<PAGE>
FORM 10-Q AMENDMENT 2
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 December 31, 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 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 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 2,094,338 shares of its no par value
common stock outstanding as of December 31, 1995.
<PAGE>
INDEX
Page
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statement of Operations 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Commitments
Office Lease 6
Clinical Trials 6
Net Loss Per Common Share 6
Credit Arrangements - Birklea, Ltd. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Operations 7
Liquidity and Capital Resources 7
Exhibits and Reports on Form 8-K 8
Signatures 9
<PAGE>
VEREX LABORATORIES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets December 31,1995 June 30,1995
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $73,784 $140,766
Receivables
Trade (net of allowance for doubtful
accounts of $2,000) 12,627 17,465
Inventory 10,573 19,337
Prepaid Expenses 13,420 15,959
Research and developement 254,335 296,549
_______ _______
364,739 490,076
Property and Equipment, at cost
Furniture and equipment 488,983 470,285
Leasehold improvments 11,358 11,358
Automobiles 2,932 2,932
_______ _______
503,273 484,575
Less accumulated depreciation
and amortization (443,757) (430,066)
_________ _________
59,516 54,509
Other Assets
Goodwill, net of accumulated
amortization of $29,932 and $26,188 44,925 48,668
______ ______
Patents and trademarks, net of
accumulated amortization of $219,521
and $211,155 143,619 123,305
_______ _______
188,544 171,973
________ ________
Total $612,799 $716,558
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and other accurals 175,543 157,876
Accrued Interest 273,231 215,765
Notes payable - stockholder 1,667,000 1,667,000
Current portion of long-term debt 32,754 40,998
Accrued salary and benefits
payable - current portion 446,287 446,287
_________ _________
2,594,815 2,527,926
Long-term liabilities
Accrued salary and benefits payable,
net of current portion 1,572,140 1,367,296
Long-term debt, net of current portion 1,061
_________ _________
1,572,140 1,368,357
Commitments and contingencies (Note 2)
Stockholders Equity
Common stock, no par value,
100,000,000 shares authorized
2,094,338 (1995) and 2,007,538 (1994)
shares issued and outstanding 2,111,407 1,942,923
Additional paid in capital 5,076,820 4,671,704
Accumulated deficit (10,742,383) (9,794,352)
____________ ___________
3,554,156 3,179,725
Total $612,799 $716,558
See notes to consolidated financial statements
</TABLE>
<PAGE>
VEREX LABORATORIES INC. AND SUBSIDIARIES
Consolidted Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Six Months
Ended December 31,1995 Ended December 31,1994
______________________ ______________________
<S> <C> <C>
Revenues
Net Sales $156,762 $212,247
Licensing Income 1,200,000
Other Income 3,080 3,148
________ __________
$159,842 $1,415,395
Cost and Expenses
Cost of sales 102,010 167,697
General and administrative 538,213 520,351
Research and development 396,877 500,575
Operating 6,484 2,150
Marketing 2,544 1,870
Interest 61,745 58,658
_________ _________
1,107,873 1,251,301
__________ _________
Net Income (loss) ($948,031) (164,094)
Net Income (loss) per
common share (note 3) ($0.46) $0.09
Weighted average shares
outstanding 2,058,123 1,915,661
</TABLE>
See notes to consolidated finacial statements
<PAGE>
VEREX LABORITORIES INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Three Months
Ended December 31,1995 Ended December 31,1994
______________________ ______________________
<S> <C> <C>
Revenues
Net sales $83,190 $160,371
Licensing Income 1,200,000
Other Income 1,716 2,742
_______ __________
$84,906 $1,309,113
Cost and Expenses
Cost of sales 52,839 109,583
General and administrative 298,792 271,972
Research and development 330,735 350,898
Operating 3,756 985
Marketing 2,379 1,710
Interest 30,283 28,338
_______ _______
718,784 763,486
Net Income (loss) ($633,878) $545,627
Net Income (loss) per
common share (note 3) ($0.31) $0.28
Weighted average shares outstanding 2,058,123 1,915,661
</TABLE>
