<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, 1998
-----------------
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
------------------------------ ---------------
(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
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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
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 December 31, 1998.
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VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets December 31, 1998 June 30, 1998
(Unaudited) (Audited)
---------------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $2,224 $4,428
Accounts receivable 1,100
Prepaid expenses 7,951 8,243
------ ------
11,275 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 (483,917) (479,107)
--------- ---------
Property and equipment - net 11,948 16,238
Other Assets
Patents and trademarks, net of
accumulated amortization of $289,261
and $277,655 131,949 141,605
-------- --------
Total $155,172 $170,514
-------- --------
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities
Accounts payable and other accruals 210,360 218,781
Royalties due related parties 32,500 32,500
Notes payable - related parties 22,813 16,313
Deposit for common stock 51,750
______
317,423 267,594
Long-term liabilities
Accrued salary and benefits payable 1,290,642 933,970
--------- ---------
Total Liabilities 1,608,065 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 (14,089,429) (13,667,586)
------------ ------------
(1,452,893) (1,031,050)
----------- -----------
Total $155,172 $170,514
=========== ===========
</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 Six For The Six
Months Ending Months Ending
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues
Licensing income 128,000
Contract projects 17,300 16,500
Net Sales 56,495
Other income 3 143
------ -------
17,303 201,138
Cost and Expenses
Cost of sales 55,206
General and administrative 433,875 378,958
Research and development 2,157 37,970
Marketing 3,111 4,114
------- -------
439,143 476,248
Net Income (loss) ($421,840) ($275,110)
---------- ----------
Net income (loss) per common share
(note 3) ($0.18) ($0.12)
Weighted average shares outstanding 2,327,359 2,327,359
</TABLE>
See notes to consolidated financial statement
Page 3
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The Three For The Three
Months Ending Months Ending
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues
Licensing income 30,000
Contract projects 8,100 16,500
Net sales 56,495
Other Income 2 142
----- -------
8,102 103,137
Cost and Expenses
Cost of sales 55,206
General and administrative 223,173 186,658
Research and development 1,221 34,373
Marketing 628 3,635
------- -------
225,022 279,872
------- -------
Net Income (loss) ($216,920) ($176,735)
---------- ----------
Net income (loss) per common share (note 3) ($0.09) ($0.08)
Weighted average shares outstanding 2,327,359 2,327,359
</TABLE>
See notes to consolidated financial statement
Page 4
<PAGE>
VEREX LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For The Six For The Six
Months Ending Months Ending
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Cash Flows from operating activities
Net income (loss) (421,840) (275,110)
Adjustments to reconcile net income
(loss) to net cash flow provided by
(used in) operating activities
Depreciation and amortization 16,416 18,382
Changes in certain assets & liabilities:
Receivables (1,100) (16,500)
Other assets 292 905
Accounts payable and other accruals (8,424) 12,945
Accrued salary and benefits payable 356,672 282,588
------- -------
Net cash provided by (used in) operating
activities (57,984) 23,210
Cash flows from financing activities:
Proceeds from note payable 6,500
Payments on note payable (23,500)
----- --------
Net cash provided by financing activities 6,500 (23,500)
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 (2,204) (8,937)
Cash and cash equivalents-beginning of period 4,428 13,915
------- ------
Cash and cash equivalents-end of period 2,224 4,978
------- ------
</TABLE>
Supplemental disclosures:
Cash flow information:
Cash paid for interest was $0 (1998) and $0 (1997)
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 six-month period ended December 31, 1997,
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 six-month periods ended December 31,
1998 and December 31, 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 six months of fiscal year 1999 ending December 31, 1998
resulted in revenue of $17,303 from operations as compared to $201,138 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 less than in 1998 due to general belt tightening.
Financial Position
------------------
The Company went from a deficit shareholders' equity of $1,031,050 to a
negative shareholders' equity of $1,452,893 as a result of losses for the
six months of $421,840.
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(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 December
31, 1998.
Page 7
<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.
(Name and Title) James M. Dunn, M.D.
President, Chief Executive Officer
and Chief Financial Officer
(Date) March 25, 1999
Page 8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 2,224
<SECURITIES> 0
<RECEIVABLES> 1,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,275
<PP&E> 495,865
<DEPRECIATION> 483,917
<TOTAL-ASSETS> 155,172
<CURRENT-LIABILITIES> 317,423
<BONDS> 0
0
0
<COMMON> 2,327,359
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 155,172
<SALES> 0
<TOTAL-REVENUES> 8,100
<CGS> 0
<TOTAL-COSTS> 225,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (216,920)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216,920)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
