U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 30, 1999
Commission file no. 0-26581
DERMATOLOGY SYSTEMS, INC.
------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Florida 65-0844181
- ------------------------------------ -----------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue Suite 113
West Palm Beach, FL 33401
- ------------------------------------------ -----------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5699
Securities to be registered under Section 12(b) of the Act:
Title of each class Names of each exchange
on which registered
None
- --------------------------------- ----------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
--------------------------------------------------------
(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel.: (561) 832-5696 - Fax: (561) 659-5371
<PAGE>
Indicate by 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 periods 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
--- ---
As of November 30, 1999, there are 2,000,000 shares of voting stock of the
registrant issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Balance Sheets...............................................................F-2
Statements of Operations.....................................................F-3
Statements of Changes in Stockholders' Equity................................F-4
Statements of Cash Flows.....................................................F-5
Notes to Financial Statements................................................F-6
<PAGE>
<TABLE>
<CAPTION>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Balance Sheets
November 30, 1999 February 28, 1999
-------------------- ------------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 37,401 $ 43,832
-------------------- ------------------
Total current assets 37,401 43,832
-------------------- ------------------
Total Assets $ 37,401 $ 43,832
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 0 $ 4,500
Accrued expenses - related party 3,123 3,123
-------------------- ------------------
Total current liabilities 3,123 7,623
-------------------- ------------------
Total Liabilities 3,123 7,623
-------------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, authorized
10,000,000 shares, none issued 0 0
Common stock, $0.0001 par value, authorized
50,000,000 shares: 2,000,000
issued and outstanding 200 200
Additional paid-in capital 49,900 49,900
Deficit accumulated during the development stage (15,822) (13,891)
-------------------- ------------------
Total Stockholders' Equity 34,278 36,209
-------------------- ------------------
Total Liabilities and Stockholders' Equity $ 37,401 $ 43,832
==================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Statements of Operations
(Unaudited)
For the Nine Months From May 21, 1998 From May 21, 1998
Ended (Inception) Through (Inception) Through
November 30, 1999 November 30, 1998 November 30, 1999
--------------------- --------------------- ----------------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
--------------------- --------------------- ----------------------
Expenses
General and administrative expenses 115 1,157 1,906
Consulting fees - related party 0 100 100
Professional fees 1,816 4,500 10,816
Professional fees - related party 0 0 3,000
--------------------- --------------------- ----------------------
Total expenses 1,931 5,757 15,822
--------------------- --------------------- ----------------------
Net loss $ (1,931)$ (5,757)$ (15,822)
===================== ===================== ======================
Net loss per weighted average share, basic $ (.00)$ (.00)$ (.00)
===================== ===================== ======================
Weighted average number of shares 2,000,000 1,930,482 1,975,955
===================== ===================== ======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Statements of Changes in Stockholders'
Equity Period from May 21, 1998 (Inception)
through November 30, 1999
Deficit
Accumulated
Additional During the Total
Number of Common Paid-in Development Stockholders'
Shares Stock Capital Stage Equity
------------ --------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
May 21, 1998 (inception) 0 $ 0 $ 0 $ 0 $ 0
May 1998 - services ($0.0001/sh) 1,000,000 100 0 0 100
May 1998 - cash ($0.05/sh) 565,000 57 28,193 0 28,250
June 1998 - cash ($0.05/sh) 371,000 37 18,513 0 18,550
July 1998 - cash ($0.05/sh) 4,000 0 200 0 200
September 1998 - cash ($0.05/sh) 60,000 6 2,994 0 3,000
Net loss 0 0 0 (13,891) (13,891)
------------ --------- ------------ ---------------- ----------------
BALANCE, February 28, 1999 2,000,000 $ 200 $ 49,900 $ (13,891)$ 36,209
------------ --------- ------------ ---------------- ----------------
Net loss 0 0 0 (1,931) (1,931)
------------ --------- ------------ ---------------- ----------------
BALANCE, November 30, 1999 (Unaudited) 2,000,000 $ 200 $ 49,900 $ (15,822)$ 34,278
============ ========= ============ ================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
(Unaudited)
For the Nine Months From May 21,1998 From May 21, 1998
Ended (Inception) Through (Inception) Through
November 30, 1999 November 30, 1998 November 30, 1999
-------------------- --------------------- ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (1,931)$ (5,757)$ (15,822)
