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, 1998
OR
|_| TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANE 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.)
284 Jackson Street
Denver, Colorado 80206
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 9,866,353 (as of August 31,
1998) 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-August 31, 1998 1
Statements of Operations - 2
Three Months Ended August 31, 1998 and 1997
Statements of Cash Flows - 3
Three Months Ended August 31, 1998 and 1997
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 7
Securities Holders
Item 6. Exhibits and Reports on Form 8-K 7
Signature 8
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PART I. FINANCIAL INFORMATION
DERMARx AND SUBSIDIARY
BALANCE SHEET
AUGUST 31, 1998
ASSETS
Current assets:
Cash and cash equivalent $ 6,800
Accounts receivable - trade 2,000
Inventory - Finished goods 141,800
Prepaid expense 2,700
-----------
Total current assets 153,300
-----------
Property and equipment:
Computer equipment, net of accumulated depreciation of
$13,600 6,500
-----------
Other assets:
Patents, net of accumulated amortization of $52,000 98,100
-----------
Total other assets 104,600
Total Assets $ 257,900
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes and accumulated interest payable - net of discounts $ 228,400
Accounts payable and accrued expenses 120,000
-----------
Total liabilities 348,400
Common stockholders' equity:
Common stock, $.05 par value: 12,000,000 shares authorized;
9,866,353 shares issued and outstanding $ 493,300
Additional paid-in capital 4,117,500
Accumulated (deficit) (4,701,300)
-----------
Shareholders' Equity $ 257,900
===========
1
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DERMARx AND SUBSIDIARY
STATEMENTS OF OPERATIONS
Three Months Ended
8/31/98
1998 1997
---- ----
Revenues:
Sales, net discounts $ 48,100 $ 6,500
Cost of Goods sold 3,100 2,400
----------- -----------
Gross profit 45,000 4,100
General and Administrative 109,000 118,700
----------- -----------
(Loss) from operations (64,000) (114,600)
Other income (expense)
Interest income 0 100
Interest expense (2,500) (800)
Commission expense -0- (5,400)
----------- -----------
(2,500) (1,100)
------------
Net profit (loss) $ (66,500) $ (120,700)
=========== ===========
Net (loss) per common share $ (.01) $ (.02)
Weighted average shares outstanding 9,271,258 7,450,000
=========== ===========
2
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DERMARx AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
Three Months Ended
08/31
(Unaudited)
1998 1997
---- ----
Cash Flows from operating activities:
Net profit (loss) $ (66,500) $ (11,000)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities
Accounts payable, accrued expenses
and accrued interest converted to
common stock
Amortization of discounts on notes 700
Expenses paid by issuance of stock 6,300
Depreciation and amortization 2,500 7,300
Changes in assets and liabilities
(Increase) decrease in accounts
receivable 16,500 (1,600)
(Increase) decrease in inventory (19,500) 14,600
(Increase) decrease in other assets 7,600
Increase (decrease) in accounts
payable, accrued
interest and accrued expenses 10,200 32,900
(Increase) decrease in prepaid
expenses Increase (decrease) in
dividends in arrears
Net cash (used) by operating activities (56,800) 56,800
========= =========
Cash flows from financing activities:
Proceeds from issuance of common stock 148,500
Repayment of debt obligations (231,800)
---------
Net cash provided by financing activities -0- (83,300)
--------- ---------
Net increase (decrease) in cash and cash equivalents. (56,800) (26,500)
--------- ---------
Cash and cash equivalents, June 1 63,600 44,800
--------- ---------
Cash and cash equivalents, August 31 $ 6,800 $ 43,500
========= =========
3
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DERMARx CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of August 31, 1998, the statements of operations for the
three months ended August 31, 1998 and 1997 and the statements of cash flows for
the three months ended August 31, 1998 and 1997 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, 1998 and for all
periods presented have been made. The results of operations, for the three
months ended August 31, 1998 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 note thereto included in the
Company's Form 10-K for its fiscal year ended February 28, 1998, which was filed
with the Securities and Exchange Commission.
NOTE 2 - OUTSTANDING SHARES
Shares issued and outstanding as of August 31, 1998 were 9,866,353.
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
In order to facilitate fund raising efforts, the Company plans a corporate
restructuring. The consulting services division and the consumer products
division will be separately incorporated. Wound Sciences, Inc. (formerly called
Integrated Wound Management) will provide wound clinic installation and protocol
development for hospitals and nursing homes. Dermedics, Inc. will market
HemorRx(TM), BottomBetter(TM), and the psoriasis cream PsoRxin(TM) (which is
under development).
The Company intends to focus resources on marketing the consulting
services and the consumer products.
Results of Operations
Gross revenues increased from $6,500 in the 3 months ended August 31, 1997
to $48,000 for the same period in 1998. The increase, while not significant, is
primarily the result of revenues generated by Wound Sciences, Inc., formerly
Integrated Wound Management. Cost of Goods Sold as a percentage of sales
decreased primarily because the costs associated with the consulting services
are reported as General and Administrative Expenses.
The Company completed a clinical evaluation of HemorRx(TM) during the
quarter. Ten physicians participating in the study reported favorable results.
Ninety-six percent of all patients studied experienced symptom relief within
three days of first application, eighty-three percent of all patients studied
experienced symptom relief within twenty four hours of first application,
sixty-seven percent of all patients studied experienced symptom relief within
twelve hours of first application, twenty-nine percent of all patients studied
experienced symptom relief within two hours of first application, and
eighty-eight percent of patients preferred HemorRx(TM) to other topical
hemorrhoid products.
A web site has been developed (www.dermarx.com) to promote visibility and
sales of HemorRx(TM), DermaMend Barrier(TM), DermaMend(TM) Cleanser,
BottomBetter(TM), and GeriMend Skin Tear Therapy(TM). A marketing consultant has
been retained to establish distribution throughout Colorado for HemorRx(TM).
Subsequent Events
The Company has entered into a distribution agreement with RXPlus+
Pharmacies of Colorado to distribute HemorRx(TM).
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 and long-term liquidity.
6
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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 August 31,
1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
7
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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 don its behalf by the
undersigned thereunto duly authorized.
DERMARx CORPORATION
(Registrant)
Dated: October 15, 1998 /s/ Maryanne Carroll
-----------------------------------
Maryanne Carroll
Chief Executive Officer
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