<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
AUGUST 31, 1995
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 33-5384
DERMARX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3301899
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
284 JACKSON STREET
DENVER, COLORADO 80206
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (303) 399-1632
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
Check if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 7,014,034 (as of 12/6/95) of common stock, par value $.01
per share.
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DERMARX CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements 1
Balance Sheet - August 31, 1995 1
Statements of Operations - 2
Three Months and Six Months
Ended August 31, 1995 and 1994
Statements of Cash Flows - 3
Six Months Ended August 31, 1995
and 1994
Notes to Financial 4
Statements
Item 2. Management's Discussion and Analysis 5
of Financial Condition and
Results of Operations
Part II. Other Information 6
Item 4. Submission of Matters to a Vote 6
of Securities Holders
Item 6. Exhibits and Reports on Form 8-K 6
Signature 7
ii
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
DERMARX CORPORATION
BALANCE SHEET AUGUST 31, 1995
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $74,592
Accounts receivable 21,525
Inventory - Finished goods 68,857
Prepaid expense 1,429
-------
Total current assets 166,403
-------
Other assets:
Patents, net of accumulated amortization of $26,576 124,115
-------
290,518
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Note payable - bank $6,000
Notes payable - other 60,000
Accounts payable and accrued expenses 82,103
Accrued interest - notes payable 14,034
Related party 33,750
-------
Total current liabilities 195,887
-------
Long-term debt:
Note payable - bank 3,500
Accrued expenses 196,679
Notes payable - net of discounts 117,186
Note payable - related party, net of discounts 179,775
Accrued interest - note payable 8,445
Accrued interest - note payable, related party 14,998
-------
Total long-term debt 520,583
-------
Commitments and Contingencies
Common stockholders' equity (deficiency):
Common stock, $.05 par value: 8,000,000 shares authorized;
4,136,460 shares issued and outstanding 206,823
Additional paid-in capital 2,845,866
Accumulated (deficit) (3,478,641)
(425,952)
-----------
$290,518
===========
</TABLE>
1
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<TABLE>
DERMARX CORPORATION
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
August 31 August 31
1995 1994 1995 1994
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Sales, net discounts $16,751 $18,021 $32,126 $29,262
16,751 18,021 32,126 29,262
------- ------- ------- -------
Expenses:
Cost of goods sold 4,808 2,645 10,071 4,337
Salaries - officers 25,243 - 50,564 -
Management consulting 25,000 - 50,000 16,000
Professional fees 8,881 1,726 15,050 2,979
Interest expense 8,850 12,753 17,989 21,966
Depreciation and amortization 2,215 2,256 4,855 4,512
Legal 6,503 314 20,269 56,980
Marketing 4,739 2,481 9,739 2,481
General and administrative 7,891 9,083 29,786 33,138
Other 707 - 7,207 -
-------- -------- --------- ---------
94,838 31,258 215,529 142,393
-------- -------- --------- ---------
Net (Loss) from continuing operations (78,085) (13,237) (183,403) (113,131)
Dividends on series A preferred stock - - - -
-------- -------- --------- ---------
(78,085) (13,237) (183,403) (113,131)
Net (Loss) from discontinued operations - - - -
--------- --------- ---------- ----------
Net (Loss) attributable to common stock $(78,085) $(13,237) ($183,403) ($113,131)
========= ========= ========== ==========
Net (Loss) per common share:
From continuing operations $(.02) $(.00) $(.04) $(.04)
From discontinued operations
$(.02) $(.00) $(.04) $(.04)
====== ====== ====== ======
Weighted-average number of common shares 4,107,196 3,291,490 3,867,713 2,976,433
outstanding ========= ========= ========= =========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DERMARX CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended August 31
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(183,403) $(113,131)
Adjustments to reconcile net (loss) to net cash (used) by
operating activities:
Amortization of discounts on notes 5,244 2,317
Expenses paid by Issuance of stock
Depreciation and amortization 4,855 4,512
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable (10,065) (4,646)
(Increase) Decrease in inventory 10,071 (64,496)
(Increase) Decrease in other assets (381) -
Increase (Decrease) in accounts payable, accrued interest
and accrued expenses (17,209) 87,084
Increase (Decrease) dividends in arrears - (12,000)
--------- ---------
Net cash (used) by operating activities (190,888) (100,360)
--------- ---------
Cash flows from financing activities:
Net Proceeds of equity sale 263,750 -
Net proceeds from debt obligations 315,500
Purchase Treasury Shares (147,500)
Repayment of debt obligations (4,000) (2,500)
--------- ---------
Net cash provided by financing activities 259,750 165,500
--------- ---------
Net increase in cash and cash equivalents 68,862 65,140
Cash and cash equivalents, beginning of year 5,730 3,843
------- --------
Cash and cash equivalents, end of year $74,592 $68,983
======= ========
</TABLE>
3
<PAGE>
DERMARX CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of August 31, 1995, the statements of operations
for the three months and six months ended August 31, 1995 and 1994 and
the statements of cash flows for the six months ended August 31, 1995
and 1994 have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments), necessary to present fairly the financial
position, results and cash flows as of August 31, 1995 and for all
periods presented have been made. The results of operations, for the
six months ended August 31, 1995 are not necessarily indicative of the
results to be expected for the full year.
