which resulted in the Loures’ loss of approximately $120,000.  On
October 22, 2007, Scivanta and the Loures reached a
settlement.  Pursuant to the settlement, Scivanta paid $20,000 to the
Loures and the Loures dismissed their complaint against Scivanta.




12. Subsequent Events




Options
Granted to Executive Officers




On
January 21, 2009, the Company granted a non-qualified stock option to purchase
250,000 shares of common stock under the 2007 Equity Incentive Plan to each of
Messers. LaVance and Gifford.  An aggregate of 500,000 shares of
common stock could be purchased pursuant to these options.  Each
option has a ten year term and is exercisable at $0.14 per share.  The
shares of common stock underlying each option vest as
follows:  166,666 shares vest on December 31, 2009; 166,666 shares
vest on December 31, 2010; and 166,668 shares vest on December 31,
2011.    In the event of a change in control of the Company,
as defined in the 2007 Equity Incentive Plan, each of the options becomes fully
vested as of ten days prior to the change in control.




F-31




The value
of each of the options was estimated on the date of grant using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 1.60%;
volatility of 93.86%; and an expected life of five years.  The options
had an aggregate value of approximately $50,230 at the date of
grant.




Stock
Options Granted to Non-Executive Officer




On
January 21, 2009, the Company granted a non-qualified stock option to purchase
125,000 shares of common stock under the 2007 Equity Incentive Plan to Allan J.
Jones, the Company’s controller.  The option has a ten year term and
is exercisable at $0.14 per share.  The shares of common stock
underlying the option vest as follows:  41,666 shares vest on December
31, 2009; 41,666 shares vest on December 31, 2010; and 41,668 shares vest on
December 31, 2011.  In the event of a change in control of the
Company, as defined in the 2007 Equity Inventive Plan, the option becomes fully
vested as of ten days prior to the change in control.




The value
of the option was estimated on the date of grant using the Black-Scholes pricing
model with the following weighted average assumptions:  dividend yield
of 0%; risk free interest of 1.60%; volatility of 93.86%; and an expected life
of five years.  The option had a value of approximately $12,558 at the
date of grant.




Options
Granted to Directors




On
January 21, 2009, the Company granted non-qualified stock options to purchase an
aggregate of 111,000 shares of common stock under the 2007 Equity Incentive Plan
to Richard E. Otto, Lawrence M. Levy and Anthony Giordano, III.  The
options were granted as partial consideration for Messers. Otto, Levy and
Giordano’s continuing service in 2009 as members of the Company’s board of
directors and related committees.  Each of the options has a five year
term and is exercisable at $0.14 per share.  The shares of common
stock underlying the options vest as follows:  27,750 shares vest on
each of March 31, 2009, June 30, 2009, September 30, 2009 and December 31,
2009.




The value
of each of the options was estimated on the date of issuance using the
Black-Scholes pricing model with the following weighted average
assumptions:  dividend yield of 0%; risk free interest of 1.60%;
volatility of 93.86%; and an expected life of five years.  The options
had an aggregate value of approximately $11,151 at the date of
grant.




F-32




INDEX
OF EXHIBITS




Exhibit No.
                
                Description of Exhibit3.1
                
                Restated
      Articles of Incorporation of Scivanta Medical Corporation, formerly
      Medi-Hut Co., Inc. (the “Registrant”), which was filed in the Office of
      the Secretary of State of the State of Nevada on January 23, 2007
      (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly
      Report on Form 10-QSB for the quarter ended January 31, 2006, filed with
      the Securities and Exchange Commission (the “SEC”) on January 29,
      2007).3.2
                
                Amended
      and Restated Bylaws of the Registrant (Incorporated by reference to
      Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-QSB for the
      quarter ended January 31, 2006, filed with the SEC on January 29,
      2007).4.1
                
                Specimen
      stock certificate representing the Registrant’s common stock (Incorporated
      by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form
      10-QSB for the quarter ended January 31, 2006, filed with the SEC on
      January 29, 2007).4.2
                
