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 --- ---
VYREX CORPORATION INDEX TO FORM 10-QSB <TABLE> <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
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. 3
VYREX CORPORATION (a development stage enterprise) Condensed Statements of Operations (Unaudited) <TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31, CUMULATIVE FROM 2000 1999 INCEPTION ------------------------------------------------------------ <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. 4
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 ------------------------------------------------------ <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
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 6
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
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
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