UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 
 (Mark One)
 
 x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
 
 For the fiscal year ended February 28, 2011
 or
 
  ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
 
 For the transition period from _______ to _______
 
 Commission file number 33-51218
 
 SensiVida Medical Technologies Inc.
 (Exact name of registrant as specified in its charter)
 
 New Jersey

22-1937826(State or other jurisdiction of

(I.R.S. Employer Identification No.)incorporation or organization)
 
 150 Lucius Gordon Drive, West Henrietta, New York

14586(Address of Principal Executive Offices)

(Zip Code)
 
 Registrant's telephone number, including area code: (585)413-9080
 
 Securities registered pursuant to Section 12(b) of the Act:
 
 Title of each class

Name of each exchange on which registeredNone
 
 Securities registered pursuant to Section 12(g) of the Act:
 
 Common stock, $.01 par value
 (Title of Class)
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 Yes  ̈ No x
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ̈ No  ̈ (the Registrant is not yet required to submit Interactive Data)
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  ̈
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
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 The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter, was approximately $5,511,945.
 
 As of June 14, 2011, there were outstanding 16,088,112 shares of the registrant'scommon stock, $.01 par value.
 
 DOCUMENTS INCORPORATED BY REFERENCE
 
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Table of Contents





PagePART IItem 1.
Business

3Item 1A.
Risk Factors

17Item 1B.
Unresolved Staff Comments

22Item 2.
Properties

22Item 3.
Legal Proceedings

22Item 4.
Submission of Matters to a Vote of Security Holders

22PART IIItem 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

22Item 6.
Selected Financial Data

24Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations

24Item 7A.
Quantitative and Qualitative Disclosures About Market Risk

26Item 8.
Financial Statements and Supplementary Data

27Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

48Item 9A(T)
Controls and Procedures

48Item 9B.
Other Information

49PART IIIItem 10.
Directors, Executive Officers and Corporate Governance

49Item 11.
Executive Compensation

52Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

53Item 13.
Certain Relationships and Related Transactions, and Director Independence

54Item 14.
Principal Accounting Fees and Services

54PART IVItem 15.
Exhibits, Financial Statement Schedules

54Signatures


55Exhibit Index




2





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain statements in this Annual Report on Form 10-K, including statements under "Item 1. Business," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), although the safe harbor under those statutes do not apply to companies, such as us, that issue penny stock. Forward-looking statements include, among other things, our assumptions underlying our statements concerning business strategy, development and introduction of new products, research and development, marketing, sales and distribution, manufacturing, competition, third-party reimbursement, government regulation (including, but not limited to, FDA requirements), continued clinical trial relationships and operating and capital requirements, critical accounting determinations, efforts to raise additional financing, and our commitment of resources. The forward-looking statements may also be impacted by the additional risks faced by us as described in this report, including those set forth under the section entitled "Risk Factors." Forward-looking statements generally can be identified by the use of terminology such as "may," "will," "expect," "intend," "estimate," "anticipate" or "believe" or similar expressions or the negatives thereof. These expectations are based on management's assumptions and current beliefs based on currently available information. Although we believe that the expectations reflected in such statements are reasonable, we can give no assurance that such expectations will be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report on Form 10-K. Our operations are subject to a number of uncertainties, risks and other influences, many of which are outside our control, and any one of which, or a combination of which, could cause our actual results of operations to differ materially from the forward-looking statements.





PART I





Item 1. Business





Business Background





We are a minimally invasive bio-medical diagnostic device company. Our proprietary optical Micro-systems based technology automates bio-sensing and data acquisition while minimizing patient discomfort. Our platform technology addresses a number of disease state diagnostics - allergy testing, pain-free automated glucose monitoring without bio-fouling, blood coagulation testing (e.g. for Coumadin patients), TB testing and cholesterol monitoring.





We have been developing two products based on our platform technology. The initial market priority focus is to commercialize a highly accurate, rapid, 3X more productive, pain-free allergy test system in the US ($1.9B market growing at a compounded rate of 7%). Several prototypes have been made and proof-of-concept human clinical trials have been successfully performed. The second product, based on the same technology is a unique portable glucose monitor ($12B market growing at a compounded rate of 7%). This highly differentiated product consists of a wearable device having multiple individually - actuable sensors that are activated in accordance to the patient's test schedule, automatically measuring the glucose level without bio-fouling, clogging or daily calibration.





A key patent, US7942827B2, recently issued. This granted patent discloses the basic elements of the company’s technical approach to allergy diagnostics. The allergy system protected by this patent includes encapsulated allergens, a microneedle array, and an actuator element that enables the encapsulated allergens to be placed into contact with the skin of the subject. A method for the determination of the degree of reaction to one or more of the allergens is also disclosed. Images of each of the microneedle penetration sites are captured and analyzed to assess the degree of reaction to the specific allergen. This patent is considered a key component enabling the allergy diagnostic business strategy of the Company.


3





The Company currently has 8 additional active pending patents that support microlancet-based medical diagnostic business opportunities. This portion of the patent portfolio is designed to provide intellectual property protection for medical diagnostic opportunities in both the U.S. and other international markets. The diagnostic opportunities include allergy testing, glucose monitoring, blood coagulation testing (e.g. for Coumadin patients), TB testing and cholesterol monitoring. Included amongst these 8 pending patents are 2 new patent filings that relate to the glucose monitoring opportunity.  These 2 new patent applications provide additional support for the glucose monitoring diagnostic opportunity through more detailed and refined disclosures of the microlancet diagnostic component of the system. Additionally, 1 new patent filing in support of the allergy business was made in March 2011. This patent offers a more refined disclosure of many of the details of the product prototype.





We have two pending patents in the area of "Smart Pill Biopsy”. Due to some significant business and technical risks associated with Smart Pill Biopsy technology, the Company refocused its business strategy in the direction of allergy testing and related opportunities shortly after its acquisition of SensiVida Medical Systems. In addition, a license agreement with City University New York (“CUNY”) covering molecular native fluorescence of cancerous tissue expired, significantly reducing the Company’s ability to successfully participate in that marketplace. The Company’s two pending patents in Smart Pill Biopsy are totally independent of CUNY’s technology and may still provide the Company licensing revenue from participants active in this market.





We have partnered with a number of companies in the areas of biomedical device product development, FDA clinical studies, and reimbursement. The Company has received clearance from the Western IRB to conduct 100 human clinical studies in the area of allergy testing. Thus far, the first studies have shown that our minimally-invasive allergy test significantly (i) reduces the extent of reaction area (reduced by 4X), (ii) results in shorter test times (10 minutes vs. 25-45 minutes), (iii) reduces test-to-test variation (2-8% vs. 14-18%), and (iv) reduces total patient skin area required (1/20th). Future clinical and FDA studies will involve side-by-side comparisons with “predicate” FDA approved devices currently in the market.





Strategy





Our primary source of revenue will be through the sale of high margin disposable products. In some product families, hardware and software may be provided for free to accelerate product adoption. Our first product family is an allergy test system comprising of a disposable Microsystems cartridge that painlessly and rapidly administers a large number of allergens. A compact imaging module captures images of the patient’s skin and provides them to a computer for display and analysis. The product targets the $1.9B U.S. allergy test market and the needs of a large and growing (7% CAGR) health care problem affecting over 50% of the U.S. population and responsible for an estimated $18B in health care costs and lost productivity. Compounding the problem, there is a need for 100 additional Allergists each year to keep up with demand and to compensate for an attrition of 20 Allergists per year. From a nursing perspective, the American Association of Colleges of Nurse projects nursing shortages will intensify over the next 10 years as a result of demographic and career trends. Both of these trends will drive a market need for more productive allergy testing in the years to come.





In the U.S., more than 75% of all Allergy tests are done via the “Skin Prick Test” method- it is estimated that 6M skin prick tests are performed each year. Current allergy tests take 25-45 minutes, are uncomfortable and stressful, especially for children. Our Microsystems-based test can accomplish the same test in 10 pain-free minutes, while concomitantly improving the Allergists’ profitability by 39%.





One significant advantage of image-based digital diagnostic systems is their ability to use image processing to quantify allergic reactions, a significant advantage over today’s subjective tests. We believe this capability will grow the channels for allergy testing, thereby increasing business penetration and use in preventive modes. Over time, SensiVida’s test will provide a new allergy screening option to Retail Clinics and potentially 200,000 Primary Care Physicians (PCP’s) who see on the average one allergy patient a day.


4





The following will facilitate commercialization of our Allergy test:





•
Allergens used by the SensiVida system are already FDA approved


•
First products to market will be intuitive image-based systems, substantially equivalent to today’s test


•
3800 U.S. Allergists form a small community in the U.S. and can be easily reached


•
Supporting hardware and software expense will be provided at minimal or no cost, thereby reducing adoption barriers


•
Test accuracy and reproducibility will be greatly improved


•
Risk for human error is reduced


•
Value Proposition to Allergists is positive- Profitability could be 39% or higher due to reduced and more efficient management of labor costs, automatic/simply electronic medical records


•
Value Proposition to patients is positive – painless, less invasive, faster test


•
Value Proposition to payers is positive- test is more accurate than today’s test (may reduce need for follow-on tests e.g. intradermal or indicate more effective therapy) and lower dosage of allergen may lower risk of test complications.


•
We have the means to develop the needed technology and the ability to do rapid commercialization in conjunction with our development partners.





The allergy test system represents a near term revenue opportunity, having low regulatory hurdles. Based on our current forecast for product development, clinical testing, and FDA approvals, we expect to launch an allergy test product in the 1st Quarter of 2013 serving the Allergist. Extensions to this product include both incremental improvements over the first product serving the Allergist (for example full diagnostic capability) and allergy screening products serving retail clinics and General Practitioners. Our second product family based on the same fundamental proprietary technology base, addresses glucose monitoring, another multi-billion dollar market ($12B) having many unmet needs. The large and growing number of diabetics currently estimated to be 18M in the U.S. and 177M worldwide, also lack a convenient, painless method to monitor their glucose level. The estimated annual cost of diabetes in the U.S. is estimated to be $132B, and is rapidly on the rise (also a 7% CAGR). In addition to diabetes, related ailments such as obesity, heart disease, kidney disease, blindness (e.g. diabetic retinopathy), atherosclerosis, and amputation can be triggered or caused by diabetes.





Current methods for glucose monitoring require periodic manual blood sampling using “finger sticks”. Children and many adults find these tests painful, inconvenient, and often are not in compliance. SensiVida will address this market need with an unobtrusive, wearable glucose monitoring system having a disposable microlancet array chip with individually monitored sensors selectively actuated in accordance to the patient’s test schedule. The uniqueness and advantages over existing offerings are:





•
Continuous measurements without bio-fouling effect or clogging


•
Accuracy equivalent to the finger stick test since it is a direct chemical measurement


•
Hygiene benefits- no blood is extracted


•
Virtually pain-free to the patient





Our minimally-invasive in vivo diagnostics technology has the potential to be extended to other billion dollar markets such as blood coagulation testing (e.g. Prothrombin Time test for patients on Coumadin), TB testing, cholesterol monitoring., drug testing and more TB skin testing, for example, benefits from mobile continuous optical monitoring since reactions take days and may be missed in the follow-up visit. A mobile continuous monitoring system would be able to capture and store patient reactivity to be conveniently downloaded at a later time. The method would also reduce scheduling problems and inefficiencies that occur when tested patients are unable to make follow-up scheduled appointments.


5





Our Products





The SensiVida Allergy Test system, the first product in the Company’s family plan, offers the Allergist an objective, painless allergy testing system that consists of the following:





•
A disposable microlancet chip/cartridge that painlessly and rapidly administers the allergens.


•
A compact imaging module/digital imager that captures real-time allergic reactions and sends images and data to a computer.


•
User-friendly software that allows the user to monitor the allergic reaction and provides quantitative data regarding reaction extent, positive/negative diagnosis versus allergen, and reaction kinetics. A electronic medical record (EMR) report is automatically created which can printed or transmitted.





Several configurations for the allergen chip/cartridge have been covered in our patent applications. The simplest involves a microlancet array individually coated with the set of allergens. Upon insertion into the subject, the aqueous interstitial fluid dissolves the allergen matrix, allowing it to diffuse into the skin, thereby triggering the allergic reaction. In another embodiment, encapsulated allergens are packaged 1:1 along with each microlancet and released upon actuation. A removable film seals the packaged allergen array, keeping it sterile until it is ready to use.





The SensiVida Allergy Test provides a number of benefits to physicians and patients:





Value Proposition: Physicians


·
Automates today’s subjective, manual Skin Prick Test with a standardized test


·
Produces digital records of allergic reactions and their diagnosis


·
Quantitative image analysis vs. subjective diagnosis


·
Achieves a 39% improvement in profitability


·
Significant improvement in test accuracy have been demonstrated (1/3 variability of standard test)


·
Reduces test-to-test variability and operator error•


·
Improved diagnosis of dark-skinned subjects, currently difficult and inefficient


·
Short procedure facilitates pediatric test





Value Proposition: Patients


·
Eliminates discomfort and fear


·
Significantly reduces procedure time, less agonizing chair-time


·
Friendlier test for children


·
Reduced reaction areas


·
More reliable test results for dark-skinned patients, e.g. African Americans


·
Covered by health insurance (unlike in vitro tests)





SensiVida’s first Allergy Test product is expected to receive rapid 510(k) approval for the following reasons: 1) the system uses FDA approved allergens; 2) we received a non-significant risk classification by the WIRB; 3) our test is substantially equivalent to multiple skin test devices, such as the ComforTen by Hollister Stier; 4) we will continue to involve medical personnel in the diagnostic process; 5) due to the nature of the test, follow-up with test subjects is not required.





The second product in our product family is an unobtrusive, wearable or mobile glucose monitoring system with a disposable microlancet chip having individually-monitored sensors that are actuated in accordance to the patient’s test schedule. The uniqueness and advantage over the existing offerings are: (1) continuous measurements without bio-fouling or clogging; (2) accuracy equivalent to finger stick test since it is a direct chemical test; (3) hygiene benefits since no blood is extracted; (4) the test is virtually painless. The first version of this product will target hospital use and then migrate to personal/mobile use. The glucose monitor will be comfortably worn as a band or patch. At user-defined time intervals, each needle of the array is individually deployed by an actuator and inserted into the patient’s skin. The fine tips of each microlancet are coated with a glucose sensitive enzyme (e.g. glucose oxidase) that is either optically or electrically read out by system electronics. The data are calibrated so as to represent actual glucose concentrations and displayed, stored, or transmitted depending on the application.


6




A compelling aspect of our glucose monitor is that it provides a positive Value Proposition for a number of customer segments in the value chain, e.g. health care facilities, hospitals, and patients:





Value Proposition: Health Care Facility, Hospital


·
Automated timed measurements- reduced monitoring by the medical staff


·
Hygiene benefits- no blood is extracted


·
Convenient data recording- direct input to digital patient records


·
Minimally invasive, virtually pain-free


·
Densely spaced sensors permit many measurements over extended times


·
Minimal periodic calibration


·
Wireless transmission to nursing station and/or alerts for dangerous levels


·
Opportunity for closed loop smart system using insulin pump





Value Proposition: Patient


·
Painless- patient friendly to children and elderly


·
Microlancets are much less invasive- reduced puncture skin damage


·
Hygiene benefits- no blood is extracted


·
Automated data recording and management, improved compliance


·
Less disruption to patient during meals, nighttime, activities at hospital or home


·
More continuous operation reveals high-low glucose levels


·
Comparable cost per test as current fingerstick test


·
Opportunity for closed loop smart system using insulin pump





Product Development and Partnerships





In May 2010, we established a partnership with Wi Inc., a Colorado-based company with years of experience developing biomedical devices. Wi, Inc. (www.wiinc.net) is a vertically integrated product development firm specializing in assisting clients in the commercialization of in vitro diagnostics devices from concept to pilot build. Wi’s team of scientists and engineers are knowledgeable in the clinical applications of the markets they serve and dedicated to advancing medical science through point-of-care diagnostics and lifesaving therapies that ultimately reduce the cost of healthcare. Under the agreement, Wi will provide design and prototype development for the disposable allergen delivery component of the allergy test system, building upon our disposable allergen cartridge technology using design-for-manufacturing (DFM) disciplines while providing access to high volume manufacturing partners. In addition to developing preferred designs and prototypes, Wi’s pilot manufacturing capabilities will help reduce our cycle time to reach FDA clinicals and product launch. The agreement may be terminated by either party upon 30 days notice and is automatically terminated for fraudulent behavior during the performance of the agreement, if either party is legally banned from engaging in any industrial or commercial activity, bankruptcy, whether voluntary or involuntary and dissolution.  The summary of this agreement is qualified in its entirety by the terms of the agreement with Wi attached hereto and incorporated herein as Exhibit 10.7 to this annual report on Form 10-K.





In June 2010, a partnership for the development of our digital allergy testing module was established with Dhurjaty Electronics Consulting, LLC of Rochester, NY. Our agreement with Dhurjaty Electronic Consulting is terminable by either party upon 30 days notice and is automatically terminated upon the earlier of the death, physical incapacity or mental incompetence of Dhurjaty and 12 months from the date of the agreement.   The summary of this consulting agreement is qualified in its entirety by the terms of the Consulting Agreement attached hereto and incorporated herein as Exhibit 10.8 to this annual report on Form 10-K.


