<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission file number 0-14026
Daltex Medical Sciences, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
13-3174562
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(IRS Employer Identification No.)
7777 Glades Road, Suite 211, Boca Raton, FL 33434
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(Address of principal executive offices)
561-470-6005
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(Issuer's telephone number)
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(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 ( ).
State the number of shares outstanding of the issuer's classes of common
equity, as of the latest practicable date. As of June 11, 1999 the registrant
had issued and outstanding 9,632,699 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes ( ) No (x)
<PAGE>
DALTEX MEDICAL SCIENCES, INC.
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
(a) Condensed balance sheets as of April 30, 1999
(Unaudited) and July 31, 1998. 2
(b) Condensed statements of operations for the three and
nine months ended April 30, 1999 (Unaudited) and
April 30, 1998 (Unaudited) 3
(c) Condensed statements of cash flows for the nine months
ended April 30, 1999 (Unaudited) and April 30, 1998
(Unaudited), 4
(d) Notes to condensed financial statements
(Unaudited) 5
Item 2 - Management's Discussion and Analysis or Plan of
Operation 6 - 8
PART II - OTHER INFORMATION
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
DALTEX MEDICAL SCIENCES, INC.
BALANCE SHEETS
April 30, July 31,
1999 1998
----------- -----------
(unaudited) *
ASSETS
Current assets
Cash and cash equivalents $ 3,104 $ 22,495
----------- -----------
Total current assets 3,104 22,495
----------- -----------
$ 3,104 $ 22,495
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable $ 20,000 $ 70,000
Accounts payable and accrued expenses 94,048 99,520
Loans payable - 39,600
----------- -----------
Total current liabilities 114,048 209,120
----------- -----------
Stockholders' deficit
Preferred stock, $1.00 par value;
authorized 150,000 shares; 89,000,
shares issued and outstanding 89,000 -
Common stock, $.01 par value;
authorized 20,000,000 shares;
9,632,699 and 8,632,699 shares issued
and outstanding, respectively 96,327 86,327
Additional paid-in capital 6,816,369 6,816,369
Retained deficit (7,112,640) (7,089,321)
----------- -----------
Total stockholders' deficit (110,944) (186,625)
----------- -----------
$ 3,104 $ 22,495
=========== ===========
*Condensed from audited financial statements
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
DALTEX MEDICAL SCIENCES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
April 30, April 30,
----------------------------- ----------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
License fees, grants and royalties $ - $ 116,485 $ - $ 270,138
Interest and other income - - - 2,000
----------- ---------- ----------- ----------
- 116,485 - 272,138
----------- ---------- ----------- ----------
Expenses
General and administrative expenses 1,450 98,754 23,319 246,355
----------- ---------- ----------- ----------
1,450 98,754 23,319 246,355
----------- ---------- ----------- ----------
Net income (loss) $ (1,450) $ 17,731 $ (23,319) $ 25,783
=========== ========== =========== ==========
Net income (loss) per share $ (0.00) $ 0.00 $ (0.00) $ 0.00
=========== ========== =========== ==========
Weighted average shares outstanding 98,632,699 8,633,000 47,437,337 8,633,000
=========== ========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
DALTEX MEDICAL SCIENCES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
April 30,
-------------------------
1999 1998
-------- ---------
Cash flows from operating activities:
Net income (loss) $(23,319) $ 25,783
Changes in assets and liabilities:
Accounts receivable - (3,048)
Prepaid royalty - 63,750
Accounts payable accrued expenses (5,472) 20,148
Advance royalty payments - (127,500)
-------- ---------
Net cash (used in) operations (28,791) (20,867)
-------- ---------
Cash flows provided by financing activities
Issuance of preferred stock 89,000
Issuance of common stock 10,000
Decrease in other liabilities (89,600) -
-------- ---------
Net cash provided by financing activities 9,400 -
-------- ---------
Net (decrease) in cash and
cash equivalents (19,391) (20,867)
Cash and cash equivalents, beginning of
period 22,495 23,522
-------- ---------
Cash and cash equivalents, end of period $ 3,104 $ 2,655
======== =========
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS -- April 30, 1999 (Unaudited)
(1) Basis of Presentation
The unaudited condensed financial statements have been prepared from
the books and records of Daltex Medical Sciences, Inc. (the "Company") in
accordance with generally accepted accounting principles for interim financial
information. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
The accompanying unaudited condensed financial statements, which are
for interim periods, do not include all disclosures provided in the annual
financial statements. These unaudited condensed financial statements should be
read in conjunction with the financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended July 31, 1998
as filed with the Securities and Exchange Commission. The July 31, 1998
consolidated balance sheet was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the nine months ended April 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
Going Concern - The report of the Company's independent accountants on
their audit of the Company's July 31, 1998 consolidated financial statements
contained uncertainties relating to the Company's ability to continue as a going
concern. The Company has incurred a loss in the nine months ended April 30, 1999
and uncertainties exist with regard to the Company's ability to generate
sufficient cash flows from operations or other sources to meet existing
obligations, which gives rise to doubts about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
(2) Stockholders' Equity
During the nine months ended April 30, 1999, the Company issued to
three investors 1,000,000 shares of Common Stock at the price of $.01 per share
in exchange for the cancellation of $10,000 in loans previously advanced by
these investors. In addition, the three investors were issued 89,000 shares of
Series A Convertible Preferred Stock in exchange for the cancellation of
additional loans and cash of $89,000. The Series A Convertible Preferred Stock
is convertible into 1000 shares of Common Stock at any time and votes with the
common shares and not as a separate class on any matters coming before the
shareholders.
