<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, 2000
/ / 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)
(858) 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, 2000, there are 7,792,867 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
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2 - Management's Discussion and 7
Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION 8
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 Form 8-K 8
Signatures 8
</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VYREX CORPORATION
(a development stage enterprise)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MAR 31, 2000 DEC 31, 1999
------------------------------------
ASSETS Unaudited (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 180,910 $ 3,184
-----------------------------------
Total current assets 180,910 3,184
Furniture and equipment, net of accumulated depreciation of $131,585 in
2000 and $132,425 in 1999 29,124 41,591
Patents, trademarks and copyrights, net of accumulated amortization and
impairment charges totaling $140,219
in 2000 and 1999 - -
------------------------------------
Total assets $ 210,034 $ 44,775
====================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued liabilities $ 287,861 $ 713,183
Deferred revenue 18,927 28,910
Notes payable to related parties 31,114 16,114
------------------------------------
Total current liabilities 337,902 758,207
Notes payable 160,000 160,000
------------------------------------
Total liabilities 497,902 918,207
------------------------------------
Commitments and contingencies
Stockholders' deficiency:
Preferred stock, $.001 par value; 10,000,000 shares authorized; none
issued - -
Common stock, $.001 par value; 50,000,000 shares authorized; 7,792,867
and 7,542,867 issued and outstanding in 2000 and 1999, respectively
7,793 7,543
Forgiveness of Accrued Compensation
1/11/2000 totaling $422,559
Additional paid-in capital 12,467,947 11,820,638
Deficit accumulated during the development stage (12,763,608) (12,701,613)
------------------------------------
Total stockholders' deficiency (287,868) (873,432)
------------------------------------
Total liabilities and stockholders' deficiency $ 210,034 $ 44,775
====================================
</TABLE>
SEE ACCOMPANYING NOTES.
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VYREX CORPORATION
(a development stage enterprise)
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, CUMULATIVE FROM
2000 1999 INCEPTION
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<S> <C> <C> <C>
Licensing and royalty revenue $ 9,983 $ 22,416 $ 399,273
------------------------------------------------------------
Operating expenses:
Research and development 7,920 153,023 6,422,141
Marketing and selling 428,093
General and administrative 53,593 187,050 5,354,344
------------------------------------------------------------
Total operating expenses 61,513 340,073 12,204,578
------------------------------------------------------------
Loss from operations (51,530) (317,657) (11,805,305)
------------------------------------------------------------
Other income (expense):
Interest income 394 305 464,921
Gain (loss) on disposal of fixed assets (6,377) 1,875 (12,606)
Interest expense (4,482) (247) (60,718)
Charge from issuance of stock options for
bridge financing - - (1,349,900)
------------------------------------------------------------
Total other income (expense) (10,465) 1,933 (958,303)
------------------------------------------------------------
Net loss $ (61,995) $ (315,724) $ (12,763,608)
============================================================
Net loss per share - basic and diluted $ (0.01) $ (0.04) $ (1.96)
============================================================
Shares used in per share computations 7,620,340 7,423,455 6,517,918
============================================================
</TABLE>
SEE ACCOMPANYING NOTES.
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VYREX CORPORATION
(a development stage enterprise)
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED CUMULATIVE
FROM
MAR 31, 2000 MAR 31,1999 INCEPTION
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<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (61,995) $ (315,724) $ (12,763,608)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, amortization and impairment 6,091 11,749 308,264
charges
Interest receivable 3,506
(Gain) loss on disposal of fixed assets 6,377 (1,875) 12,606
Issuance of compensatory notes, stock, stock
options 2,081,712
and warrants
Changes in operating assets and liabilities:
Other assets 16,591 100,000
Accounts payable and accrued liabilities (2,765) 179,379 710,422
Deferred revenue (9,982) (20,816) (81,072)
Accrued interest on convertible debentures - 9,041
------------------------------------------------------
Net cash used in operating activities (62,274) (130,696) (9,619,129)
------------------------------------------------------
INVESTING ACTIVITIES
Purchase of short-term investments (8,440,442)
Sale of short-term investments 8,467,931
Purchases of furniture and equipment (209,595)
Proceeds on sale of fixed assets 4,000 10,000
Patent, trademark and copyrights costs (133,519)
Other assets, including notes receivable from
related parties 32,117 (4,202)
------------------------------------------------------
Net cash provided by (used in) investing
activities 36,117 (309,827)
------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 225,000 7,694,808
Exercise of stock options and sale of options 950,100
Proceeds from short-term loan 100,000 873,844
Proceeds from note payable 15,000 591,114
Advances from potential investors 100,000
Repayment of advances (100,000)
------------------------------------------------------
Net cash provided by financing activities 240,000 100,000 10,109,866
------------------------------------------------------
Net increase in cash and cash equivalents 177,726 5,421 180,910
Cash and cash equivalents, beginning of the
period 3,184 80,007
-----------------------------------------------------
Cash and cash equivalents, end of the period $ 180,910 $ 85,428 $ 180,910
=====================================================
</TABLE>
SEE ACCOMPANYING NOTES.
