<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, 1999
/_ / 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, 1999, there are 7,423,455 shares of common stock outstanding
and warrants to purchase 1,156,701 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 Statements
Balance Sheets..........................................3
Statements of Operations................................4
Statements of Cash Flows................................5
Notes to Financial Statements...........................6
Item 2 - Management's Discussion and
Analysis of Financial Condition
And Results of Operations.................................6
PART II OTHER INFORMATION
Item 1 - Legal Proceedings.........................................8
Item 2 - Changes in Securities.....................................8
Item 3 - Defaults upon Senior Securities...........................8
Item 4 - Submission of Matters to a Vote of
Security Holders..........................................8
Item 5 - Other Information.........................................8
Item 6 - Exhibits and Reports on Forms 8-K and 8-K/A...............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>
MARCH 31, DECEMBER 31,
1999 1998
-------------------------------------
(Unaudited) Note
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $85,428 $80,007
Other assets 8,388 24,979
--------------------------------
Total current assets 93,816 104,986
Furniture and equipment costs, net
of accumulated depreciation of
$112,410 in 1999 and $107,037 in 1998 66,029 79,903
Note receivable from related party - 32,117
--------------------------------
Total assets $159,845 $217,006
================================
LIABILITIES AND STOCKHOLDERS' EQUITY ( DEFICIT )
Current liabilities:
Accounts payable and accrued liabilities $458,949 $279,570
Deferred revenue 79,184 100,000
Note payable 100,000 -
---------------------------------
Total current liabilities 638,133 379,570
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued - -
Common stock, $.001 par value; 50,000,000 shares authorized;
7,423,455 issued and outstanding in 1999 and 1998
respectively 7,423 7,423
Additional paid-in capital 11,743,078 11,743,078
Deficit accumulated during the development stage (12,228,789) (11,913,065)
-------------------------------------
Total stockholders' equity(deficit) (478,288) (162,564)
-------------------------------------
Total liabilities and stockholders' equity $159,845 $217,006
=====================================
</TABLE>
Note: The balance sheet at December 31, 1998 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
1999 1998 INCEPTION
--------------------------------------------------
<S> <C> <C> <C>
Revenue and licensing
Agreement $ 22,416 $ - $ 334,016
--------------------------------------------------
Operating expenses:
Research and development 153,023 459,760 6,272,742
Marketing and selling - 86,117 428,093
General and administrative 187,050 463,714 4,932,193
--------------------------------------------------
Total operating expenses 340,073 1,009,591 11,633,028
--------------------------------------------------
Loss from operations (317,657) (1,009,591) (11,299,012)
Other income (expense)
Interest income 305 38,365 464,511
Gain on sale of fixed assets 1,875 - 1,875
Interest expense (247) (26,509) (46,263)
Charge from issuance of stock
options for arranging bridge
financing costs - - (1,349,900)
--------------------------------------------------
Total other income (expense) 1,933 11,856 (929,777)
==================================================
Net loss $ (315,724) $ (997,735) $(12,228,789)
==================================================
Net loss per basic
and diluted common share $ (0.04) $ (0.14) $ (1.92)
============== =============== ===================
Shares used in per share
computations 7,423,455 7,314,894 6,378,799
============== =============== ===================
</TABLE>
SEE ACCOMPANYING NOTES.