Adjustments to reconcile net loss to net cash used by
operating activities:
Stock issued for services - related party 0 100 100
Changes in operating assets and liabilities:
(Decrease) Increase in accrued expenses (4,500) 4,500 0
Decrease in accrued expenses - related party 0 0 (3,123)
-------------------- --------------------- ----------------------
Net cash used by operating activities (6,431) (1,157) (12,599)
-------------------- --------------------- ----------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 50,000 50,000
-------------------- --------------------- ----------------------
Net cash provided by financing activities 0 50,000 50,000
-------------------- --------------------- ----------------------
Net increase (decrease) in cash (6,431) 48,843 42,278
CASH, beginning of period 43,832 0 0
-------------------- --------------------- ----------------------
CASH, end of period $ 37,401 $ 48,843 $ 37,401
==================== ===================== ======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(Information with respect to the nine months
ended November 30, 1999 is unaudited)
(1) Summary of Significant Accounting Principles
TheCompany Dermatology Systems, Inc. is a Florida chartered development
stage corporation which conducts business from its headquarters in West
Palm Beach, Florida. The Company was incorporated on May 21, 1998, and
has elected February 28 as its fiscal year end.
The Company has not yet engaged in its expected operations. The
Company's future operations will be to provide certain treatments for
skin diseases. Current activities include raising additional equity and
negotiating with potential key personnel and facilities. There is no
assurance that any benefit will result from such activities. The
Company will not receive any operating revenues until the commencement
of operations, but will nevertheless continue to incur expenses until
then.
The financial statements have been prepared in conformity with
generally accepted accounting principles. The financial statements for
the nine months ended November 30, 1999 and for the period from May 21,
1998 (Inception) through November 30, 1998 include all adjustments
which in the opinion of management are necessary for fair presentation,
and such adjustments are of a normal and recurring nature. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition and revenues
and expenses for the period then ended. Actual results may differ
significantly from those estimates.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.
b) Net loss per share Basic net loss per weighted average share is
computed by dividing the net loss by the weighted average number of
common shares outstanding during the period.
c) Stock compensation for services rendered The Company issues
shares of common stock in exchange for services rendered . The costs of
the services are valued according to generally accepted accounting
principles and have been charged to operations.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock, and 10,000,000 shares of $0.0001 par
value preferred stock. Rights and privileges of the preferred stock are
to be determined by the Board of Directors prior to issuance. On May
21, 1998, the Company issued a total of 1,000,000 restricted shares to
its President and Treasurer for the value of services rendered in
connection with the organization of the Company. In May 1998, the
Company sold 565,000 shares of common stock for $28,250 in cash. In
June 1998, the Company sold 371,000 shares of common stock for cash of
$18,550. In July 1998, the Company sold 4,000 shares of common stock
for cash of $200. In September 1998, the Company sold 60,000 shares of
common stock for cash of $3,000.
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company has net operating loss
carry-forwards for income tax purposes of $15,822, with $13,891
expiring in 2019, and $1,931, expiring in 2020.
The amount recorded as deferred tax assets as of November 30, 1999 is
approximately $3,100, which represents the amount of tax benefit of the
loss carryforward. The Company has established a 100% valuation
allowance against this deferred tax asset, as the Company has no
history of profitable operations.
F-6
<PAGE>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(4) Going Concern The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company's financial position and operating results raise substantial
doubt about its ability to continue as a going concern, as reflected by
the net loss of $15,822 accumulated from May 21, 1998 (inception)
through November 30, 1999. The ability of the Company to continue as a
going concern is dependent upon commencement of operations, developing
sales, and obtaining additional capital and financing. The financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The Company is
currently seeking additional capital to allow it to begin its planned
operations.
(5) Related parties Counsel to the Company indirectly owns 80,000 shares of
the Company's common stock through the sole ownership of the common
stock of another company which invested in the Company. Also, counsel's
adult son owns 80,000 shares in the Company. The Company's president
owns a 42.5% interest in the Company, consisting of 850,000 shares, and
the treasurer owns a 7.5% interest, consisting in 150,000 shares.
