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 April 30, 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. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Florida -------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 13-3174562 --------------------------------- (IRS Employer Identification No.) 7777 Glades Road, Suite 211, Boca Raton, FL 33434 --------------------------------------------------- (Address of principal executive offices) 561-470-6005 --------------------------- (Issuer's telephone number) ---------------------------------------------------- (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 June 11, 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 April 30, 1999 (Unaudited) and July 31, 1998. 2 (b) Condensed statements of operations for the three and nine months ended April 30, 1999 (Unaudited) and April 30, 1998 (Unaudited) 3 (c) Condensed statements of cash flows for the nine months ended April 30, 1999 (Unaudited) and April 30, 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 April 30, July 31, 1999 1998 ----------- ----------- (unaudited) * ASSETS Current assets Cash and cash equivalents $ 3,104 $ 22,495 ----------- ----------- Total current assets 3,104 22,495 ----------- ----------- $ 3,104 $ 22,495 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Note payable $ 20,000 $ 70,000 Accounts payable and accrued expenses 94,048 99,520 Loans payable - 39,600 ----------- ----------- Total current liabilities 114,048 209,120 ----------- ----------- 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 and 8,632,699 shares issued and outstanding, respectively 96,327 86,327 Additional paid-in capital 6,816,369 6,816,369 Retained deficit (7,112,640) (7,089,321) ----------- ----------- Total stockholders' deficit (110,944) (186,625) ----------- ----------- $ 3,104 $ 22,495 =========== =========== *Condensed from audited financial statements See accompanying notes to condensed consolidated financial statements 2 DALTEX MEDICAL SCIENCES, INC. STATEMENT OF OPERATIONS (Unaudited) For the Three Months Ended For the Nine Months Ended April 30, April 30, ----------------------------- ---------------------------- 1999 1998 1999 1998 ----------- ---------- ----------- ---------- Revenues License fees, grants and royalties $ - $ 116,485 $ - $ 270,138 Interest and other income - - - 2,000 ----------- ---------- ----------- ---------- - 116,485 - 272,138 ----------- ---------- ----------- ---------- Expenses General and administrative expenses 1,450 98,754 23,319 246,355 ----------- ---------- ----------- ---------- 1,450 98,754 23,319 246,355 ----------- ---------- ----------- ---------- Net income (loss) $ (1,450) $ 17,731 $ (23,319) $ 25,783 =========== ========== =========== ========== Net income (loss) per share $ (0.00) $ 0.00 $ (0.00) $ 0.00 =========== ========== =========== ========== Weighted average shares outstanding 98,632,699 8,633,000 47,437,337 8,633,000 =========== ========== =========== ========== See accompanying notes to condensed consolidated financial statements 3 DALTEX MEDICAL SCIENCES, INC. STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended April 30, ------------------------- 1999 1998 -------- --------- Cash flows from operating activities: Net income (loss) $(23,319) $ 25,783 Changes in assets and liabilities: Accounts receivable - (3,048) Prepaid royalty - 63,750 Accounts payable accrued expenses (5,472) 20,148 Advance royalty payments - (127,500) -------- --------- Net cash (used in) operations (28,791) (20,867) -------- --------- Cash flows provided by financing activities Issuance of preferred stock 89,000 Issuance of common stock 10,000 Decrease in other liabilities (89,600) - -------- --------- Net cash provided by financing activities 9,400 - -------- --------- Net (decrease) in cash and cash equivalents (19,391) (20,867) Cash and cash equivalents, beginning of period 22,495 23,522 -------- --------- Cash and cash equivalents, end of period $ 3,104 $ 2,655 ======== ========= See accompanying notes to condensed consolidated financial statements 4 NOTES TO CONDENSED FINANCIAL STATEMENTS -- April 30, 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 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 nine months ended April 30, 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 nine months ended April 30, 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 nine months ended April 30, 1999, 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 nine months ended April 30, 1999, 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 1,000 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 Nine Months Ended April 30, 1999 as compared to April 30, 1998 There were no revenues for the nine months ended April 30, 1999. For the nine months ended April 30, 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 nine months ended April 30, 1999 and 1998, revenues from license fees and royalties were $0 and $270,138, respectively. All of the Company's revenues for the nine months ended April 30, 1998 were derived from license fees and royalties received from its two sublicensees. Operating expenses for the nine months ended April 30,1999 and 1998 consisted principally of general and administrative expenses. General and administrative expenses in the nine months ended April 30, 1999 and 1998 were $23,319 and $246,355, respectively. General and administrative expenses have decreased by $223,036 from 1998 to 1999 due to continuing inactivity of the Company. The Company expects this trend to continue thru 1999 and into fiscal 2000, unless it is successful in attracting a merger candidate. The Company had a net loss of $23,319 for the nine months ended April 30, 1999 compared to net income of $25,783 for the nine months ended April 30, 1998. Results of Operations for the Three Months Ended April 30, 1999 as compared to April 30, 1998 There were no revenues for the three months ended April 30, 1999. For the three months ended April 30, 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 April 30, 1999 and 1998, revenues from license fees and royalties were $0 and $116,485, respectively. All of the Company's revenues for the three months ended April 30, 1998 were derived from license fees and royalties received from its two sublicensees. Operating expenses for the three months ended April 30, 1999 and 1998 consisted principally of general and administrative expenses. General and administrative expenses in the three months ended April 30, 1999 and 1998 were $1,450 and $98,754, respectively. General and administrative expenses have decreased by $97,304 from 1998 to 1999 due to continuing inactivity of the Company. The Company expects this trend to continue thru 1999 and into fiscal 2000, unless it is successful in attracting a merger candidate. The Company had a net loss of $1,450 for the three months ended April 30, 1999 compared to net income of $17,731 for the three months ended April 30, 1998. LIQUIDITY AND CAPITAL RESOURCES At April 30, 1999, the Company had cash and cash equivalents of approximately 3,104, representing a decrease of approximately $19,391 over the July 31, 1998 balance of cash and cash equivalents. During the nine months ended April 30, 1999, the Company used net cash for operations of $28,791 as compared to $20,867 for the nine months ended April 30, 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 $110,944 as of April 30, 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 The Company issued an aggregate of 89,000 shares of Series A Convertible Preferred Stock to three shareholders in the first quarter of 1999. The issuance of these shares resulted in a change of control of the Company upon filing of a Certificate of Designations and Preferences in Delaware on June 10, 1999. A description of the terms of issuance of the Series A Convertible Preferred Stock and the resultant change of control will appear in a Report on Form 8-K to be filed after the date of this Report on Form 10-QSB. See Note (2) to Notes to Condensed Financial Statements appearing in Item 1 of this Report and Item 2, "Management's Discussion and Analysis or Plan of Operation." 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 April 30, 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: June 11, 1999 By:/s/Bruce Hausman, Esq. ---------------------- BRUCE HAUSMAN, ESQ. President and Chief Executive Officer