4
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VYREX CORPORATION
(a development stage enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, CUMULATIVE
1999 1998 FROM INCEPTION
---------------- ---------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (315,724) $ (997,735) $ (12,228,789)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation, amortization and impairment
Charges 11,749 13,359 278,473
Accounts receivable and interest receivable - 110,423 3,506
Gain on disposal of fixed assets (1,875) - 5,491
Issuance of compensatory notes, stock and
stock options - - 2,044,632
Other assets 16,591 (51,517) 91,612
Accounts payable and accrued liabilities 179,379 (235,657) 458,953
Deferred revenue (20,816) - (20,816)
Accrued interest on convertible debentures - - 9,041
------------------- -------------------- -------------------
Net cash used in operating activities (130,696) (1,161,127) (9,357,897)
------------------- -------------------- -------------------
INVESTING ACTIVITIES
Purchases of short term investments - - (8,440,442)
Sale of short term investments - 1,025,737 8,467,931
Purchases of property and equipment - (6,520) (209,595)
Proceeds on sale of fixed assets 4,000 - 10,000
Patent, trademark and copyright costs - - (133,519)
Other assets including notes receivable
from related parties 32,117 2,240 (4,202)
------------------- -------------------- -------------------
Net cash provided by (used in) investing activities 36,117 1,021,457 (309,827)
------------------- -------------------- -------------------
FINANCING ACTIVITIES
Net proceeds from issuance of common stock - - 7,429,208
Exercise of stock options and sale of options - - 950,100
Proceeds from short term loan 100,000 - 973,844
Proceeds from note payable - - 400,000
Advances from potential investors - - 100,000
Repayments of advances - - (100,000)
------------------- -------------------- -------------------
Net cash provided by financing activities 100,000 - 9,753,152
------------------- -------------------- -------------------
Net increase (decrease) in cash equivalents 5,421 (139,670) 85,428
Cash and equivalents, beginning of period 80,007 2,041,339 -
------------------- -------------------- -------------------
Cash and equivalents, end of period $ 85,428 $ 1,901,669 $ 85,428
=================== ==================== ===================
</TABLE>
SEE ACCOMPANYING NOTES
5
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VYREX CORPORATION
(A Development Stage Enterprise)
Notes To Financial Statements
(Unaudited)
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, 1999, and the results of operations for the three-month period
ended March 31, 1999. The results of operations for the period ended
March 31, 1999, 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-K/A SB for the year ended December 31, 1998.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. This basis of accounting
contemplates the recovery of the Company's assets and the satisfaction
of its liabilities in the normal course of business. As of March 31,
1999, the Company had an accumulated deficit of $12,228,789, a net
capital deficiency of $478,288 and negative working capital of
$544,317. Due to the Company's recurring losses and net capital
deficiency, there can be no assurance that the Company will be able to
obtain additional operating capital, which may impact the Company's
ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
The Company is seeking collaborative or other arrangements with larger
pharmaceutical and nutraceutical companies, under which such companies
would provide additional capital to the Company in exchange for
exclusive or non-exclusive licensees or other rights to certain of the
technologies and products the Company is developing. Competition for
corporate partnering arrangements with major pharmaceutical and
nutraceutical companies is intense, with a large number of
biopharmaceutical companies attempting to arrive at such arrangements.
Accordingly, although the Company is presently engaged in discussions
with a number of candidate companies, there can be no assurance that an
agreement will arise from these discussions in a timely manner, or at
all, or that any agreement that may arise from these discussions will
successfully reduce the Company's short-term or long-term funding
requirements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
The Company earned $20,816 in royalty income from the sale of four
nutritional formulations by the Retired Persons Services Inc. The
Company is entitled to a royalty of 15% on the sale of these
formulations. In addition the Company earned $1,600 in license fees.
Research and development expenses decreased $307,000, to $153,000, in
the three months ended March 31, 1999, compared to $460,000 for the
same period during 1998. The decrease is due to reductions in salaries
of $117,000, consulting fees of $143,000, and other research and
development expenses of $47,000.
6
<PAGE>
General and administrative expenses decreased $277,000 to $187,000
in the three months ended March 31, 1999, compared to $464,000 for
the same period during 1998. The decrease is due to reductions in
salaries of $57,000 and $220,000 in other general and administrative
expenses. No marketing expenses were incurred in the three months
ended March 31, 1999 compared to $86,000 during the same period in
1998. The Company's marketing efforts were focused on seeking
potential collaborative partners for both its pharmaceutical and
nutritional compounds.
