10QSB 1 qsb1q03.txt 10QSB PERIOD ENDING MARCH 31, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) [x] QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2003 ------------------ [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______________ to ______________ Commission file number 010690 ____________________ Science Dynamics Corporation ------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware ------------------------------------------------------------ (State or other jurisdiction of incorporation or organization) 22-2011859 ------------------------------- (IRS Employer Identification No.) 2059 Springdale Road, Suite 100, Cherry Hill, New Jersey 08003 ----------------------------------------------------- (Address of principal executive offices) ( 856 ) 424-0068 ----------------------------------------------------- (Issuer's telephone number) N/A --------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 05/14/2003 41,418,655 shares of common stock were outstanding. S C I E N C E D Y N A M I C S C O R P O R A T I O N INDEX ----- PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2003 1 (unaudited)and December 31, 2002 (audited) Consolidated Statements of Operations for three 2 months ended March 31, 2003 (unaudited) and three months ended March 31, 2002 (unaudited) Consolidated Statements of Cash Flows for three 3 months ended March 31, 2003 (unaudited) and three months ended March 31, 2002 (unaudited) Notes to Consolidated Financial Statements 4 - 5 Item 2. Management's Discussion and Analysis of Financial 5 - 10 Condition and Results of Operations Item 3. Controls and Procedures 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports 11 Item 7. Signatures 12 Item 1. Financial Statements SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
ASSETS March 31, December 31, 2003 2002 Unaudited Audited --------- ------- Current assets: Cash and cash equivalents $ 8,824 $ 43,141 Accounts receivable - trade 99,542 46,428 Inventories 165,133 205,551 Other current assets 9,832 28,275 ---------- --------- Total current assets 283,331 323,395 ---------- --------- Property and equipment, net 448,623 514,417 Deferred Financing costs 130,434 149,068 Other assets 17,370 17,370 ---------- --------- Total assets $ 879,758 1,004,250 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short term Debt $ 31,860 $ 128,413 Current portion of convertible note 185,500 185,500 Bank Note 33,550 33,550 Customer deposits 89,492 286,990 Short term loan payable 163,192 163,192 Accounts payable 1,194,018 1,214,792 Accrued expenses 597,667 413,534 ---------- --------- Total current liabilities 2,295,279 2,425,971 Long Term liabilities: Long term Debt 127,431 - Non current portion of bank note 42,355 50,326 Convertible Debenture 1,639,309 1,653,815 ---------- --------- Total liabilities $4,104,374 $4,130,112 ---------- --------- Shareholders' equity (deficit) Preferred Stock - .01 par value 10,000,000 shares authorized No shares issued Common stock - .01 par value, 200,000,000 and 45,000,000 shares authorized, 41,544,455 and 41,254,455 issued 41,418,655 and 41,128,655 outstanding in 2003 and 2002 respectively. 415,545 412,545 Additional paid-in capital 15,549,848 15,546,611 Reserve for stock compensation 160,909 160,909 (Deficit) (18,953,085) (18,848,094) ---------- --------- (2,826,783) (2,728,029) Common stock held in treasury, at cost (397,833) (397,833) ---------- --------- Total shareholders' equity (deficit) (3,224,616) (3,125,862) ---------- --------- Total liabilities and shareholders' Equity $ 879,758 $1,004,250 ========== ========= The accompanying notes are an integral part of these consolidated financial statements.
-1- SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31 2003 2002 ---- ---- NET SALES $ 476,297 $ 469,797 ---------- ---------- Operating costs and expenses: Cost of sales 72,807 184,805 Research and development 121,740 257,732 Selling, general and administrative 279,142 539,318 Depreciation 64,856 83,007 ---------- ---------- 538,545 1,064,862 ---------- ---------- Operating (loss) (62,248) (595,065) Other income (expenses): Interest Income - - Interest Expense (24,106) (33,626) Finance Expense (18,633) (143,694) ---------- ---------- Net (loss) $ (104,987) $ (772,385) ========== ========== Net(loss)per common share basic and diluted $ (0.00) $ (0.03) ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