7





We have also established a partnership with MDC Associates, a consulting firm that specializes in FDA clearance and compliance, clinical study design and management, establishing company quality systems documentation for regulatory compliance, , developing pre-market submissions, facility audits and more. After product launch, MDC will provide customer support services including its comprehensive call center, over-the-phone training all conducted in compliance with FDA and ISO system requirements.  The agreement is terminable by us upon 30 days notice to MDC.  The summary of this agreement is qualified in its entirety by the terms of the agreement with MDC attached hereto and incorporated herein as Exhibit 10.9 to this annual report on Form 10-K.





Government Regulation (FDA) Matters





The FDA classifies medical devices into one of three classes, Class I, II, or III. This classification is based on the controls deemed necessary by the FDA to reasonably insure the safety and effectiveness of the device. Class I devices are those whose safety and effectiveness can be reasonably ensured through the use of general controls, such as labeling, adherence to GMP requirements and the "510-(k)" process of marketing pre-notification. Class II devices are those whose safety and effectiveness can reasonably be ensured through implementation of general and special controls, such as performance standards, post market surveillance, patient registries, and FDA guidelines. Class III devices are those devices that must receive pre-market approval ("PMA") to insure their safety and effectiveness. They are generally life-sustaining, life-supporting, or implantable devices, and also include devices that are not substantially equivalent to a legally marketed Class I or II devices or to a Class III device first marketed prior to May 28, 1976 for which a PMA has not yet been requested by the FDA.





The Allergy test, glucose monitor and other future product offerings will require us to prove safety and efficacy prior to commercialization. As such, these will be classified under the FDA’s Devices category and will be required to prove “substantial equivalence” via a 510k (all the allergens are FDA approved). Due to the fact that the allergen cartridge breaches the skin, it will most likely be classified as a Class II device. Initial Allergy clinical tests, are being performed under an IRB, which authorizes human clinical testing on 100 patients. A first round of testing performed on a subset of the 100 approved subjects was completed as of May 2010. Additional clinical tests as approved by the IRB are being strategically reserved for later in 2011, after refined engineering prototypes closely resembling the final product design will become available from Wi Inc. and Dhurjaty Electronic Consulting.





Our minimally-invasive allergy tester uses FDA approved allergens and is an extension of the current gold standard, the Skin Prick Test. We believe, based on initial assessment by the Western IRB, that this test is a “non-significant risk”, potentially expediting the FDA clinical trials. Future tests will compare dose response characteristics of our test using side-by-side testing of the Company’s technology vs. the standard test. Although the statistics for the number of patients required for the FDA clinical trials has not been set, it is expected that less than 500 patients at four different sites will be sufficient. Barring delays in obtaining anticipated funding for this work, we expect to initiate FDA clinical trials April 2012 (due to aforementioned reasons, expected duration of trials will be only 2 months). We expect to work closely with MDC Associates for the next 14 months to define and implement our clinical strategy.





We must also comply with the prohibitions against promotion and other practices as identified in the Code of Federal Regulation Title 21, section 812.7. According to this section of the regulation, the sponsor of a NSR study, investigator, or any person acting for or on behalf of our or investigator, is prohibited from promoting or test marketing the investigational device until after FDA has approved the device for commercial distribution; commercializing the device by charging a price greater then that necessary to recover the cost of manufacture, research, development, and handling; unduly prolonging the investigation; and representing the investigational device as being safe or effective for the purposes for which it is being investigated.





Although we believe that our products will ultimately be approved, there is no assurance the FDA will act favorably or quickly in making such reviews and approving our products for sale. We may encounter delays or unanticipated costs in our efforts to secure needed funding and all governmental approvals or licenses, which could delay or possibly preclude us from completing our FDA process and/or marketing our products. To the extent that we may market our products in foreign markets, we will be subject to additional foreign governmental regulations with respect to the manufacture and sale of our medical device products. We cannot accurately estimate the cost and time that will be required in order to comply with such regulations.


8




Initial Clinical Results




Initial clinical tests of the Company’s digital allergy test system as cleared by the Western Institutional Review Board (WIRB) of Olympia, Washington were conducted in 2010. Under the supervision of clinical and research staff at the Allergy, Asthma, Immunology of Rochester (AAIR) Research Center, the Company’s test was benchmarked against the well-known "Skin Prick Test" using the same allergens and subjects. Dimension and color of allergic responses produced by the Company’s test were compared with reactions produced by the Skin Prick Test with the aim of quantifying extent of reaction, test time, and accuracy.





The Company’s test device was found to:


·
significantly reduce the area of allergic reactions,


·
be painless to the patient,


·
significantly reduce time required for the test,


·
enable allergic reactions to dissipate rapidly.





SensiVida’s "non-significant risk" test device was found to reduce the area of allergic reactions by a factor of four or more when compared with today's Skin Prick Test. As a result, only small areas on the subjects' arms needed to be tested and all reactions were accurately monitored using the company's proprietary microsystems and image science technologies. Test-to-test variation for each subject was found to be less than 10% (2-8%), significantly lower than when using the same allergens with the Skin Prick Test (14-18%). Negative control (saline) reactions with the SensiVida test were virtually absent, an indication of negligible trauma inherent in its minimally invasive technology. These early results are promising since test variation often leads to uncertain diagnosis of allergies, and at times may indicate further testing is required.





From the subject's point of view, the Company’s test was not only totally painless, but test time was significantly shorter due to more efficient patient prep, faster allergic reaction times, and faster data acquisition. SensiVida's test including setup, patient prep, and data recording was virtually complete after 10 minutes, at least one third the time required by the Skin Prick Test.





Allergic reactions (tiny bumps) resulting from the Company’s test dissipated in less than one hour compared with several hours for large reactions produced by the standard test. In one instance involving a highly allergic patient, Skin Prick Test reactions remained visible even after 24 hours. In contrast, the Company’s test reactions dissipated in less than one hour for the same patient.





The Company will continue to gather clinical data under WIRB clinical test guidelines in 2011 as it continues product development efforts and commercialization.





Business Development and Marketing





While our platform technologies can address several billion dollar diagnostic markets, our initial focus is to commercialize a rapid pain-free allergy test. Based on our current forecast for product development, clinical testing, and FDA approvals, we expect to launch an allergy test product in the First Quarter of 2013 serving the Allergist. A second product will become available at Retail Clinics as a simple allergy screen test. Based on our current assumptions and projections, we expect revenue from our allergy products to grow to $227M in 2016, with gross margins of 75% or more.


9





Although allergies affect many industrialized countries worldwide, the U.S. is viewed as our primary market. Skin testing is still considered the gold standard in the U.S. due to its sensitivity, predictive value, low cost, health insurance reimbursement policies, and its role in the Allergist’s current practice/business. In vitro testing is more prevalent in some European countries (~50% of tests) and Japan (~85% of tests) where socialized medical practices and the small number of Allergists per capita affects the dynamics and Value Chain of the local industry. Given its lower cost, immediacy, sensitivity, and the aforementioned reasons, rapid adoption of in vitro allergy tests in the U.S. is not expected, barring unexpected major changes in our healthcare system. Due to similarities with the U.S. in this regard, Australia and some European countries could also adopt our allergy test system. Nevertheless, our marketing and sales focus will be the United States.





Early adoption by Allergists is an essential part of our strategy since it validates the technology and provides expert scientific and clinical information needed for market adoption. Our primary target segment will be rapidly growing young practices that are receptive to adopting digital patient record technology. Based on surveys and demographic data, we estimate that this segment constitutes approximately one third of the 3800 practicing Allergists. U.S. Allergists share a relatively common set of processes, customers, and suppliers. They are well connected by societies such as the American Academy of Allergy, Asthma, & Immunology (AAAAI); its associated Journal of Allergy and Clinical Immunology; the American College of Allergy, Asthma, and Immunology (ACAAI); the National Institute of Health’s National Institute of Allergy and Infectious Diseases (NIAID); the Asthma and Allergy Foundation of America (AAFA); and a number of annual meetings and conferences. Due to this relatively small number of specialists, achieving customer reach and awareness in this segment will be relatively straightforward. We will pursue the following approaches to achieve awareness in this segment:





·
Develop relationships and advocacy with Key Opinion Leaders (KOL’s) in field


·
Extensive tradeshow and conference participation e.g. AAAAI meetings


·
Talks and white paper describing minimally-invasive allergy testing


·
Posters presenting benefits to specialist and patient


·
Professionally engineered prototypes demonstrated at SensiVida’s booth


·
Demo software for testing process


·
Scientific and trade journal advertising


·
Direct contact using contract sales marketing in key regional hubs


·
Mailing product and company brochures


·
Development of SensiVida website describing product and scientific data





The Company retained Scott Taylor Associates (STA) of Newbury, MA to assess clinical and economic drivers that will influence product adoption by Allergists. STA conducted in-depth telephone interviews with 20 Allergists from across the U.S. to gather their perspectives of the Company’s Digital Allergy Test System. Interviews consisted of questions that discussed clinical utilization, standards of care and pricing, as well as an evaluation of the product profile.





Allergists were asked to rate their reaction to the various components of the Allergy Test System. Overall, the Allergists provided strong positive feedback; they particularly liked the data management component for its ability to reduce human error, to provide consistent, standardized results and to connect to electronic medical records. The pricing also had very favorable scores, indicating a strong potential to sell at the prices suggested.





The following comments, made by the Allergists during the interviews, highlight the benefits they perceive in the Allergy Testing System:





"Time savings, allowing to test more patients daily";


"Could increase nurses' time spent on other activities due to less time on testing";


"Results go directly into the EMR — saves time and labor";


10




"More automation can reduce human error";
 "Less pain for the patients."


Allergists particularly liked the time savings, automatic digital records and the more accurate and consistent test data they will obtain with the system. The survey results clearly correspond with data obtained in prior business research activities and trade conferences, indicating that Allergists favor the Company’s  product as a more accurate, more profitable alternative to standard Skin Prick Testing.





Our allergy test is an innovative, high-tech system that will require careful cultivation of KOL’s. Early feedback from KOL’s, has been positive, especially relative to the possibility of our adding more “science” to allergy testing through improved quantification and reproducibility. Notwithstanding these and other advantages, extending the life of skin testing through technological improvements would also reduce disruption to specialists who significantly depend on in-office testing and diagnostics for their livelihood. We plan to use these factors to help create partnerships with a high level panel of KOL’s who would serve as key advocates of our technology.





Given the lack of scientific data involving minimally-invasive approaches in skin allergy testing, we plan to publish “white papers” that gains credibility and creates scientific interest from KOL’s. Our first white paper was presented along with an exhibit at the November 2010 American College of Allergy, Asthma, and Immunology (ACAAI). We believe that our product was extremely well received by both Allergists and industry participants. Future clinical work done in collaboration with the KOL’s will also be presented as a peer-review document in journals like Journal of Allergy and Clinical Immunology, American Journal of Immunology, International Journal of Allergy and Immunology, European Academy of Allergy and Clinical Immunology etc. In parallel, selected KOL’s and SensiVida representatives can jointly make presentations and participate in “Poster Sessions” in key allergy and immunology conferences. This will provide an excellent opportunity to disseminate technical and Company literature such as laminated copies of key charts and graphs from the “white paper”, FDA clinical data summary, and information presenting expected improvements in Allergists’ profitability. These will be subtle messages, while the key focus would be to present the benefits of our system. The one-on-one interaction with practitioners will also provide the opportunity to gather names and contact information to collect as potential customer leads.





Since the number of U.S. Allergists is relatively small, a direct mailing campaign will be mounted that communicates the efficacy of our system as well as the relative profitability of the practitioners who adopt our system. Full-page ads in trade magazines or newspapers that coincide with FDA approval will also enhance customer awareness.





The primary positioning of our product is threefold: a) improved profitability for Allergists, b) pain-free Allergy testing for the patients, and c) accuracy, reliability, and standardization. Tag lines include: “A new era of allergy testing”, “The new standard of care”, “Automatic digital patient records”. An important element of the marketing plan will be to communicate financial benefits of the SensiVida Allergy Test to the practitioner.





Product adoption will largely depend on acceptance of key basic premises behind our Allergy test. In addition to clinical issues and cost, human factor aspects of the Value Proposition such as ease of use, reliability, and productivity will strongly influence adoption, especially early in the market cycle. For this reason, our sales and marketing plan includes a mobile sales team that visits doctors’ offices to demonstrate the product, thus allowing them to become familiar with the user-friendly software and system. Leads resulting in customer visits will be harvested from the various marketing activities described above as well as regional business research and teleprospecting. Given the relatively small revenue of our hardware and software compared to the consumable revenue stream, the sales pitch will emphasize minimal adoption cost and rapid increase in the physician’s profitability. The low unit manufacturing cost of the hardware and software allows us to offer these at nominal or no cost to minimize adoption barriers. Promotional literature estimating average gains in productivity and profitability will also be widely distributed.


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Following purchase of our system, consumable cartridges will be made available to Allergists through web or catalog sales, providing pricing advantages if done on a subscription basis. These channels for purchasing consumables and supplies are familiar to Allergists who routinely purchase allergen extracts, controls, and lancets in this manner. Our website, customers, and sales team will be connected by a Customer Relationship Management system (CRM) to optimize sales effectiveness, customer satisfaction, and retention.  Product upgrades, new product/services, usage tips, training, and other services that can retain customers and expand customer base can be effectively marketed when customers buy consumables through our web or catalog.





Our second allergy test product (launch 2014) is a screening test provided at retail clinics that targets the estimated 32M US patients that go untested each year. The low cost, simplified allergy screening test includes 15 broad-spectrum allergens that will provide a convenient option for today’s undiagnosed allergic patients. Retail clinics are an attractive channel for the SensiVida Allergy Screen Test. Facilities such as MinuteClinics, RediClinics, and Take Care Health are growing nationwide at rapid rates, already providing 1000’s of sites with in-place capabilities for SensiVida’s simple screening test. A recent announcement by MinuteClinic (CVS) of a $60 in vitro allergy screen test validates that interest and need are there, in spite of the fact that in vitro is a more expensive, less immediate, and non-reimbursable option. The retail clinic allergy test can be either referred by the PCP or provided as walk-in business.





Our allergy screening test will have automated image analysis capability, providing data in digital pictorial/tabular formats and hard copy (will help transition from paper to digital record keeping). Convenient file sharing capabilities will be integrated in the software allowing clinics to share their results with PCP’s and insurance companies productively, securely, and in a timely manner. Prior acceptance of our test by the specialist community will aid adoption of the screen product by one or more of the major retail clinics. By product introduction, planned for 2014, (a year following the Allergist product) the expected reach of retail clinics will substantially satisfy the needs of the target population. Furthermore, retail clinics will likely drive their own advertising campaigns to the general public through their extensive channels.





Due to our test automation and simplicity, the need for highly specialized nursing staff is obviated. Furthermore, the reduced test cycle time (10 minutes vs. 25-45 minutes) has significant impact on patient throughput and profitability. The clinic profitability of approximately 50% EBIT takes into account increased test productivity and somewhat reduced labor costs compared to the Allergist practice. We believe that our test provides a very profitable opportunity for the clinics and a low cost (potentially reimbursed), painless option for allergy patients.





As we progress in the allergy test market, we will seek to expand the business into other markets that highly leverage our core technology. Most notably, glucose and blood monitoring products will be explored for future business expansion and growth in subsequent years. Although the Company will aggressively focus on allergy testing, a number of patents based on our core microlancet and image processing technology have been filed that should provide the Company significant future market options and growth opportunities.





Competitive Landscape





Allergy Testing





Although it is highly labor intensive and subject to operator variability, the Skin Prick Test is still the gold standard and the most widely used test in the U.S. Some of its advantages are: 1) highest positive predictive value, 2) immediate results and, 3) low cost. One major negative is that the test can be traumatic to the patients, especially children. Our product automates this labor intensive test, taking the subjectivity out of the equation and making the testing experience significantly less traumatic to patients. While in vivo Skin Prick Tests dominate in the U.S., in vitro tests such as RAST, MAST, ELISA, ImmunoCAP are also used. The advantage of in vitro tests is that blood can be drawn at any location with relatively minimal trauma, and results come back as quantitative data (versus the subjectivity of the Skin Prick Test). On the negative side, test results are not immediately available, test cost is higher (typically not reimbursed), and tests are still subject to false positives or negatives. The position of allergy specialists in the U.S. relative to in vivo (skin test) and in vitro testing is summarized below:


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"In vivo tests, most commonly skin tests, are viewed by many as the most relevant indicator of IgE antibody since they involve direct observation of a biological response in the patient. It remains the primary method used by Allergists to detect IgE antibody, because of its sensitivity, specificity, speed, cost effectiveness, and ease of performance."