<PAGE>
Item 2
Management's Discussion and Analysis or Plan of Operation
The following discussion regarding the Company and its business and
operations contains "forward-looking statements" within the meaning of Private
Securities Litigation Reform Act 1995. Such statements consist of any statement
other than a recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. The reader is cautioned that all forward-looking statements are
necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in
such forward looking statements. The Company does not have a policy of updating
or revising forward-looking statements and thus it should not be assumed that
silence by management of the Company over time means that actual events are
bearing out as estimated in such forward looking statements.
The Company had been principally engaged in research and development
activities with the objective of developing and commercializing certain
cost-reducing medical device and pharmaceutical technologies. In 1984, the
Company successfully completed an initial public offering to raise working
capital. Since that time, prior management of the Company had been working on a
number of development projects which involved experimental and unproven
technologies. Since March 1, 1994 and continuing to date, research and
development efforts have been substantially discontinued, or in most cases put
on hold. In fiscal 1998 and 1997, the Company did not have any sales of its
technologies or its antimicrobial medical gloves. During this period, the
Company received revenues from royalty payments and development fees pursuant to
two licenses with sublicensees of applications of the Company's antimicrobial
medical technology. Effective April 30, 1998, the Company, by entering into a
Settlement and Mutual Release Agreement with Columbia University (a creditor),
substantially terminated all operations and currently remains as a shell
corporation.
The report of the Company's independent auditors on the Company's
financial statements includes an explanatory paragraph which states that the
Company's recurring losses and working capital and total stockholders' deficits
raise substantial doubt about the Company's ability to continue as a going
concern and precludes and has precluded the expression of an opinion on the
Company's financial statements as of and for the years ended July 31, 1998 and
1997. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty. Because of the continued working capital
deficit, management's plan in order to continue in operation for the next year
is to continue to attempt to raise additional capital. Furthermore, the Company
has curtailed expenditures to the extent possible. The Company does not have any
commitments to raise additional capital in the future, and there can be no
assurance that the Company will be successful in any of its capital-raising
efforts or that the Company can avoid liquidation.
During the nine months ended April 30, 1999, the Company issued to
three investors 1,000,000 shares of Common Stock at the price of $.01 per share
in exchange for the cancellation of $10,000 in loans previously advanced by
these investors. In addition, the three investors were issued 89,000 shares of
Series A Convertible Preferred Stock in exchange for the cancellation of
additional loans and cash of $89,000. The Series A Convertible Preferred Stock
is convertible into 1,000 shares of Common Stock at any time and votes with the
common shares and not as a separate class on any matters coming before the
shareholders.
<PAGE>
The discussion below should be reviewed together with the Company's
Financial Statements and the Notes thereto.
Results of Operations for the Nine Months Ended April 30, 1999 as
compared to April 30, 1998
There were no revenues for the nine months ended April 30, 1999. For
the nine months ended April 30, 1998, the Company's principal sources of revenue
had consisted of license fees and royalties. The Company plans to attempt to
raise additional capital to fund operations in fiscal 2000.
