<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period ended MARCH 31, 1997
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number : 000-27866
VYREX CORPORATION
(Name of small business issuer as specified in its charter)
NEVADA 88-0271109
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2159 AVENIDA DE LA PLAYA, LA JOLLA, CALIFORNIA 92037
(Address of principal executive offices)
(619) 454-4446
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes / X / No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common
equity, as of latest practicable date:
As of March 31, 1997 there are 7,121,209 shares of common stock outstanding and
warrants to purchase 1,239,701 shares of common stock outstanding.
Transitional Small Business Disclosure Format
Yes _____ No / X /
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VYREX CORPORATION
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Sheet 1
Table of Contents 2
PART I FINANCIAL INFORMATION
Item I - Financial Information
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and 6
Analysis of Financial Condition
And Results of Operations
PART II OTHER INFORMATION 7
Signature 8
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VYREX CORPORATION
(a development stage enterprise)
Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,171,844 $3,187,906
Short-term investment, available-for-sale 3,354,040 1,893,830
Interest receivable 73,147 47,979
Prepaid Assets 57,514 -
---------- ----------
Total current assets 4,656,546 5,129,715
Furniture and equipment, net of accumulated depreciation of
$57,674 in 1997 and $54,394 in 1996 59,397 54,256
Notes receivable from related parties 50,931 313,304
Patents, trademarks and copyrights, net of accumulated 121,956 124,018
amortization of $18,263 in 1997 and $16,201 in 1996
---------- ----------
Total assets $4,888,829 $5,621,293
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 456,271 $ 504,646
---------- ----------
Total current liabilities 456,271 504,646
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued - -
Common stock, $.001 par value; 50,000,000 shares authorized;
7,121,209 issued and outstanding in 1997 and 1996 7,121 7,121
Additional paid-in capital 10,338,339 10,338,339
Deficit accumulated during the development stage (5,912,902) (5,228,813)
---------- ----------
Total stockholders' equity 4,432,558 5,116,647
---------- ----------
Total liabilities and stockholders' equity $4,888,829 $5,621,293
---------- ----------
---------- ----------
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
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VYREX CORPORATION
(a development stage enterprise)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------- CUMULATIVE FROM
1997 1996 INCEPTION
---- ---- ---------------
<S> <C> <C> <C>
Revenue and licensing agreement $ -- $ -- $ 310,000
Operating Expenses:
Research and development 404,130 60,448 2,797,915
General and administrative 340,900 48,153 2,338,448
------------- ------------ -----------
Total operating expenses 745,030 108,601 5,136,363
------------- ------------ -----------
Loss from Operations (745,030) (108,601) (4,826,363)
Other Income (expense):
Interest Income 60,941 185 263,361
Charge from issuance of stock options for
arranging bridge financing costs -- -- (1,349,900)
------------- ------------ ----------
Total other income (expense) 60,941 185 (1,086,539)
------------- ------------ ----------
Net loss $ (684,089) $ (108,416) $(5,912,902)
------------- ------------ -----------
------------- ------------ -----------
Net loss per common share $ (0.10) $ (0.02)
------------- ------------
------------- ------------
Shares used in per share computations 7,121,209 5,302,706
------------- ------------
------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
VYREX CORPORATION
(a development stage enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED CUMULATIVE
MARCH 31, MARCH 31, FROM
1997 1996 INCEPTION
--------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (684,089) $ (108,416) $(5,912,902)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,342 1,817 75,652
Interest receivable (25,168) -- (73,147)
Issuance of compensatory notes, stock and
stock options -- -- 1,561,052
Accounts payable and accrued liabilities (48,375) (73,731) 456,272
---------- ---------- ----------
Net cash used in operating activities (752,290) (180,330) (3,893,073)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchase of short-term investments (1,460,210) -- (6,401,425)
Sale of short-term investments -- -- 3,048,365
Purchases of furniture and equipment (8,421) -- (117,071)
Cost of patent, trademarks and copyrights -- -- (133,519)
Other assets, including notes receivable from
related parties 204,859 -- (109,141)
---------- ---------- ----------
Net cash used in investing activities (1,263,772) -- (3,712,791)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from note payable -- -- 400,000
Exercise of stock options and sale of option -- -- 950,100
Net proceeds from issuance of common stock -- 5,694,214 7,427,608
---------- ---------- ----------
Net cash provided by financing activities -- 5,694,214 8,777,708
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents (2,016,062) 5,513,884 1,171,844
Cash and cash equivalents, beginning of the
period 3,187,906 65,995 --
---------- ---------- ----------
Cash and cash equivalents, end of the period $1,171,844 $5,579,879 $1,171,844
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
VYREX CORPORATION
(A Development Stage Enterprise)
Notes To Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company in
accordance with generally accepted accounting principles for interim
financial information. Certain information and disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the
opinion of the Company's management, the unaudited financial statements
contain all adjustments necessary (consisting of normal recurring accruals)
for a fair presentation of the financial position as of March 31, 1997, and
the results of operations for the three month period ended March 31, 1997
and 1996. The results of operations for the periods ended March 31, 1997
are not necessarily indicative of the results to be expected for the full
year. For further information, refer to the consolidated financial
statements and footnotes thereto included in Vyrex's 10-KSB for the year
ended December 31, 1996.
