SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission file number 0-14026
Daltex Medical Sciences, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
13-3174562
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(IRS Employer Identification No.)
7777 Glades Road, Suite 211, Boca Raton, FL 33434
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(Address of principal executive offices)
561-470-6005
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ( ).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of December 15, 1998 the
registrant had issued and outstanding 8,632,699 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes ( ) No (x)
DALTEX MEDICAL SCIENCES, INC.
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
(a) Condensed balance sheets as of October 31, 1998
(Unaudited) and July 31, 1998. 2
(b) Condensed statements of operations for the three
months ended October 31, 1998 (Unaudited) and
October 31, 1997 (Unaudited) 3
(c) Condensed statements of cash flows for the
three months ended October 31, 1998 (Unaudited) and
October 31, 1997 (Unaudited), 4
(d) Notes to condensed financial statements
(Unaudited) 5
Item 2 - Management's Discussion and Analysis or Plan of
Operation 6 - 8
PART II - OTHER INFORMATION
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
[TO COME]
DALTEX MEDICAL SCIENCES, INC.
BALANCE SHEETS
October 31, July 31,
1998 1998
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(unaudited) *
ASSETS
- ------
Current assets
Cash and cash equivalents $ 15,160 $ 22,495
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Total current assets 15,160 22,495
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$ 15,160 $ 22,495
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Note payable $ 49,500 $ 70,000
Accounts payable and accrued expenses 96,059 99,520
Loans payable 72,500 39,600
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Total current liabilities 218,059 209,120
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Stockholders' deficit
Common stock, $.01 par value;
authorized 20,000,000 shares; 8,632,699,
shares issued and outstanding, respectively 86,327 86,327
Additional paid-in capital 6,816,369 6,816,369
Retained deficit (7,105,595) (7,089,321)
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Total stockholders' deficit (202,899) (186,625)
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$ 15,160 $ 22,495
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* Condensed from audited financial statements
See accompanying notes to condensed consolidated financial statements
2
DALTEX MEDICAL SCIENCES, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended
October 31,
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1998 1997
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Revenues
License fees, grants and royalties $ - $ 78,244
Interest and other income - 2,000
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- 80,244
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Expenses
General and administrative expenses 16,274 79,371
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16,274 79,371
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Net income (loss) $ (16,274) $ 873
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Net income (loss) per share $ (0.00) $ 0.00
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Weighted average shares outstanding 8,633,000 8,633,000
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See accompanying notes to condensed consolidated financial statements
3
DALTEX MEDICAL SCIENCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended
October 31,
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1998 1997
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Cash flows from operating activities:
Net income (loss) $ (16,274) $ 873
Changes in assets and liabilities:
Accounts receivable - (3,048)
Prepaid royalty - 21,250
Accounts payable accrued expenses (23,961) 3,048
Advance royalty payments - (42,500)
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Net cash (used in) operations (40,235) (20,377)
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Cash flows provided by financing activities
Increase in other liabilities 32,900 -
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Net cash provided by financing activities 32,900 -
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Net (decrease) in cash and
cash equivalents (7,335) (20,377)
Cash and cash equivalents, beginning of
period 22,495 23,522
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Cash and cash equivalents, end of period $ 15,160 $ 3,145
=============== ================
See accompanying notes to condensed consolidated financial statements
4
NOTES TO CONDENSED FINANCIAL STATEMENTS-October 31, 1998 (Unaudited)
(1) Basis of Presentation
The unaudited condensed financial statements have been prepared from
the books and records of Daltex Medical Sciences, Inc. (the "Company") in
accordance with generally accepted accounting principles for interim financial
information. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
The accompanying unaudited condensed financial statements, which are
for interim periods, do not include all disclosures provided in the annual
financial statements. These unaudited condensed financial statements should be
read in conjunction with the financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended July 31, 1998
as filed with the Securities and Exchange Commission. The July 31, 1998
consolidated balance sheet was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the three months ended October 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
Going Concern - The report of the Company's independent accountants on
their audit of the Company's July 31, 1998 consolidated financial statements
contained uncertainties relating to the Company's ability to continue as a going
concern. The Company has incurred a loss in the three months ended October 31,
1998 and uncertainties exist with regard to the Company's ability to generate
sufficient cash flows from operations or other sources to meet existing
obligations, which gives rise to doubts about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Item 2
Management's Discussion and Analysis or Plan of Operation
The following discussion regarding the Company and its business and
operations contains "forward-looking statements" within the meaning contains
"forward-looking statements" within the meaning of Private Securities
Litigation Reform Act 1995. Such statements consist of any statement other than
a recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. The reader is cautioned that all forward-looking statements are
necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in
such forward looking statements. The Company does not have a policy of updating
or revising forward-looking statements and thus it should not be assumed that
silence by management of the Company over time means that actual events are
bearing out as estimated in such forward looking statements.
The Company had been principally engaged in research and development
activities with the objective of developing and commercializing certain
cost-reducing medical device and pharmaceutical technologies. In 1984, the
Company successfully completed an initial public offering to raise working
capital. Since that time, management of the Company had been working on a number
of development projects which involved experimental and unproven technologies.