During the nine months ended April 30, 1999 and 1998, revenues
from license fees and royalties were $0 and $270,138, respectively. All of the
Company's revenues for the nine months ended April 30, 1998 were derived from
license fees and royalties received from its two sublicensees.
Operating expenses for the nine months ended April 30,1999 and 1998
consisted principally of general and administrative expenses. General and
administrative expenses in the nine months ended April 30, 1999 and 1998 were
$23,319 and $246,355, respectively. General and administrative expenses have
decreased by $223,036 from 1998 to 1999 due to continuing inactivity of the
Company. The Company expects this trend to continue thru 1999 and into fiscal
2000, unless it is successful in attracting a merger candidate.
The Company had a net loss of $23,319 for the nine months ended April
30, 1999 compared to net income of $25,783 for the nine months ended April 30,
1998.
Results of Operations for the Three Months Ended April 30, 1999 as
compared to April 30, 1998
There were no revenues for the three months ended April 30, 1999. For
the three months ended April 30, 1998, the Company's principal sources of
revenue had consisted of license fees and royalties. The Company plans to
attempt to raise additional capital to fund operations in fiscal 2000.
During the three months ended April 30, 1999 and 1998, revenues
from license fees and royalties were $0 and $116,485, respectively. All of the
Company's revenues for the three months ended April 30, 1998 were derived from
license fees and royalties received from its two sublicensees.
<PAGE>
Operating expenses for the three months ended April 30, 1999 and 1998
consisted principally of general and administrative expenses. General and
administrative expenses in the three months ended April 30, 1999 and 1998 were
$1,450 and $98,754, respectively. General and administrative expenses have
decreased by $97,304 from 1998 to 1999 due to continuing inactivity of the
Company. The Company expects this trend to continue thru 1999 and into fiscal
2000, unless it is successful in attracting a merger candidate.
The Company had a net loss of $1,450 for the three months ended April
30, 1999 compared to net income of $17,731 for the three months ended April 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1999, the Company had cash and cash equivalents of
approximately 3,104, representing a decrease of approximately $19,391 over the
July 31, 1998 balance of cash and cash equivalents. During the nine months ended
April 30, 1999, the Company used net cash for operations of $28,791 as compared
to $20,867 for the nine months ended April 30, 1998. This change in cash flows
from operations was primarily due to a net reduction in accounts payable and
accrued expenses. In addition, the Company had a working capital deficit of
$110,944 as of April 30, 1999.
Management has continued to curtail expenditures in many areas,
including discretionary expenditures, in order to stay in business and to focus
the Company's extremely limited resources in what it believes are the most
promising areas of the Company's business in the near term. However, there can
be no assurance that the Company will have sufficient funds to carry out these
plans or to remain in business. In addition, further cost saving measures may be
impossible and cost savings measures may have an adverse effect on the Company's
future operations. If the Company is unsuccessful in raising additional capital
during fiscal year 1999, the Company may be unable to continue as a going
concern, even with further cost-cutting measures. To meet its long-term
liquidity requirements, the Company must also generate sufficient income through
operations or obtain additional financing as required, as to which there can be
no assurance. However, there can be no assurance that the Company will be
successful in meeting its immediate or long-term liquidity requirements or that
the Company can continue as a going-concern.
<PAGE>
PART II - OTHER INFORMATION
Item 5 - Other Information
The Company issued an aggregate of 89,000 shares of Series A Convertible
Preferred Stock to three shareholders in the first quarter of 1999. The issuance
of these shares resulted in a change of control of the Company upon filing of a
Certificate of Designations and Preferences in Delaware on June 10, 1999. A
description of the terms of issuance of the Series A Convertible Preferred Stock
and the resultant change of control will appear in a Report on Form 8-K to be
filed after the date of this Report on Form 10-QSB. See Note (2) to Notes to
Condensed Financial Statements appearing in Item 1 of this Report and Item 2,
"Management's Discussion and Analysis or Plan of Operation."
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April
30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DALTEX MEDICAL SCIENCES, INC.
Date: June 11, 1999 By:/s/Bruce Hausman, Esq.
----------------------
BRUCE HAUSMAN, ESQ.
President and Chief Executive
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 3,104
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,104
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,104
<CURRENT-LIABILITIES> 114,048
<BONDS> 0
0
0
<COMMON> 96,327
<OTHER-SE> (207,271)
<TOTAL-LIABILITY-AND-EQUITY> 3,104
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 23,319
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (23,319)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,319)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
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