-2- SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31 2003 2002 ---- ---- Cash flows from operating activities: Net (Loss) $ (104,987) $ (772,385) ----------- ----------- Adjustments to reconcile net (loss) to net cash provided by (used for) operating activities: Depreciation 64,856 83,007 Interest expense non cash 24,106 116,470 Financing expense non cash 18,633 - Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable (53,114) (147,562) Other receivable - 20,721 Inventories 40,417 57,813 Other current assets (18,443) 48,550 Increase (decrease) in: Accounts Payable and accrued expenses 163,359 125,498 Customer deposits (197,498) (138,254) ----------- ----------- Total adjustments 42,317 166,243 ----------- ----------- Net cash provided by (used for) operating activities (62,670) (606,142) ----------- ----------- Cash flows from investing activities: Purchase of property and equipment - net - (13,455) ----------- ----------- Net cash used in investing activities - (13,455) ----------- ----------- Cash flows from financing activities: Increase (decrease)in Bank Note (7,971) - Issuance of Convertible Debt - 613,935 Short term loan Payable - 8,000 Capitalized Lease / Debt 36,324 - ----------- ----------- Net cash (used in) provided by financing activities 28,353 621,935 ----------- ----------- Net increase (decrease) in cash and cash equivalents (34,317) 2,338 Cash and cash equivalents - beginning of period 43,141 17,075 ----------- ----------- Cash and cash equivalents - end of period 8,824 19,413 The accompanying notes are an integral part of these consolidated financial statements.
-3- SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Operations and Summary of Significant Accounting Policies Basis of Presentation --------------------- The unaudited financial statements included in the Form 10-QSB have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation SB. The financial information furnished herein reflects all adjustments, which in the opinion of management are necessary for a fair presentation of the Company's financial position, the results of operations and the cash flows for the periods presented. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed, or omitted, pursuant to such rules and regulations. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002. The Company presumes that users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for any interim period are not necessarily indicative of the results for the full year. Description of Business ----------------------- Science Dynamics Corporation (the "Company", "SciDyn" or "Science Dynamics") was incorporated in the State of Delaware May 1973 and commenced operations in July 1977. The Company began as a provider of specialized solutions to the telecom industry. Throughout its history SciDyn has adapted to the changes in this industry by reinventing itself to be more responsive and open to the dynamic pace of change experienced in the broader converged communications industry of today. Currently SciDyn still provides advanced solutions for several vertical markets. The greatest change in operations is in the shift from being a component manufacture to a solution provider focused on developing applications through software on our core platform technology. Acquisition of Assets --------------------- On March 31, 2003, the Company acquired certain business assets and liabilities of Modern Mass Media, Inc. (MMM), a privately held company based in Florham Park, NJ. The Company will file within the requisite time period the consolidated financial information on Form 8-K, which will reflect proforma statements for the period ended March 31, 2003. Use of Estimates ---------------- Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (US GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on -4- historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. US GAAP requires us to make estimates and judgments in several areas, including those related to impairment of goodwill and equity investments, revenue recognition, recoverability of inventory and receivables, the useful lives of long lived assets such as property and equipment, the future realization of deferred income tax benefits and the recording of various accruals. The ultimate outcome and actual results could differ from the estimates and assumptions used. Income per share ---------------- Per-share data has been computed on the basis of the weighted average number of shares of common stock outstanding during the periods. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2003 AND FOR THE THREE MONTHS ENDED MARCH 31, 2002. Business Overview ----------------- During the first quarter of 2003, SciDyn produced and shipped several new products and product enhancements. This is a reflection of the product re- positioning actions taken last year. Most notable of these products is the new MinuteMan prepaid switch and the first Commander inmate phone control system to incorporate SciDyn voice over packet capabilities. The Company's software development division is now focused on providing Telecommunication solutions to a wider customer base, both within the Inmate marketplace and the wider global commercial business world. On February 27, 2003, the Company signed an agreement with Laurus Master Fund, Ltd., to extend the Maturity Date of each of the convertible debentures to December 31, 2004. In exchange for the extended Maturity Dates, the