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
                                  May 31, 1997

                                       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.)

   400 Colorado Blvd., Suite 420
          Denver, Colorado                                 80222
(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: 7,302,363 (as of 5/31/97) of
common stock, par value $.05 per share.
<PAGE>

                               DERMARx CORPORATION

                                      INDEX

                                                                        Page No.

Part I. Financial Information

   Item 1.        Financial Statements
                           Balance Sheet - May 31, 1997                      1
                           Statements of Operations -                        2
                              Three Months Ended May 31, 1997 and 1996
                           Statements of Cash Flows -                        3
                              Three Months Ended May 31, 1997 and 1996

                  Notes to Financial Statements                              4

   Item 2.        Management's Discussion and Analysis                       5
                  of Financial Condition and Results of Operations

Part II. Other Information

   Item 4.        Submission of Matters to a Vote of                         6
                  Securities Holders

   Item 6.        Exhibits and Reports on Form 8-K                           6

   Signature                                                                 7
<PAGE>

PART I. FINANCIAL INFORMATION

      Item 1. Financial Statements

                               DERMARX CORPORATION
                                  BALANCE SHEET
                                  MAY 31, 1997

                                     ASSETS

Current assets
      Cash and cash equivalent                                      $    44,783
      Accounts receivable - trade                                         9,664
      Inventory - Finished goods                                        113,629
      Prepaid expense                                                    11,432
                                                                    -----------
               Total current assets                                     179,508
                                                                    -----------

Property and equipment:, net of accumulated
      Equipment, net of accumulated depreciation of $8,366               11,939
                                                                    -----------

Other assets:
      Security deposits                                                   1,000
      Patents, net of accumulated amortization of $42,087               108,604
                                                                    -----------
                                                                    $   301,051
                                                                    ===========


               LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
      Notes payable - net of discounts                              $    34,603
      Notes payable - related party, net of discounts                    50,232
      Accrued interest - notes payable                                    5,833
      Accrued interest - notes payable, related party                     9,051
      Accounts payable and accrued expenses                              37,936
      Related party                                                      16,667
                                                                    -----------
               Total current liabilities                                154,321
                                                                    -----------


Common stockholders' equity:
      Common stock, $.05 par value; 12,000,000 shares
         authorized; 7,302,363 shares issued and outstanding            365,118
      Additional paid - in capital                                    4,068,245
      Accumulated (deficit)                                          (4,286,634)
                                                                    -----------
                                                                        146,729
                                                                    -----------
                                                                    $   301,051
                                                                    ===========


                                       1
<PAGE>

                               DERMARX CORPORATION
                            STATEMENTS OF OPERATIONS

                                                         Three Months Ended
                                                              05/31/97
                                                       1997             1996
                                                   -----------      -----------
                                                             (Unaudited)

Revenues:
      Sales, net of discounts                      $    20,035      $     5,759
      Cost of goods sold                                 6,745            1,937
                                                   -----------      -----------
      Gross profit                                      13,290            3,822

      General and administrative                       139,742          185,606
                                                   -----------      -----------

(Loss) from operations                                (126,452)        (181,784)

Other income (expense)
      Interest income                                      176            6,185
      Interest expense                                  (1,275)          (6,029)
                                                   -----------      -----------

Extraordinary item                                     226,904                0

Net profit (loss)                                  $    99,353      ($  181,628)
                                                   ===========      ===========

Net profit (loss) per common share:                $       .01      $      (.03)

Weighted average shares outstanding                  7,173,196        7,052,363
                                                   ===========      ===========