American Academy of Allergy Asthma and Immunology Work Group Report: Allergy Diagnosis in Clinical Practice, November 2006





"Skin tests with allergens represent the primary diagnostic tool in determining atopic status. Prick tests are the most commonly used for diagnostic purposes. Their characteristics–simplicity, rapidity of performance, low cost, and high sensitivity–explain their key position... Measurement of specific IgE in serum (in vitro) does not surpass skin tests and is more expensive."


Global Strategy for Asthma Management and Prevention: NIH Publication 02-3659 update, 2005





"Skin testing remains the principal tool in the determination of the presence of allergic sensitization. Reliability of skin testing and understandable documentation of test results are important when a patient is being evaluated by an Allergist and when a patient changes Allergists... almost all Allergists (in their survey) performed Skin Prick Testing (98.7%)"


Skin Testing: a Survey of Allergists, Oppenheimer et al, Ann. Allergy Asthma Immunol. 2006;96:19–23.





For these reasons, U.S. insurance providers generally do not cover in vitro tests, except for special cases (e.g. patients with delicate skin, infants). Another issue slowing adoption in the U.S. is that in vitro testing bypasses the Allergist’s revenue source by outsourcing this profitable part of their business. On the other hand, an analysis of Allergists’ cost structure reveals that our system should be financially attractive and supportive of their profession.





In addition to the aforementioned Allergist surveys conducted by Scott Taylor Associates, the company has obtained feedback regarding the Sensivida Allergy Test from some independent and internationally known medical research professionals. . A sampling of their commentary is provided below:


“... a good market niche exists for a fully automated allergy testing system, particularly if it has benefits for the patient and physician related to cost, time, and clinical usefulness.”


“... a good imaging subsystem can circumvent some of the most difficult parameters of allergy testing to overcome...”


“...The company (SensiVida) has identified a significant market opportunity.”


“...(current) skin testing is embarrassing- anything that’s going to standardize, is reproducible, and quantifiable will be great.”


“...Clearly opens up skin testing for kids.”





Market participants in allergy testing include Alk Abello, Greer, Hollister-Stier, Allergy Labs of Ohio and Lincoln Diagnostics for in vivo testing, and Phadia for in vitro testing. In spite of the number of participants, no offering such as SensiVida’s digital allergy test that overcomes shortcomings of skin tests while providing objectivity of in vitro tests (at a lower cost and with immediacy) is available.





Glucose Monitoring





Due to its large business potential, many large and small companies are pursuing less invasive, continuous, automated ways to sample glucose and other blood chemicals. A sampling of the various technologies is given below:





·
Subcutaneous continuous glucose monitor (CGM) sensor inserted into abdomen like infusion set


·
NIR in vivo: spectral analysis of near infrared by implanted sensor


·
NIR ex vivo: spectral analysis of near infrared scattered from skin


·
Ophthalmic: Spectral/fluorescence by retina or aqueous humor


·
Impedance analysis: glucose migrates to skin‐ impedance analysis


·
Ultrasonic: glucose diffusion through skin produced by ultrasound


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·
Photoacoustic: IR light pulse into skin produces acoustic signal


·
Sampling: Small amount of blood/interstitial fluid drawn for analysis





Although many of these technologies have been investigated for many years, only subcutaneous CGM’s has been granted FDA approval. Even those methods marketed by companies like Dexcom, Medtronics, and Abbott, have a ways to go before they achieve therapeutic accuracy and do not require excessive calibration.





Developed and proposed methods found in the literature to monitor blood chemistry suffer from a number of disadvantages. The standard finger stick test requires the use of a lancet that pierces the skin and is able to draw blood for subsequent measurements. Unfortunately, this process is not only invasive, but inconvenient as well. Furthermore, finger stick-based monitors provide periodically sampled measurements of the subject’s blood chemistry even though glucose levels may be fluctuating rapidly between readings. Non invasive optical approaches are being investigated that are continuous and non-invasive but suffer from calibration problems and day-to-today subject variation. Implantable devices could be continuous but are prone to a process known as bio-fouling, poor calibration, and periodic replacement needs.





Technical literature suggests that there are companies that are pursuing “microneedle-based” technologies capable of sampling minute quantities of blood or interstitial fluid with minimal impact or pain to the subjects. In spite of this advantage, microneedle systems described in the literature are still somewhat invasive since they extract blood from the patients for the measurements or reside long term as in vivo sensors. In vivo devices are also hampered by bio-fouling, long start-up times, and require frequent calibration or device replacement.





In view of the above information, the primary advantages that set our technology apart from other automated/minimally invasive monitors are in the following four areas:


•
It is a true chemical analysis- potentially accurate as finger stick test


•
Less prone to calibration problems than optical or implanted devices


•
No blood is extracted- test is done in vivo


•
Each microlancet is used for only a short time- no biofouling





Intellectual Property





A key patent, US7942827B2 issued in May 2011. This granted patent discloses the basic elements of our approach to allergy diagnostics. The allergy system protected by this patent includes encapsulated allergens, a microneedle array, and an actuator element that enables the encapsulated allergens to be placed into contact with the skin of the subject. A method for the determination of the degree of reaction to one or more of the allergens is also disclosed. Images of each of the microneedle penetration sites are captured and analyzed to assess the degree of reaction to the specific allergen. This patent is considered a key component enabling the allergy diagnostic business strategy of the Company. US7942827B2 provides broad coverage of the intellectual property space for microneedle or microlancet allergy diagnostic systems. Another patent filed in 2010 (see patent list below) provides additional support for the allergy diagnostic business. It is expected that subsequent filings will further strengthen the Company’s intellectual property position in this area.





We have either direct assignment or a worldwide exclusive license to 10 minimally-invasive in vivo diagnostics patent applications, including a number of PCT and European filings (see Patent list). In addition to allergy testing and glucose monitoring using microlancet technologies, coagulation monitoring for patients on blood thinners (e.g. Coumadin), cholesterol and other blood chemistry. There can be no assurance, however, that any pending patent applications will issue as patents, or if patents do issue, that the claims will be sufficiently broad to protect what the Company believes to be its proprietary rights.


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SensiVida Medical Systems executed a license agreement in February 2007 with Infotonics Technology Center, Inc.  Under the terms of the license agreement, SensiVida Medical Systems received an exclusive license to utilize Infotonics' intellectual property in minimally invasive devices, products and methods for diagnostic and therapeutic medical applications for humans and animals.  SensiVida Medical Systems received a worldwide excusive license in return for issuing 6,000 shares (6%) of its common stock and agreeing to pay a minimum royalty in years 1-3 equal to $10,000 and in years 4-6 of $20,000 and a 50% royalty on any sublicense.  The agreement terminates in the event that SensiVida Medical Systems fails to (i) make the minimum royalty payments after a 60 day notice, (ii) cure a material breach after a 30-day cure period, or (iii) produce a prototype by December 31, 2007 or some other mutually agreed date thereafter, and our filing for bankruptcy protection. The summary of license agreement is qualified in its entirety by the terms of the License Agreement attached hereto and incorporated herein as Exhibit 10.10 to this annual report on Form 10-K. The Company has acquired all rights granted to SensiVida Medical Systems, Inc. Since the acquisition of SensiVida Medical Systems by Mediscience, three additional key patents have been filed independently of the Infotonics license agreement.




Our Patents




A number of patent applications have been filed covering unique device, systems, and methods. The following patents are assigned or exclusively licensed to SensiVida:





Minimally Invasive Allergy Testing System


US Patent No. 7,942,827 B2, Issued May 17, 2011





Minimally Invasive Allergy Testing Systems and Methods


CIP to US Patent No. 7,942,827 B2


US Patent Application 11/995,366





Minimally Invasive Allergy Testing System with Coated Allergens


PCT/US2007/061604


US Patent Application 12/373,385





Compact Minimally Invasive Biomedical Monitor


US Patent Application 11/754,987


European Application EP 08756404.3





Blood Monitoring Systems and Methods


US Patent Application 11/279,290


European Application EP 06 749 731.3





MEMS Interstitial Prothrombin Time Test


US Patent Application 12/189,509





Spatial Imaging Methods for Biomedical Monitoring and Systems


US Patent Application 12/877,738





Replaceable Microneedle Cartridge for Biomedical Monitoring


US Patent Application 12/877,755





Methods for Skin Test Image Analysis and Systems Thereof


US Patent Application13/0176,182





Method and System for Managing Power Consumption in a Compact Diagnostic Capsule


US Patent Application12/175,901





Diagnostic Capsule with Peripheral Imaging


US Patent Application12/254,538





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Third Party Reimbursement




We will ultimately seek reimbursement from third-party payers, primarily in the United States, through Federal, State, Medicare, Medicaid and private health insurance plans, and in other countries, typically national government sponsored health and welfare plans. Such reimbursement will be subject to the regulations and policies of governmental agencies and other third-party payers. Reduced governmental expenditures in the United States and in other countries continue to put pressure on diagnostic procedure reimbursement. We cannot predict what, if any changes, may be forthcoming in these policies and procedures, nor the effect of such changes on our business potential of our screening and diagnostic technology.




We recently contracted Scott Taylor Associates Inc., a Newbury Massachusetts-based firm, to conduct a reimbursement assessment and determine how we can best obtain positive insurance coverage for its Allergy Test System. The primary objective of the evaluation was to gain an understanding of the key drivers that influence coverage decisions, product adoption, and ultimately patient access to our technology for the diagnosis and treatment of allergies.





Scott Taylor Associates conducted in-depth telephone interviews with 15 private Payers — the insurance companies that reimburse allergy testing — representing over 100 million covered individuals. All of the Payers interviewed stated that the SensiVida Allergy Test System would be covered by their respective plans. This was an extremely positive finding since there is no need to undergo the often lengthy insurance coverage process, obtaining new CPT Codes, and reimbursement pricing. For all companies in the health sciences field, lack of reimbursement can have very detrimental impact on the success of the business. Since SensiVida technology is considered an improvement over current reimbursed standard of care tests having existing CPT codes, adoption becomes merely a contracting issue with allergists.




Employees




As of May 31, 2011, we had three full-time employees, one part time employee, and a number of contracted workers. None of our employees are covered by collective bargaining agreements and none are represented by labor unions. We believe that relations with our employees and contractors are good.




Scientific Staff and Medical Advisors





We have assembled a group of experienced technology and industry experts to provide critical review and analysis of product development programs and to serve as a source of information on new and existing product ideas, new technologies and current research activities. We also believe that we have attracted accomplished scientists, engineers, and clinicians who will help guide us in product development and at gaining regulatory approval for commercial applications of our diagnostic technology. They will also be called upon to advise us about priorities and unmet needs in their respective disciplines and in matters such as physician's habits and preferences that would bear on product design and configuration.





Key people are:




·
Jose Mir: President,




Over 30 years experience managing innovation and New Business Development. Co-founder of Eastman Kodak’s new business incubator. GM of $15M digital motion picture business. Director of Infotonics Biomedical Initiatives. SensiVida Medical Systems founder. 70+ patents and publications.




·
David R. Smith, Chairman




Former CEO, Chairman and Founding Member of Infotonics Technology Center, Inc. from 2002 to 2008.Director of Engineering and Technology at Eastman Kodak. 35 years of diverse technology development experience. Board Chair of Optoelectronic Industry Development Association.


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·
John Spoonhower, CTO




PhD. (Cornell) in Applied and Engineering Physics. Creator of several multi-hundred million dollar business enterprises at Kodak. Former Managing Director of Kauffman Foundation Innovation interface at Cornell – a multi university project to investigate new businesses at Cornell and MIT. 56 patents and several pending




·
Margy Lydon, COO




M.S. Materials Science and Engineering (RIT). Senior level manager with over 20 years experience in operations management and  product development in the medical device field. Former GM of Angiotech BioCoatings, Vice President of Operations and Product Development STS Biopolymers




·
John Condemi, M.D.:Medical Advisor (Independent)




President of the Allergy Asthma Immunology of Rochester (AAIR) and Director of the Clinical Research Department and Infusion Center. Fellow of all major allergy/immunology societies. Over 90 technical papers, 23 chapters, 350 clinical studies.




·
Scott Taylor: FDA and Reimbursement Advisor(Independent)




Has more than 15 years consulting experience with Diagnostics, Medical Device, Point-of-Care Testing (POCT), and Pharmaceutical companies facilitating FDA approval process, reimbursement issues, and CPT Codes. President and CEO of Scott Taylor Associates.




·
John Agostinelli(Independent Consultant)




Ph.D (Univ. of Rochester) in Optics. Research Fellow at Kodak and Chief Technologist at Kodak’s Display Research Center. A Kodak “Elite Inventor”. Over 70 patents issued and pending.




·
Scott Rosebrough,(Independent Consultant)




PhD. (Univ. of Rochester) in Pharmacology. Product development experience in Medical Devices including Director of drug delivery coatings at Angiotech. Medical Device start ups, including Quality Assurance and Regulatory Affairs.




·
John Squilla(Independent Consultant)




Former WW Director of Innovation Strategy for Carestream Health Inc. and Kodak’s Healthcare Group. Senior Program Manager, Over 30 patents in the fields of camera design, advanced imaging, dental and medical applications, and integrated systems





Item. 1A.
Risk Factors




The following risk factors should be considered carefully in addition to the other information presented herein:




WE DO NOT HAVE A LONG OPERATING HISTORY, WHICH MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS.




Because limited historical information is available on our revenue trends and operations, it will be difficult for you to evaluate our business. Our prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by entrants into the medical device industry, which is characterized by slow adoption, competition and a high failure rate.




WE HAVE A HISTORY OF LOSSES, AND WE EXPECT LOSSES TO CONTINUE.




We have never been profitable, and we have had operating losses since our inception. We expect our operating losses to continue as we continue to expend substantial resources to launch our product line, to complete development of our products, obtain regulatory clearances or approvals, and build our marketing, sales, manufacturing and finance organizations, and conduct further research and development. To date, we have been engaged primarily in research and development efforts. The further development and commercialization of our products will require substantial development, regulatory, sales and marketing, manufacturing and other expenditures.


17




IF WE CANNOT OBTAIN ADDITIONAL FUNDS WHEN NEEDED, WE WILL NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.




We will require substantial additional capital to develop our products, including completing product testing and clinical trials, obtaining all required regulatory approvals and clearances, beginning and scaling up manufacturing, and marketing our products. We have historically funded a significant portion of our activities through private placements and available university matching funds. Any failure of such funding to take place or to be in an amount sufficient to commercialize our technology may compel us to find other collaborative partners to fund our capital expenditures, or our inability to obtain capital through other sources will limit our ability to grow and operate as planned. Even if we do enter into an agreement with a collaborative partner, the obligations of a collaborative partner to fund our expenditures is largely discretionary and depends on a number of factors, including our ability to meet specified milestones in the development and testing of the relevant product. We may not be able to meet these milestones, or our collaborative partner may not continue to fund our expenditures. We bear responsibility for all aspects of our Minimally-Invasive Diagnostic Platform Technology and its product line consisting of Allergy Test System, Glucose and Blood Diagnostic Test System, and its Optical Biopsy Pill products (early development done jointly with the research of our collaborative equity partner, Infotonics Technology Center). We may be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements. We believe that our existing capital resources may not be sufficient to fund our operations to the point of commercial introduction of our diagnostic products. Any failure to achieve adequate funding in a timely fashion would delay our development programs and could lead to abandonment of one or more of our development initiatives. Any required additional funding may not be available on terms attractive to us, or at all. To the extent we cannot obtain additional funding, our ability to continue to develop and introduce products to market will be limited. Any additional equity financing will be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants that would limit how we conduct our business or finance our operations. Absent additional funding from private or public equity or debt financings, collaborative or other partnering arrangements, or other sources and if we do not secure additional funding, we will be unable to conduct all of our product development efforts as planned, and we may need to cease operations or sell assets.




OUR ABILITY TO SELL OUR PRODUCTS IS CONTROLLED BY GOVERNMENT REGULATIONS, AND WE MAY NOT BE ABLE TO OBTAIN ANY NECESSARY CLEARANCES OR APPROVALS.




The design, manufacturing, labeling, distribution and marketing of medical device products are subject to extensive and rigorous government regulation including but not limited to FDA which can be expensive and uncertain and can cause lengthy delays before we can begin selling our products.




IN THE UNITED STATES, THE FOOD AND DRUG ADMINISTRATION'S ACTIONS COULD DELAY OR PREVENT OUR ABILITY TO SELL OUR PRODUCTS, WHICH WOULD ADVERSELY AFFECT OUR GROWTH AND STRATEGY PLANS.




In order for us to market our products in the United States, we must obtain continued clearance or approval from the Food and Drug Administration. We cannot be sure that we or any collaborative partners will make timely filings with the FDA; that the FDA will act favorably or quickly on these submissions; that we will not be required to submit additional information or perform additional clinical studies; that we would not be required to submit an application for IDE as described below; or that other significant difficulties and costs will not be encountered to obtain FDA clearance or approval. The IDE approval process  can take several years from initial filing and require the submission of extensive supporting data and clinical study data. The FDA may impose strict labeling or other requirements as a condition of its clearance or approval, any of which could limit our ability to market our products. Further, if we wish to modify a product after FDA clearance of a pre-market notification or approval of a pre-market approval application, including changes in indications or other modifications that could affect safety and efficacy, additional clearances or approvals will be required from the FDA. Any request by the FDA for additional data, or any requirement by the FDA that we conduct additional clinical studies or submit to the more rigorous and lengthier pre-market approval process, could result in a significant delay in bringing our products to market and substantial additional research and other expenditures. Similarly, any labeling or other conditions or restrictions imposed by the FDA on the marketing of our products could hinder our ability to effectively market our products. Any of the above actions by the FDA could delay or prevent altogether our ability to market and distribute our products. Further, there may be new FDA policies or changes in FDA policies that could be adverse to us.


