FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11232
VEREX LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-0850695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 Inverness Drive East, D-100 Englewood, Colorado 80112
(Address of principal executive offices)
(303) 799-4499
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to 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 requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
The registrant had 2,041,538 shares of its no par value common stock
outstanding as of September 30, 1995.
<PAGE>
PART I FINANCIAL INFORMATION
- -
Item 1. Consolidated Financial Statements:
Unaudited consolidated balance sheet
Unaudited consolidated statement of
operations for the nine-month periods
Unaudited consolidated statement of
cash flows for the nine-month periods
Notes to unaudited consolidated 5
financial statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of 6
Operations
PART II OTHER INFORMATION 7
PART III FINANTIAL DATA SCHEDULE 8
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION> September 30, 1995 June 30, 1995
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $34,472 $140,766
Receivables
Trade (net of allowance 17,012 17,465
for doubtful accounts of $2,000)
Other 5,412
Inventory 13,118 19,337
Prepaid Expenses 18,665 15,959
Research and development 296,549 296,549
385,228 490,076
Property and Equipment, at cost
Furniture and equipment 479,431 470,285
Leasehold improvements 11,358 11,358
Automobiles 2,932 2,932
493,721 484,575
Less accumulated depreciation
and amortization (436,424) (430,066)
57,297 54,509
Other Assets
Goodwill (net of accumulated 46,797 48,668
amortization of $28,060 and $26,188
Patents and trademarks, net of
accumulated amortization
of $211,155 and $215,338
127,921 123,305
174,718 171,973
Total $617,243 $716,558
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and other accruals 41,051 $157,876
Accrued Interest 244,059 215,765
Notes payable - stockholder 1,667,000 1,667,000
Current portion of long-term debt 38,998 40,998
Accrued salary and benefits payable 446,287 446,287
- current portion
2,437,395 2,527,926
Long-term liabilities
Accrued salary and benefits payable,
net of current portion 1,469,718 1367296
Long-term debt, net of current portion 1,061
1469718 1368357
Commitments and contingencies (Note 2)
Stockholder's equity
Common Stock, no par value,
100,000,000 shares authorized
authorized 2,041,538 (1995)
and 2,007,538 (1994)
shares issued and outstanding 2002844 1942923
Additional paid in capital 4,815,783 4,671,704
Accumulated deficit (10,108,497) (9,794,352)
(3,289,870) (3,179,725)
Total $617,243 $716,558
</TABLE>
See notes to consolidated financial statements
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement Of Operations
(Unaudited)
<TABLE>
<CAPTION> For The For The
Three Months Three Months
Ended September 30, 1995 Ended September 30, 1994
<S> <C> <C>
Revenues
Net sales $73,572 $105,876
Contract income
Settlement of claim
Miscellaneous 1,364 406
74,936 106,282
Cost and Expenses
Cost of sales 49,171 58,114
General and administrative 239,421 248,379
Research and development 66,142 149,677
Operating 2,728 1,165
Marketing 165 160
Interest 31,462 30,320
389,089 487,815
Net Income (loss) ($314,153) ($381,533)
Net income (loss) per
common share (note 3) ($0.15) ($0.20)
Weighted average
shares outstanding 2,033,038 1,914,371
</TABLE>
See notes to consolidated financial statements
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement Of Cash Flows
(Unaudited)
<TABLE>
<CAPTION> For The For The
3 Months Ending 3 Months Ending
September 30, 1995 September 30, 1994
<S> <C> <C>
Cash Flows from
operating activitites
Net income (loss) ($314,153) ($381,533)
Ajustments to reconcile net income
(loss) to net cash flow provided
by (used in ) operating activities
Depreciation and amortization 12,420 13,529
Changes in certain assets
& liabilities:
Patented drug products 30,835
Receivables (4,959) 11,717
Inventory 6,219 460
Other assets (2,706) (3,460)
Accounts payable and other accruals (88,531) 71,880
Accrued salary and benefits payable 102,422 88,300
Net cash provided by (used in)
operating activities ($289,288) ($168,272)
Cash flows from financing activities:
Proceeds from note payable 123,000
Payments on note payable (3,061) (12,418)
Net cash provided by financing activities (3,061) 110,582
Cash flows from investing activities:
Proceeds from sale of common stock 204,000
Additions to property and equipment (9,146) (11,501)
Additions to patents and trademarks (8,799)
Deposit on Common stock purchase 22,000
Net cash provided by (used in)
investing activities 86,055 10,499
Net increase (decrease) in cash
and cash equivalents (106,294) (47,191)
Cash and cash equivalents-beginning of period 140,766 56,487
Cash and cash equivalents-end of period $34,472 $9,296
</TABLE>
Supplemental cash flow information:
Cash paid for interest was $2,290 (1995) and @$1,148 (1994).