During the first quarter of the year, the Company reviewed its
scientific programs and made a decision to refocus its efforts into its
core anti-oxidant technologies, in both the pharmaceutical and
nutraceutical areas. The decision was based, in part, on the Company's
belief of the greater commercial and collaborative opportunities in
these areas. In 1998, the Company amended its collaboration with The
Immune Response Corporation to develop anti-oxidant drug candidates as
potential therapeutics for CNS trauma. As part of its plan, the Company
has made a strategic decision to discontinue its genomics program and
is terminating its licenses for Epitope Tagging and CD-Tagging
technologies. This decision is not expected to have any material effect
on its collaboration with the Immune Response Corporation or other
pharmaceutical and nutraceutical programs.
Net loss decreased $682,000, to $316,000 in the current period,
compared to $998,000 for the same period during 1998, as the Company
kept expenditures to a minimum. In addition, salaries of science,
administrative and management personnel were deferred until such time
as the Company has sufficient resources to fund the payroll. As of
March 31, the deferred payroll amounted to approximately $325,000.
Net loss per common share decreased $0.10 to $0.04, compared to $0.14
for the same period during 1998. The lower net loss per common share
was decreased following a higher number of average shares outstanding
during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception solely through
the sales of debt and equity securities. As of March 31, 1999, the
Company had a working capital deficit of ($544,000) which included
$85,000 of cash and cash equivalents. Net cash used in operating
activities during the three months ended March 31, 1999 was $131,000,
compared to $1,161,000 for the same period during 1998. The decrease in
cash used was primarily related to the lower net loss from operations
as the Company scaled back its operating activities in order to
conserve cash. The Company generated $36,000 of cash in investing
activities during the current period, which consists of $4,000 from the
sale of equipment and $32,000 from the repayment of a loan made to a
former employee of the company. This compares to $1,021,000 of cash
provided by investing activities during the same period in 1998. The
Company generated $100,000 from financing activities. This consists of
a $100,000 short-term loan repayable in full with interest in March
2000. The loan carries interest at 10% and is secured by a general
pledge of the assets of the Company with the applicable provisions of
the Uniform Commercial Code.
While the Company expects revenues during 1999, there can be no
assurance that they will be significant and therefore without
additional financing it is uncertain whether the Company can continue
as a going concern. The Company is actively pursuing collaborations
with potential partners in both the pharmaceutical and nutraceutical
divisions with the objective of raising financing to enable the
Company to continue operations. To date the Company does not have any
commitments for financing. It is anticipated that the $100,000 loan
will enable the Company to continue operating until the summer of
1999, at which time it is anticipated that additional funds will
have been raised through strategic collaborations. If the Company is
unable to raise additional funds to continue operations by the
summer of 1999, it will have a material adverse impact on the
business and operations of the Company, and the Company may be
unable to continue
7
<PAGE>
operations. The Company does not have any lease or other
commitments, other than a lease on a secondary office, which expired
on April 30, 1999. The Company does not have an existing bank line
of credit or other form of revolving or renewable credit facility.
There can be no assurance the Company will generate significant
revenues during 1999, or 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 FORMS 8-K AND 8-K/A
The Company filed Forms 8-K, and 8-K/A reports on April 27th and May
5th respectively following a change in the Company's auditors.
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/ MARTIN MALK
-----------------------------
Martin Malk,
Chief Financial Officer
(Principal Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 85,428
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,816
<PP&E> 178,439
<DEPRECIATION> 112,410
<TOTAL-ASSETS> 159,845
<CURRENT-LIABILITIES> 638,133
<BONDS> 0
0
0
<COMMON> 7,423
<OTHER-SE> (485,711)
<TOTAL-LIABILITY-AND-EQUITY> 159,845
<SALES> 22,416
<TOTAL-REVENUES> 24,596
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (340,073)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (247)
<INCOME-PRETAX> 315,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,875)
<CHANGES> 0
<NET-INCOME> 315,724
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