During the period since inception, the Company incurred certain legal
and consulting fees from related parties, in the amount of $3,100.
Professional services rendered by the Company's legal counsel and
shareholder amounted to $3,000 and is presented in Professional fees -
related party. Consulting services rendered by the Company's secretary
and treasurer amounted to $100 and is presented in Consulting fees -
related party. Legal counsel paid certain miscellaneous expenses on
behalf of the Company, amounting to $123. Unpaid amounts at November
30, 1999 are $3,123 and are presented in Accrued expenses - related
party.
F-7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since its inception, the Company has conducted no business operations
except for organizational and capital raising activities. For the period from
inception (May 21, 1998) through November 30, 1999, the Company had no income
from operations and operating expenses aggregating of $15,822, and a loss from
operations. The Company proposes to profitably participate in the recent trend
in the medical/cosmetic removal of blemishes through the use of laser technology
and, specifically through the application of Photo Therapy Resonancy technology
(otherwise referred to as "PTR").
Dr. Pierre Haouzi, 61 years old, is a graduate of the Paris School of
Medicine, specializing in Biology and is Licensed to practice general medicine.
He has a specialty in Sports Medicine and Traumatology and in 1979 was certified
by the Country of France. Dr. Haouzi has testified numerous times in court as a
medical expert. He also holds a certification in Homeopathy and Accupuncture. In
June 1995 Dr. Haouzi resigned his position managing retirement homes and private
clinics. In 1996 he assumed the position of Medical Director of Lasertec of
France's research and development of laser therapy for the specialized treatment
of cancer. Dr. Pierre Haouzi is associated with all of the key leaders in the
medical industry specializing in Dermatology. His networking power will connect
the Company with all the current industry issues and procedures. Dr. Haouzi is
developing the sales of this medical laser technology for the Company for the
following, among other, reasons: (i) because of his belief that a public company
could exploit his talents, services and business reputation to commercial
advantage and (ii) to observe directly whether the perceived advantages of a
public company, including, among others, greater ease in raising capital,
liquidity of securities holdings and availability of current public information,
would translate into greater profitability for a public, as compared to a
locally-owned company.
Dr. Haouzi has applied portions of his training to his recent research
and development of laser technology therapy. While the research and development
has been focused on specialized treatment of cancer and many benefits from laser
application have been discovered, refined and applied to the areas in which the
Company will market its services. Dr. Haouzi has been authorized and permitted
to develop this additional technology while engaged in his research and
development for the specialized treatment of cancer. Such forms of cancer
researched to which PTR technology may apply includes cancer of the bladder,
skin cancer and cancer of the vocal chords. In some respects the areas overlap
and the cancer research has developed new methods of treatment and laser
application for the areas in which the Company will engage. Dr. Haouzi has been
a key researcher for Lasertec of France, was authorized and permitted by
Lasertec of France to develop additional technology while doing cancer research
and has a verbal commitment from Lasertec of France which owns the PTR
technology that he is permitted to utilize such technologies in his own
business. The specific terms of the license is under discussion and the Company
expects a written agreement with respect to the technology in the very near
future.
Dr. Haouzi, at least initially, will be solely responsible for
developing DSI's medical laser sales business. However, at such time, if ever,
as sufficient operating capital becomes available, management expects to employ
<PAGE>
additional staffing and marketing personnel. In addition, the Company expects to
continuously engage in market research in order to monitor new market trends and
other critical information deemed relevant to DSI's business.
In addition, at least initially, the Company intends to operate out of
an office provided by Dr. Haouzi. Thus, it is not anticipated that DSI will
lease or purchase office space or computer equipment in the foreseeable future.
DSI may in the future establish its own facilities and/or acquire computer
equipment if the necessary capital becomes available; however, the Company's
financial condition does not permit management to consider the acquisition of
office space or equipment at this time.
Financial Condition, Capital Resources and Liquidity
At November 30, 1999, the Company had assets totaling $37,401 and
liabilities of $3,123 attributable to accrued legal expenses, organization
expenses and professional fees. Since the Company's inception, it has received
$50,000 in cash contributed as consideration for the issuance of shares of
Common Stock.
