<PAGE>
                 
                 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
                           AUGUST 31, 1996
                                  
                                 OR
                                  
[ ]   TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934
                                  
                  COMMISSION FILE NUMBER:  33-5384
                                  
                         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.)
                                                 
 400 COLORADO BLVD., SUITE 420                   
        DENVER, COLORADO                      80206
(Address of principal executive             (Zip Code)
            offices)
                                  
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:
   7,225,969 shares (as of July 1, 1996) of common stock, par  value
$.01 per share.

<PAGE>
                         DERMARX CORPORATION
                                  
                                INDEX
                                                              
                                                                      Page
                                                                       No.
Part I.  Financial Information                                                

   Item 1.  Financial Statements                                       1
                                                        
            Balance Sheet - August 31, 1996                            1
                                                              
            Statements of Operations -                                 2
            Three  Months and Six Months Ended August 31, 1996
            and 1995
                                                              
            Statements of Cash Flows -                                 3
            Three Months Ended August 31, 1996 and 1995
                                                              
            Notes to Financial Statements                              4
                                                              
   Item 2.  Management's Discussion and Analysis                       5
            of Financial Condition and Results of Operations
                                                              
            Liquidity & Capital Resources                              6
                                                              
Part II. Other Information

   Item 4.  Submission  of  Matters to a Vote of  Securities           7
            Holders
                                                              
            Exhibits and Reports on Form 8-K                           7

   Item 6.  Signature                                                  8       
<PAGE>


PART I.   FINANCIAL INFORMATION
  Item 1.   Financial Statements

<TABLE>
<CAPTION>

                         DERMARX CORPORATION
               BALANCE SHEET AUGUST 31, 1996  (Unaudited)
                               ASSETS

<S>                                                         <C>
Current assets:
     Cash                                                     $293,878
     Accounts receivable                                        10,415
     Inventory - Finished goods                                113,278
     Prepaid expense                                            17,605
                                                              --------
          Total current assets                                 435,176
                                                              --------

Property and equipment, net of accumulated                       
     depreciation of $3,754                                    $16,551
                                                              --------        
Other assets:                                                    
     Patents, net of accumulated amortization of $35,439       115,252
     $35,439
                                                              --------
Total Assets                                                  $570,265
                                                              ========

          LIABILITIES AND STOCKHOLDERS' EQUITY (Deficiency)

Current liabilities:
     Note payable - bank                                        $2,881
     Notes payable - other                                           0
     Accounts payable and accrued expenses                      41,928
     Accrued interest - notes payable                                0
                                                               -------
          Total current liabilities                             44,809
                                                               -------
Long-term debt:                                                  
     Notes payable - net of discounts                           34,003
     Note  payable  -  related  party,  net  of                 48,780
     discounts                                                   
     Accrued interest - note payable                             4,258
     Accrued  interest - note  payable,  related                 6,801
     party
                                                               -------
        Total long-term debt                                    93,842
                                                               -------
     Commitments and Contingencies
        Contingent liability                                   224,334
                                                               -------
        Total  long-term debt commitments  and                 318,176
        contingencies                                          -------
                                                                 
Common stockholders' equity (deficiency):                        
     Common  stock,  $.05 par  value:  8,000,000                
        shares authorized;
     7,225,969 shares issued and outstanding                   361,298
     Additional paid-in capital                              3,955,745
     Accumulated (deficit)                                  (4,109,763)
                                                            ----------
                                                               207,280
                                                            ----------
                                                              $570,265
                                                            ==========                     
                                                          
          See accompanying notes to the financial statements.