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IN FOREIGN COUNTRIES, INCLUDING LATIN AMERICAN AND EUROPEAN COUNTRIES, WE ARE ALSO SUBJECT TO GOVERNMENT REGULATION, WHICH COULD DELAY OR PREVENT OUR ABILITY TO SELL OUR PRODUCTS IN THOSE JURISDICTIONS.




In order for us to market our products in Latin America or Europe and some other international jurisdictions, we and our distributors and agents must obtain required regulatory registrations or approvals. We must also comply with extensive regulations regarding safety, efficacy and quality in those jurisdictions. We may not be able to obtain the required regulatory registrations or approvals, or we may be required to incur significant costs in obtaining or maintaining any regulatory registrations or approvals we receive. Delays in obtaining any registrations or approvals required to market our products, failure to receive these registrations or approvals, or future loss of previously obtained registrations or approvals would limit our ability to sell our products internationally. For example, international regulatory bodies have adopted various regulations governing product standards, packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. These regulations vary from country to country. For example in order to sell our products in Europe, we must maintain ISO 13485 certification and CE mark certification, which is an international symbol of quality and compliance with applicable European medical device directives. Failure to receive or maintain ISO 13485 certification or CE mark certification or other international regulatory approvals would prevent us from selling in Europe and similar requirements would prevent us from selling in Latin American countries.




EVEN IF WE OBTAIN CLEARANCE OR APPROVAL TO SELL OUR PRODUCTS, WE ARE SUBJECT TO ONGOING REQUIREMENTS AND INSPECTIONS THAT COULD LEAD TO THE RESTRICTION, SUSPENSION OR REVOCATION OF OUR CLEARANCE.




We, as well as any collaborative partners, will be required to adhere to applicable FDA regulations regarding good manufacturing practice, which include testing, control, and documentation requirements. We are subject to similar regulations in foreign countries. Ongoing compliance with good manufacturing practice and other applicable regulatory requirements will be strictly enforced in the United States through periodic inspections by state and federal agencies, including the FDA, and in international jurisdictions by comparable agencies. Failure to comply with these regulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure to obtain pre-market clearance or pre-market approval for devices, withdrawal of approvals previously obtained, and criminal prosecution. The restriction, suspension or revocation of regulatory approvals or any other failure to comply with regulatory requirements would limit our ability to operate and could increase our costs.




19




OUR SUCCESS LARGELY DEPENDS ON OUR ABILITY TO OBTAIN AND PROTECT THE PROPRIETARY INFORMATION ON WHICH WE BASE OUR PRODUCTS.




Our success depends in large part upon our ability to establish and maintain the proprietary nature of our technology through the patent process, as well as our ability to possibly license from others patents and patent applications necessary to develop products. If any of our patent applications are not allowed, patents are successfully challenged, invalidated or circumvented, or our right or ability to manufacture our products were to be limited, our ability to continue to manufacture and market our products could be adversely affected. In addition to patents, we rely on trade secrets and proprietary know-how, which we seek to protect, in part, through confidentiality and proprietary information agreements. The other parties to these agreements may breach these provisions, and we may not have adequate remedies for any breach. Additionally, our trade secrets could otherwise become known to or be independently developed by competitors. In addition, we have filed for, or have rights to, 11 patents (including those under license) that are still pending. One or more of the patents we hold directly or license from third parties, may be successfully challenged, invalidated or circumvented, or we may otherwise be unable to rely on these patents. We have contract obligations to financially maintain these patents with periodic payments to the United States, Japan and European Union patent offices which could be unmet jeopardizing our existing rights. These risks are also present for the process we use or will use for manufacturing our products. In addition, our competitors, many of whom have substantial resources and have made substantial investments in competing technologies, may apply for and obtain patents that prevent, limit or interfere with our ability to make, use and sell our products, either in the United States or in international markets. The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property rights. In addition, the United States Patent and Trademark Office may institute interference proceedings. The defense and prosecution of intellectual property suits, Patent and Trademark Office proceedings and related legal and administrative proceedings are both costly and time consuming. Moreover, we may need to litigate to enforce our patents, to protect our trade secrets or know-how, or to determine the enforceability, scope and validity of the proprietary rights of others. Any litigation or interference proceedings involving us may require us to incur substantial legal and other fees and expenses and may require some of our employees to devote all or a substantial portion of their time to the proceedings. An adverse determination in the proceedings could subject us to significant liabilities to third parties, require us to seek licenses from third parties or prevent us from selling our products in some or all markets. We may not be able to reach a satisfactory settlement of any dispute by licensing necessary patents or other intellectual property. Even if we reached a settlement, the settlement process may be expensive and time consuming, and the terms of the settlement may require us to pay substantial royalties. An adverse determination in a judicial or administrative proceeding or the failure to obtain a necessary license could prevent us from manufacturing and selling our products.




DEADLINE FOR PRODUCT LAUNCH AND SALES DEFINED IN OUR FEBRUARY 2007 INTELLECTUAL PROPERTY AGREEMENT WITH INFOTONICS HAS PASSED.




We plan to amend the SensiVida-Infotonics Intellectual Property Agreement to extend the launch date requirement beyond May 31, 2010, and make it consistent with our current commercialization timeline estimates. Although there is a risk that this contract may not be negotiated successfully or with the same terms, we believe that the risk is small for the following reasons: 1) Since 2007, SensiVida has been fully responsible for supporting all technical, legal, and financial elements associated with the patent portfolio licensed from Infotonics; 2) SensiVida has filed three patents that it owns solely and that provide significant enabling embodiments and enhancements over the licensed Infotonics IP. Without access to these SensiVida Medical Technologies inventions, the licensed Infotonics IP would decrease in technical and commercial value; 3) SensiVida's clinical, technical, and business progress since the IP agreement was executed provides Infotonics the best channel for extracting value from its IP, since to our best understanding that are no other companies that have our knowledge base in the area or that approach our stage of product development; 4) Infotonics would lose potential future royalties if it terminated the agreement.




WE ARE CURRENTLY DEVELOPING OUR CURRENT PRODUCT LINE INDEPENDENTLY FROM ANY COLLABORATIVE PARTNERS, WHICH MAY REQUIRE US TO ACCESS ADDITIONAL CAPITAL AND TO DEVELOP ADDITIONAL SKILLS TO PRODUCE, MARKET AND DISTRIBUTE THESE PRODUCTS.




We are also currently seeking direct funding for and expect to commercialize our products independently of any collaborative partner. These activities will require development of partnerships and/or additional resources and capital that we will expect to be provided through this Offering. There is no assurance that we will be able to raise sufficient capital through the Offering or attract and retain skilled personnel to enable us to finish development, launch and market these products.




BECAUSE OUR PRODUCTS, WHICH USE DIFFERENT TECHNOLOGY OR APPLY TECHNOLOGY IN MORE INNOVATIVE WAYS THAN OTHER MEDICAL DEVICES, ARE OR WILL BE NEW TO THE MARKET, WE MAY NOT BE SUCCESSFUL IN LAUNCHING OUR PRODUCTS AND OUR OPERATIONS AND GROWTH WOULD BE ADVERSELY AFFECTED.




Our products are based on new methods of in vivo diagnostics analogous to Skin Prick Allergy Testing (SPT), glucose monitoring, and endoscopy. If our products do not achieve significant market penetration, our sales will be limited and our financial condition may suffer. Physicians and individuals may not recommend or use our products unless they determine that these products are an attractive alternative to current tests that have a long history of safe and effective use. To date, our products have not been used by anyone, and no independent studies regarding our products have been published. The lack of independent studies limits the ability of doctors or consumers to compare our products to conventional products.


20




IF WE ARE UNABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE MEDICAL DEVICE INDUSTRY, OUR FUTURE GROWTH AND OPERATING RESULTS WILL SUFFER.




The medical device industry in general and the markets in which we expect to offer products in particular, are intensely competitive. Many of our competitors have substantially greater financial, research, technical, and manufacturing, marketing and distribution resources than we do and have greater name recognition and lengthier operating histories in the health care industry. We may not be able to effectively compete against these and other competitors. Furthermore, if our products are not available at competitive prices, health care providers, and health insurance companies who are subject to increasing pressures to reduce costs may not elect to purchase or reimburse them. Accordingly, competition in this area is expected to increase. Furthermore, our competitors may succeed in developing, either before or after the development and commercialization of our products, devices and technologies that permit more efficient, less expensive non-invasive and less invasive monitoring, or cancer detection. It is also possible that one or more pharmaceutical or other health care companies will develop therapeutic drugs, treatments or other products that will substantially render our products obsolete.




THE AVAILABILITY OF THIRD-PARTY REIMBURSEMENT FOR OUR PRODUCTS IS UNCERTAIN, WHICH MAY LIMIT CONSUMER USE AND THE MARKET FOR OUR PRODUCTS.




In the United States and elsewhere, sales of medical products are dependent, in part, on the ability of consumers of these products to obtain reimbursement for all or a portion of their cost from third-party payers, such as government and private insurance plans. Any inability of patients, hospitals, physicians and other users of our products to obtain sufficient reimbursement from third-party payers for our products, or adverse changes in relevant governmental policies or the policies of private third-party payers regarding reimbursement for these products, could limit our ability to sell our products on a competitive basis. Although our business research work reported We are unable to predict what changes will be made in the reimbursement methods used by third-party health care payers. Moreover, third-party payers are increasingly challenging the prices charged for medical products and services, and some health care providers are gradually adopting a managed care system in which the providers contract to provide comprehensive health care services for a fixed cost per person. Patients, hospitals and physicians may not be able to justify the use of our products by the attendant cost savings and clinical benefits that we believe will be derived from the use of our products, and therefore may not be able to obtain third-party reimbursement. Reimbursement and health care payment systems in international markets vary significantly by country and include both government sponsored health care and private insurance. We may not be able to obtain approvals for reimbursement from these international third-party payers in a timely manner, if at all. Any failure to receive international reimbursement approvals could have an adverse effect on market acceptance of our products in the international markets in which approvals are sought.




OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN SCIENTIFIC, TECHNICAL, MANAGERIAL AND FINANCE PERSONNEL.




Our ability to operate successfully and manage our future growth depends in significant part upon the continued service of key scientific, technical and managerial and finance personnel, as well as our ability to attract and retain additional highly qualified personnel in these fields. We may not be able to attract and retain key employees when necessary, which would limit our operations and growth.




WE ARE INFLUENCED BY OUR DIRECTORS, EXECUTIVE OFFICERS AND THEIR AFFILIATED ENTITIES.




Our directors, executive officers and entities affiliated with them beneficially owned an aggregate of 8.9% of our outstanding common stock as of June 15, 2010. These stockholders, acting together, would be able to exert some influence on all matters requiring approval by our stockholders, including the election of directors and the approval of mergers and other business combination transactions.


21




Item 1B.
Unresolved Staff Comments





None.





Item 2.
Description of Property




Our corporate headquarters are located in Henrietta, New York. We have one year lease which expires on June 30, 2011 with High Tech Rochester, Inc. , (HTR) in a 50,000 square feet facility. The Company leases 1437 square feet of office and laboratory space from HTR.    The Company also leased 200 square foot laboratory space at the Rochester BioVentures Center in Henrietta, New York until September 30, 2010.  In October 2011, we relocated the laboratory to a 383 square foot leased space at Eastman Business Park, part of the Eastman Kodak Company, in Rochester, New York.  The lease with Eastman Kodak Company expires September 30, 2011.




We believe that our current facilities adequately provide for our operations.  However, as more employees and contractors are hired, we expect to require additional laboratory and office space for sales, marketing and business development.





Item 3.
Legal Proceedings





We have been sued by Dr. Robert R. Alfano in a case styled Robert R. Alfano v. SensiVida Medical Technologies, Inc., C.A. No 09 CV 8753 (SDNY 2009). Dr. Alfano alleges that he is owed $1,487,053 in consulting fees in connection with a consulting agreement that he claims we breached.  Dr. Alfano also is claiming that he is owed 132,000 post reverse split shares of our common stock under the terms of alleged various anti-dilution agreements with us. We have filed an Answer and a counterclaim.




Item 4.
Submission of Matters to a Vote of SecurityHolders





None.




PART II





Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities





Market Information





Our common stock is traded under the symbol "SVMT" on the OTC Bulletin Board. The following table sets forth the range of high and low closing bid for our common stock for the periods set forth below as reported by the OTC Bulletin Board.  Such quotations represent inter-dealer quotations, without adjustment for retail markets, markdowns or commissions, and do not necessarily represent actual transactions.





High


Low3/1/2010 through 5/31/2010

$
1.01


$
0.116/1/2010 through 8/31/2010


1.00



0.169/1/2010 through 11/30/2010


0.75



0.1812/1/2010 through 2/28/2011


0.85



0.283/1/2009 through 5/31/2009

$
2.00


$
0.626/1/2009 through 8/31/2009


1.05



0.259/1/2009 through 11/30/2009


0.79



0.5112/1/2009 through 2/29/2010


0.54



0.11


22





Holders





As of June 15, 2011, there were approximately 151 holders of record of our common stock.





Dividends





We do not intend to pay cash dividends on our common stock for the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of dividends if any, on the common stock will rest solely within the discretion of the Board of Directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors. We have not paid or declared any dividends upon our common stock since inception.





Securities Authorized for Issuance Under Equity Compensation Plans





We have two equity compensation plans. Our 1999 Stock Incentive Plan effective as of April 1, 2003 (the "1999 Plan") provides for the issuance of up to 25,000,000 incentive and non-qualified stock options, stock appreciation rights and shares of common stock to our eligible employees and consultants and our 2003 Consultants Stock Option, Stock Warrant and Stock Award Plan effective as of February 17, 2004 (the "2003 Plan," and together with the 1999 Plan, the "Stock Option Plans") provides for the issuance of up to 7,000,000 non-qualified stock options, stock purchase warrants and shares of common stock to our eligible employees and consultants. Each of the Stock Option Plans was approved by our Board of Directors and ratified by the holders of a majority of our issued and outstanding shares of common stock within 12 months of such board approval. The following table presents certain information relating to outstanding awards and shares available for future grant under our Stock Option Plans in accordance with Item 201(d) of Regulation S-K.





Equity Compensation Plan Information





Number of securitiesremaining available forfuture issuance underNumber of securities to


Weighted-average


equity compensationbe issued upon exercise


exercise price of


plans (excludingof outstanding options,


outstanding options,


securities reflected inwarrants and rights


warrants and rights


column (a))Plan category

(a)


(b)


(c)Equity compensation plans not approved by security holders


800,000


$
0.36



N/ATotal


800,000


$
0.36



N/A


23


Recent Sales of Unregistered Securities





The information required by Item 701 of Regulation S-K has been previously included in one or more current reports on Form 8-K filed by the Company.





Item 6.
Selected Financial Data





We are a “smaller reporting company” as such term is defined in Rule 12b-2 of the Exchange Act and are exempt from making the disclosures required by this item pursuant to paragraph (c) of Item 301 of Regulation S-K.





Item 7.
Management's Discussion and Analysis of Financial Condition andResults of Operations





The following discussion should be read in conjunction with the Financial Statements and the notes thereto that appear in Item 8 of this annual report on Form 10-K.





Results of Operations





Year Ending February 28, 2011 Compared to


Year Ending February 28, 2010





Revenues





We had no revenues during the years ending February 28, 2011 and February 28, 2010.  Previously, our prior focus was our continued development of our light-based technology.  Effective March 3, 2009, with the merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix, Inc., the Company’s technology has focused on the automation of analysis and data acquisition for allergy testing, glucose monitoring, blood coagulation testing, tuberculosis testing, and cholesterol monitoring.





