<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 March 31, 1999
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11232
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VEREX LABORATORIES, INC.
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(Exact name of Registrant as specified in its charter)
Colorado 84-0850695
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 Inverness Drive East, D-100 Englewood, Colorado 80112
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(Address of principal executive offices)
(303) 799-4499
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(Registrant's telephone number, including area code)
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(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
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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 March 31, 1999.
Page 1
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VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets
March 31, 1999 June 30, 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 130 $ 4,428
Prepaid expenses 7,805 8,243
------- ------
7,935 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 (486,322) (479,107)
Property and equipment - net 9,543 16,238
Other Assets
Patents and trademarks, net of
accumulated amortization
of $295,064 and $277,655 126,146 141,605
-------- --------
Total $143,624 $170,514
-------- --------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and other accruals 232,216 218,781
Royalties due related parties 32,500 32,500
Notes payable unrelated parties 25,013 16,313
Deposit for common stock 59,250
Deferred rent 10,875
------- --------
359,854 267,594
Long-term liabilities
Accrued salary and benefits payable 1,473,512 933,970
--------- -------
Total Liabilities 1,833,366 1,201,564
Commitments and contingencies
(Note 2)
Stockholders' Equity
Common Stock, no par value,
100,000,000
shares authorized
2,327,359 and 2,301,359 shares issued
and outstanding 2,304,422 2,304,422
Additional paid in capital 10,332,114 10,332,114
Accumulated deficit (14,326,278) (13,667,586)
---------- ----------
(1,689,742) (1,031,050)
---------- ----------
Total $143,624 $170,514
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</TABLE>
See notes to consolidated financial statement
Page 2
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VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The Nine For The Nine
Months Ending Months Ending
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues
Licensing income 158,000
Net sales 56,495
Contract income 17,200 67,553
Other income 4 144
-------- --------
17,204 282,192
Cost and Expenses
Cost of sales 55,206
General and administrative 669,284 559,697
Research and development 3,501 39,114
Marketing 3,111 10,654
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675,896 664,671
------- --------
Net Income (loss) ($658,692) ($382,479)
-------- --------
Net income (loss) per common share
(note 3) ($0.28) ($0.16)
Weighted average shares outstanding 2,327,359 2,327,359
</TABLE>
See notes to consolidated financial statement
Page 3
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VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The Three For The Three
Months Ending Months Ending
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues
Licensing income 30,000
Net sales
Contract income (100) 51,053
Other Income 1 1
------ ------
(99) 81,054
Cost and Expenses
General and administrative 235,409 180,739
Research and development 1,344 1,144
Marketing 6,540
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236,753 188,423
------- -------
Net Income (loss) ($236,852) ($107,369)
Net income (loss) per common share
(note 3) ($0.10) ($0.04)
Weighted average shares outstanding 2,327,359 2,327,359
See notes to consolidated financial statement
Page 4
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VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
For The Nine For The Nine
Months Ending Months Ending
March 31, 1999 March 31, 1998
--------------- --------------
<S> <C> <C>
Cash Flows from operating activities
Net income (loss) (658,692) (382,479)
Adjustments to reconcile net income (loss)
to net
cash flow provided by (used in) operating
activities
Depreciation and amortization 24,624 27,573
Changes in certain assets & liabilities:
Receivables (19,884)
Other assets 438 362
Accounts payable and other accruals 13,435 (7,277)
Accrued salary and benefits payable 539,542 423,882
Deferred rent 10,875
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Net cash provided by (used in) operating
activities (69,778) 42,177
Cash flows from financing activities:
Deposits on sales of common stock 59,250
Proceeds from note payable 8,700
Payments on note payable (32,700)
-------- -------
Net cash provided by financing activities 67,950 (32,700)
Cash flows from investing activities:
Additions to property and equipment (520) (763)
Additions to patents and trademarks (1,950) (7,885)
-------- ------
Net cash provided by (used in) investing
activities (2,470) (8,648)
Net increase (decrease) in cash and cash
equivalents (4,298) 829
Cash and cash equivalents-beginning of period 4,428 13,915
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Cash and cash equivalents-end of period 130 14,744
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Supplemental disclosures:
Cash flow information:
Cash paid for interest was $0 (1999) and
$0 (1998)
</TABLE>
See notes to consolidated financial statements
Page 5
<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 nine-month period ended March 31, 1999, 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
---------------------------
Income (loss) per common share for the nine-month periods ended March 31, 1999
and March 31, 1998 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 nine months of fiscal year 1999 ending March 31, 1999 resulted in
revenue of $17,204 from operations as compared to $282,192 for the
corresponding fiscal 1998 period. The revenues are from licensing Company
drug formulations and from product sales and contract research projects.
General and administrative expense and research and development expense are
about the same as in 1998.
Financial Position
------------------
The Company went from a deficit shareholders' equity of $1,031,050 to a
negative shareholders' equity of $1,689,742 as a result of losses for the
nine months of $658,692.
Page 6
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Liquidity and Capital Resources
-------------------------------
Other than facilities rent and salaries, there are no other commitments.
The Company is currently pursuing additional licensing and contract
formulation arrangements, however there is no assurance such will be obtained.
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.
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, 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 December 31,
1998.
Page 7
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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) May 10, 1999
By;(Signature) /s/James M. Dunn
(Name and Title) James M. Dunn, M.D.
President, Chief Executive Officer
and Chief Financial Officer
Page 8
(/TEXT>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE ACCOMPANYING
FORM 10-Q OF VEREX LABS. FOR THE 10-Q ENDED 3/31/99 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 130
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,935
<PP&E> 495,865
<DEPRECIATION> 486,322
<TOTAL-ASSETS> 143,624
<CURRENT-LIABILITIES> 359,854
<BONDS> 0
0
0
<COMMON> 2,327,359
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 143,624
<SALES> (100)
<TOTAL-REVENUES> (99)
<CGS> 0
<TOTAL-COSTS> 236,753
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (236,852)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,852)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