2. ACCOUNTING STANDARD ON EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact
of the adoption of this statement is not expected to be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
Research and development expenses increased $344,000, to $404,000 in the
three months ended March 31, 1997, from $60,000 for the same period during
1996. The increase is primarily due to higher salaries as the Company
built up its research organization as well as higher expenses for the
CD-Tagging-TM- functional genomics project and for Vantox-Registered
Trademark- antioxidant preclinical efforts. General and administrative
expenses increased $293,000, to $341,000 in the current period, from
$48,000 for the same period in 1996. The increase is due to higher
salaries and consulting as the Company built up its administrative team as
well as higher insurance and patent related legal costs.
Net loss increased $576,000, to $684,000 in the current period, from
$108,000 for the same period during 1996 as the Company built up its
research efforts subsequent to going public in March of 1996. Net loss per
common share increased $0.08 to $0.10, from $0.02 for the same period
during 1996. Higher operating expenses were partially offset by higher
average shares outstanding during the period.
6
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LIQUIDITY AND CAPITAL RESOURCES
The Company has financed it operations since inception solely through the
sales of debt and equity securities. As of March 31, 1997, the Company had
working capital of $4,200,000 which includes $4,526,000 of cash, cash
equivalents and short term investments. Cash flow used in operating
activities during the period ended March 31, 1997 was $752,000, compared to
$180,000 for the same period during 1996. The increase in cash used was
primarily related to the net loss from operations as the Company
accelerated its research activities subsequent to its initial public
offering in March of 1996. The Company also used $1,264,000 in investing
activities during the current period, compared to zero for the same period
during 1996, as maturing cash equivalents were reinvested in short term
investments with maturities greater than three months. The investment in
short-term investments was partially offset by $267,000 collected on a note
receivable from the Company's former president.
The Company believes that its current cash reserves will fund the business
for at least the next twelve months from the balance sheet date. The
Company does not anticipate have revenues in the foreseeable future and
will be required to raise additional funds to continue operations. There
is no assurance that funds will be available through the public or private
markets.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three months
ended March 31, 1997.
7
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VYREX CORPORATION
Registrant
By: /s/ STEVEN J. KEMPER
--------------------
Steven J. Kemper,
Chief Financial Officer
(Principal Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,171,844
<SECURITIES> 3,354,040
<RECEIVABLES> 73,147
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,656,546
<PP&E> 117,071
<DEPRECIATION> 57,674
<TOTAL-ASSETS> 4,888,829
<CURRENT-LIABILITIES> 456,271
<BONDS> 0
0
0
<COMMON> 7,121
<OTHER-SE> 4,425,437
<TOTAL-LIABILITY-AND-EQUITY> 4,888,829
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 745,030
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,941
<INCOME-PRETAX> (684,089)
<INCOME-TAX> 0
<INCOME-CONTINUING> (684,089)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (684,089)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