General and Administrative Expense





General and administrative expenses increased approximately $224,000, or 21%, during the current year ended February 28, 2011 as compared to the year ended February 28, 2010.  The increase was the net of increases and decreases in major expense components.  Salaries, wages and related expenses approximating $430,000 increased approximately $43,000 from the prior year period, primarily as a result of the hiring of Ms. Margaret Lydon as Chief Operating Officer and Mr. John P. Spoonhower as Chief Technology Officer with salaries to date approximating $135,000 plus stock option costs of $22,700. The increase in salary and related cost was partially offset by the resignation of the former CEO, Kamal Sarbadhikari effective December 31, 2009.  Marketing and consulting costs of approximately $213,000 for the year ended February 28, 2011 increased approximately $168,000 as compared to the year ended February 28, 2010.  Approximately $82,000 of the marketing and consulting costs had been funded by common stock for current and future services.  These costs represent investor and media public relations along with strategic corporate development and financing.  Placement agent fees of $50,000 increased approximately $33,000 from the prior year period, primarily as a result of the engagement of a financial advisory company for the placement of the Company's securities.  The initial fee consisted of a $25,000 deposit with the remainder to be paid out of the initial proceeds or placement.  To date, no securities have been placed by the current placement agent.  As an offset to the increase in general and administrative expense for the year ended February 28, 2011, professional fees decreased approximately $61,000 during the current year ended.  In the prior year February 28, 2010, there were increased professional activities associated with the merger of the Company and SensiVida Medical Systems, Inc. on March 3, 2009 and related matters.  In October 2009, a civil action was entered against the Company by Dr. Robert Alfano.  The litigation centers around payment for accrued consulting fees and expenses totaling approximately $1,490,000.  In addition, Dr. Alfano is contesting the termination of his anti-dilution rights and the exchange of his former Mediscience Technology Corp. stock for SensiVida Medical Technologies, Inc. stock.  The Company does not believe the case has merit and has filed an answer and counterclaim.  The Company intends to vigorously contest these claims.  Other increases in general and administrative expenses for the year ended February 28, 2011 as compared to the year ended February 28, 2010, were depreciation expense of $14,000, telephone of $7,000, supplies of $8,000 and printing of $6,000.  All other general and administrative expenses net to an additional increase of approximately $6,000 when compared to the prior year period.


24





Product Development Expense





Product development expense increased approximately $367,400, or 121%, during the current year ended February 28, 2011 when compared to the prior year ended February 28, 2010.  The increase is  net of an increase of approximately $468,000 in costs for product design and development, plus clinical studies for allergy research being conducted in Rochester, NY, by the Company and its consultants, less a decrease of approximately $100,500 of deferred charges amortized during the current year ended as compared to the prior year ended February 28, 2010.





Cancellation of Indebtedness





The Company has written off certain accrued consulting fees totaling $43,597 that had been outstanding for a number of years due to lack of completion of the engagement by the consultant.





Liquidity and Capital Resources





We had a deficiency in working capital as of February 28, 2011 of approximately $3,539,000 compared to a deficiency of approximately $3,365,000 at February 28, 2010, representing an increase in the deficiency of approximately $174,000 for the current year ended February 28, 2011.  The increase in the deficiency consisted of a decrease of approximately $10,000 in cash and an increase of approximately $164,000 in current liabilities.  The principal reason for the increase in the deficiency was the increase in trade payables approximating $125,000 and the increase in accrued liabilities of $490,000.  These increases totaling $615,000 were partially offset by a redemption of convertible debt of $50,000, plus an exchange of preferred stock subscribed of $250,000, an outstanding loan of $50,000, plus accrued interest of approximately $39,000 in exchange for Series A Preferred stock.  Also, an additional $62,500 of accrued expenses was exchanged for Series A Preferred stock during the year ended February 28, 2011.





During March 2010, the Company began an offering of a maximum of $10,000,000 of Series A Preferred stock at $1.00 per share.  The Series A Preferred stock is convertible into shares of the Company’s common stock, par value $.01 per share at $0.35 per share for a period of three years from the date of issuance and bears interest at 12% per annum, such interest to accrue and be paid in cash at the end of three years from the date of issuance of the Series A Preferred stock or in shares of common stock if the investor elects to convert the Series A Preferred stock.  The investor also will receive warrants to acquire shares of common stock in an amount equal to 50% of the number of shares of common stock into which the Series A Preferred stock converts.  The exercise price of the warrant is $1.00 per share.  Series A Preferred stock subscriptions to date have exceeded approximately $1,738,000, net of expenses approximating $255,000.





Our ability to continue our operations is largely dependent upon obtaining regulatory approval for the commercialization of our diagnostic technology for allergy testing, glucose monitoring, blood coagulation testing, tuberculosis testing and cholesterol monitoring.  There can be no assurance as to whether or when the various requisite government approvals will be obtained or the terms or scope of these approvals, if granted.  We intend to defray the costs of obtaining regulatory approval for the commercialization of such technology by the establishment of clinical trial arrangements with medical institutions.  We intend to continue to pursue the establishment of co-promotional arrangements for the marketing, distribution and commercial exploitation of our technology.  Such arrangements, if established, may include up-front payments, sharing of sales revenues after deduction of certain expenses, and/or product development funding.  Our management anticipates that substantial resources will be committed to a continuation of our research and development efforts and to finance government regulatory applications.  While management believes that we will obtain sufficient funds to satisfy our liquidity and capital resources for the next 12 months from financings and short term borrowings, no assurances can be given that additional funding or capital from other sources, such as co-promotion arrangements, will be obtained on a satisfactory basis, if at all.  In the absence of the availability of financing on a timely basis, we may be forced to materially curtail or cease our operations.  Our operating and capital requirements, as described above, may change depending upon several factors, including: (i) results of research and development activities; (ii) competitive and technological developments; (iii) the timing and cost of obtaining required regulatory approvals for our products; (iv) the amount of resources which we devote to clinical evaluation and the establishment of marketing and sales capabilities; and (v) our success in entering into, and cash flows derived from, co-promotion arrangements.


25





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.





Recent Accounting Pronouncement





Reference is made to the summary or significant accounting policies included in the consolidated financial statements for a discussion and analysis of recently issued accounting pronouncements and their impact on the Company.





Item 7A.
Quantitative and Qualitative Disclosures About Market Risk





We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K, and we are not required to make the disclosures required by this item pursuant to Item 305(e) of Regulation S-K.





26





Item 8.
Financial Statements and Supplementary Data




SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 FEBRUARY 28, 2011 AND 2010
  CONTENTS
 
 PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
28CONSOLIDATED BALANCE SHEETS
29CONSOLIDATED STATEMENTS OF OPERATIONS
30CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
31CONSOLIDATED STATEMENTS OF CASH FLOWS
32NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33 - 47
  27
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Board of Directors
 SensiVida Medical Technologies, Inc.
 West Henrietta, New York
 
 We have audited the accompanying consolidated balance sheets of SensiVida Medical Technologies, Inc. and subsidiaries, (the “Company”) as of February 28, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  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 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of SensiVida Medical Technologies, Inc. and subsidiaries as of February 28, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
 
 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As disclosed in Note 1 to the financial statements, the Company has no revenues, incurred significant losses from operations, has negative working capital and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plan in regard to these matters is also described in Note 1.   The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
 
 /s/ MORISON COGEN LLP
 
 Bala Cynwyd, Pennsylvania
 June 15, 2011
  28
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 FEBRUARY 28, 2011 AND 2010
 
 2011


2010ASSETSCURRENT ASSETSCash

$
2,240


$
12,002TOTAL CURRENT ASSETS


2,240



12,002PROPERTY PLANT AND EQUIPMENTNet of Accumulated Depreciation of $14,690 (2011) and $207,322 (2010)


12,489



-OTHER ASSETSIntellectual Property - Net of Accumulated Amortization of $374,474 (2011) and $187,237 (2010)


2,434,090



2,621,327Deferred Costs


-



49,167Other Assets


7,760



3,016Restricted Cash


-



18,727TOTAL OTHER ASSETS


2,441,850



2,692,231TOTAL ASSETS

$
2,456,579


$
2,704,239LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESConvertible Debt

$
401,500


$
451,500Other Loans Payable


49,828



99,828Accounts Payable


380,298



255,189Officer Loan Payable


5,524



5,524Accrued Liabilities


2,704,431



2,315,680Preferred Stock Subscribed


-



250,000TOTAL CURRENT LIABILITIES


3,541,581



3,377,721TOTAL LIABILITIES


3,541,581



3,377,721STOCKHOLDERS' DEFICITPreferred Stock - $.01 Par Value, 11,000,000 and 5,000 shares Authorized; 2,021,728 and -0- shares issued and outstanding in 2011 and 2010


20,217



-Common Stock - $.01 Par Value, 89,000,000 and 19,995,000 shares authorized, 16,088,112 and 15,980,612 shares issued and outstanding in 2011 and 2010


160,881



159,806COMMON STOCK SUBSCRIBED


140,800



140,800ADDITIONAL PAID-IN CAPITAL


35,947,558



34,153,453ACCUMULATED DEFICIT


(37,354,458
)


(35,127,541
)TOTAL STOCKHOLDERS' DEFICIT


(1,085,002
)


(673,482
)TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT

$
2,456,579


$
2,704,239
 
 The accompanying notes are an integral part of these consolidated financial statements.
  29
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 YEARS ENDED FEBRUARY 28, 2011 AND 2010
 
 2011


2010SALES

$
-


$
-COST OF SALES


-



-GROSS PROFIT


-



-GENERAL AND ADMINISTRATIVE EXPENSE


1,292,833



1,069,040RESEARCH AND DEVELOPMENT EXPENSE


670,932



303,537TOTAL EXPENSE


1,963,765



1,372,577LOSS FROM OPERATIONS


(1,963,765
)


(1,372,577
)OTHER INCOME (EXPENSE)Cancellation of Indebtedness


-



43,597Interest Income


48



86Interest Expense


(263,200
)


(149,399
)Accretion of Discount on Convertible Debt


-



(86,036
)Total Other Income (Expense)


(263,152
)


(191,752
)NET LOSS

$
(2,226,917
)

$
(1,564,329
)BASIC AND DILUTED NET LOSS PER COMMON SHARE

$
(0.139
)

$
(0.112
)BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

$
16,001,530


$
13,984,738
 
 The accompanying notes are an integral part of these consolidated financial statements.
  30
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
 YEARS ENDED FEBRUARY 28, 2011 AND 2010
 
 Preferred Stock


Common Stock


CommonNumber





Number





Stock


Additional


Accumulatedof Shares


Amount


of Shares


Amount


Subscribed


Paid-in Capital


DeficitBALANCE AT FEBRUARY 28, 2009


-


$
-



7,123,241


$
71,232


$
-


$
27,784,596


$
(33,563,212
)Common stock subscribed


-



-



-



-



140,800



-



-Acquisition of SensiVida Medical Sys tem s , Inc.


-



-



3,333,333



33,334



-



2,717,999



-Com m on s tock issued in cancellation of shareholder debt


-



-



1,172,510



11,725



-



2,135,462



-Conversion of debt and acrrued interest


-



-



4,155,222



41,552



-



1,412,773



-Cancellation of fractional s hares as a result of reverse stock split


-



-



(27
)


-



-



-



-Com m on s tock issued for future services


-



-



150,000



1,500



-



76,000



-Com m on s tock issued for services


-



-



46,333



463



-



26,623



-Net loss for the year ended February 28, 2010


-



-



-



-



-



-



(1,564,329
)BALANCE AT FEBRUARY 28, 2010


-


$
-



15,980,612


$
159,806


$
140,800


$
34,153,453


$
(35,127,541
)Com m on Stock Issued for Services


-



-



107,500



1,075



-



53,025



-Series A Preferred Stock-Net of Expenses of $254,714


2,021,728



20,217



-



-



-



1,718,312



-Fair Value of Employee Stock Option Grants


-



-



-



-



-



22,768



-Net Loss


-



-



-



-



-



-



(2,226,917
)BALANCE AT FEBRUARY 28, 2011


2,021,728


$
20,217



16,088,112


$
160,881


$
140,800


$
35,947,558


$
(37,354,458
)
 
 The accompanying notes are an integral part of these consolidated financial statements.
  31
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED FEBRUARY 28, 2011 AND 2010
 
 2011


2010CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(2,226,917
)

$
(1,564,329
)Adjustments to reconcile net loss to net cash used in operating activitiesFair value of employee stock options grant


22,768



-Depreciation and Amortization


201,926



187,237Amortization of deferred costs


49,167



158,880Accretion of discount on convertible debt


-



86,036Common stock issued for services


54,100



27,086Subtotal


(1,898,956
)


(1,105,090
)Changes in assets and liabilities, net of acquistion(Increase) decrease in assetsPrepaid expenses


-



17,262Other assets


(4,744
)


(216
)Restricted Cash


18,727



(18,727
)Increase in liabilitiesAccounts payable


125,109



181,294Accrued liabilities


490,029



569,882Net cash used in operating activities


(1,269,835
)


(355,595
)CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property and equipment


(27,178
)


-CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds from Issuance of series A preferred stock


1,337,251



-Redemption of convertible debt


(50,000
)


-Subscription for convertible debt


-



100,000Proceeds from common stock subscribed


-



140,800Increase in other loans payable


-



50,000Net cash provided by financing activities


1,287,251



290,800NET DECREASE IN CASH


(9,762
)


(64,795
)CASH - BEGINNING OF YEAR


12,002



76,797CASH - END OF YEAR

$
2,240


$
12,002SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:Common stock issued in acquisition of intellectual property and other liabilities (Note 10)

$
-


$
2,751,332Common stock issued for future services

$
-


$
77,500Preferred Stock Issued in Cancellation of preferred stock subscribed

$
250,000


$
-Preferred Stock Issued in Cancellation of other loans payable

$
50,000


$
-Preferred Stock Issued in Cancellation of accrued liabilities

$
101,278


$
-Common stock issued in conversion of debt and accrued interest

$
-


$
1,454,325Common stock issued in cancellation of accrued liabilities

$
-


$
2,147,187
 
 Property, plant and equipment with an original cost of $207,322 that was fully depreciated, was retired or abandoned during the year ending February 28, 2011.
 
 The accompanying notes are an integral part of these consolidated financial statements.
  32
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Nature of the Business
 The consolidated financial statements include the accounts of SensiVida Medical Technologies, Inc. (“SensiVida”) and its wholly-owned subsidiaries, Laser Diagnostic Instruments, Inc. (“Laser”), Photonics for Women’s Oncology, LLC (“Photonics”) and Mediphotonics Development, LLC (“Mediphotonics”), and Bioscopix, Inc. (“Bioscopix”), (collectively the “Company”).   All significant intercompany transactions and balances have been eliminated in consolidation.  All wholly-owned subsidiaries are currently inactive.
 
 The Company had operated in one business segment encompassing in the design and development of medical diagnostic instruments that detect cancer in vivo in humans by using light to excite the molecules contained in tissue and measuring the differences in the resulting natural fluorescence between cancerous and normal tissue.  Effective March 3, 2009, with the merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix, Inc., the Company’s technology now focuses on the automation of analysis and data acquisition for allergy testing, glucose monitoring, blood coagulation testing, new tuberculosis testing, and cholesterol monitoring.
 
 Management’s Plan
 The Company is subject but not limited to a number of risks similar to those of other companies at this stage of development, including dependence on key individuals, the development of commercially usable products and processes, competition from substitute products or alternative processes, the impact of research and product development activity, competitors of the Company, many of whom have greater financial or other resources than those of the Company, the uncertainties related to technological improvements and advances, the ability to obtain adequate additional financing necessary to fund continuing operations and product development and the uncertainties of future profitability.  The Company expects to incur substantial additional costs before beginning to generate income from product sales, including costs related to ongoing research and development activities, preclinical studies and regulatory compliance.  Substantial additional financing is needed by the Company.
 
 The Company has no revenues, incurred significant losses from operations, has an accumulated deficit and a highly leveraged position that raises substantial doubt about the Company’s ability to continue as a going concern.  The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company expects to incur substantial expenditures to further the development and commercialization of its products.  There can be no assurance that continued financings will be available to the Company or that, if available, the amounts will be sufficient or that the terms will be acceptable to the Company.
 
 Use of Estimates
 The preparation of 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.  Actual results could differ from those estimates.
  33
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D).
 
 Equipment and Leasehold Improvements
 Equipment and leasehold improvements are stated at cost.  Depreciation is computed using the straight-line method over an estimated useful life of five years for equipment and the shorter of the lease term or fifteen years for leasehold improvements.  Depreciation expense was $14,690 and $-0- for the years ended February 28, 2011 and 2010, respectively.
 
 Intellectual Property
 Intellectual property consists of technology with patents pending approval that was included in the acquisition of SensiVida Medical Systems, Inc. and is stated at cost.  Amortization is computed using the straight-line method over an estimated useful life of fifteen years.  Amortization expense was $187,236 and $187,237 for the years ended February 28, 2011 and 2010, respectively.
 
 Income Taxes
 The Company accounts for income taxes under Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 740 IncomeTaxes which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
 
 Research and Development
 Research and development costs are charged to operations when incurred.  The amounts charged to expense were $670,932 and $303,537 in 2011 and 2010, respectively.
 
 Loss per Common Share
 In accordance with FASB ASC 260, Earnings per Share, basic and diluted net loss per share is computed using net loss divided by the weighted average number of shares of common stock outstanding for the period presented.  Because the Company reported a net loss for each of the years ended February 28, 2011 and 2010, common stock equivalents consisting of options and warrants were anti-dilutive; therefore, the basic and diluted net loss per share for each of these periods were the same.
 
 Accounting for Stock-Based Compensation
 FASB ASC 718, Share-Based Paymentrequires measurement of all employee stock-based compensation awards using a fair value method and the recording of such expense in the consolidated financial statements.  In addition, this topic requires additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements.  See Note 9 regarding Issuance of options associated with new employment agreements.
 