                                   1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                         DERMARX CORPORATION
                      STATEMENTS OF OPERATIONS
                                  
                                     Three Months         Six Months
                                        Ended               Ended
                                      August 31,           August 31,
                                    1996      1995      1996       1995
                                    ----      ----      ----       ----
                                      (unaudited)         (unaudited)
<S>                                <C>      <C>        <C>        <C>
Revenues:
     Sales, net of discounts       $7,383   $16,751    $13,143    $32,126
                                    7,383    16,751     13,143     32,126
                                                                     
Cost of goods sold                 (2,844)   (4,808)    (4,642)   (10,071)
                                  -------   -------    -------   --------                                                        
Gross profit                        4,539    11,943      8,501     22,055
                                  -------   -------    -------   --------
Expenses                                                             
  Management consulting             2,000    25,000      2,000     50,000
  Research & development           14,458         -     32,178          -
  Business development             42,748         -     87,491          -
  Professional fees                 1,600     8,881      6,873     15,050
  Interest expense                  5,961     8,850     11,989     17,989
  Depreciation and amortization     4,352     2,215      8,343      4,855
  Legal                            11,820     6,503     18,064     20,269
  Marketing                        13,206     4,739     40,181      9,739
  G&A employee salaries            49,113    25,243     99,561     50,564
  General and administrative       28,083     7,891     43,485     29,786
  Other                             9,290       707     12,039      7,207
                                  -------   -------    -------    -------
                                  184,326    90,029    372,204    205,459
                                  -------   -------    -------    -------                                                       
  Interest Income                   5,850         -     12,490         -
                                                                     
Net (Loss) from continuing       (173,937)  (78,085)  (351,213)  (183,403)
operations                           
                                                                     
Net (Loss) from discontinued                                   
operations                            -            -          -        -
                                 ---------  --------  ---------  ---------
Net (Loss) attributable to       (173,937)  (78,085)  (351,213)  (183,403)
common stock                     =========  ========  =========  =========
                                                                     
Net (Loss) per common share:                                         
  From continuing operations       $(.02)    $(.02)     $(.05)     $(.04)
  From discontinued operations     
                                   ------    ------     ------     ------                            
                                   $(.02)    $(.02)     $(.05)     $(.04)
                                                                     
Weighted-average number of      7,139,166  4,107,196  7,139,166  3,867,713
common shares outstanding 


               See accompanying notes to the financial statements.

                                      2
</TABLE>
<PAGE>
 
<TABLE>                           
<CAPTION>

                           DERMARX CORPORATION
                         STATEMENTS OF CASH FLOWS
                                  
                                                           Six  Months  Ended
                                                                August 31
                                                            1996         1995
                                                            ----         ---- 
                                                            (Unaudited)
<S>                                                      <C>         <C>
Cash flows from operating activities:                             
     Net (loss)                                          ($351,213)  ($183,403)
     Adjustments to reconcile net (loss) to net                     
       cash (used) by operating activities:
       Accounts payable, accrued expenses and                8,680        -
       accrued interest converted to common stock
       Amortization of discounts on notes                   13,218       5,244
       Expenses paid by Issuance of                           -           -
       stock
       Depreciation and amortization                         6,842       4,855
     Changes in assets and liabilities:                           
           (Increase) Decrease in accounts receivable       (4,721)    (10,065)
           (Increase) Decrease in inventory                (50,601)     10,071
           (Increase) Decrease in other assets              (4,952)       (381)
           Increase (Decrease) in accounts payable,        (28,558)    (17,209)
           accrued interest and accrued expenses
           Increase (Decrease) dividends in arrears            -           -
                                                         ----------   ---------
     Net cash (used) by operating                         (411,305)   (190,888)
     activities                                          ----------   ---------
                                                                  
Cash flows from investing activities:                             
     Purchase of property and equipment                     (7,209)        -
                                                         ----------   ---------
Net cash (used) by investing activities                     (7,209)        -
                                                         ----------   ---------
Cash flows from financing activities:                             
     Net Proceeds of equity sale                              -        263,750
     Net proceeds from debt obligations                       -            -
     Purchase Treasury Shares                                 -            -
     Repayment of debt obligations                            -         (4,000)
                                                         ----------   ---------
Net cash provided by financing activities                     -        259,750
                                                         ----------   ---------         
Net increase in cash and cash equivalents                ($418,514)    $68,862
                                                    
Cash and cash equivalents, March 1, 1996                  $712,392       5,730
                                                         ----------   ---------
Cash and cash equivalents, August 31, 1996                $293,878     $74,592
                                                         ==========   =========


               See accompanying notes to the financial statements.