DSI's working capital is presently minimal and there can be no assurance that
the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities. In May, 1998, the Company sold 565,000 shares of
common stock for $28,250 in cash. In June, 1998, the Company sold 371,000 shares
of common stock for $18,550 in cash. The Company, in July, 1998, sold a total of
4,000 shares of common stock for $200 in cash. Then in September 1998 the
Company sold 60,000 shares of common stock for $3,000 in cash. Even though
management believes, without assurance, that it will obtain sufficient capital
with which to implement its business plan on a limited scale, the Company is not
expected to continue in operation without an infusion of capital. In order to
obtain additional equity financing, management may be required to dilute the
interest of existing shareholders or forego a substantial interest of its
revenues, if any.
The Company has no potential capital resources from any outside sources
at the current time. In its initial phase, the Company will operate out of the
facility provided by Dr. Haouzi. Dr. Haouzi will begin by finding clients for
the Company and instructing Mr. Hileman in the operation of medical laser sales
business. To attract clients, Dr. Haouzi and Mr. Hileman will visit potential
clients in order to determine their needs. The Company will place advertising in
local area newspapers in Palm Beach County to directly solicit prospective
clients and to brand-name awareness. In the event the Company requires
additional capital during this phase, Dr. Haouzi has committed to fund the
operation until such time as additional capital is available.
The ability of the Company to continue as a going concern is dependent
upon its ability to obtain a licensing arrangement with the manufacturer of PTR
medical lasers and then finding clients who will purchase it. The Company
believes that in order to be able to expand its initial operations, it must rent
offices in Palm Beach County, hire clerical staff and acquire through purchase
or lease computer and office equipment to maintain accurate financial accounting
and client data. The Company believes that there is adequate and affordable
rental space available in Palm Beach County and sufficiently trained personnel
to provide such clerical services at affordable rates. Further, the Company
<PAGE>
believes that the type of equipment necessary for the operation is readily
accessible at competitive rates.
Net Operating Losses
The Company has net operating loss carry-forwards of $15,822 expiring
in 2019, $1,931, expiring in 2020. The company has a $3,100 deferred tax asset
resulting from the loss carry-forwards, for which it has established a 100%
valuation allowance. Until the Company's current operations begin to produce
earnings, it unclear as to the ability of the Company to utilize such
carry-forwards.
Year 2000 Compliance
The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company did not experience a materially negative impact during the
Year 2000 date switch-over and it has determined that there will be minimal
impact if any to its business, operations or financial condition since all of
the internal software to be developed and utilized by the Company will be and
has been upgraded to support Year 2000 versions.
There can be no assurance, however, that the systems of other companies
on which the Company's systems may have to rely also will be timely converted or
that any such failure to convert by another company would not have an adverse
affect on the Company's systems. Currently the Company does not rely on other
systems that might have an adverse affect on any Company systems and does not
anticipate any such reliance in the near future.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
<PAGE>
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements. The Safe Harbor
provisions referred to herein do not apply to the Company until the Company is
subject to the reporting requirements of Section 13(a) or Section 15(d) of the
Exchange Act.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending November 30, 1999,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated
herein by reference, as follows:
<PAGE>
Exhibit No. Description
- --------------- -------------------------------------------------------
3(i).1 Articles of Incorporation of DSI filed May 21, 1998(1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
- ----------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB. and subsequent amendments filed thereto.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended November 30,
1999.
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
DERMATOLOGY SYSTEMS, INC..
Date Signature
---- ---------
January 13, 2000 By:/s/ Dr. Pierre Haouzi
-----------------------
Dr. Pierre Haouzi, President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001065801
<NAME> DERMATOLOGY SYSTEMS, INC
<MULTIPLIER> 1
<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-START> Mar-01-1999
<PERIOD-END> Nov-30-1999
<EXCHANGE-RATE> 1
<CASH> 37,401
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,401
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,401
<CURRENT-LIABILITIES> 3,123
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 34,278
<TOTAL-LIABILITY-AND-EQUITY> 37,401
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,931)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,931)
<EPS-BASIC> (.00)
<EPS-DILUTED> 0
</TABLE>