Company has agreed to repay the aggregate principal amount of the Notes and interest commencing April 1st 2003 and ending December 31, 2004. The schedule includes a principal conversion feature as previously described. The payment schedule will be accelerating, meaning that the size of the monthly payments will start low and increase over time. On March 31, 2003, the Company through its newly formed majority owned subsidiary M3 Acquisition Corp., acquired certain business assets and assumed certain liabilities of Modern Mass Media, Inc. (MMM), a privately held company based in Florham Park, NJ. Modern Mass Media, Inc. is in the business of providing audio/video technology that includes consultation, custom engineering, facility design, audio/visual products, installation, testing, user training and repair service. With this acquisition the Company has embarked on a strategy of diversification & growth. The Company auditors will be performing their audit of Modern Mass Media in the near future and a Form 8-K with proforma statements will be filed shortly thereafter. The Company continues to face the challenges of a market unsure of its direction. However, the Company believes it is now in a more secure position. The Company continues to look for new & innovative products & services to deploy. The Company is actively looking for partners to work with in new markets. The Company expects operating losses and negative cash flow for the foreseeable future as we must obtain orders, introduce additional services and create optional procurement methods. We believe that increasing our revenues will depend in large part on our ability to offer products that are attractive to our customers, increase customer awareness of our product offerings by developing effective marketing and promotional activities and develop strategic relationships. -5- PRODUCTS -------- IP Telephony SciDyn has continued efforts in the development of Voice over Internet technology. The focus of these efforts revolves around upgrading existing product technology and adapting the technology into new and existing applications. IP technology is being deployed within the Commander system at specific installations. This is a major step in the Inmate phone control industry, and SciDyn is at the forefront of this technology. SciDyn is also in the process of adding direct IP trunking capability to the MinuteMan platform. Additionally SciDyn will be enhancing the MinuteMan with a complete Radius interface to allow any Voice Over IP gateway that supports this common protocol to use the MinuteMan as a centralized platform to create and manage pre and post paid services. Commander Call Control System The Commander call control system is built on SciDyn's unique BubbleLINK(R) software architecture. This open system platform is a combination of integrated Computer Telephony (CTI) hardware and software, which can handle thousands of call transactions per hour and provide correctional facility officials with effective tools to manage and control inmate telephone calls using the Commander system software. The Commander I models are designed for the small to midsize municipal and county correctional facilities requiring control for up to 40 inmate telephone lines. The Commander I base system provides telephone control for 4 lines and can be expanded in 4 line increments. This modular design provides a cost effective solution with an abundance of inmate phone control features. Commander call control systems are supported by an integrated array of administrative and investigative programs that provide a management solution suite. All programs interact in real-time with Commander calls and databases via an Ethernet Local Area Network (LAN) or a Wide Area Network (WAN). Commander provides state of the art call control and some of the first tools targeted at investigation and law enforcement in the inmate telephone control industry. The Commander Live Monitoring, Debit and Recording continue to be some of the leading features required within the industry today. The DebitCard feature set provides flexible capability in card creation and management. DebitCard supports specialized tariffs and call timing. By being totally integrated with the Commander, no external network facility is necessary. This provides complete control and security when using pre-paid cards. As with all of the Commander feature sets, integrity of the system is not compromised with the use of pre-paid cards. Currently under development is the next generation Commander system. The next generation Commander will be produced on the latest technology and provide greater capabilities for new features. This new Commander system will introduce SciDyn's first totally internal recording solution. The fully integrated component will provide great cost savings over the traditional recording equipment used today. This generation of Commander will no longer