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 January 31, 1999
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 the issuer's classes of common
equity, as of the latest practicable date. As of March 10, 1999 the registrant
had issued and outstanding 9,632,699 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 January 31, 1999
(Unaudited) and July 31, 1998. 2
(b) Condensed statements of operations for the
three and six months ended January 31, 1999
(Unaudited) and January 31, 1998 (Unaudited) 3
(c) Condensed statements of cash flows for the six months
ended January 31, 1999 (Unaudited) and January 31, 1998
(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
DALTEX MEDICAL SCIENCES, INC.
BALANCE SHEETS
January 31, July 31,
1999 1998
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(unaudited) *
ASSETS
- ------
Current assets
Cash and cash equivalents $ 755 $ 22,495
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Total current assets 755 22,495
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$ 755 $ 22,495
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Note payable $ 35,000 $ 70,000
Accounts payable and accrued expenses 94,249 99,520
Loans payable -- 39,600
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Total current liabilities 129,249 209,120
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Stockholders' deficit
Preferred stock, $1.00 par value;
authorized 150,000 shares; 89,000,
shares issued and outstanding 89,000 --
Common stock, $.01 par value;
authorized 20,000,000 shares; 9,632,699,
shares issued and outstanding, respectively 96,327 86,327
Additional paid-in capital 6,816,369 6,816,369
Retained deficit (7,111,190) (7,089,321)
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(109,494)
Less stock subscription receivable 19,000
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Total stockholders' deficit (128,494) (186,625)
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$ 755 $ 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 For the Six Months Ended
January 31, January 31,
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1999 1998 1999 1998
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Revenues
License fees, grants and royalties $ -- $ 75,409 $ -- $ 153,653
Interest and other income -- -- -- 2,000
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-- 75,409 -- 155,653
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Expenses
General and administrative expenses 13,496 68,230 21,869 147,601
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13,496 68,230 21,869 147,601
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Net income (loss) $ (13,496) $ 7,179 $ (21,869) $ 8,052
============ ============ ============ ============
Net income (loss) per share $ (0.00) $ 0.00 $ (0.00) $ 0.00
============ ============ ============ ============
Weighted average shares outstanding 45,562,470 8,633,000 26,996,684 8,633,000
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements
3
DALTEX MEDICAL SCIENCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended
January 31,
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1999 1998
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Cash flows from operating activities:
Net income (loss) $(21,869) $ 8,053
Changes in assets and liabilities:
Accounts receivable -- (3,048)
Prepaid royalty -- 42,500
Accounts payable accrued expenses (5,271) 18,048
Advance royalty payments -- (85,000)
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Net cash (used in) operations (27,140) (19,447)
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Cash flows provided by financing activities
Issuance of preferred stock 89,000
Issuance of common stock 10,000
Increase in subscription receivable (19,000)
Decrease in other liabilities (74,600) --
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Net cash provided by financing activities 5,400 --
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Net (decrease) in cash and
cash equivalents (21,740) (19,447)
Cash and cash equivalents, beginning of
period 22,495 23,522
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Cash and cash equivalents, end of period $ 755 $ 4,075
======== ========
See accompanying notes to condensed consolidated financial statements
4
NOTES TO CONDENSED FINANCIAL STATEMENTS-January 31, 1999 (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 January 31, 1999
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 six months ended January 31, 1999 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 six months ended January 31,
1999 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.
(2) Stockholders' Equity
During the quarter, the Company issued to three investors 1,000,000 shares of
Common Stock at the price of $.01 per share in exchange for the cancellation of
$10,000 in loans previously advanced by these investors. In addition, the three
investors were issued 89,000 shares of Series A Convertible Preferred Stock in
exchange for the cancellation of additional loans and cash of $89,000. The
Series A Convertible Preferred Stock is convertible into 1000 shares of Common
Stock at any time and votes with the common shares and not as a separate class
on any matters coming before the shareholders.
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 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, prior 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.
During the quarter, the Company issued to three investors 1,000,000 shares of
Common Stock at the price of $.01 per share in exchange for the cancellation of
$10,000 in loans previously advanced by these investors. In addition, the three
investors were issued 89,000 shares of Series A Convertible Preferred Stock in
exchange for the cancellation of additional loans and cash of $89,000. The
Series A Convertible Preferred Stock is convertible into 1000 shares of Common
Stock at any time and votes with the common shares and not as a separate class
on any matters coming before the shareholders.
The discussion below should be reviewed together with the Company's
Financial Statements and the Notes thereto.
Results of Operations for the Six Months Ended January 31, 1999 as
compared to January 31, 1998
There were no revenues for the six months ended January 31, 1999. For the six
months ended January 31, 1998, the Company's principal sources of revenue had
consisted of license fees and royalties. The Company plans to attempt to raise
additional capital to fund operations in fiscal 1999.
During the six months ended January 31, 1999 and 1998, revenues
from license fees and royalties were $0 and $153,653, respectively. All of the
Company's revenues for the six months ended January 31, 1998 were derived from
license fees and royalties received from its two sublicensees.
Operating expenses for the six months ended January 31,1999 and 1998
consisted principally of general and administrative expenses. General and
administrative expenses in the six months ended January 31, 1999 and 1998 were
$21,869 and $147,601, respectively. General and administrative expenses have
decreased by $125,732 from 1998 to 1999 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 $21,869 for the six months ended January
31, 1999 compared to net income of $8,052 for the six months ended January 31,
1998.
Results of Operations for the Three Months Ended January 31, 1999 as
compared to January 31, 1998
There were no revenues for the three months ended January 31, 1999. For the
three months ended January 31, 1998, the Company's principal sources of revenue
had consisted of license fees and royalties. The Company plans to attempt to
raise additional capital to fund operations in fiscal 2000.
During the three months ended January 31, 1999 and 1998, revenues
from license fees and royalties were $0 and $75,409, respectively. All of the
Company's revenues for the three months ended January 31, 1998 were derived from
license fees and royalties received from its two sublicensees.
Operating expenses for the three months ended January 31,1999 and 1998
consisted principally of general and administrative expenses. General and
administrative expenses in the three months ended January 31, 1999 and 1998 were
$13,496 and $68,230, respectively. General and administrative expenses have
decreased by $54,734 from 1998 to 1999 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 $13,496 for the three months ended
January 31, 1999 compared to net income of $7,179 for the three months ended
January 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1999, the Company had cash and cash equivalents of approximately
755, representing a decrease of approximately $21,740 over the July 31, 1998
balance of cash and cash equivalents. During the six months ended January 31,
1999, the Company used net cash for operations of $27,140 as compared to $19,447
for the six months ended January 31, 1998. 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 $128,494 as
of January 31, 1999.
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
January, 31 1999.
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: March 17, 1999 By:/s/Bruce Hausman, Esq.
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BRUCE HAUSMAN, ESQ.
President and Chief Executive
Officer