Certain information and footnote disclosure normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statement and notes thereto included in the Company's Form 10-KSB for
its fiscal year ended February 28, 1995, which was filed with the
Securities and Exchange Commission.
NOTE 2 - MANAGEMENT PLANS
The Company is now in the process of obtaining capital in a private
placement. This process has been substantially completed. During the
three months ended August 31, 1995, the Company has raised capital
(net) of $43,750 in a prior private placement. Subsequent to the
three months ended August 31, 1995, additional capital of $1,006,500
has been raised.
4
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DERMARX CORPORATION AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's revenues decreased to $16,751 in its fiscal quarter
ended August 31, 1995 from $18,021 in its fiscal quarter ended August
31, 1994, a decrease of $1,270. This increase is negligible and not
attributable to any particular trend or effect. The Company's costs
of goods sold as a percentage of revenues increased to 31% from 14% in
the three months ended August 31, 1995 as compared to the comparable
period one year ago. Total expenses were $94,836, an increase of
$63,578 from the comparable period one year ago. This increase is
primarily attributable to an increase in salary and consulting expense
incurred as the result of the Company's efforts to develop and
introduce new products. Interest expense increased by $3,093 for the
quarter ended August 31, 1995, compared to the same period in 1994, a
negligible amount. For the second quarter of fiscal year 1995, the
Company had a net loss of $78,085 or $.02 per share as compared to a
net loss of $13,237 or $.00 per share for the previous comparable
period.
Liquidity and Capital Resources
Subsequent to the fiscal year ended February 28, 1995 the Company
raised $351,750 in a private placement offering dated March 3, 1995 at
the price of $.50 per common share. Subsequent to August 31, 1995,
the Company commenced another private placement offering of 2,000,000
shares of the Company's stock at the price of $.50 per common share.
The Company has raised $928,500 in this offering as of November 30,
1995. The Company extended an offer to certain holders of the
Company's debt to convert such debt to common shares of the Company's
stock. Holders of such debt converted $296,112 of debt and accrued
interest into 604,898 shares of the Company's common stock subsequent
to August 31, 1995, thereby reducing the Company's outstanding debt
significantly.
As a result of the private placement offering and the debt
conversion, the Company has sufficient working capital for the near
term future to provide viability and continue as a going concern.
OTHER MATTERS
The Company has entered into a two year employment contract
effective November 1, 1995 with Dr. Gerit Mulder, an expert in the
would care industry. Dr. Mulder will be a Vice President of the
Company, responsible for new product development, marketing,
distribution and customer support programs.
5
<PAGE>
As of September 1, 1995 the Company has received FDA approval to
market DermaMend Foam(TM), its new polyurethane wound dressing which
contains an odor neutralizing ingredient.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITIES HOLDERS
In April 1995, a majority of the Company's Shareholders consented
in writing to increase the number of authorized shares that the
corporation shall have authority to issue to 8,000,800. The Company
has submitted the Amendment to Article of Incorporation to the
Secretary of State of Delaware, the Company's place of incorporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DERMARX CORPORATION
(Registrant)
Dated: December 8, 1995 /S/
-----------------------
Maryanne Carroll,
Chief Executive Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1995
<CASH> 74,592
<SECURITIES> 0
<RECEIVABLES> 21,525
<ALLOWANCES> 0
<INVENTORY> 68,857
<CURRENT-ASSETS> 166,403
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 290,518
<CURRENT-LIABILITIES> 195,887
<BONDS> 520,583
<COMMON> 206,823
0
0
<OTHER-SE> (632,775)
<TOTAL-LIABILITY-AND-EQUITY> 290,518
<SALES> 32,126
<TOTAL-REVENUES> 32,126
<CGS> 10,071
<TOTAL-COSTS> 10,071
<OTHER-EXPENSES> 187,469
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,989
<INCOME-PRETAX> (183,403)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,403)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<NET-INCOME> (183,403)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<CHANGES> 0
</TABLE>
