SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
August 31, 1999
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.)
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 |_|
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: 9,999,019 of common stock,
par value $.05 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DERMARX AND SUBSIDIARY
BALANCE SHEET
August 31, 1999
UN-AUDITED
ASSETS
Current assets:
Cash $ 4,400
Accounts receivable - trade 1,000
Inventory - Finished goods 38,000
Other receivable 25,000
-----------
Total current assets 68,400
Property and equipment:
Computer equipment, net of accumulated
depreciation of $17,900 2,400
Other assets:
Patents, net of accumulated amortization
of $57,000 90,000
-----------
92,400
Total assets $ 160,800
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes and accumulated interest payable -
net of discounts 176,000
Notes payable - related party
net of discounts 57,500
Accrued interest - notes payable 24,700
Accrued interest - notes payable, related party 18,300
Accounts payable and accrued expenses 169,500
-----------
Total current liabilities 446,000
Common stockholders' equity:
Common stock, $.05 par value; 12,000,000 authorized;
9,999,019 shares issued and outstanding 500,000
Additional paid-in capital 4,125,000
Accumulated (deficit) (4,910,200)
-----------
Total stockholders' equity (285,200)
-----------
Total liabilities and stockholders' equity $ 160,800
2
<PAGE>
DERMARX AND SUBSIDIARY
STATEMENTS OF OPERATIONS
UN-AUDITED
Three Months Ended
August 31, 1999
1998 1999
---- ----
Revenues:
Sales, net discounts $ 48,100 $ 3,900
Cost of goods sold 3,100 1,700
----------- -----------
Gross profit 45,000 2,200
General and administrative 109,000 16,500
----------- -----------
(Loss) from operations (64,000) (14,300)
Other income (expense)
Interest income -0- -0-
Interest expense (2,500) (4,700)
----------- -----------
(2,500) (4,700)
Net (loss) (66,500) (19,000)
Net (loss) per common share: $ (.01) $ (.01)
Weighted-average number of common shares
outstanding 9,271,258 9,999,019
3
<PAGE>
DERMARX AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
UN-AUDITED
Three Months Ended
August 31, 1999
1998 1999
---- ----
Cash flows from operating activities:
Net (loss) $(66,500) $(19,000)
Adjustments to reconcile net (loss) to
net cash (used) by operating
activities:
Depreciation and amortization 3,900 3,400
Changes in assets and liabilities:
(Incr) in accounts receivable (16,500) (1,000)
Decr in inventory 19,500 1,000
Decr in other receivables 0 6,500
Incr in accounts payable,
accrued interest and accrued
expenses 10,200 2,700
-------- --------
Net cash (used) by operating activities $(56,800) $ (6,400)
Cash flows from investing activities: -0- 0
Net cash provided by financing activities -0- 0
-------- --------
Net increase (decrease) in cash and
cash equivalents (56,800) (6,400)
Cash and cash equivalents, beginning of period $ 63,600 $ 10,800
Cash and cash equivalents, end of period 6,800 4,400
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest -0- -0-
4
<PAGE>
DERMARX CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The balance sheet as of August 31, 1999, the statements of operations for the
three months ended August 31, 1999 and 1998, and the statements of cash flows
for the three months ended August 31, 1999 and 1998, 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 of operations and cash flows as of August 31, 1999,
and for all periods presented have been made. The results of operations, for the
three months ended August 31, 1999, 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 statement and notes thereto included in the
Company's Form 10-K for its fiscal year ended February 28, 1999, which was filed
with the Securities and Exchange Commission.
NOTE 2 - OUTSTANDING SHARES
Shares issued and outstanding as of August 31, 1999, were 9,999,019.
5
<PAGE>
DERMARX CORPORATION and SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management Plans
Three new members have been appointed to the Board of Directors to fill
existing vacancies. These individuals will serve as an interim management team
to restart business operation.
Management's immediate focus will be on completing a secondary offering to
finance the development and operation of DermaRx.Com. DermaRx.Com is the
Company's Internet skin/wound repair boutique that provides information and
over-the-counter treatments for all types of skin related problems including
pressure ulcers, acne, psoriasis, wrinkles, hemorrhoids, nail fungus, diaper
rash, burns, age spots, etc. The Company will market its own proprietary
skin/wound repair products as well as a variety of complimentary topical
products, related vitamins and supplements.
Results of Operations
The Company's operations have been significantly impacted by the loss of
its primary source of revenue due to the resignation of Gerit Mulder as
President and Director of Integrated Wound Management, Inc., the Company's
wholly-owned wound care consulting subsidiary, and as a Vice President and
Director of DermaRx, in October, 1998. The Company has filed a lawsuit against
Mr. Mulder seeking damages based on breach of fiduciary duty among other things.
Liquidity of Capital Resources
The Company expects its capital requirements to increase significantly as
the business again becomes operational. The ability to successfully raise
working capital and successfully distribute its products as well as other
products offered through its Internet boutique will likely have a material
impact on the Company's short-term and long-term liquidity.
Subsequent Events
On September 14th, three new Board Members were appointed to fill existing
vacancies. On September 21st, Tom Dean and Peter Martin resigned from the Board.
On October 11, the Board of Directors elected Maryanne Carroll to serve as
Chairman of the Board, Brian W. Hall to serve as President, and Alan Molk to
serve as Corporate Secretary.
As part of a Corporate reorganization consistent with the Board's plan to
complete a secondary offering, the Board approved a one for five reverse stock
split effective October 15, 1999.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and 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: October 14, 1999 /s/ Brian W. Hall
-----------------------------------
Brian W. Hall, President
7
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