5
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VYREX CORPORATION
(A Development Stage Enterprise)
Notes To Condensed Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying condensed 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, 2000, and its results of operations and cash
flows for the three month period ended March 31, 2000. The results of
operations for the period ended March 31, 2000, 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, 1999.
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,
2000, the Company had an accumulated deficit of $12,763,608, a net
capital deficiency of $287,868 and negative working capital of
$156,992. 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 licenses 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, there can be no assurance that an agreement will arise in
a timely manner, or at all, or that any agreement that may arise will
successfully reduce the Company's short-term or long-term funding
requirements.
The Company's major activities through March 31, 2000 have been limited
to raising funds for conducting research and development on its
proposed products. These activities have not generated any significant
revenues; accordingly, the Company has been in the development stage
since its inception. Successful completion of the Company's development
program and its transition, ultimately, to attaining profitable
operations is dependent upon obtaining additional financing adequate to
fulfill its research and development activities, and achieving a level
of revenue adequate to support the Company's cost structure. There can
be no assurance that the Company will be successful in these areas. To
supplement its existing resources, the Company will require additional
capital through the sale of debt or equity. There can be no assurance
that such capital will be available on favorable terms, or at all, and
if additional funds are raised by issuing equity securities, dilution
to existing stockholders is likely to result.
(2) FORGIVENESS OF ACCRUED COMPENSATION
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During the three months ended March 31, 2000, three officers of the
Company forgave previously accrued compensation totaling $422,559. This
amount has been treated as a contribution to the Company and,
accordingly, added to additional paid-in capital in the accompanying
condensed financial statements.
(3) NOTES PAYABLE
During the three months ended March 31, 2000, the Company borrowed
$15,000 under a bridge loan agreement that bears interest at 10% per
annum and is due in February 2001.
(4) COMMON STOCK
During the three months ended March 31, 2000, the Company sold 250,000
shares of common stock in a private placement exempt from registration
for $225,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report on Form 10-QSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. This report should be
read in conjunction with the Company's report on Form 10-KSB for the year ended
December 31, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
The Company earned $10,000 in royalty income from the sale of four
nutritional formulations by the Retired Persons Services Inc. compared
to $22,000 earned in the same period of 1999. This decrease was due to
a direct decline in sales after the initial marketing promotion in
1999. The Company is entitled to a royalty of 15% on the sale of these
formulations.
Research and development expenses decreased $145,000 in the three
months ended March 31, 2000. This decrease was due to funding
constraints that caused a reduction in personnel and all R&D work came
to a halt.
General and administrative expenses decreased $133,000. Again, this
decrease was due to funding constraints that caused a reduction in
personnel. First quarter expenses were minimal and were comprised of
patent fees, rents, utilities and general office expenses.
Net loss decreased $254,000 to $62,000, compared to $316,000 for the
same period during 1999. The decrease in net loss was attributed to the
reduction in personnel and stoppage of R&D work. Net loss per common
share decreased $.03 to ($.01), compared to ($.04) for the same period
during 1999.
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, 2000, the
Company had negative working capital deficit of ($157,000) which
included $181,000 of cash and cash equivalents. Net cash used in
operating activities during the three months ended March 31, 2000 was
$62,000, compared to $131,000 for the same period during 1999. The
Company generated $240,000 from financing activities during the current
period. This consists of $225,000 from the sale of common stock and a
$15,000 short-term bridge loan that
7
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carries interest at 10%. The loan and interest are repayable in full in
February 2001. An additional equity sale of $45,000 was committed to in
March and recorded in April of 2000.
There can be no assurance that any revenues will be realized in 2000 or
that they will be significant and therefore without additional
financing the Company may be unable to 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. To date
the Company has no prospects for merger or acquisition. The Company
does not have any lease or other commitments. 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 2000 to continue its operations, or that
funds will be available through the public or private markets.
The Company believes that its current cash reserves and other resources
will fund the business through December 2000. The Company does not
anticipate having significant revenues in the foreseeable future and
will likely be required to raise additional funds to continue
operations. There can be no assurance that additional funds will be
available.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
During the period ending March 31, 2000, the Company sold 250,000
shares of its common stock to five investors, which shares were not
registered under the Securities Act of 1933. The sales were exempt from
such registration under Section 4(2) of the Securities Act. Each sale
was negotiated individually and each purchaser was an accredited
investor as defined in Rule 501(a) of Regulation D.
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, 2000.
8
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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/ G. DALE GARLOW/
---------------------------------
G. Dale Garlow,
Director
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 180,910
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 180,910
<PP&E> 160,709
<DEPRECIATION> 131,585
<TOTAL-ASSETS> 210,034
<CURRENT-LIABILITIES> 497,902
<BONDS> 0
0
0
<COMMON> 7,793
<OTHER-SE> (287,868)
<TOTAL-LIABILITY-AND-EQUITY> 210,034
<SALES> 9,983
<TOTAL-REVENUES> 9,983
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 61,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,482)
<INCOME-PRETAX> (61,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,995)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