 Concentration of Credit Risk Involving Cash
 The Company may have deposits with major financial institutions which exceed Federal Deposit Insurance limits during the year.
 
 Reclassification
 The February 28, 2010 financial statements have been reclassified to conform to the 2011 financial statement presentation.
  34
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 
 RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
 
 In December 2010, FASB issued ASU No. 2010-29, Business Combination (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations.  The amendments in this Update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.  The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.  The Company will adopt the disclosure requirements for any business combinations after March 1, 2011.
 
 As of February 28, 2011, the FASB has issued Accounting Standards Updates (ASU) through No. 2011-01.  None of the ASUs have had an impact on the Company’s financial statements.
 
 Recently Issued Accounting Pronouncements Not Yet Adopted
 As of February 28, 2011, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.
 
 NOTE 2 – RELATED PARTY TRANSACTIONS
 
 Legal services rendered by Mr. Peter Katevatis amounted to $-0- and $55,000 for the years ended February 28, 2011 and 2010.  These amounts are recorded in general and administrative expense.  On February 3, 2010, Mr. Katevatis resigned from his legal service agreement.
 
 See Note 9 for details regarding the Company’s consulting agreement with one of its principal stockholders and Note 5 and 6 for related party loans and accrued liabilities.
 
 NOTE 3 – DEFERRED CHARGES
 
 In fiscal 2011 and 2010, the Company issued -0- and 150,000, respectively, of fully vested restricted shares of its common stock at fair market value to different consulting groups in exchange for a variety of services to be rendered, over a period of 12 months for matters such as corporate management, marketing opportunities, product development and research, corporate funding and investor relations.  These costs have been capitalized and have been recognized ratably over the terms of the agreements.
 
 NOTE 4 – CONVERTIBLE DEBT
 
 On January 10, 2007, the Company commenced a Private Placement Offering for $2,000,000 of 12% convertible promissory notes (“the Notes”) in amounts of not less than $25,000.  The Notes shall be due and payable, together with accrued and unpaid interest, on the earlier of April 15, 2008 for the first $1,000,000 tranche and April 15, 2009 for the second $1,000,000 tranche (of which $656,500 had been raised as of February 28, 2009) or three months after the completion of the initial public offering (“the IPO”) of the shares of BioScopix (now SensiVida Medical Technologies, Inc. as a result of the merger of BioScopix into Mediscience Technology Corp. and subsequent name changes of the Company to BioScopix and then SensiVida Medical Technologies, Inc. (SensiVida), after the merger of BioScopix and SensiVida Medical Technologies, Inc. Holders of the Notes may convert the notes into (i) cash in the amount of the principal and accrued and unpaid interest due and a warrant exercisable until April 15, 2009 to purchase shares of BioScopix (now SensiVida) in an amount equal to 50% of the principal of the Notes at an exercise price of 120% of the five day volume weighted average preceding the effective date of the IPO of SensiVida or (ii) shares of SensiVida at a price equal to 50% of the IPO price of the SensiVida shares of common stock in an amount equal to the principal and accrued and unpaid interest due on the Notes.  In accordance with FASB ASC 470.2, under option (ii), the carrying value of the Notes was reduced by the intrinsic value of the beneficial conversion option resulting in a carrying value of $-0-.  On January 29, 2008, the Notes were modified to provide for two additional options.  In addition to options (i) and (ii), holders of the notes may now also convert the notes into (iii) SensiVida stock with a six month lockup in the amount of principal and accrued interest and receive 50% warrant coverage at 75% of the SensiVida stock IPO price and (iv) combination of alternatives (ii) and (iii).  The additional options did not require an adjustment to the value of the Notes.
  35
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 4 – CONVERTIBLE DEBT (CONT’D).
  As of May 31, 2009, the notes have been accreted to their maturity value.  Accretion of discount on convertible debt amounted to $-0- and $86,036 for the fiscal years 2011 and 2010.
 
 Accrued interest payable on the notes as of February 28, 2011 and 2010 was $173,499 and $141,431, respectively.  Interest expense for the years ended February 28, 2011 and 2010 was $49,656 and $149,399, respectively.
 
 Effective April 15, 2008, the first $1,000,000 tranche of the Notes were in default.  Under the terms of the Notes, in the event of default, the entire principal and unpaid accrued interest is immediately due and payable. The January 29, 2008 modification of the Notes provided two additional options of the Note holders as compensation for the delay of the IPO which was expected to take place prior to April 15, 2009.
 
 Effective April 15, 2009, the second tranche of the Notes in the amount of $656,500 were in default.  Under the terms of the Notes, in the event of default, the entire principal and unpaid accrued interest is immediately due and payable.
 
 On July 31, 2009, certain note holders converted the note and accrued interest through July 31, 2009 into common stock of the Company at the net price of $.35 per share which represents 50% of the opening market value of the stock on this date.   Principal of $1,205,000 and accrued interest of $249,325 were converted into 4,155,222 shares of the Company’s common stock.
 
 As of May 19, 2010, one convertible note holder demanded repayment of principal of $50,000 with a subsequent demand for accrued interest approximating $17,588.  As of June 1, 2010,both principal and interest had been satisfied.  The remaining notes are in default.
 
 NOTE 5 – OTHER LOANS PAYABLE
 
 On September 1, 2005, SensiVida Medical Systems, Inc. (SensiVida) issued a $50,000 convertible subordinated note to the order of Excell Partners, Inc. (Holder).  Principal and accrued interest was due and payable in one installment on September 1, 2008, the maturity date.   Interest was accruable at 2% per annum on the unpaid principal amount of the Note.  Upon any default of this Note, the Holder has the right to convert the Note to Common Stock of SensiVida.  The number of shares of Common Stock would be determined by dividing the outstanding principal and accrued interest to the date of conversion by the conversion price or fair market value paid in a most recent Qualified Transaction by SensiVida.  The note was in default upon acquisition (by the Company) and was amended as of December 1, 2009.  Commencing January 1, 2010, interest will accrue on the balance at a rate of 8% compounded annually.  The Note has a maturity date of January 1, 2011.  If the entire unpaid balance of the note is not paid when due, then the amount unpaid shall bear interest at the current rate plus 1% and such rate shall increase by an additional one percent each year until the note is paid in full.  The amount drawn on the note at February 28, 2011 and 2010 was $49,828. Interest accrued on the note was $8,272 and $4,286 as of February 28, 2011 and 2010, respectively.
  36
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 On September 1, 2009, the Company borrowed $50,000 from a shareholder.  The loan called for interest at 12% per annum.  The principal and accrued interest was convertible into the company’s common stock at $.66 per share after six months at the discretion of the note holder.  Proceeds of the loan were to be used for the company’s patient allergy clinical trial and related clinical expenses.  In April 2010, the terms of the loan were modified to provide for an option to convert principal and accrued interest into Series A Preferred stock which was completed on May 1, 2010.  Principal of $50,000 and accrued interest of $3,929 were converted to 53,929 shares of Series A Preferred stock.
 
 NOTE 6 – ACCRUED LIABILITIES
 
 Accrued liabilities consist of the following:
  2011


2010Legal and professional fees

$
225,747


$
301,247Consulting fees and expenses


1,489,254



1,489,254Salaries and wages


562,917



346,500Accrued Interest


385,313



178,479Other


41,200



200Totals

$
2,704,431


$
2,315,680
  Accrued legal and professional fees include services rendered by Mr. Peter Katevatis, former CEO of the Company (Note 2).  The amount of the accrual was $2,500 and $65,000 as of February 28, 2011 and 2010, respectively. During the year ended February 28, 2011, Mr. Katevatis converted $62,500 of accrued professional fees into 62,500 shares of Series A preferred stock.
 
 Accrued consulting fees and expenses include costs owed to Dr. Robert R. Alfano, a principal stockholder and former chairman of the Company’s Scientific Advisory Board , with respect to his prior consulting agreement, of $1,489,254 as of February 28, 2011 and 2010, which fees and expenses the Company is contesting in litigation between Dr. Alfano and the Company.
 
 Dr. Alfano and Mr. Katevatis had previously agreed to forebear any and all collection action for accrued fees and salary, including forgiveness of interest, in exchange for the option of converting any such accrued salary and fees into the Company’s common stock at $2.50 per share.  The option was unlimited in duration.  If the Company were to receive financing, either may elect to receive all or part of such accrued salary or fees in cash or common stock.
 
 On March 23, 2009 Mr. Katevatis exercised his option to convert all outstanding salary and fees accrued through November 3, 2008 totaling $2,147,187 along with the termination of his employment agreement and anti-dilution rights in exchange for 1,172,510, shares of the Company’s common stock.
  37
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 Accrued salaries and wages consist of the following:
 
 2011


2010Jose Mir, President

$
250,000


$
131,250David R. Smith, Chairman of the Board


115,000



80,000Margaret Lydon, Chief Operating Officer


52,083



-John Spoonhower, Chief Technical Officer


52,083



-Frank D. Benick, Chief Financial Officer


27,500



29,000Kamal Sarbadhikari, Former Chief Executive Office


66,250



106,250Totals

$
562,916


$
346,500
 
 Accrued interest consists of the following:
 
 2011


2010Convertible Debt

$
173,499


$
141,431Series A Preferred Stock


203,542



-Other Debt


8,272



37,048Totals

$
385,313


$
178,479
 
 NOTE 7 - PREFERRED STOCK SUBSCRIBED
 
 Preferred Stock Subscribed
 During February 2009, a current shareholder advanced $150,000 plus an additional $100,000 received in March 2009 in exchange for 2,500 of Series A Preferred stock having a par value of $100 (the shares).  Each Series A Preferred share was convertible into 150 shares of common stock for a total of 375,000 shares of common stock together with warrants to purchase up to 50,000 shares of common stock with an exercise price of $1.00.  Because the Company did not have the required authorized Preferred Stock to execute this transaction, the Company had recorded the advances as a liability.
 
 On April 13, 2010, the Company and the current preferred stock subscriber mutually agreed to revised terms on a prior $250,000 unissued preferred stock subscription agreement.  The new terms call for a “ratcheted” conversion to common stock, at a price of $0.35 from $0.66.  In addition, accrued interest of $34,849 as of May 1, 2010, on the $250,000 subscription, the subscription, plus a 10% premium of $28,485 on the principal and accrued interest all totaling $313,334, were available at the option of subscriber to roll over the total into the Company’s current Series A subscription agreement.  In addition, warrants to purchase 50,000 shares of common stock have been “ratcheted” downward from $0.66666 to $0.35, resulting in a proportional increase in the warrants to purchase 95,237 common shares. On May 1, 2010 principal of $250,000, interest of $34,849 plus the premium of $28,485 were converted to 313,334 shares of Series A Preferred stock.
 
 NOTE 8 – INCOME TAXES
 
 There is no income tax benefit for operating losses for the years ended February 28, 2011 and 2010 due to the following:
 
 Current tax benefit – the operating losses cannot be carried back to earlier years.
 
 Deferred tax benefit – the deferred tax assets were offset by a valuation allowance required by FASB ASC 740 “Accounting for Income Taxes.”  The valuation allowance is necessary because, according to criteria established by this topic, it is more likely than not that the deferred tax asset will not be realized through future taxable income.
  38
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 The components of the net deferred income tax asset and liability as of February 28, 2011 and February 28, 2010 are as follows:
 
 2011


2010Deferred income tax asset:Net operating loss carryforward

$
7,644,749


$
7,230,294Valuation allowance


7,644,749



7,230,294-



-Deferred income tax liability


-



-Totals

$
-


$
-
 
 As of February 28, 2011 and 2010, the Company has valuation allowances of $7,644,749 and $7,230,294 respectively, which relate to federal and state net operating loss carryforwards.  The change in the total valuation allowance for the years ended February 28, 2011 and 2010 was an increase and a decrease of $414,455 and ($158,914), respectively.  The Company evaluates a variety of factors in determining the amount of the valuation allowance, including the Company’s earnings history, the number of years the Company’s operating losses can be carried forward, the existence of taxable temporary differences, and near-term earnings expectations.  Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit will be realized through future earnings.  As of February 28, 2011 and 2010, the Company has net operating loss carryforwards of approximately $20,482,000 and $19,414,000, respectively for federal purposes and $12,010,000 and $10,656,000, respectively, for state purposes, which may be used to reduce future income subject to income taxes.
  39
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 8 – INCOME TAXES (CONT’D).
 
 The net operating losses are scheduled to expire in the following years:
 
 Federal


State2012

$
1,556,000


$
2,358,0002013


2,636,000



2,197,0002014


1,128,000



1,399,0002015


-



2,159,0002016


-



1,433,0002017


-



-2018


-



-2019(*)


808,000



-2020(*)


943,000



-2021(*)


298,000



-2022(*)


316,000



-2023(*)


182,000



-2024(*)


790,000



-2025(*)


2,284,000



-2026(*)


2,156,000



-2027(*)


1,388,000



-2028(*)


2,096,000



-2029(*)


1,435,000



-2030(*)


262,000



260,0002031(*)


2,204,000



2,204,000Totals

$
20,482,000


$
12,010,000
 
 (*)   Under the Taxpayer Relief Act of 1997, the carryforward period of net operating losses arising after May 1, 1998 were extended from 15 to 20 years.
 
 The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations.  As of March 1, 2011, the Company had no unrecognized tax benefits, and accordingly, the Company has not recognized any interest or penalties during the years ended February 28, 2011 and 2010 related to unrecognized tax benefits.  The Company does not have an accrual for uncertain tax positions as of February 28, 2011 and 2010.
 
 The Company files U.S. income tax returns and multiple state income tax returns.  With few exceptions, the U.S. and state income tax returns filed for the tax years ending on February 28, 2008 and thereafter are subject to examination by the relevant taxing authorities.
 
 NOTE 9– COMMITMENTS AND CONTINGENCIES
 
 Dr. Robert R. Alfano
 The Company had a consulting agreement (the “Agreement”) through March 2007 with Dr. Robert R. Alfano, a principal stockholder of the Company and prior Chairman of its Scientific Advisory Board.  Pursuant to the terms of the Agreement, Dr. Alfano was paid a consulting fee of not less than $150,000 per annum in exchange for services to be rendered for approximately fifty days per annum in connection with the company’s medical photonics business.  The Agreement further provided that Dr. Alfano was to be paid a bonus and fringe benefits in accordance with policies and formulas provided to key executives of the Company.  The agreement expired on March 5, 2007.
 
 In October 2009, Dr. Alfano filed a civil action against the Company, alleging that he was owed $1,487,053 in consulting fees and expenses.  The Company had accrued the consulting fees in conjunction with the consulting agreement (Note 6).  In addition, Dr. Alfano contested the termination of his anti-dilution rights and claimed that the Company owed him 132,000 shares of common stock (Note 10).  The Company does not believe the case has merit and has filed an Answer and Counterclaim.  The Company intends to vigorously defend against these claims.
  40
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 9– COMMITMENTS AND CONTINGENCIES (CONT’D).
  In connection with the acquisition of patent rights to its cancer detection technology, the Company assumed an obligation to pay to Dr. Alfano’s daughter a royalty of one percent of the gross sales derived from any equipment made, leased or sold which utilizes the concepts described in the Company’s cancer detection patent.  Since there has been no revenue, no amounts have been paid during the two years ended February 28, 2011 and 2010.
 
 Employment Agreements
 Mr. Peter Katevatis, the former Chief Executive Officer and Chairman of the Company and a current stockholder of the Company, had an employment agreement.  The prior agreement was renewed on March 5, 2007 which increased his salary from $200,000 to $250,000 per year. The agreement also provided for a bonus and fringe benefits in accordance with policies and formulas mutually agreed upon by Mr. Katevatis and the Board of Directors.  The contract was due to expire on March 5, 2015.  In November 2008, Mr. Katevatis terminated his employment agreement as Chief Executive Officer and Chairman along with his anti-dilution rights and on March 23, 2009 exercised his option to convert all outstanding salary and fees accrued through November 2008 in exchange for 1,172,510 shares of the Company’s common stock.
 
 On November 15, 2005, the Company entered into a two year employment agreement with Frank D. Benick as Chief Financial Officer.  Mr. Benick was paid a monthly salary of $3,000 per month for the first two months and then $4,000 per month for the remaining term of the agreement and received an option to purchase 30,000 shares of common stock at $10.00 per share.  This agreement has not been formally updated. Mr. Benick’s employment is continuing under the terms of the expired agreement.
 
 On November 5, 2008, the Company entered into three year employment contracts with Kamal Sarbadhikari as Chief Executive Officer and Jose Mir as Chief Technical Officer.  Under the terms of those employment agreements, Mr. Sarbadhikari and Mr. Mir are each paid a base salary of $150,000 per annum.  On November 2, 2009, Mr. Kamal Sarbadhikari resigned for health reasons effective December 31, 2009.  Jose Mir has been appointed interim President effective December 31, 2009.
 
 On November 10, 2008, the Company entered into a three year employment contract with David R. Smith as Chairman of the Board.  Under the terms of the employment agreement, Mr. Smith is to be paid $60,000 per annum.
 