See notes to consolidated finacial statements
<PAGE>
VEREX LABORITORIES INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
For The Six For The Six
Months Ending Months Ending
December 31,1995 December 31,1994
________________ ________________
<S> <C> <C>
Cash Flows from operating activities
Net income (loss) ($948,031) $164,094
Adjustment to reconcile net income (loss)
to net cash flow provided by (used in)
operating activities
Depreciation and amortization 25,800 27,057
Changes in certain assets and liabilities:
Research & development 42,214 30,835
Receivables 4,838 32,854
Inventory 8,764 117
Other assets 2,539 860
Accounts payable and other accurals 75,133 113,083
Accrued salary and benefits payable 204,844 174,844
__________ _________
Net cash provided by (used in)
operating activities ($583,899) $543,744
Cash flows from financing activities:
Proceeds from note payable 123,000
Payments on note payable (9,305) (27,104)
Provided by (used in) ________ _______
financing activities ($9,305) $95,896
Cash flows from investing activities:
Proceeds from sales of common stock $573,600 $180,000
Additions to property and equipment (18,698) (11,501)
Additions to patents and trademarks (28,680) (3,148)
Deposits on Common Stock purchases 47,000
Net cash provided by (used in) ________ ________
investing activities $526,222 $212,351
Net increase (decrease) in cash and
cash equivalents ($66,982) $851,991
Cash and cash equivalents-beginning of period $140,766 $56,487
________ ________
Cash and cash equivalents-end of period $73,784 $908,478
Supplemental cash flow information:
Cash paid for interest was $5,691 (1995) and $2,564 (1994).
</TABLE>
<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 six- month period
ended December 31, 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 $286,000, part of which has been completed.
3. Net Loss Per Common Share
______________________________
Net income (loss) per common share for the six-month periods ended
December 31, 1995 and December 31, 1994 has been computed on the basis
of the weighted number of common shares outstanding of 2,058,123 and
1,915,661 at December 31, 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 December 31, 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 six months of fiscal year 1996, current assets decreased
by $125,337 to $364,739, which was due to the loss for the period of
$948,031.
Operations
__________
Comparison of the six-month periods ended December 31, 1995
and December 31, 1994
Net sales decreased for the period by 26% 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 $103,700 from the corresponding 1994 period.
The net loss for the six months increased $1,112,125 from the prior
year, due to a loss in licensing income.
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 was
reduced due to the $1,200,000 licensing/option agreement with
Burroughs Wellcome in fiscal 1995. In December 1995 Wellcome informed
the Company that it was not going to exercise its option on Aztec and
thus no further funding from this source is currently expected. It is
estimated that an additional $165,000 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. In
February 1996, the Company sold 36,364 shares pursuant to Regulation S
for a total of $100,000. 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 December 31, 1995.
<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.
(REGISTRANT) VEREX LABORATORIES, INC
BY (SIGNATURE) /s/ James M. Dunn, M.D.
(DATE) 03/18/96
(NAME AND TITLE) James M. Dunn, M.D.
President, ChiefExecutive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 73,784
<SECURITIES> 0
<RECEIVABLES> 14,627
<ALLOWANCES> 2,000
<INVENTORY> 10,573
<CURRENT-ASSETS> 364,739
<PP&E> 503,273
<DEPRECIATION> 443,757
<TOTAL-ASSETS> 612,799
<CURRENT-LIABILITIES> 2,594,815
<BONDS> 0
<COMMON> 2,094,338
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 612,799
<SALES> 156,762
<TOTAL-REVENUES> 159,842
<CGS> 102,010
<TOTAL-COSTS> 1,107,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,745
<INCOME-PRETAX> (948,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (948,031)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
</TABLE>