                Form
      of Convertible Debenture, dated February 1, 2007, issued to the following
      persons and in the following amounts:  Jesse H. Austin, III
      ($50,000); Andrew O. Whiteman and Gwen C. Whiteman, JTWROS ($25,000); Alan
      Eicoff ($25,000); Jack W. Cumming ($25,000); Scott C. Withrow ($25,000);
      Terrence McQuade ($25,000); Steven J. Olsen ($25,000); Robert P. Reynolds
      ($12,500); Chartwell Partners, LLP ($12,500); and Marc G. Robinson and
      Joshua Goldfarb ($25,000)  (Incorporated by reference to Exhibit
      4.8 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter
      ended January 31, 2007, filed with the SEC on March 14,
    2007).10.1
                
                The
      Registrant’s 2002 Equity Incentive Plan, adopted and effective January 1,
      2002 (Incorporated by reference to Exhibit B of the Registrant’s
      definitive proxy statement, filed with the SEC on June 10,
      2002).10.2*
                
                Warrant
      to purchase 200,000 shares of common stock of the Registrant, dated July
      24, 2003, issued to Richard E. Otto. (Incorporated by reference to Exhibit
      10.10 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended October 31, 2002, filed with the SEC on November 25,
      2005).10.3*
                
                Warrant
      to purchase 200,000 shares of common stock of the Registrant, dated July
      24, 2003, issued to John A. Moore. (Incorporated by reference to Exhibit
      10.11 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended October 31, 2002, filed with the SEC on November 25,
      2005).10.4*
                
                Warrant
      to purchase 200,000 shares of common stock of the Registrant, dated July
      24, 2003, issued to Salvatore J. Badalamenti. (Incorporated by reference
      to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB for the
      fiscal year ended October 31, 2002, filed with the SEC on November 25,
      2005).




E-1




Exhibit No.
              
              Description of Exhibit10.5*
              
              Warrant
      to purchase 200,000 shares of common stock of the Registrant, dated May
      14, 2004, issued to Richard E. Otto. (Incorporated by reference to Exhibit
      10.13 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year
      ended October 31, 2002, filed with the SEC on November 25,
      2005).10.6
              
              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).10.10
              
              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).10.11
              
              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).10.12
              
              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).10.13
              
              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,
  2008.10.14*
              
              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).10.15*
              
              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 Exhibit10.16*
              
              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).10.17*
              
              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).10.18*
              
              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).10.19
              
              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).10.20
              
              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).10.21
              
              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).10.22
              
              Product
      Development Agreement, dated August 23, 2007, between the Registrant and
      Sparton Medical Systems, a business group of Sparton Electronics Florida,
      Inc., including Exhibit B – Change Approval Form and Exhibit D – Payment
      Terms.  Upon the request of the SEC, the Registrant agrees to
      furnish copies of each of the following exhibits:  Exhibit A –
      Statement of Work; and Exhibit C – Sparton Medical Systems Labor Rates
      (Incorporated by reference to Exhibit 10.20 to the Registrant’s Current
      Report on Form 8-K filed with the SEC on August 23,
  2007).10.23
              
              Service
      Agreement, dated February 1, 2008, between the Registrant and Rivertek
      Medical Systems, Inc.10.24
              
              Amendment
      No. 1 to the Service Agreement dated February 1, 2008 between the
      Registrant and Rivertek Medical Systems, Inc., dated April 28,
      2008.




E-3




Exhibit No.
              
              Description of Exhibit10.25*
              
              Stock
      Option Agreement and Notice of Grant, dated January 1, 2008, pursuant to
      which David R. LaVance was granted a non-qualified stock option to
      purchase up to 100,000 shares of common stock of the Registrant
      (Incorporated by reference to Exhibit 10.21 to the Registrant’s Current
      Report on Form 8-K filed with the SEC on January 2,
  2008).10.26*
              
              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).10.27*
              
              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).10.28*
              
              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).10.29*
              
              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).10.30*
              
              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).10.31*
              
              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).10.32*
              
              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.10.33*
              
              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.




E-4




Exhibit No.
              
              Description of Exhibit10.34*
              
              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.10.35*
              
              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.10.36*
              
              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.21.1
              
              List
      of Subsidiaries of the Registrant.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.




*
Constitutes a management contract under Section 601 of Regulation
S-B.




E-5