be assembled exclusively from components purchased from a single vendor. Currently two vendors have been selected to source components in the next generation Commander. This will provide SciDyn greater flexibility and reliability in producing and supporting new systems. Also in development is the integration of new biometric technology interfaces to the Commander. Biometric technology is fast becoming a realistic tool for increasing system security at many levels. SciDyn and the Commander product will lead the industry with practical and effective biometric solutions. Development will also continue in the area of morepowerful investigative tools. The Investigator's File Cabinet will provide a single repository for storing call records, recordings and other documents related to a specific case or investigation. -6- Development has begun on a new Commander system targeted at multi-facility centralized control. This solution will allow Inmate phone providers to offer all of the Commander features including the extensive call control, debit, and pre-paid solutions to the smallest facilities. This system provides an aggregated point of switching and control for the provider, minimizing on-site equipment and maintenance costs. The Commander will still maintain per facility branding and rating without the need for dedicated switching equipment at the institution. SciDyn continues to explore opportunities with the major telephone companies in providing the Commander inmate phone control system with call transaction (price per call) programs. Management believes that the recent and continued drive to develop new capabilities for the Commander will establish the Commander and SciDyn as the leader in inmate telephone control. MinuteMan The MinuteMan product, built on SciDyn's core BubbleLINK(R) technology, is a complete turnkey system providing all aspects of a pre-paid and debit card platform. MinuteMan provides PSTN interface, card databases, IVR and SMDR collection. The MinuteMan is ideal for smaller pre-paid card vendors that want to break free from the resale only mode of the card business. MinuteMan is also the ideal front end for VoIP carriers that are looking to complete their offerings for low cost international traffic. Most VoIP Gateways do not offer a robust solution for pre-paid calling. Most of these carriers have been forced to purchase or lease expensive adjunct systems to integrate pre-paid solutions into their VoIP networks. The MinuteMan provides all of the necessary functions to convert an existing VoIP toll bypass network into a full-featured international pre-paid network. MinuteMan development is continuing based on requirements from customers and other industry trends. Enhancements to the original MinuteMan include expanded rating capabilities for specialized charges and dynamic rates. A second-generation MinuteMan platform is currently in the integration test stage. This next generation platform is built on the industry standard Compact PCI architecture. This solution provides an even higher level of system reliability and maintainability. This version of the MinuteMan will provide higher density within a single chassis as well as the ability to dynamically add new resources to the switch and provision new services with out taking the system offline. New applications for the MinuteMan will be released this year expanding the service offerings of the platform beyond traditional Pre-Paid calling cards to account based calling and calling card services, making the MinuteMan a versatile revenue source for the owner and operator. The latest releases of the MinuteMan also provide greater flexibility in system integration with support for various database technologies. Support will be provided for Microsoft SQL Server, the open source MYSQL server, and the original embedded data engine of the MinuteMan. All applications developed for the MinuteMan will operate on any of the supported database solutions. This allows system owners to operate at a cost and performance level which they feel appropriate. A specialized version of MinuteMan has been developed and deployed for use in the Inmate Marketplace. This version provides an Inmate Phone Service provider with a centralized system to switch and manage pre-paid calling from all of it's contracted facilities. This Version of MinuteMan capitalizes on SciDyn's years of experience in inmate phone control to provide a full featured pre-paid switch without compromising the security and fraud protection required for this specialized calling application. -7- Video over Frame Relay Sales against the distribution contract with Korean-based Mercury Corporation have not yet come to fruition due to the deteriorated economy within Korea. The market for the VFX continues to be the international arena in which customers benefit from the most substantial cost savings versus peak long distance rates. Scidyn