See notes to consolidated financial statements
<PAGE>
VEREX LABORATORIES, INC. and SUBSIDIARIES
Consolidated Notes to Financial Statements
(Unaudited)
1. Financial Statements
These unaudited financial statements should be read in conjunction with
the Company's financial statements as of June 30, 1995, included in the
Annual Report on Form 10-K. In the opinion of the Company, the
accompanying consolidated financial statements contain all adjustments
(consisting of normal recurring items) necessary to present fairly the
consolidated financial position and results of operations for the periods
presented. The results of operations for the three-month period ended
September 30, 1995, are not necessarily indicative of the results to be
expected for the full year. The Company's consolidated financial
statements include the accounts of its wholly-owned subsidiaries,
Colorado Nut Company, Inc. and Bear Laboratories, Inc.
2. Commitments
Office Lease:
The Company is obligated under an office lease commencing April 1, 1995
and ending on March 31, 1997, to pay $4,610.56 in monthly installments.
Clinical Trials:
The Company is continuing with clinical trials on its AIDS drug, Aztec ,
and has made commitments for ongoing patient and laboratory work totaling
$420,000, part of which has been completed.
3. Net Loss Per Common Share
Net income (loss) per common share for the three-month periods ended
September 30, 1995 and September 30, 1994 has been computed on the basis
of the weighted number of common shares outstanding of 2,033,038 and
1,914,377 at September 30, 1995 and 1994 respectively.
4. Credit Arrangements - Birklea, Ltd.
Effective November 30, 1993, the Company entered into a Credit Agreement
with Birklea, Ltd, a major shareholder of the Company, whereby Birklea,
Ltd. agreed to use its best efforts to provide up to $10,000,000 in
financing to the Company. Advances under the arrangement bear interest at
prime rate set by Morgan Guaranty Bank, New York. The convertible
promissory note thereunder is secured by the Company's right, title and
interest in patent applications, patents, trade names, know-how and trade
secrets relating to existing and future drug formulations relating to the
drug commonly known as AZT. At September 30, 1995, the Company had drawn
down $1,667,000 pursuant to the Credit Agreement. Subject to the Company
having sufficient cash resources or alternative borrowing resources,
principal is payable July 15, 1996 and interest is payable quarterly
commencing March 31, 1994. Birklea has an option to convert all or any
portion of the balance of this note to common stock of the Company thereby
increasing its holdings to approximately 54% of the outstanding common
stock of the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
During the first three months of fiscal year 1996, current assets decreased
by $104,848 to $385,228, which was due to the loss for the period of $314,153.
Operations
Comparison of the nine-month periods ended September 30, 1995 and
September 30, 1994
Net sales decreased for the period by 30% from the prior corresponding
period and relate to snack items. Cost of sales is down for the period,
reflective of the lower sales. Research and development costs are
down $83,535 from the corresponding 1994 period.
The net loss for the nine months was down $67,380 from the prior year,
largely due to a reduction in research and development expenses.
The Company continues to seek industry partners, both U.S. and
international, for licensing agreements for the Company's research
products. In addition, the Company continues to seek opportunities to
perform research with respect to drug formulations on a contract basis.
Liquidity and Capital Resources
The Company in the past was dependent upon Birklea, Ltd., an Irish
corporation, and other outside sources to provide equity and/or debt
financing to the Company to fund its research and development and other
administrative costs. To some extent, this dependency has been reduced in
the past nine months due to the licensing/option agreement with Burroughs
Wellcome. It is estimated that an additional $190,000 during the next
three months will be required to complete the Phase III Aztec clinical
trials. The Company is currently seeking funding from outside sources,
including licensing arrangements. There is no assurance such funding will
be available, or if available, on terms favorable or acceptable to the
Company. During October 1995 the Company sold 52,800 shares of common
stock for a total of $369,600 pursuant to Regulation S under the Securities
Act of 1993 to three non-residents of the U.S. These funds are to pay for
clinical trials and general and administrative expenses.
Except as indicated above, there are no planned expenditures outside the
normal operating costs of the Company which will cause the Company to make
any extraordinary plans for handling any cash requirements within the
foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.1 Restated Articles of Incorporation*
Exhibit 3.2 Restated By-Laws*
Stock Purchase Agreement - Birklea, Ltd. **
Stock Option - James M. Dunn, M.D. **
Stock Option - Jerry R. Dunn **
Exhibit 10.33 Option Agreement - Burroughs Wellcome ***
* Incorporated by reference to SEC File No. 2-82403-D
filed September 30, 1983
** Incorporated by reference to SEC File No. 0-11232,
Form 8-K January 14, 1993
*** Incorporated by reference to SEC File No. 0-11232,
Form 8-K December 1, 1994
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1995.<PAGE>
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VEREX LABORATORIES, INC.
James M. Dunn, M.D.
President, Chief Executive Officer
and Chief Financial Officer
Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedulle contains summary financial information extracted from the
consolidated Balance sheets and consolidated statements of operations
found on pages 3 and 4 of the company's form 10-q for the year-to-date,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 96
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 129
<PP&E> 478
<DEPRECIATION> 0
<TOTAL-ASSETS> 650
<CURRENT-LIABILITIES> 172
<BONDS> 0
<COMMON> 73
0
0
<OTHER-SE> 324
<TOTAL-LIABILITY-AND-EQUITY> 650
<SALES> 337
<TOTAL-REVENUES> 338
<CGS> 220
<TOTAL-COSTS> 391
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (529)
<EPS-PRIMARY> (.72)
<EPS-DILUTED> (.72)
