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: August 31, 2000
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
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(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
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(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 August 31, 2000, there are 2,000,000 shares of voting stock of
the registrant issued and outstanding.
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Balance Sheets......................................................F-2
Statements of Operations............................................F-3
Statements of 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
February 29, August 31,
2000 2000
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 36,900 $ 28,140
---------------- ----------------
Total current assets 36,900 28,140
---------------- ----------------
Total Assets $ 36,900 $ 28,140
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 2,000 $ 0
Accrued expenses - related party 3,000 3,000
---------------- ----------------
Total current liabilities 5,000 3,000
---------------- ----------------
Total Liabilities 5,000 3,000
---------------- ----------------
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 (18,200) (24,960)
---------------- ----------------
Total Stockholders' Equity 31,900 25,140
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 36,900 $ 28,140
================ ================
</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)
Period from
Three Months Ended Six Months Ended May 21, 1998
August 31, August 31, (Inception)
------------------------- --------------------------- through
2000 1999 2000 1999 August 31, 2000
---------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0 $ 0
---------- ----------- ------------ ----------- ----------------
Expenses
General and administrative 10 0 10 20 2,436
Consulting fees - related party 0 0 0 0 100
Consulting fees 2,000 0 2,000 0 4,000
Professional fees 750 1,400 4,750 1,400 15,424
Professional fees - related party 0 0 0 0 3,000
---------- ----------- ------------ ----------- ----------------
Total expenses 2,760 1,400 6,760 1,420 24,960
---------- ----------- ------------ ----------- ----------------
Net loss $ (2,760) $ (1,400) $ (6,760) $ (1,420) $ (24,960)
========== =========== ============ =========== ================
Net loss per weighted average share, basic $ (0.01) $ (0.01) $ (0.01) $ (0.01)
========== =========== ============ ===========
Weighted average number of shares 2,000,000 2,000,000 2,000,000 2,000,000
========== =========== ============ ===========
</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 Stockholders'
Equity Period from May 21, 1998 (Inception)
through August 31, 2000
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
Year Ended February 28, 1999:
----------------------------
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
Year Ended February 29, 2000:
----------------------------
Net loss 0 0 0 (4,309) (4,309)
------------ ---------- ------------ --------------- ---------------
BALANCE, February 29, 2000 2,000,000 200 49,900 (18,200) 31,900
Six Months Ended August 31, 2000: (unaudited)
--------------------------------
Net loss 0 0 0 (6,760) (6,760)
------------ ---------- ------------ --------------- ---------------
ENDING BALANCE, August 31, 2000
(unaudited) 2,000,000 $ 200 $ 49,900 $ (24,960) $ 25,140
============ ========== ============ =============== ===============
</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
Six Months Ended August 31, 2000
(Unaudited)
Period from
May 21, 1998
(Inception)
through
2000 1999 August 31, 2000
------------- ------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,760) $ (1,420) $ (24,960)
Adjustments to reconcile net loss to net cash used by
operating activities:
Stock issued for services - related party 0 0 100
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses (2,000) (4,500) 0
Increase (decrease) in accrued expenses - related party 0 0 3,000
------------- ------------- ----------------
Net cash used by operating activities (8,760) (5,920) (21,860)
------------- ------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
None 0 0 0
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Net cash used by investing activities 0 0 0
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 50,000
------------- ------------- ----------------
Net cash provided by financing activities 0 0 50,000
------------- ------------- ----------------
Net increase (decrease) in cash (8,760) (5,920) 28,140
CASH, beginning of period 36,900 43,832 0
------------- ------------- ----------------
CASH, end of period $ 28,140 $ 37,912 $ 28,140
============= ============= ================
</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 six months
ended August 31, 2000 and 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. 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.
d) Interim financial information The financial statements for the six
months ended August 31, 2000 and 1999 are unaudited and include all
adjustments which in the opinion of management are necessary for fair
presentation, and such adjustments are of a normal and recurring
nature. The results for the six months are not indicative of a full
year results.
(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 $25,000, with $13,900
expiring in 2019, $4,300 expiring in 2020 and $6,800 expiring in 2021.
F-6
<PAGE>
Dermatology Systems, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(3) Income Taxes (Continued) The amount recorded as deferred tax assets as
of August 31, 2000 is approximately $3,750, 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.
(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 $25,000 accumulated from May 21, 1998 (inception)
through August 31, 2000. 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 August 31,
2000 are $3,000 and are presented in Accrued expenses - related party.
F-7
<PAGE>
Item 6. 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 quarter ending
August 31, 2000 and 1999, the Company had no income from operations and
accumulated operating expenses of $2,760 and $1,400 respectively, and losses
from operations of $2,760 and $1,400 respectively. 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. 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.
Subsequent to the submission of PTR for FDA approval management intends
to explore all available alternatives for debt and/or equity financing,
including but not limited to additional private and public securities offerings.
Management anticipates that it will be able to satisfy its cash requirements
through its 2001 fiscal year end without raising funds via debt and/or equity
financing or from third party funding sources. Accordingly, management expects
that it will be necessary for DSI to raise additional funds within the next
twelve (9) months, commencing approximately nine(6) months from the date hereof.
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
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.
<PAGE>
Financial Condition, Capital Resources and Liquidity
At August 31, 2000, the Company had assets totaling $28,140 and
liabilities of $3,000 . The increase in the Company's liabilities is
attributable to increased consulting and professional fees rendered by the
Company's legal counsel and shareholder. 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 approximately $28,140 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.
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, submitting PTR for FDA approval, and then finding clients who
will purchase it.
To implement such plan, also during this initial phase, the Company
intends to initiate a self- directed private placement under Rule 506 in order
to raise an additional $300,000. In the event such placement is successful, the
Company believes that it will have sufficient operating capital to meet the
initial expansion goals and operating costs through its 2001 fiscal year end. In
the event the Company is not successful in raising such funds, the Company
believes that it will not be able to continue operations past a period of six
months beyond its 2001 fiscal year end.
Net Operating Losses
The Company has net operating loss carry-forwards of $25,000, with
$13,900, $4,300 and $6,800 expiring in 2019, 2020 and 2021 respectively. The
Company has as of August 31, 2000 a $3,750 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 Company has not experienced a material impact as a result of the
YEAR 2000 event and does not anticipate that it will experience a material
impact to the Company's operations or financial condition in the future since
all of the internal software developed and utilized by the Company has been
upgraded to support Year 2000 versions.
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
<PAGE>
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 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 August 31, 2000,
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 August 31,
2000.
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.
(Registrant)
Date Signature
---- ---------
October 15, 2000 By: /s/ Dr. Pierre Haouzi
-----------------------------
Dr. Pierre Haouzi
President and Director
