<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
NOVEMBER 30, 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.)
400 COLORADO BLVD., SUITE 420
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 (X) 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 7,199,034
shares (as of February 29, 1996) of common stock, par value $.01 per share.
<PAGE>
DERMARX CORPORATION
INDEX
Page No.
Part I. Financial Information 1
Item 1. Financial Statements 1
Balance Sheet - August 31, 1995 1
Statements of Operations - 2
Three Months and Nine Months
Ended November 30, 1995 and 1994
Statements of Cash Flows - 3
Nine Months Ended November 30, 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 5. Increase of 5% ownership in class of subscriptions 6
Item 6. Exhibits and Reports on Form 8-K 6
Signature 7
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
DERMARX CORPORATION
BALANCE SHEET NOVEMBER 30, 1995 (Unaudited)
ASSETS
<CAPTION>
<S> <C>
Current assets:
Cash $ 913,716
Accounts receivable 15,383
Inventory - Finished goods 66,899
Prepaid expense 8,050
------------
Total current assets 1,004,048
------------
Property and equipment, net of accumulated
depreciation of $68 4,012
Other assets:
Patents, net of accumulated amortization of $26,576 121,900
------------
Total Assets $ 1,129,960
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Note payable - bank $ 6,000
Notes payable - other 25,000
Accounts payable and accrued expenses 81,622
Accrued interest - notes payable 5,757
Related party 33,750
------------
Total current liabilities 152,129
------------
Long-term debt:
Note payable - bank 2,000
Accrued expenses 196,679
Notes payable - net of discounts 33,560
Note payable - related party, net of discounts 48,268
Accrued interest - note payable 2,398
Accrued interest - note payable, related party 4,642
------------
Total long-term debt 287,547
------------
Commitments and Contingencies
Total Liabilities 439,676
------------
Common stockholders' equity (deficiency):
Common stock, $.05 par value: 8,000,000
shares authorized; 6,838,829 shares issued
and outstanding 341,941
Additional paid-in capital 4,092,118
Accumulated (deficit) (3,743,775)
------------
690,284
------------
Total Liabilities and Stockholder's Equity (deficit) $ 1,129,960
============
See accompanying notes to the financial statements.
1
</TABLE>
<PAGE>
<TABLE>
DERMARX CORPORATION
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
1995 1994 1995 1994
---------- ---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales $ 8,422 $ 6,215 $ 40,548 $ 35,477
Cost of goods sold (1,958) (940) (12,028) (5,277)
Gross Profits 6,464 5,275 28,520 30,200
Operating Expenses (138,153) (59,881) (343,513) (197,937)
Operating Profit (131,689) (54,606) (315,093) (167,737)
Extraordinary Expenses (111,450) 0 (111,450) 0
Net (Loss) from continuing
operations (243,139) (54,606) (426,543) (167,737)
Dividends on series A
preferred stock - - - 2,800
---------- ---------- ---------- ----------
(243,139) (54,606) (426,543) (170,537)
========== ========== ========== ==========
Net (Loss) from
discontinued operations - - - -
Net (Loss) attributable to
common stock $(243,139) $ (54,606) $(426,543) $(170,537)
Net (Loss) per common
share:
From continuing operations $ (.05) $ (.02) $ (.04) $ (.05)
From discontinued operations $ (.05) $ (.02) $ (.04) $ (.05)
Weighted-average number of
common shares outstanding 5,218,897 3,512,468 3,867,713 3,120,721
========= ========= ========= =========
See accompanying notes to the financial statements.
2
</TABLE>
<PAGE>
<TABLE>
DERMARX CORPORATION
STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended November 30
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (448,538) $ (167,737)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Amortization of discounts on notes 7,866 4,946
Expenses paid by Issuance of stock
Depreciation and amortization 7,138 6,768
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable (3,923) 1,820
receivable
(Increase) Decrease in inventory 12,029 (62,906)
(Increase) Decrease in other assets (7,002) -
Increase (Decrease) in accounts payable,
accrued interest (59,315) 78,767
and accrued expenses
Increase (Decrease) dividends in arrears - (12,000) -
----------- -----------
Net cash (used) by operating activities (491,745) (150,344)
----------- -----------
Cash flows from financing activities:
Net Proceeds of equity sale 1,650,120 -
Net proceeds from debt obligations - 315,500
Purchase Treasury Shares - (147,500)
Repayment of debt obligations (250,389) (4,000)
----------- -----------
Net cash provided by financing activities 1,399,731 164,000
----------- -----------
Net increase in cash and cash equivalents 907,986 13,656
Cash and cash equivalents, beginning of year 5,730 3,843
----------- -----------
Cash and cash equivalents, end of period $ 913,716 $ 17,499
=========== ===========
See accompanying notes to the financial statements.
