<PAGE>
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 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 120,010
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) 02/09/95
(NAME AND TITLE) James M. Dunn, M.D.
President, ChiefExecutive Officer
and Chief Financial Officer
<PAGE>
[ARTICLE] 5
<TABLE>
<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
[PREFERRED-MANDATORY] 0
[PREFERRED] 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>