maintains a small but steady revenue stream from the VFX. RESULTS OF OPERATIONS --------------------- The following table summarizes the basic results of operations for the periods indicated in the Consolidated Statement of Operations. Three Months ended March 31, 2003 (unaudited) compared to the Three Months ended March 31, 2002 (unaudited). Three Months Ended March 31, 2003 2002 ---- ---- Sales 476,297 469,797 Net (Loss) (104,987) (772,385) Net (Loss) Per Share $(0.00) $(0.03) OPERATING EXPENSES PERCENT OF SALES 2003 2002 2003 2002 ---- ---- ---- ---- Cost of Goods Sold 72,807 184,805 15% 39% Research & Development 121,740 257,732 26% 55% Sales, General & Admin 279,142 539,318 59% 115% Depreciation 64,856 83,007 14% 18% Total Operating Costs and Expenses $ 538,545 1,064,862 114% 227% Sales for the three months ended March 31, 2003 were $476,297 an increase of $6,500 from sales of $469,797 for the three months ended March 31, 2002. The Company's revenue in 2003 was predominantly derived from the non-exclusive license sale of our technology and sales of the MinuteMan Calling Platform. The sales results from the comparative quarter ended March 31, 2002 were derived from the Commander Product Line along with sales of the VFX Product Line. -8- Cost of Goods sold decreased to $ 72,807 in the three months ended March 31, 2003 from $184,805 in the corresponding three months ended March 31, 2002. The decrease in the cost of goods sold both in absolute dollars and percentage of sales was directly related to the increased margins due to the sale of the license of our technology and the sales of the software based MinuteMan Product. Research & Development expenses decreased to $121,740 in the three months ended March 31, 2003 as compared to $257,732 in the comparable three months ended March 31, 2002. The decrease in research and development expenses during the first three months of 2003 reflects the reduction in the development staff for the IP Telephony Integrator product line that occurred in the first quarter of 2002, natural attrition and other cost cutting initiatives. Sales, General & Administrative expenses decreased to $279,142 in the three months ended March 31, 2003, compared to $539,318 in the three months ended March 31, 2002. The Company has significantly reduced its operating requirements as streamlining of operations and cost curtailment measures have been implemented. Depreciation expenses decreased to $64,856 in the three months ended March 31, 2003, compared to $83,007 in the three months ended March 31, 2002. Interest Expense is interest paid and accrued on the Convertible Notes, the line of credit and the interest due for the loan from a stockholder. Finance Expense in the first three months ended March 31, 2003 was $18,633 that consists of the amortization of the finance cost. The finance expense in the period ending March 31, 2002, includes $116,470 relating to the recognition of a debt discount resulting from a beneficial conversion feature embedded in the convertible notes issued between February 6, 2002 and April 1, 2002. The finance expense also includes the amortization of the finance cost. LIQUIDITY AND CAPITAL RESOURCES: ------------------------------- Cash and cash equivalents decreased to $8,824 for the three months ended March 31, 2003 from $19,413 at March 31, 2002. Net cash used for operating activities was $62,670 during the three month ended March 31, 2003 compared to $606,142 in the corresponding three months ended March 31, 2002. The increase in accounts payable and accrued expenses consists of over extended accounts payable, arrearages to the landlord and newly established extended terms with some of our vendors. The accrued expenses consist primarily of accrued interest due on the convertible notes and the accrued Calabash Consulting LTD consultancy fee. We have reached a tentative agreement with the landlord and will be relocating to smaller quarters. After a final residence is located, a final repayment schedule will be agreed upon. Net cash used in investing activities was zero for the three months ended March 31, 2003, compared to $13,455 in the corresponding three months ended March 31, 2002. This decrease was attributable to budgetary restraints for capital expenditures. Net cash provided by financing activities in the three months ended March 31, 2003 amounted to $28,353 compared to $621,935 in the corresponding three months ended March 31, 2002. This was the outcome of the renegotiation of the capital lease obligation. The repayment agreement has been extended for a period of 60 months. The cash requirements for funding our operations have greatly exceeded cash flows from operations. We have satisfied our operating cash flow deficiencies primarily through debt financing. Our liabilities consist of over extended accounts payable, accrued compensation and the accrued Calabash Consulting Ltd. consultancy fee. -9- We