3
</TABLE>
<PAGE>
DERMARX CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of November 30, 1995, the statements of
operations for the three months and nine months ended November
30, 1995 and 1994 and the statements of cash flows for the nine
months ended November 30, 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 November 30, 1995 and for all periods presented
have been made. The results of operations, for the nine months
ended November 30, 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 has completed the process of obtaining capital in a
private placement. The private placement involved an offering of
2,000,000 shares of the Company's common shares at the price of
$.50 per common share. During the quarter ended November 30,
1995, $928,500 had been raised in this offering. Subsequent to
November 30, 1995 this offering was completed with the placement
of the remaining shares raising an additional $71,500.
Intended use of the private placement proceeds includes debt
repayment; operating overhead; completion of product development
and patent application for an amorphous hydrogel; and expenses
related to the market launch of three recently developed wound
care products (a skin tear therapy, an antimicrobial wound
cleanser and a polyurethane foam).
4
<PAGE>
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 increased to $8,422 in its fiscal
quarter ended November 30, 1995 from $6,215 in its fiscal quarter
ended November 30, 1994, an increase of $2,207. 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 decreased to 23% from 30% in the three months ended
November 30, 1995 as compared to the comparable period one year
ago. Total expenses were $273,556, an increase of $212,735 from
the comparable period one year ago. This increase is primarily
attributable to an increase in salary, marketing, general and
administrative, and other expenses incurred as the result of the
Company's efforts to develop and introduce new products.
Interest expense decreased by $5,300 for the quarter ended
November 30, 1995, compared to the same period in 1994 as a
result of the debt conversion. For the third quarter of fiscal
year 1995, the Company had a net loss of $265,134 or $.05 per
share as compared to a net loss of $54,606 or $.02 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. Subsequent to
November 30, 1995, the Company raised an additional $71,500 in
this offering. 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 entered into a two year employment contract
effective November 1, 1995 with Dr. Gerit Mulder, an expert in
the wound care industry. Dr. Mulder is now a Vice President of
the Company, responsible for new product development, marketing,
distribution and customer support programs.
5
<PAGE>
The Company was notified on February 28, 1996 by the United
States Patent Office that a patent was issued for its GeriMend(TM)
product. GeriMend(TM) is a topical ointment designed primarily
for skin tears.
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 5. INCREASE OF 5% OWNERSHIP IN CLASS OF SECURITIES
During the quarter ended November 30, 1995 the Company
conducted a private offering of 2,000,000 shares of the Company's
stock at an offering price of $.50 per share. This private
offering was exempt from registration under Regulation D, Rule
505. As a result of this private offering, at the quarter ended
November 30, 1995, the outstanding common shares of the Company
had increased by 65% over the number outstanding at the end of
the period ending August 31, 1995.
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: March ______, 1996. /s/ Maryanne Carroll
-----------------------
Maryanne Carroll,
Chief Executive Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 913,716
<SECURITIES> 0
<RECEIVABLES> 15,383
<ALLOWANCES> 0
<INVENTORY> 66,899
<CURRENT-ASSETS> 1,004,048
<PP&E> 4,012
<DEPRECIATION> 68
<TOTAL-ASSETS> 1,129,960
<CURRENT-LIABILITIES> 152,129
<BONDS> 6,000
<COMMON> 341,941
0
0
<OTHER-SE> 348,343
<TOTAL-LIABILITY-AND-EQUITY> 690,284
<SALES> 40,548
<TOTAL-REVENUES> 40,548
<CGS> 12,028
<TOTAL-COSTS> 12,028
<OTHER-EXPENSES> 343,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,839
<INCOME-PRETAX> (315,093)
<INCOME-TAX> 0
<INCOME-CONTINUING> (315,093)
<DISCONTINUED> 0
<EXTRAORDINARY> (111,450)
<NET-INCOME> (426,543)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<CHANGES> 0
</TABLE>