 On August 15, 2010, the Company entered into three year employment contracts with Margaret Lydon as Chief Operating Officer and John P. Spoonhower as Chief Technology Officer.  Under the terms of their employment contracts, Ms. Lydon and Mr. Spoonhower are to be paid a base salary of $125,000 per annum. Both Ms. Lydon and Mr. Spoonhower were each granted 400,000 options, for a total of 800,000 options, to acquire 400,000 shares each, of the Company’s common stock over a three year vesting period with an exercise price of $0.36 per share.  The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 28.6%, based on comparable companies in similar industries, risk free interest rate of 2.68% and expected option life of three years.  The total estimated employer cost associated with these options approximates $126,100, which is being amortized over the life of the employment agreements. In the interim vesting period, the Company’s 1999 stock incentive plan will require revision as the plan previously had a limitation on the aggregate number of shares it may issue.
 
 Lease Agreements
 The Company entered into a lease agreement for office space in West Henrietta, NY.  The term of the lease runs from July 2010 to June 2011.  Base rent and expenses total $1,819 per month.  The Company also entered into a lease agreement for laboratory space in Rochester, NY.  The term of the lease runs from October 2010 to September 2011.  The rental is $1,053 per month.  Previously, the Company renewed its Henrietta office space on a month to month basis for the period May 2010 to February 2013 at $1,100 per month.  The agreement has been terminated as of September 30, 2010.
  41
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 10 – STOCKHOLDERS’ DEFICIT
 
 Reverse Stock Split
 On March 19, 2009, the Company’s Board of Directors, and the holders of a majority of the Company’s voting capital stock, approved an amendment to the Company’s Restated Certificate of Incorporation to provide for the reduction of the total number of authorized, issued and outstanding shares of the Company’s common stock, par value $.01 per share (“Common Stock”) and its preferred stock, par value $.01 per share (“Preferred Stock”), by exchanging each ten (10) shares of such authorized, issued and outstanding shares of Common Stock and Preferred Stock for one (1) share of Common Stock or Preferred Stock, respectively (such exchange, the “Reverse Split”).  The Reverse Split became effective on May 18, 2009.  All references to number of shares and per share amounts in the consolidated financial statements and notes have been adjusted to give retroactive effect to the reverse stock split.
 
 Preferred Stock
 The Company was previously authorized to issue 5,000 shares of preferred stock, $.01 par value per share, which may be issued from time-to-time in one or more series, the terms of which may be designated by the Board of Directors without further action by stockholders.  Any preferred stock issued will have preferences with respect to dividends, liquidation and other rights, but will not have preemptive rights.
 
 On March 1, 2010, the Company amended its Certificate of Incorporation to provide for 10,000,000 shares of Series A convertible preferred stock and 1,000,000 shares of preferred stock with preferences and characteristics to be determined by the board of Directors.  See Note 12 – Amendment of Certificate of Incorporation.
 
 Series A Convertible Preferred Stock Offering
 During March 2010, the Company began an offering of a maximum of $10,000,000 of Series A Preferred stock at $1.00 per share.  The Series A Preferred stock is convertible into shares of the Company’s common stock, par value $.01 per share at $.035 per share for a period of three years from the date of issuance and bears interest at 12% per annum, such interest to accrue and be paid in cash at the end of three years from the date of issuance of the Series A Preferred stock or in shares of common stock if the investor elects to convert the Series A Preferred stock.  As of February 28, 2011, 2,021,728 shares of preferred stock were sold. The investor also will receive warrants to acquire shares of common stock in an amount equal to 50% of the number of shares of common stock into which the Series A Preferred stock converts.  The exercise price of the warrant is at $1.00 per share.  As of February 28, 2011, 2,888,182 warrants were granted.
 
 Common Stock
 On March 1, 2010, the Company amended its Certificate of Incorporation to provide for 89,000,000 authorized shares of common stock, $.01 par value.
 
 Common Stock Issued for Services
 During fiscal 2010, the Company issued 46,333 restricted shares of its common stock with a value of $30,620 to a group of consultants in exchange for professional services, as per their agreements.  The transactions were recognized based on the fair market value of the shares issued (the closing price of the Company’s common stock of the date of issuance).
 
 During February 2011, the Company issued 90,000 restricted shares of its common stock with a value of $45,000 to a consulting firm in exchange for professional services, as per their agreements.  The transaction was recognized based on the fair market value of the services rendered.
 
 During March 2010, the Company issued 17,500 restricted shares of its common stock with a value of $9,100 to two consultants in exchange for professional services, as per their agreements.  The transactions were recognized based on the fair market value of the services rendered.
 
 42
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 10 – STOCKHOLDERS’ DEFICIT (CONT’D).
 
 Common Stock Issued for Future Services
 During July 2009, the Company issued 50,000 restricted shares of its common stock with a value of $37,500 to a medical consultant in exchange for professional services, as per agreement.  The transaction was recognized based on the fair market value of the shares issued (the closing price of the company’s common stock of the date of the agreement).
 
 During February 2010, the Company issued 100,000 restricted shares of its common stock with a value of $40,000 to a financial consultant in exchange for professional services.  The transaction was recognized based on the fair market value of the shares issued (the closing price of the Company’s common stock on the date of issuance).
 
 Common Stock Issued in Acquisition of SensiVida Medical Systems, Inc.
 On March 3, 2009, the Company (formerly known as Mediscience Technology Corp.) and SensiVida Medical Systems, Inc. completed a merger of the two companies, with Mediscience changing its name to SensiVida Medical Technologies, Inc.  As consideration for the merger, the Company issued 3,333,333 shares of the Company’s common stock, valued at $2,751,000 to the three stockholders of SensiVida Medical Systems, Inc. as consideration for the transaction.
 
 Common Stock Issued in Cancellation of Shareholder Debt
 In March 2009, the Company issued 1,172,510 shares of its common stock to Mr. Katevatis in settlement of all his accrued fees and salary to include termination of his employment agreement as Chief Executive Officer and Chairman, along with cancellation of his anti-dilution rights.
 
 On July 31, 2009, the company issued 4,155,222 shares of its common stock to certain note holders who converted principal of $1,205,000 and accrued interest of $249,326 into common stock of the company at a net price of $0.35 per share.
 
 Common Stock Subscribed
 In August 2009, the Company received $30,000 for 30,000 shares of the Company’s common stock.  As of February 28, 2011, the shares have not yet been issued.  The Company anticipates the shares to be issued in June 2011.
 
 In December 2009, the Company received $110,800 for 221,600 shares of the company’s common stock.  As of February 28, 2011, the shares have not yet been issued.  The Company anticipates the shares to be issued in June 2011.
 
 2003 Consultants Stock Plan
 The Board of Directors previously adopted, subject to stockholder approval, a 2003 Consultants Stock Plan (“Consultants Plan”).  The Consultants Plan was subsequently approved by the stockholders on February 17, 2004.  The aggregate number of shares that may be issued under the options shall not exceed 700,000.  No options were issued prior to stockholder approval and no options were outstanding under this plan as of February 28, 2011 and 2010.
 
 1999 Incentive Stock Option Plan
 The Board of Directors previously adopted, subject to stockholder approval, a 1999 Incentive Stock Option Plan (the “Plan”) for officers and employees of the Company.  The stockholders subsequently approved the Plan on February 17, 2004.  Accordingly awards issued under the Plan prior to February 17, 2004 were deemed not to be granted until that date.  The aggregate number of shares that may be issued under the options shall not exceed 300,000.
  43
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 10 – STOCKHOLDERS’ DEFICIT (CONT’D).
 
 Stock Options
 Activity related to stock options during the years ended February 28, 2011 and 2010 is as follows:
 
 WeightedExercise


Avg. ExerciseShares


Price Range


PriceOutstanding, February 29, 2009


30,000


$
10.00


$
10.00Granted


-Exercised


-Forfeited


-Outstanding, February 28, 2010


30,000


$
10.00


$
10.00Granted


800,000



0.36



0.36Exercised


-Forfeited or Expired


(30,000
)Outstanding, February 28, 2011


800,000


$
0.36


$
0.36
  30,000 options issued in November 2005 expired November 15, 2010.
 
 Weighted average remaining life of options approximates 2.46 years at February 28, 2011.
 
 As of February 28, 2011, there were no exercisable stock options.  200,000 options shall vest and become exercisable on August 14, 2011, 200,000 on August 14, 2012 and 400,000 on August 14, 2013.
 
 Stock Warrants
 Stock warrant activity during the years ended February 28, 2011 and 2010 was as follows:
 
 Shares





WeightedCurrently


Exercise


Avg. ExerciseExercisable


Price Range


PriceOutstanding, February 29, 2009


399,933


$
2.50 - $30.00


$
9.00Granted


195,800


$
0.60 - $1.00Exercised


-Forfeited


-Outstanding, February 28, 2010


595,733


$
0.60 - $30.00


$
6.32Granted


2,895,682


$
-Exercised


-Forfeited


(100,000
)

$
30.00Outstanding, February 28, 2011


3,391,415


$
.60 - $2.50


$
1.08
 
 100,000 stock warrants issued in 2004 expired in November 2010.
 Weighted average remaining life of warrants approximates 2.16 years at February 28, 2011.
 
 Anti-Dilution Rights
 The Company and Mr. Peter Katevatis had an anti-dilution rights agreement which provided that Mr. Katevatis’ ownership interest would at all times represent 17% of the issued and outstanding shares of the Company.  The anti-dilution rights were exercisable at Mr. Katevatis’ sole discretion.  In November 2008, Mr. Katevatis terminated his employment agreement as Chief Executive Officer and Chairman along with his anti-dilution rights and on March 23, 2009 exercised his option to convert all outstanding salary and fees accrued through November 2008 in exchange for 1,172,510 shares of the Company’s common stock.
 
 44
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 10 – STOCKHOLDERS’ DEFICIT (CONT’D).
 
 The Company and Dr. Robert Alfano had an anti-dilution rights agreement which provided that Dr. Alfano’s ownership interest would at all times represent 4% of the issued and outstanding shares of the Company.  The anti-dilution rights were exercisable at Dr. Alfano’s sole discretion.  As of February 28, 2007, the Company was obligated to issue an additional 1,400 shares to Dr. Alfano in connection with the anti-dilution rights.   As a result of the completion of Dr. Alfano’s consulting agreement as of March 5, 2007, the anti-dilution rights terminated.  Subsequent to March 5, 2007, Dr. Alfano was issued 6,400 shares of the Company’s common stock in connection with the anti-dilution rights of which 5,000 shares were issued in error.  The Company has placed a stop order and requested the 5,000 shares be returned by Dr. Alfano for cancellation.  Dr. Alfano’s anti-dilution rights are currently in the process of litigation along with amounts owed to him for consulting and related expenses.
 
 NOTE 11 – ACQUISITION OF SENSIVIDA MEDICAL SYSTEMS, INC.
 
 On November 5, 2008, Mediscience Technology Corp., a New Jersey corporation (“Mediscience”) entered into an agreement and plan of reorganization (the “Merger Agreement”) with SensiVida Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Mediscience (“Merger Sub”), and SensiVida Medical Systems, Inc., a Delaware corporation (“SensiVida”), pursuant to which Merger Sub was merged into SensiVida and thereafter SensiVida was merged with and into Mediscience (the “Merger”).  As a condition precedent to completing the Merger, on January 29, 2009, BioScopix, Inc., a Delaware corporation and wholly- owned subsidiary of Mediscience, merged with and into Mediscience, with the surviving corporation changing its name to BioScopix, Inc. (such surviving corporation hereafter referred to as the “Company”).
 
 On March 3, 2009, the Company and SensiVida completed the Merger and the Company changed its name to SensiVida Medical Technologies, Inc.  As consideration for the Merger, the Company issued 3,333,333 shares of the company’s common stock, par value $.01 per share (the “Common Stock”) to the three stockholders of SensiVida as consideration for the transaction.  In addition, the Company issued 1,172,510 shares of its Common Stock to Mr. Katevatis in settlement of all of his accrued claims and salary, to include termination of his employment agreement as Chief Executive Officer and Chairman, along with cancellation of his anti-dilution rights.
 
 The merger was accounted for under the acquisition method in accordance with SFAS 141(R), Business Combination.  The merger of SensiVida Medical Systems, Inc. into the Company’s wholly-owned subsidiary BioScopix, Inc. enabled the Company to focus on the automation of analysis and data acquisition for allergy testing, glucose monitoring, blood coagulation testing, new tuberculosis testing, and cholesterol monitoring.  The fair value of the consideration was approximately $2,751,000, the value of the 3,333,333 shares on March 3, 2009, which includes the assumption of various liabilities totaling approximately $58,000.  The Company has completed its valuation of the identifiable assets acquired and liabilities assumed at their acquisition date fair values as follows:
 
 Cash

$
558Technology with Patents Pending Approval


2,808,563Note Payable


(49,828
)Accrued Expenses


(2,437
)Officer Loan


(5,524
)$
2,751,332
 The Company engaged the services of a valuation firm to estimate the fair value of SensiVida Medical Systems, Inc.  Based on the valuation report, the acquisition date fair values of the assets acquired and the liabilities assumed ranged from $591,000 to $7,740,000.  Due to the wide range in valuation amounts and uncertainty of realizing the probabilities employed in the valuation, the Company has used the fair value of the common stock issued, $2,751,000, as it approximates the fair value of the assets acquired and liabilities assumed.
 45
 
 SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 11 – ACQUISITION OF SENSIVIDA MEDICAL SYSTEMS, INC. (CONT’D).
 
 The operating results of the acquired Company has been included in the consolidated financial statements from the date of acquisition, effective on March 1, 2009 for accounting purposes.  The following table provides the unaudited proforma results of operations as if the acquisition had occurred as of March 1, 2008.
 
 Year EndedFebruary 28, 2009Net Sales

$
-0-Net Loss

$
(2,195,967
)Basic and Diluted Loss for Common Share

$
(0.321
)
  On March 19, 2009, the Company’s Board of Directors, the holders of a majority of the Company’s voting capital stock, approved an amendment to the Company’s Restated Certificate of Incorporation to provide for the reduction of the total number of authorized, issued and outstanding shares of the Company’s common stock, par value $.01 per share (“Common Stock”) and its preferred stock, par value $.01 per share (“Preferred Stock”), by exchanging each ten (10) shares of such authorized, issued and outstanding shares of Common Stock and Preferred Stock for one (1) share of Common Stock or Preferred Stock, respectively (such exchange, the “Reverse Split”).  The Reverse Split became effective on May 18, 2009.  All references to number of shares and per share amounts in the consolidated financial statements and notes have been adjusted to give retroactive effect to the reverse stock split.
 
 NOTE 12 – AMENDMENT OF CERTIFICATE OF INCORPORATION
 
 On March 1, 2010, the Board of Directors approved and on March 1, 2010, the holders of a majority of the voting capital stock approved an amendment to restate the Certificate of Incorporation to provide for the increase in the total number of authorized shares of the Company’s common and preferred stock.
 
 The aggregate number of shares which the Company shall have authority to issue is 100,000,000, 89,000,000 of which is common stock, $.01 par value per share and 11,000,000 of which is preferred stock, $.01 par value per share.  10,000,000 shares of preferred stock are designated Series A, convertible preferred stock and 1,000,000 shares of preferred stock shall have all preferences and characteristics to be determined by the Company’s Board of Directors on a case-by-case basis, prior to issuance.
 
 The Series A Preferred stock shall have the following relative rights, preferences and limitations:
 
 a).   The Series A Preferred stock shall bear interest at 12% per annum, such interest to accrue and be paid in cash at the end of three years from the date of issuance of the Series A Preferred stock or in shares of common stock if the holder of the Series A Preferred stock elects to convert the Series A Preferred stock.
 
 b).   The holders of the Series A Preferred stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore, dividends, whether in cash or stock, in preference to the holders of common stock.
 
 c).   The holders of the Series A Preferred stock shall be entitled to a preference over holders of common stock with regard to distribution of assets in the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary.
  d).   The shares of Series A Preferred stock shall not entitle the holder thereof to have any right to vote or to receive any notice of any meeting of the holders of the Company’s stock or to exercise any voting power.
  46
  SENSIVIDA MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FEBRUARY 28, 2011 AND 2010
 
 NOTE 12 – AMENDMENT OF CERTIFICATE OF INCORPORATION (CONT’D).
 
 e).   The Series A Preferred stock  may, at any time for a period of three years from the date of its issuance, at the option of the holders thereof, be converted into common stock at a price of $0.35 per share (as adjusted for subsequent stock dividends, stock splits, combinations, recapitalizations or the like).
 
 NOTE 13 – RETIREMENT PLAN
 
 During July 2010, the Company adopted a 401-K plan for its employees.  As of February 28, 2011, the Company has not recognized any employer retirement costs associated with the plan.
  47


Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure





None.




Item 9A(T).
Controls and Procedures





Evaluation of disclosure controls and procedures





Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are not effective due to the existence of material weaknesses in our internal control over financial reporting, discussed below.





Management's Report on Internal Control Over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.