have successfully negotiated payment arrangements with some of our vendors and are attempting to negotiate payment arrangements with other vendors. We cannot guarantee that any of these discussions will be successful. If we are unable to obtain successful negotiations, our business may well be severely affected. The sales revenue shortfall has greatly impacted cash on hand. SciDyn's currently anticipated levels of revenue and cash flow are subject to many uncertainties and cannot be assured. In order to have sufficient cash to meet our anticipated cash requirements for the next twelve months we must increase sales to provide cash flow from operations. However, SciDyn does not have sufficient cash on hand to continue its operations without successfully raising additional funds. The inability to generate sufficient cash from operations or to obtain the required additional funds could require SciDyn to reduce or curtail operations. Forward Looking Statements -------------------------- The Company is making this statement in order to satisfy the "safe harbor" provisions contained in the Private Securities Litigation Reform Act of 1995. This Form 10-QSB includes forward-looking statements relating to the business of SciDyn. Forward-looking statements contained herein or in other statements made by SciDyn are made based on management's expectations and beliefs concerning future events impacting SciDyn and are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by forward- looking statements. The Company believes that the following factors, among others, could affect its future performance and cause actual results of the Company to differ materially from those expressed in or implied by forward- looking statements made by or on behalf of the Company: (a) the effect of technological changes; (b) increases in or unexpected losses; (c) increased competition; (d) fluctuations in the costs to operate the business; (e) uninsurable risks; and (f) general economic conditions. Item 3. CONTROLS AND PROCEDURES. As of March 31, 2003, an evaluation was performed under the supervision and with the participation of the Company's management, including the Principal Executive Officer and the Principal Accounting Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the Principal Executive Officer and the Principal Accounting Officer, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2003. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to March 31, 2003. -10- PART II. OTHER INFORMATION SCIENCE DYNAMICS CORPORATION AND SUBSIDIARIES --------------------------------------------- Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Employee Options The previous employee stock option plan expired November 2002, at that time 491,200 options expired. On February 28, 2003, the Company pursuant to the new stock option plan issued 660,000 options from the new plan at .03, which included 160,000 options issued to Joy C. Hartman. Issuances of Stock for Services or in Satisfaction of Obligations None. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information On March 31, 2003, the Company through its newly formed majority owned subsidiary M3 Acquisition Corp., acquired certain business assets and assumed certain liabilities of Modern Mass Media, Inc. (MMM), a privately held company based in Florham Park, NJ. Modern Mass Media, Inc. is in the business of providing audio/video technology that includes consultation, custom engineering, facility design, audio/visual products, installation, testing, user training and repair service. The Company auditors will be performing their audit of Modern Mass Media in the near future and a Form 8-K with proforma statements will be filed within the requisite time period. Item 6. Exhibits and Reports A press release was filed on Form 8-K as Exhibit 99.01 on April 15, 2003 reflecting the acquisition of certain business assets and assumed certain liabilities of Modern Mass Media, Inc. on March 31, 2003. -11- Item 7. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. SCIENCE DYNAMICS CORPORATION BY: /s/ Alan C. Bashforth ---------------------- CEO/President DATED: May 15, 2003 In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date --------- ----- ---- BY: /s/ Alan C. Bashforth CEO/President May 15, 2003 --------------------- Chairman of the Board Alan C. Bashforth Secretary BY: /s/ Joy C. Hartman CFO May 15, 2003 --------------------- Joy C. Hartman -12- CERTIFICATION I, Alan C. Bashforth, CEO and President, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Science Dynamics Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 15, 2003 /s/Alan C. Bashforth, CEO and President Alan C. Bashforth, CEO and President -13- CERTIFICATION I, Joy C. Hartman, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Science Dynamics Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 15, 2003 /s/ Joy C. Hartman Joy C. Hartman, Chief Financial Officer