<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 September 30, 1998
------------------------
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 2,327,359 shares of its no par value common stock
outstanding as of September 30, 1998.
-1-
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets September 30, 1998 June 30, 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,901 $ 4,428
Accounts receivable 9,200 0
Prepaid expenses 8,097 8,243
------- -------
19,198 12,671
Property and Equipment, at cost
Furniture and equipment 494,548 494,028
Leasehold improvements 1,317 1,317
------- -------
495,865 495,345
Less accumulated depreciation
and amortization (481,512) (479,107)
------- -------
Property and equipment - net 14,353 16,238
Other Assets
Patents and trademarks, net of
accumulated amortization of
$283,458 and $277,655 137,752 141,605
Total $171,303 $170,514
------- -------
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable and other accruals 199,238 218,7881
Royalties due to related parties 32,500 32,500
Notes payable - related parties 16,313 16,313
Deposit on sales of common stock 51,750
-------- --------
299,801 267,594
Long-term liabilities
Accrued salary and benefits payable,
net of current portion 1,107,472 933,970
Total liabilities 1,407,273 1,201,564
Commitments and contingencies
(Note 1)
Stockholders' deficit
Common Stock, no par value,
100,000,000 shares
Authorized, 2,327,359 shares
issued and outstanding 2,304,422 2,304,422
Additional paid in capital 10,332,114 10,332,114
Accumulated deficit (13,872,506) (13,667,586)
---------- ----------
(1,235,970) (1,031,050)
--------- ---------
Total $171,303 $170,514
-------- --------
</TABLE>
See notes to consolidated financial statement
-2-
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The Three For The Three
Months Ending Months Ending
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Revenues
Contract income 9,200
Licensing income 98,000
Miscellaneous 1 1
-------- -------
$9,201 $98,001
Cost and Expenses
General and administrative 210,702 192,300
Research and development 936 3,597
Marketing 2,483 479
-------- --------
214,121 196,376
-------- --------
Net Income (loss) ($204,920) ($98,375)
-------- -------
Net income (loss) per common
share (note 3) ($0.09) ($0.04)
Weighted average shares
outstanding 2,327,359 2,312,239
</TABLE>
See notes to consolidated financial statement
-3-
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For The Three For The Three
Months Ending Months Ending
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Cash Flows from operating activities
Net income (loss) (204,920) ($98,375)
Adjustments to reconcile net income
(loss) to net cash flow provided by
(used in) operating activities
Depreciation and amortization 8,208 9,190
Changes in certain assets & liabilities:
Receivables (9,200)
Other assets 146 454
Accounts payable and other accruals (19,543) (10,589)
Accrued salary and benefits payable 173,502 141,294
-------- --------
Net cash provided by (used in) operating
activities ($51,807) $41,974
Cash flows from financing activities:
Proceeds from note payable
Payments on note payable (9,500)
------
Net cash provided by financing
activities (9,500)
Cash flows from investing activities:
Deposit on sale of common stock 51,750
Additions to property and equipment (520) (763)
Additions to patents and trademarks (1,950) (7,884)
Net cash provided by (used in) investing
activities 49,280 (8,647)
Net increase (decrease) in cash and cash
equivalents (2,527) 23,827
Cash and cash equivalents-beginning of
period 4,428 13,915
------- -------
Cash and cash equivalents-end of period $1,901 $37,742
------- -------
Supplemental disclosures:
Cash flow information:
Cash paid for interest was $0 (1998)
and $0 (1997)
</TABLE>
See notes to consolidated financial statements
-4-
<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, 1998, 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, 1998, 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 subsidiary Bear Laboratories, Inc.
2. Commitments
-----------
Office Lease:
The Company is obligated under an office lease commencing April 1, 1997 and
ending on March 31, 2000, to pay $6,826.54 in monthly installments for its
general office and research facility, which contains 8,623 sq. ft. of space.
A portion of this space is subleased to others.
3. Net Income Per Common Share
---------------------------
Net income (loss) per common share for the three-month periods ended
September 30, 1998 and 1997 has been computed on the basis of the weighted
number of common shares outstanding of 2,327,359.
Item 2. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Operations
----------
The first three months of fiscal year 1999 ending September 30, 1998 resulted
in revenue of $9,201 from operations as compared to $98,001 for the
corresponding fiscal 1998 period. The revenues are from contract research
projects. General and administrative expense and research and development
expense are about the same as prior years.
Liquidity and Capital Resources
-------------------------------
Other than facilities rent and salaries, there are no commitments. The
Company is currently pursuing additional licensing and contract formulation
arrangements, however there is no assurance such will be obtained.
-5-
<PAGE>
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.
The Company currently has very limited cash resources and is not now seeking
funding through securities sales. It is seeking a licensing agreement for
Aztec(r), as well as license and supply agreements which are pending
regulatory approval in three countries. The Company is also trying to
obtain funding through a variety of other sources, including industry partners
and possibly other means. The Company is currently deferring salaries of some
of its employees.
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*
* Incorporated by reference to SEC File No. 2-82403-D filed September 30, 1983
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1998.
-6-
<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.
(Date) December 15, 1998
BY:(Signature) /s/ James M. Dunn, M.D.
(Name and Title) James M. Dunn, M.D.
President, Chief Executive Officer
and Chief Financial Officer
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 19,198
<SECURITIES> 0
<RECEIVABLES> 9,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,198
<PP&E> 495,865
<DEPRECIATION> 481,512
<TOTAL-ASSETS> 171,303
<CURRENT-LIABILITIES> 299,801
<BONDS> 0
0
0
<COMMON> 2,327,359
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 171,303
<SALES> 0
<TOTAL-REVENUES> 9,201
<CGS> 0
<TOTAL-COSTS> 214,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (204,920)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (204,920)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