                                       2
<PAGE>

                               DERMARX CORPORATION
                            STATEMENTS OF CASH FLOWS

                                                            Three Months Ended
                                                                  May 31
                                                             1997        1996
                                                          ---------   ----------
                                                             (Unaudited)
Cash Flows from operating activities:
   Net profit (loss)                                      $ 109,353   ($181,628)
   Adjustments to reconcile net (loss) to net
     cash (used) by operating activities:
        Discount on notes amortized                             679         750
        Expenses paid by issuance of stock                    6,250
        Depreciation  and amortization                        3,602       3,436
   Changes in assets and liabilities
        (Increase) decrease in accounts receivable           (2,929)      3,551
        (Increase) decrease in inventory                      2,083     (44,461)
        (Increase) decrease in other assets                   5,382      (1,644)
        Increase (decrease) in accounts payable, accrued     13,695     (14,820)
        interest and accrued expenses

Net cash (used) by operating activities                     138,116    (234,817)
                                                          ---------   ---------


Cash flows from financing activities:
   Proceeds from issuance of common stock                    87,500          --
   Repayment of debt obligations                           (231,810)         --
                                                          ---------   ---------
Net cash provided by financing activities                  (144,310)          0
                                                          ---------   ---------


Net increase in cash and cash equivalents                 ($  6,194)  ($234,817)

Cash and cash equivalents, March 1,                          50,977     712,392
                                                          ---------   ---------

Cash and cash equivalents, May 31,                        $  44,783   $ 477,575
                                                          =========   =========


                                       3
<PAGE>

                               DERMARx CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - FINANCIAL STATEMENTS

The balance sheet as of May 31, 1997, the statements of operations for the three
months ended May 31, 1997 and 1996 and the statements of cash flows for the
three months ended May 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 May 31, 1997 and for all periods
presented have been made. The results of operations, for the three months ended
May 31, 1997 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 28, 1997, which was filed
with the Securities and Exchange Commission.

NOTE 2 - OUTSTANDING SHARES

Shares issued and outstanding as of May 31, 997 were 7,044,969.


                                       4
<PAGE>

                       DERMARx CORPORATION and SUBSIDIARY

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

Management Plans

      The most immediate plan of the Company is to establish a distribution
network throughout the United States and Australia, to market various wound care
education and clinic development consulting services, and to obtain additional
working capital through a private placement. Failure to secure additional
working capital jeopardizes the continued operation of the Company as a going
concern.

Results of Operations

      The primary focus has been on establishing distribution of its newly
developed line of wound care products and consulting services. The Company is
negotiating with several potential distributors and private label partners and
anticipates a distribution network to be in place throughout the United States
and Australia by year-end. The Company is continuing to seek a consumer-oriented
partner to market its diaper rash product.

      The Company's revenues increased to $20,035 in its fiscal quarter ended
May 31, 1997 from $5,759 in its fiscal quarter ended May 31, 1996, an increase
of $14,276. This increase is negligible and not attributable to any particular
trend or effect. The company's cost of goods sold as a percentage of revenues
remained the same at 34% in the three months ended May 31, 1997 as compared to
the comparable period one year ago. Total expenses were $129,742, a decrease of
$55,864 from the comparable period one year ago. During the first quarter of
1996 the Company incurred a number of non-recurring expenses including safety,
stability and effectiveness testing on newly developed products, moving and
start-up marketing costs. For the first quarter of fiscal year 1997, the Company
had a net profit of $99,353, or $.01 per share as compared to a net loss of
$181,628 or $.03 per share for the previous comparable period. The net profit is
attributable primarily to an extraordinary item in the amount of $226,904. The
law firm of Schwartz, Warren & Ramirez agreed to accept $10,000 as payment in
full accord and satisfaction of the total outstanding balance. Schwartz has
discharged DermaRx from all existing obligations and has terminated the royalty
agreement.

Subsequent Events

      None


                                       5
<PAGE>

Liquidity and Capital Resources

      The Company expects its capital requirements to increase significantly as
marketing efforts and inventory requirements increase. 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.

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 May 31,
1997.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      None.
<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: July 15, 1997                    /s/ Maryanne Carroll
                                        -----------------------
                                        Maryanne Carroll,
                                        Chief Executive Officer