Since March 1, 1994 and continuing to date, research and development efforts
have been substantially discontinued, or in most cases put on hold. In fiscal
1998 and 1997, the Company did not have any sales of its technologies or its
antimicrobial medical gloves. During this period, the Company received revenues
from royalty payments and development fees pursuant to two licenses with
sublicensees of applications of the Company's antimicrobial medical technology.
Effective April 30, 1998, the Company, by entering into a Settlement and Mutual
Release Agreement with Columbia University (a creditor), substantially
terminated all operations and currently remains as a shell corporation.
The report of the Company's independent auditors on the Company's
financial statements includes an explanatory paragraph which states that the
Company's recurring losses and working capital and total stockholders' deficits
raise substantial doubt about the Company's ability to continue as a going
concern and precludes and has precluded the expression of an opinion on the
Company's financial statements as of and for the years ended July 31, 1998 and
1997. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty. Because of the continued working capital
deficit, management's plan in order to continue in operation for the next year
is to continue to attempt to raise additional capital. Furthermore, the Company
has curtailed expenditures to the extent possible. The Company does not have any
commitments to raise additional capital in the future, and there can be no
assurance that the Company will be successful in any of its capital-raising
efforts or that the Company can avoid liquidation.
In May 1997, the Company entered in to a second license modification
agreement with a manufacturer and marketer of catheters and cardiovascular
supplies. In connection with the modifications the Company received a one-time,
non-refundable, non-creditable fee of $100,000 of which
$50,000 was paid to a university. Revenue, as well as the expense for the
amounts paid to the university, were recognized ratably over the term of the
agreement. In consideration for this fee the Company waived development fees and
minimum annual royalties due on products sold by the licensee for the specific
products added to the agreement under the second license modification for a
period of three years. After three years the licensee was to pay development
fees of $2,500 per quarter payable in advance during the development phase.
After such time as a sale was made the licensee was to pay a running royalty as
defined by the agreement, and at a minimum $2,500 payable quarterly in advance.
Effective April 30, 1998, the Company, by entering into a Settlement
and Mutual Release Agreement with Columbia University reassigned and transferred
back to Columbia University all of the above mentioned licensee agreements.
The discussion below should be reviewed together with the Company's
Financial Statements and the Notes thereto.
Results of Operations for the Three Months Ended October 31, 1998 as compared to
October 31, 1997
There were no revenues for the three months ended October 31, 1998. For
the three months ended October 31, 1997, the Company's principal sources of
revenue have consisted of license fees, royalties and the sale of patents and
grants. The Company plans to attempt to raise additional capital to fund
operations in fiscal 1999.
During the three months ended October 31, 1998 and 1997, revenues from
license fees and royalties were $0 and $78,244, respectively. All of the
Company's revenues for the three months ended October 31, 1997 were derived from
license fees and royalties received from its two sublicensees.
Operating expenses for the three months ended October 31, 1998 and 1997
consisted principally of general and administrative expenses. General and
administrative expenses in the three months ended October 31, 1998 and 1997 were
$16,274, and $79,371, respectively. General and administrative expenses have
decreased by $63,097 from 1997 to 1998 due to continuing inactivity of the
Company. The Company expects this trend to continue thru 1999, unless it is
successful in attracting a merger candidate.
The Company had a net loss of $16,274 for the three months ended
October 31, 1998 compared to net income of $873 for the three months ended
October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1998, the Company had cash and cash equivalents of
approximately $15,160, representing a decrease of approximately $7,335 over the
July 31, 1998 balance of cash and cash equivalents. During the three months
ended October 31, 1998, the Company used net cash for operations of $40,235 as
compared to $20,377 for the three months ended October 31, 1997. This change in
cash flows from operations was primarily due to a net reduction in accounts
payable and accrued expenses. In addition, the Company had a working capital
deficit of $202,899 as of October 31, 1998.
Management has continued to curtail expenditures in many areas,
including discretionary expenditures, in order to stay in business and to focus
the Company's extremely limited resources in what it believes are the most
promising areas of the Company's business in the near term. However, there can
be no assurance that the Company will have sufficient funds to carry out these
plans or to remain in business. In addition, further cost saving measures may be
impossible and cost savings measures may have an adverse effect on the Company's
future operations. If the Company is unsuccessful in raising additional capital
during fiscal year 1999, the Company may be unable to continue as a going
concern, even with further cost-cutting measures. To meet its long-term
liquidity requirements, the Company must also generate sufficient income through
operations or obtain additional financing as required, as to which there can be
no assurance. However, there can be no assurance that the Company will be
successful in meeting its immediate or long-term liquidity requirements or that
the Company can continue as a going-concern.
PART II - OTHER INFORMATION
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
October, 31 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DALTEX MEDICAL SCIENCES, INC.
Date: December 15, 1998 By:/s/Bruce Hausman, Esq.
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BRUCE HAUSMAN, ESQ.
President and Chief Executive
Officer