                                      3
</TABLE>
<PAGE>

                         DERMARX CORPORATION
                    NOTES TO FINANCIAL STATEMENTS

NOTE 1 - FINANCIAL STATEMENTS

The balance sheet as of August 31, 1996, the statements of operations
for  the six months ended August 31, 1996 and 1995 and the statements
of  cash flows for the six months ended August 31, 1996 and 1995 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 August 31, 1996 and  for  all  periods
presented  have been made.  The results of operations,  for  the  six
months  ended August 31, 1996 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 notes thereto included in the Company's Form 10-K  for
its  fiscal  year ended February 29, 1996, which was filed  with  the
Securities and Exchange Commission.

                                  4
<PAGE>
                 DERMARX CORPORATION and SUBSIDIARY

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

           The  Company's revenues decreased to $7,383 in its  fiscal
quarter  ended  August 31, 1996 from $16,751 in  its  fiscal  quarter
ended  August  31,  1995,  a decrease of $9,368.   This  decrease  is
attributable to a decline in the sales of Bottom Better as all  sales
efforts have been halted on the product while a marketing partner  is
sought.   The  Company  does not expect and appreciable  increase  in
revenues until its distribution network for the wound care line is in
place.  Limited resources have been devoted to marketing and only two
of  the  four new products in the would care line were available  for
sale.   The Company's costs of goods sold as a percentage of revenues
decreased  to  39% from 29% in the three months August  31,  1996  as
compared to the comparable period one year ago.  Total expenses  were
$184,326, an increase of $94,297 from the comparable period one  year
ago.  This increase is primarily attributable to expenses incurred in
clinical  evaluations,  R&D and to additional  expenses  in  overhead
resulting  from  increased personnel and new operating  headquarters.
Interest expense decreased by $2,889 for the quarter ended August 31,
1996, compared to the same period in 1995.  For the second quarter of
fiscal year 1996, the Company had a net loss of $173,937, or $.02 per
share as compared to a net loss of $78,085, or $.02 per share for the
previous comparable period.

     The  primary  focus  of  the Company has  been  on  establishing
distribution  for  the newly developed line of would  care  products.
The  Company  is negotiating with several potential distributors  and
anticipated a distribution network to be in place throughout the U.S.
by  year  end.  The Company is continuing to seek a consumer oriented
partner  to  market  its diaper rash product.  Boots,  the  Company's
Australian distributor, has recently applied for regulatory  approval
with the TGA.  Shipments are expected to begin in Australia following
the  receipt  of  TGA approval.  The first of a series  of  marketing
seminars  is scheduled in San Diego for the 18th of October.   Patent
and  510(k)  applications have recently been filed on  the  Company's
newest product DermaMend Gel, an amorphous hydrogel.

      A  clinical  evaluation was completed on the polyurethane  foam
products at Henry Ford Hospital in Detroit in August 1996.  A  poster
incorporating the results is being prepared for presentation  at  the
Academy of Dermatology in San Francisco in March 1997.

                                  5
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The   Company  expects  its  capital  requirements  to  increase
significantly as the Company begins to actively market its  products.
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 or long-term
liquidity.   There  are  no  guarantees  that  the  Company  will  be
successful  in  the  necessary fund raising activities.   Failure  to
raise  sufficient working capital threatens the Company's  near  term
viability.

                                  6
<PAGE>
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 August 31, 1996.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     None.
                                  
                                  7
<PAGE>
                                  
                              SIGNATURE
                                  
      Pursuant to the requirements of the Securities 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 28, 1996.        /S/ Maryanne Carroll
                                   -----------------------
                                   Maryanne Carroll,
                                   Chief Executive Officer



                                  8