Our system of internal control over financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail,





i.  accurately and fairly reflect the transactions and dispositions of the assets of the Company;





ii. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and





iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





Management performed an assessment of the effectiveness of our internal control over financial reporting  as of February 28, 2011 based upon criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, management has concluded that the Company's internal control over financial reporting was not effective as of February 28, 2011 because of the material weaknesses described below.





A material weakness and significant deficiency are defined as a control deficiency, or combination of control deficiencies, that adversely affects an entity’s ability to initiate, authorize, record, process or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a material misstatement (with respect to material weaknesses) of the entity’s financial statements or a misstatement that is more than inconsequential (with respect to a significant deficiency) will not be prevented or detected by the entity’s internal controls over financial reporting.


48





i. We do not have an independent board of directors or audit committee to oversee our internal control over financial reporting.





ii. We have a limited number of personnel and as a result, there is limited segregation of duties amongst the company's employees with respect to preparation and review of the Company's financial statements.





iii. We have limited ability to account for complex equity transactions, such that our controls relating to disclosure and related assertions in the financial statements in the area of non-routine transactions


were not adequate.





iv. We have informal policies and procedures and we lack a formal budgeting process.





These material weaknesses may affect management's ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with generally accepted


accounting principles.





This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.





Changes in internal control over financial reporting





During the last fiscal quarter, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




Item 9B.
Other Information





None





PART III





Item 10.
Directors, Executive Officers and Corporate Governance





Board of Directors





The following table sets forth information regarding our executive officers and directors. Each of our executive officers has been elected by our board of directors and serves until his or her successor is duly elected and qualified.





Name

Age

PositionDavid R. Smith

67

Director and Chairman of the BoardJose Mir

59

Director and PresidentJohn Spoonhower

61

Chief Technical OfficerFrank D. Benick

62

Chief Financial OfficerMargaret Lydon

45

Chief Operating Officer





The principal occupations and business experience that led to the conclusion that each person should serve as a director or executive officer are set forth in the paragraphs that follow.


49





Each director holds office until the next annual meeting of shareholders or until their successors have been duly elected and qualified. Executive officers are appointed and serve at the discretion of the Board of Directors.




The Company’s Bylaws provided that the Board of Directors shall consist of not more than 15 and not less than seven members.  As a result of the recent changes to the composition of the Board of Directors following the Company’s completion of its merger with SensiVida Medical Systems, Inc. and name change on March 3, 2009 and reverse stock split on May 18, 2009, there are currently two vacancies that exist on the Board of Directors.  At this time, the current members of the Board of Directors are evaluating the Company’s options at this time, including identifying prospective candidates for appointment to the Board as well as amending the Bylaws to reduce the size of the Board of Directors.  The Company will make prompt public disclosure of any actions relating to the composition of its Board of Directors.




The Board of Directors does not have a separate, standing audit committee at this time.  Pursuant to Section 3(a)(58) of the Exchange Act, the full Board of Directors performs the functions of an audit committee for the Company.  During the year ended February 28, 2011, the Board of Directors met 14 times. Each member of the Board attended all of the meetings of the Board and committees on which he served.  Although all of the members of the Board of Directors are financial literate under listing standards of national securities exchanges such as the NYSE, none of the members of the Board of Directors qualifies as an “audit committee financial expert” as such term is defined under Item 407(d)(5) of Regulation S-K. Although the Board of Directors believes that it is appropriate and desirable for the Board to have an “audit committee financial expert,” the Board believes that based upon the limited size and operations of the Company at this time, it is appropriate for the Company to not have an “audit committee financial expert.”





Directors and Executive Officer Biographies





David R. Smith, Chairman of the Board.  Mr. Smith is a founding member of Infotonics Technology Center Inc. and served as its President, Chief Executive Officer and Chairman of the Board from 2002 to 2008.  Mr. Smith also previously served as the Chairman of the Board for OIDA (Optoelectronics Industry Development Association). His professional memberships include the Institute of Electrical and Electronics Engineers (IEEE Senior Member) and American Society for Quality.  Mr. Smith has a MS in Electrical Engineering from the University of Rochester and a BS in Electrical Engineering from the University of Massachusetts.   He began his Eastman Kodak career in 1965 as an electrical engineer. He has had many diverse assignments in Kodak Apparatus Division and Kodak Park Engineering with increasing levels of responsibility in design engineering, technology development, process improvement and systems engineering. In 1985 he was appointed Director of Automatic Machine Systems Technology, now known as Manufacturing Systems Technology Division (“MSTD”). MSTD is a corporate technical resource that develops manufacturing process technology, designs high performance manufacturing systems and installs these systems in new and existing factories around the world.  Effective in June 1997, Mr. Smith was then appointed Director, Production Systems Engineering & Technology Organization, Eastman Kodak Research & Development. The organization concentrated on process R&D for discrete products, encompassing media converting, packaging and high volume equipment manufacturing. Mr. Smith remained the R&D Technical Director, Advanced Production & Commercialization Technology Platform until he just recently retired.





Key Director Qualifications: Mr. Smith has significant business, scientific and engineering expertise that will assist us in designing our medical devices, obtaining financing and developing an effective FDA regulatory strategy and sales and marketing plan for the sale of our medical devices.


50





Jose Mir, President.  Mr. Mir started his career at the Eastman Kodak Company, pioneering new technologies that enabled some of the world's earliest digital imaging products. He evangelized and co-founded a corporate worldwide innovation initiative that after five years was able to drive significant growth beyond Kodak's traditional product lines. Mr. Mir had profit and loss statement responsibilities for a $16 million business that commercialized four radically new digital products- two of them won industry awards for technical excellence. After leaving Kodak, he started and led Infotonics Technology Center's Innovation initiative, responsible for founding two new start-ups. Most recently, he founded SensiVida Medical Systems Inc. and served as its President/CTO for three years. Mr. Mir is a prolific inventor, has won several professional awards, and has served on boards for companies and universities.





Key Director Qualifications:  Mr. Mir has the requisite business and technical background that have enabled him to develop our patents and patent strategy, design our medical devices, assist with our financing and oversee the growth of our company.





Frank D. Benick, Chief Financial Officer.  Mr. Benick has served as our Chief Financial Officer since November 2005. He has been a partner at the accounting firm of Cust, Dori & Benick (“CDB”) from 1983 and is now a partner at Wiss & Company, LLP which merged with CDB in January 2011.





John Spoonhower,Chief Technical Officer.Mr. Spoonhower has served as our Chief Technical Officer since August 2010.Mr. Spoonhower was employed during 2008 and 2009 as Managing Director of the Innovation Interface at Cornell University, a not-for-profit supported by financial contributions from corporate sponsors to investigate new business opportunities using teams at both Cornell University and MIT, and held teaching positions at Cornell University in the MBA and engineering schools. From 1995 to June 2008 Mr. Spoonhower held a variety of positions with Eastman Kodak Company, including Director of External Alliances in the Office of the Chief Technology Officer, and Chief Technologist in the Systems Concepts Center. At Eastman Kodak Company Mr. Spoonhower twice won the CTO Patent Award. Mr. Spoonhower received a B.S. degree in Physics (magna cum laude) from the University of Notre Dame and M.S. and Ph.D. degrees in Applied and Engineering Physics from Cornell University. He has co-authored 55 refereed publications and currently has 56 granted patents and five patents pending.




Margaret Lydon, Chief Operating Officer.  Ms. Lydon has served as our Chief Operating Officer since August 2010.  Ms. Lydonhas over 20 years experience in general management and product development in the medical device field and specific expertise in the development and commercialization of polymer coated and drug-eluting medical devices.  Immediately prior to joining SensiVida in 2010 Ms. Lydon was a consultant for one year to Isoflux Biomed, a company that develops inorganic coatings for medical devices. From 2003 to 2008 Ms. Lydon  was General Manager of Angiotech BioCoatings Corp., a subsidiary of Angiotech Pharmaceuticals, Inc., a company that develops and manufactures drug device combination products and polymer coatings for medical devices.  From 1988 to 2003 Ms. Lydon rose to the position of Vice President of Operations and Product Development for STS Biopolymers, Inc., a company that develops and manufactures polymer coatings for medical devices, and prior to that was an analytical lab technician with Eastman Kodak Company.  Ms. Lydon graduated from Saint John Fisher College and received her M.S. in Materials Science and Engineering from Rochester Institute of Technology.





There are no family relationships between any of our directors, executive officers, or advisors.





Nominating Procedures





During the fiscal year ended February 28, 2011, there were not any material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors.





Directors' Fees





No compensation has been paid to any individual for services rendered as a director.


51


Compliance with Section 16(a) of the Securities Exchange Act





In connection with the completion of the Company’s merger with SensiVida Medical Systems, Inc. on March 3, 2009, Kamal Sarbadhikari was issued 1,420,454 shares of the Company’s common stock as his pro rata share of the merger consideration and neither his initial statement of beneficial ownership on Form 3 nor his statement of changes in beneficial ownership on Form 4 have been filed to report these transactions.





Code of Ethics





We have adopted a Code of Ethics for all officers and directors which is filed as Exhibit 14.1 to this Annual Report on Form 10-K. We will provide a copy of our Code of Ethics to any person, without charge, upon written request to the Company. There have been no waivers to any of the Code of Ethics provisions nor any amendments made to the Code of Ethics during the year ended February 28, 2010.





Item 11.
Executive Compensation





Compensation accrued as of February 28, 2011 to Jose Mir, our President since the voluntary termination in December 2009 by Kamal Sarbadhikari, our former President and CEO, is set forth in the Summary Compensation Table below. No other executive officer's compensation exceeded $100,000 in the fiscal years ended February 28, 2011 and February 29, 2010, respectively.





SUMMARY COMPENSATION TABLE





All OtherCompensation


Total*Name and Principal Position
Year

Salary ($)*


($)


($)Jose Mir (PEO)
2010

$   250,000


$            -0-



$  250,000President
2009

$           -0-


$            -0-



$          -0-Frank Benick
2011

$     27,500


$            -0-



$          -0-CFO (PFO)
2010

$           -0-


$            -0-



$          -0-





*All salary was accrued until sufficient funds are available to the Company to pay the accrued salary.


52





Change of Control





Our 1999 Stock Incentive Plan and our 2003 Consultants Stock Option, Stock Warrant and Stock Award Plan provide that all outstanding options, warrants and restricted stock will become vested and immediately exercisable, in the case of options and warrants, or free from all restrictions, in the case of restricted stock, upon a change of control of our company.





Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters





The following table sets forth, as of June 14, 2011, certain information concerning the beneficial ownership of common stock by (i) each person known by the company to be the owner of more than 5% of the outstanding common stock, (ii) each director, (iii) each Named Executive Officer, and (iv) all directors and executive officers as a group. In general, "beneficial ownership" includes those shares a director or executive officer has the power to vote or the power to transfer, and stock options and other rights to acquire common stock that are exercisable currently or become exercisable within 60 days. Except as indicated otherwise, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them..




Name

Shares Owned


Percentage OwnershipDirectors and Executive Officers:Jose Mir


1,420,454



8.82%Frank D. Benick


14,187



*David R. Smith


—



—John Spoonhower


—



—Margaret Lydon


—



—All Directors and ExecutiveOfficers as a group:


1,429,641



8.88%5% Stockholders:Peter Katevatis


2,228,659
(1)


13.85%William M. Baker


1,932,019
(2)


12.00%Kamal Sarbadhikari


1,420,454



8.82%Infotonics Technology Center, Inc.


592,424



3.68%








* Beneficial ownership of less than 1% is omitted.





(1) Includes 178,571 shares of common stock issuable upon conversion of shares of Series A convertible preferred stock and warrants to purchase up to 89,286 shares of common stock issuable in connection with the issuance of shares of Series A convertible preferred stock.


(2) Includes 1,049,332 shares of common stock issuable upon conversion of shares of Series A convertible preferred stock and warrants to purchase up to 524,661 shares of common stock issuable in connection with the issuance of shares of Series A convertible preferred stock.


53





Item 13.
Certain Relationships and Related Transactions, and Director Independence





Related Person Transactions





None.





Director Independence





The Company is not subject to any independence standards of a national securities exchange or national securities association dealer quotation system.  The Board of Directors has determined that to be considered independent, an outside director may not have a direct or indirect material relationship with the company.  A material relationship is one which impairs or inhibits/ or has the potential to impair or inhibit a director's exercise of critical and disinterested judgment on behalf of the company and its stockholders.  To determine whether a material relationship exists, the Board consults with the company's counsel. This ensures that the Board's determinations are consistent with:





1.
All relevant securities and other laws; and


2.
Recent relevant cases and regulations regarding the definition of (independent director/business judgment) including those set forth in the listing standards of the New York Stock Exchange as in effect from time to time.





Based on the foregoing criteria, the Board of Directors has determined that David R. Smith, our Chairman of the Board, is the only member of the Board of Directors that is independent.





Item 14.
Principal Accounting Fees and Services





Audit Fees





The aggregate fees billed for each of the fiscal years ended February 28, 2011 and February 28, 2010 for professional services rendered by the principal accountant for the audit of our annual financial statements and reviews of the quarterly financial statements was $70,122 and $60,000, respectively.





Audit Related Fees





None.





Tax Fees





None.





All Other Fees





None.




PART IV





Item 15.
Exhibits, Financial Statement Schedules





(a)
The Financial Statements filed as part of this annual report on Form 10-K are filed under Part II, Item 8 beginning on page 27.





(b)
The Exhibits filed as part of this annual report on Form 10-K are listed in the Exhibit Index beginning on page 56.





(c)
Not applicable.


54


SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, SensiVida Medical Technologies, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




SENSIVIDA MEDICAL TECHNOLOGIES, INC.Date: June 15, 2011
By:
/s/ Jose MirJose MirPresident




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




Date: June 15, 2011
/s/ Jose MirJose MirPresident andDirector(Principal Executive Officer)  Date: June 15, 2011
/s/ David R. SmithDavid R. SmithChairman of the Board





Date: June 15, 2011
/s/ Frank D. BenickFrank D. Benick, CPAChief Financial Officer(Principal Financial and AccountingOfficer)


55





Exhibit Index





2.1

Agreement and Plan of Merger of BioScopix, Inc., a Delaware corporation, into MediScience Technology Corp., a New Jersey corporation, dated as of November 5, 2008, incorporated by reference to the registrant's Form 10-Q filed January 20, 2009.2.2

Agreement and Plan of Reorganization by and Among BioScopix, Inc., a New Jersey corporation (successor by merger to MediScience Technology Corp.), SensiVida Acquisition Corp., a Delaware corporation, and SensiVida Medical Systems, Inc., a Delaware corporation, dated as of November 5, 2008, incorporated by reference to registrant's Form 8-K filed March 9, 2009.2.3

Certificate of Ownership and Merger merging SensiVida Medical Systems, Inc. with and into BioScopix, Inc., with the surviving corporation changing its name to SensiVida Medical Technologies, Inc., incorporated by reference to the registrant's Form 8-K filed March 9, 2009.3.1

Amended Certificate of Incorporation incorporated by reference to the registrant's Definitive Schedule 14C filed April 28, 2010.3.2

By-laws incorporated by reference to the registrant's Form SB-2 filed December 21, 2004.4.2

Anti-Dilution Agreement between the registrant and Peter Katevatis, dated July 19, 2004, incorporated by reference to registrant's Form 10-QSB filed August 3, 2004.10.1

Employment Agreement dated August 15, 2010 between the registrant and John Spoonhower incorporated by reference to the registrant's Form 8-K filed August 27, 2010.10.2

Employment Agreement dated August 15, 2010 between the registrant and Margaret Lydon incorporated by reference to the registrant's Form 8-K filed August 27, 2010.10.3

Employment Agreement dated November 5, 2008 between the registrant and Jose Mir incorporated by reference to the registrant's Form 10-Q filed January 20, 2009.10.4

1999 Incentive Stock Option Plan incorporated by reference to the registrant's Form SB-2 filed December 21, 2004.10.5

2003 Consultants Stock Option, Stock Warrant and Stock Award Plan incorporated by reference to the registrant's definitive Schedule 14C filed January 20, 2004.10.6

Agreement between the registrant and William M. Baker relating to the issuance of shares of Series A Convertible Preferred Stock of the registrant incorporated by reference to the registrant's Form 8-K filed February 12, 2009.10.7

Agreement dated May 26, 2010 between the registrant and Wi Inc. incorporated by reference to registrant's Form 10-K/A filed February 18, 2011.10.8

Agreement dated June 1, 2010 between the registrant and Dhurjaty Electronics Consulting LLC incorporated by reference to registrant's Form 10-K/A faled February 18, 2011.10.9

Agreement dated May 21, 2010 between the registrant and MDC incorporated by reference to registrant's Form 10-K/A filed February 18, 2011.




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10.10

Agreement dated June 21, 2007 between the registrant and Infotonics Technology Center, incorporated by reference to the registrant's Form 8-K filed June 25, 2007.10.11

Consulting Agreement between the registrant and John Condemi dated July 3, 2009, incorporated by reference to the registrant's Form 8-K filed July 6, 2009.14.1

SensiVida Code of Ethics *21.1

Subsidiaries of the registrant31.1

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) *31.2

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) *32.1

Certification  of the Chief  Executive Officer and the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*




* Filed herewith


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