Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

Fair Value of Financial Instruments

 

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

 

The fair value of the convertible debentures and the notes payable approximate fair value since these investments are at market rates currently available to the Company.

 

Concentration of Credit Risk

 

The Company has no significant off balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.  The Company’s financial instruments that are exposed to concentration of credit risks consist of cash.  The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed federally-insured limits.

 

Income Taxes

 

The Company accounts for income taxes under Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”).  ASC 740 requires that the Company recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable.  The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.  While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company was to determine that it would be able to realize the deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.

 

Research and Development

 

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

 

Stock Based Compensation

 

The Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”).  All stock-based payments to employees are grants of stock options that are recognized in the statement of operations based on their fair values at the date of grant.

 

The Company calculates the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model.  The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.  ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant.  Scivanta estimates forfeiture rates for all unvested awards when calculating the expense for a period.  In estimating the forfeiture rate, Scivanta monitors both stock option and warrant exercises as well as employee termination patterns.

The resulting stock-based compensation expense for employee awards is recognized on a straight-line basis over the requisite service period of the award.

 

During the fiscal years ended October 31, 2013 and 2012, the Company recorded general and administrative stock-based compensation expense of $0 and $3,716, respectively, related to employees and $4,725 and $0, respectively, related to non-employees.

 

 

Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive.  The dilutive effect of the outstanding stock options, warrants and convertible debt is computed using the treasury stock method.

 

 

For the fiscal year ended October 31, 2012, diluted net loss per share did not include the effect of 249,532 shares of common stock issuable upon the exercise of outstanding options, 93,000 shares of common stock issuable upon the exercise of outstanding warrants and 666,667 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.

 

Recent Accounting Pronouncements Applicable to the Company

 

The Company does not believe there are any recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations.