<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 JUNE 30, 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 Identification No.)
incorporation or organization)
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 June 30, 1997 there are 7,121,409 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
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION
Item 1 - 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
Item 1 - Legal Proceedings 7
Item 2 - Changes in Securities 7
Item 3 - Defaults upon Senior Securities 7
Item 4 - Submission of Matters to a Vote of
Security Holders 7
Item 5 - Other Information 7
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures 8
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VYREX CORPORATION
(a development stage enterprise)
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited) Note
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 353,588 $ 3,187,906
Short-term investment, available-for-sale 3,387,205 1,893,830
Interest receivable 65,831 47,979
Prepaid assets 42,812 --
----------- -----------
Total current assets 3,849,436 5,129,715
Furniture and equipment, net of accumulated depreciation of
$63,467 in 1997 and $54,394 in 1996 58,458 54,256
Notes receivable from related parties 51,804 313,304
Patents, trademarks and copyrights, net of accumulated
amortization of $20,325 in 1997 and $16,201 in 1996 119,894 124,018
----------- -----------
Total assets $ 4,079,592 $ 5,621,293
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 338,885 $ 504,646
----------- -----------
Total current liabilities 338,885 504,646
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued -- --
Common stock, $.001 par value; 50,000,000 shares authorized;
7,121,409 issued and outstanding in 1997 and 7,121,209
issued and outstanding in 1996 7,121 7,121
Additional paid-in capital 10,339,939 10,338,339
Deficit accumulated during the development stage (6,606,353) (5,228,813)
----------- -----------
Total stockholders' equity 3,740,707 5,116,647
----------- -----------
Total liabilities and stockholders' equity $ 4,079,592 $ 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 SIX MONTHS ENDED CUMULATIVE FROM
JUNE 30,1997 JUNE 30,1996 JUNE 30,1997 JUNE 30,1996 INCEPTION
------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Revenue and licensing agreement $ -- $ -- $ -- $ -- $ 310,000
Operating expenses:
Research and development 335,842 53,796 739,973 114,244 2,729,628
General and administrative 413,360 311,558 754,259 359,711 2,410,908
---------- ---------- ----------- ---------- -----------
Total operating expenses 749,202 365,354 1,494,232 473,955 5,140,536
---------- ---------- ----------- ---------- -----------
Loss from operations (749,202) (365,354) (1,494,232) (473,955) (4,830,536)
Other income (expense):
Interest income 55,751 45,165 116,692 45,350 258,171
Charge from issuance of stock options
for arranging bridge financing costs -- -- -- -- (1,349,900)
---------- ---------- ----------- ---------- -----------
Total other income (expense) 55,751 45,165 116,692 45,350 (1,091,729)
---------- ---------- ----------- ---------- -----------
Net loss $ (693,451) $ (320,189) $(1,377,540) $ (428,605) $(5,922,265)
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Net loss per common share $ (0.10) $ (0.05) $ (0.19) $ (0.07) $ (0.97)
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Shares used in per share computations 7,121,290 6,308,954 7,121,246 5,805,566 6,076,851
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
4
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VYREX CORPORATION
(a development stage enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED CUMULATIVE
JUNE 30, JUNE 30, FROM
1997 1996 INCEPTION
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,377,540) $(428,605) $(6,606,353)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 13,197 7,503 83,507
Interest receivable (17,852) -- (65,831)
Issuance of compensatory notes, stock and
stock options -- -- 1,561,052
Prepaid assets (42,812) -- (42,812)
Accounts payable and accrued liabilities (165,761) 150,542 338,888
----------- ----------- -----------
Net cash used in operating activities (1,590,768) (270,560) (4,731,549)
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of short-term investments (2,439,785) (2,927,034) (7,381,002)
Sale of short-term investments 946,410 -- 3,994,775
Purchases of furniture and equipment (13,275) (49,780) (121,925)
Cost of patent, trademarks and copyrights -- -- (133,519)
Other assets, including notes receivable from
related parties 261,500 (25,208) (52,500)
----------- ----------- -----------
Net cash used in investing activities (1,245,150) (3,002,022) (3,694,171)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds (repayment) from note payable -- (50,000) 400,000
Exercise of stock options and sale of option -- -- 950,100
Net proceeds from issuance of common stock 1,600 5,787,711 7,429,208
----------- ----------- -----------
Net cash provided by financing activities 1,600 5,737,711 8,779,308
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (2,834,318) 2,465,129 353,588
Cash and cash equivalents, beginning of the
period 3,187,906 65,995 --
----------- ----------- -----------
Cash and cash equivalents, end of the period $353,588 $2,531,124 $353,588
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES
5
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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 June 30,
1997, and the results of operations for the three and six month periods
ended June 30, 1997 and 1996. The results of operations for the periods
ended June 30, 1997 are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the financial
statements and footnotes thereto included in Vyrex's Form 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 JUNE 30, 1997 AND JUNE 30, 1996
Research and development expenses increased $282,046, to $335,842 in the
three months ended June 30, 1997, compared to $53,796 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
CD-Tagging-TM- development and for Vantox-Registered Trademark-preclinical
efforts. General and administrative expenses increased $101,802, to
$413,360 in the current period, compared to $311,558 for the same period
in 1996. The increase is due to higher salaries and consulting as the
Company built up its administrative structure.
Net loss increased $373,262, to $693,451 in the current period, compared to
$320,189 for the same period during 1996 as the Company built up its
research efforts and administrative structure. Net loss per common share
increased $0.05 to $0.10, compared to $0.05 for the same period during
1996. Higher operating expenses were partially offset by higher average
shares outstanding during the period.
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Research and development expenses increased $625,729, to $739,973 in the
six months ended June 30, 1997, compared to $114,244 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
CD-Tagging-TM- development and for Vantox-Registered Trademark-preclinical
efforts. General and
6
<PAGE>
administrative expenses increased $394,548, to $754,259 in the six months
ended June 30, 1997, compared to $359,711 for the same period during 1996.
The increase is due to higher salaries and consulting as the Company built
up its administrative structure as well as higher legal costs for patent
and acquisition efforts.
Net loss increased $948,935, to $1,377,540 in the six months ended June 30,
1997, compared to $428,605 for the same period during 1996 as the Company
built up its research efforts and administrative structure. Net loss per
common share increased $0.12 to $0.19, compared to $0.07 per share for the
same period during 1996. Higher operating expenses were partially offset by
higher average shares outstanding during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed it operations since inception solely through the
sales of debt and equity securities. As of June 30, 1997, the Company had
working capital of $3,511,000 which includes $3,741,000 of cash, cash
equivalents and short-term investments. Cash flow used in operating
activities during the six months ended June 30, 1997 was $1,591,000,
compared to $271,000 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. The Company also used $1,245,000 for
investing activities during the current period, compared to $3,002,000 for
the same period during 1996, as proceeds from the initial public offering
during the first half of 1996 were invested in short-term investments with
maturities greater than three months.
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
can be 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
7
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The Company did not file any reports on Form 8-K during the three months
ended June 30, 1997.
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> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 353,588
<SECURITIES> 3,387,205
<RECEIVABLES> 65,831
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,849,436
<PP&E> 121,925
<DEPRECIATION> 63,467
<TOTAL-ASSETS> 4,079,592
<CURRENT-LIABILITIES> 338,885
<BONDS> 0
0
0
<COMMON> 7,121
<OTHER-SE> 3,733,586
<TOTAL-LIABILITY-AND-EQUITY> 4,079,592
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 749,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (55,751)
<INCOME-PRETAX> (693,451)
<INCOME-TAX> 0
<INCOME-CONTINUING> (693,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (693,451)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
