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
May 31, 1997
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number
33-15607
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 80222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 333-4600
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: 7,302,363 (as of 5/31/97) of
common stock, par value $.05 per share.
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DERMARx CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet - May 31, 1997 1
Statements of Operations - 2
Three Months Ended May 31, 1997 and 1996
Statements of Cash Flows - 3
Three Months Ended May 31, 1997 and 1996
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis 5
of Financial Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of 6
Securities Holders
Item 6. Exhibits and Reports on Form 8-K 6
Signature 7
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DERMARX CORPORATION
BALANCE SHEET
MAY 31, 1997
ASSETS
Current assets
Cash and cash equivalent $ 44,783
Accounts receivable - trade 9,664
Inventory - Finished goods 113,629
Prepaid expense 11,432
-----------
Total current assets 179,508
-----------
Property and equipment:, net of accumulated
Equipment, net of accumulated depreciation of $8,366 11,939
-----------
Other assets:
Security deposits 1,000
Patents, net of accumulated amortization of $42,087 108,604
-----------
$ 301,051
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable - net of discounts $ 34,603
Notes payable - related party, net of discounts 50,232
Accrued interest - notes payable 5,833
Accrued interest - notes payable, related party 9,051
Accounts payable and accrued expenses 37,936
Related party 16,667
-----------
Total current liabilities 154,321
-----------
Common stockholders' equity:
Common stock, $.05 par value; 12,000,000 shares
authorized; 7,302,363 shares issued and outstanding 365,118
Additional paid - in capital 4,068,245
Accumulated (deficit) (4,286,634)
-----------
146,729
-----------
$ 301,051
===========
1
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DERMARX CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended
05/31/97
1997 1996
----------- -----------
(Unaudited)
Revenues:
Sales, net of discounts $ 20,035 $ 5,759
Cost of goods sold 6,745 1,937
----------- -----------
Gross profit 13,290 3,822
General and administrative 139,742 185,606
----------- -----------
(Loss) from operations (126,452) (181,784)
Other income (expense)
Interest income 176 6,185
Interest expense (1,275) (6,029)
----------- -----------
Extraordinary item 226,904 0
Net profit (loss) $ 99,353 ($ 181,628)
=========== ===========
Net profit (loss) per common share: $ .01 $ (.03)
Weighted average shares outstanding 7,173,196 7,052,363
=========== ===========
2
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DERMARX CORPORATION
STATEMENTS OF CASH FLOWS
Three Months Ended
May 31
1997 1996
--------- ----------
(Unaudited)
Cash Flows from operating activities:
Net profit (loss) $ 109,353 ($181,628)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Discount on notes amortized 679 750
Expenses paid by issuance of stock 6,250
Depreciation and amortization 3,602 3,436
Changes in assets and liabilities
(Increase) decrease in accounts receivable (2,929) 3,551
(Increase) decrease in inventory 2,083 (44,461)
(Increase) decrease in other assets 5,382 (1,644)
Increase (decrease) in accounts payable, accrued 13,695 (14,820)
interest and accrued expenses
Net cash (used) by operating activities 138,116 (234,817)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 87,500 --
Repayment of debt obligations (231,810) --
--------- ---------
Net cash provided by financing activities (144,310) 0
--------- ---------
Net increase in cash and cash equivalents ($ 6,194) ($234,817)
Cash and cash equivalents, March 1, 50,977 712,392
--------- ---------
Cash and cash equivalents, May 31, $ 44,783 $ 477,575
========= =========
3
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DERMARx CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of May 31, 1997, the statements of operations for the three
months ended May 31, 1997 and 1996 and the statements of cash flows for the
three months ended May 31, 1996 and 1995 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 May 31, 1997 and for all periods
presented have been made. The results of operations, for the three months ended
May 31, 1997 are not necessarily indicative of the results to be expected for
the full year.
Certain information and footnote disclosures 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 statements and notes thereto included in the
Company's Form 10-K for its fiscal year ended February 28, 1997, which was filed
with the Securities and Exchange Commission.
NOTE 2 - OUTSTANDING SHARES
Shares issued and outstanding as of May 31, 997 were 7,044,969.
4
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DERMARx CORPORATION and SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management Plans
The most immediate plan of the Company is to establish a distribution
network throughout the United States and Australia, to market various wound care
education and clinic development consulting services, and to obtain additional
working capital through a private placement. Failure to secure additional
working capital jeopardizes the continued operation of the Company as a going
concern.
Results of Operations
The primary focus has been on establishing distribution of its newly
developed line of wound care products and consulting services. The Company is
negotiating with several potential distributors and private label partners and
anticipates a distribution network to be in place throughout the United States
and Australia by year-end. The Company is continuing to seek a consumer-oriented
partner to market its diaper rash product.
The Company's revenues increased to $20,035 in its fiscal quarter ended
May 31, 1997 from $5,759 in its fiscal quarter ended May 31, 1996, an increase
of $14,276. This increase is negligible and not attributable to any particular
trend or effect. The company's cost of goods sold as a percentage of revenues
remained the same at 34% in the three months ended May 31, 1997 as compared to
the comparable period one year ago. Total expenses were $129,742, a decrease of
$55,864 from the comparable period one year ago. During the first quarter of
1996 the Company incurred a number of non-recurring expenses including safety,
stability and effectiveness testing on newly developed products, moving and
start-up marketing costs. For the first quarter of fiscal year 1997, the Company
had a net profit of $99,353, or $.01 per share as compared to a net loss of
$181,628 or $.03 per share for the previous comparable period. The net profit is
attributable primarily to an extraordinary item in the amount of $226,904. The
law firm of Schwartz, Warren & Ramirez agreed to accept $10,000 as payment in
full accord and satisfaction of the total outstanding balance. Schwartz has
discharged DermaRx from all existing obligations and has terminated the royalty
agreement.
Subsequent Events
None
5
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Liquidity and Capital Resources
The Company expects its capital requirements to increase significantly as
marketing efforts and inventory requirements increase. The ability to secure
additional working capital and the ability to obtain successful distribution for
its products are reasonably likely to have a material impact on the Company's
short-term or long-term liquidity.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITIES HOLDERS
There was no matter submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fiscal quarter ended May 31,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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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: July 15, 1997 /s/ Maryanne Carroll
-----------------------
Maryanne Carroll,
Chief Executive Officer
