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, 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 May 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 - May 31, 1998 1
Statements of Operations- 2
Three Months Ended May 31, 1998 and 1997
Statements of Cash Flows- 3
Six Months Ended May 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 6
Securities Holders
Item 6. Exhibits and Reports on Form 8-K 6
Signature 7
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PART I. FINANCIAL INFORMATION
DERMARx AND SUBSIDIARY
BALANCE SHEET
MAY 31, 1998
ASSETS
Current assets:
Cash and cash equivalent $63,600
Accounts receivable - trade 21,100
Inventory - Finished goods 124,300
Prepaid expense 2,700
-----------
Total current assets 211,700
-----------
Property and equipment:
Computer equipment, net of accumulated
preciation of $12,930 7,400
-----------
Other assets:
Patents, net of accumulated amortization of $48,900 101,800
-----------
Total other assets 101,800
Total Assets $320,900
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - net of discounts $152,900
Notes payable - related party, net of discounts 50,000
Accrued interest - notes payable 11,100
Accrued interest - notes payable, related party 11,300
Accounts payable and accrued expenses 120,200
-----------
Total current liabilities 345,500
Total liabilities $345,500
===========
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) (4,635,400)
-----------
$320,900
Shareholders' Equity ===========
1
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DERMARx AND SUBSIDIARY
STATEMENTS OF OPERATIONS
Three Months Ended
5/31/98
1998 1997
----------- -----------
Revenues:
Sales, net discounts $31,300 $20,000
Cost of Goods sold 13,400 6,700
----------- -----------
Gross profit 17,900 13,300
General and Administrative 102,000 139,800
----------- -----------
(Loss) from operations (84,100) (126,500)
Other income (expense)
Interest income 10 200
Interest expense -0- (1,300)
Commission expense -0- -0-
----------- -----------
10 (1,100)
-----------
Extraordinary item -0- 226,900
----------- -----------
Net profit (loss) $(84,100) $99,300
=========== ===========
Net (loss) per common share $(.01) $(.01)
Weighted average shares outstanding 9,271,258 7,173,196
=========== ===========
2
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DERMARx AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
Three Months Ended
May 31
(Unaudited)
1998 1997
--------- ---------
Cash Flows from operating activities:
Net profit (loss) $(84,100) $109,400
Adjustments to reconcile net (loss) to net
cash (used) by operating activities
Accounts payable, accrued expenses and
accrued interest converted to common stock 27,100
Amortization of discounts on notes 700
Expenses paid by issuance of stock 6,200
Depreciation and amortization 4,200 3,600
Changes in assets and liabilities
(Increase) decrease in accounts
receivable (4,400) (2,900)
(Increase) decrease in inventory 4,800 2,100
(Increase) decrease in other assets 1,200 5,300
Increase (decrease) in accounts
payable, accrued (18,500) 13,700
interest and accrued expenses
(Increase) decrease in prepaid expenses 2,300
Increase (decrease) in dividends in arrears
Net cash (used) by operating activities (67,400) 138,100
========= =========
Cash flows from financing activities:
Proceeds from issuance of common stock 60,000 87,500
Repayment of debt obligations -0- (231,800)
--------- ---------
Net cash provided by financing activities 60,000 (144,300)
--------- ---------
Net increase (decrease) in cash and cash equivalents (7,400) (6,200)
--------- ---------
Cash and cash equivalents, March 1 71,000 51,000
--------- ---------
Cash and cash equivalents, May 31 $63,600 $44,800
========= =========
3
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DERMARx CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of May 31, 1998, the statements of operations for the three
months ended May 31, 1998 and 1997 and the statements of cash flows for the
three months ended May 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 May 31, 1998 and for all periods
presented have been made. The results of operations, for the three months ended
May 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 May 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
As a result of the development of HemorRx(TM), the Company's new topical
hemorrhoid treatment, and the success of preliminary effectiveness testing, the
Company's focus has been redirected. Operations have been separated into three
profit centers including:
1. Integrated Wound Management (IWM)
IWM, a wholly owned subsidiary has been established to provide wound care
training and treatment protocols for wound clinic development. IWM is currently
attempting to raise investment capital to increase its staff and its marketing
effort.
2. Institutional Wound Care Products
The Company's goal is to market its complete line of proprietary wound care
products throughout the U.S., Europe and Australia through private label
arrangements.
3. Consumer Wound and Skin Care Products
Following completion of clinical evaluations, HemorRx(TM) will be test marketed
in Colorado and also sold over the internet. Management intends to focus
resources on promoting HemorRx(TM) and BottomBetter(TM), the Company's diaper
rash cream.
Results of Operations
The majority of the Company resources have been focused on the
development, clinical evaluation and market launch of the Company's new topical
over-the-counter hemorrhoid cream. Until HemorRx(TM) has been launched and
achieves some degree of market penetration, the Company does not expect any
significant change in operating results.
Gross revenues increased from $20,000 in May of 1997 to $31,000 in May of
1998. The increase, while not significant, is primarily the result of revenues
generated by Integrated Wound Management, the Company's newly incorporated,
wholly owned subsidiary.
Subsequent Events
IWM completed installation of a wound clinic at the Grossmont Hospital
(Sharp) in San Diego in June, 1998.
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.
5
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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 May 31,
1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
6
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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: July 10, 1998
/s/ Maryanne Carroll
-----------------------------------
Maryanne Carroll
Chief Executive Officer
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