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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001104659-01-500440.txt : 20010511
<SEC-HEADER>0001104659-01-500440.hdr.sgml : 20010511
ACCESSION NUMBER:		0001104659-01-500440
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010331
FILED AS OF DATE:		20010510

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VYREX CORP
		CENTRAL INDEX KEY:			0000933972
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				880271109
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		
		SEC FILE NUMBER:	000-27866
		FILM NUMBER:		1628311

	BUSINESS ADDRESS:	
		STREET 1:		2159 AVENIDA DE LA PLAYA
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037
		BUSINESS PHONE:		6194544462

	MAIL ADDRESS:	
		STREET 1:		2159 AVENIDA DE LA PLAYA
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>j0373_10qsb.htm
<TEXT>

<HTML>

<head>
<TITLE>Prepared by MerrillDirect</TITLE>
</head>

<body link=blue vlink=purple>

<div>

<div align=right><b><font size=3 face=Times>

<hr size=2 width="100%" noshade color=black align=right>

</font></b></div>


<div align=right><b><font size=3 face=Times>

<hr size=1 width="100%" noshade color=black align=right>

</font></b></div>

<p align=center><b><font size=4>United
States<br>
Securities and Exchange Commission<br>
</font></b><b><font>Washington D.C. 20549</font></b></p>

<p align=center><b><font size=4>Form 10-QSB</font></b></p>

<p><font size=3 face=Wingdings>x</font><font> &nbsp;&nbsp;&nbsp;&nbsp; Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934</font></p>

<p align=center><b><font size=3>For the Quarterly
Period ended March 31, 2001</font></b></p>

<p><font size=3 face=Wingdings>&#168;</font><font> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transition report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934</font></p>

<p><b><font size=3>Commission file
number : 000-27866</font></b></p>

<p><font size=3 face=Times>&nbsp;</font></p>

<p align=center><b><font size=4>VYREX CORPORATION<br>
</font></b><font>(Name
of small business issuer as specified in its charter)</font></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td  align=center width="50%" valign=top><b><font size=3>Nevada</font></b></td>
  <td  align=center width="49%" valign=top><b><font size=3>88-0271109</font></b></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font   size=3>(State or other jurisdiction of</font></td>
  <td  align=center width="49%" valign=top><font   size=3>(IRS Employer Identification No.)</font></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font   size=3>incorporation or organization)</font></td>
  <td  align=center width="49%" valign=top>&nbsp;</td>
 </tr>
</TABLE>

</div>

<p align=center><b><font size=3>2159 Avenida de la Playa, La Jolla,
California, 92037<br>
</font></b><font>(Address of principal executive offices)</font></p>

<p align=center><b><font size=3>(858) 454-4446<br>
</font></b><font>(Issuer&#146;s telephone number including area code)</font></p>

<p><font size=3>Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act&nbsp; 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.</font></p>

<p><font size=3>Yes </font><font face=Wingdings>x</font><font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No </font><font face=Wingdings>&#168;</font></p>

<p align=center><font size=3>Applicable Only to Issuers Involved in
Bankruptcy<br>
Proceedings During the Preceding Five Years</font></p>

<p><font size=3>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.</font></p>

<p><font size=3>Yes </font><font face=Wingdings>&#168;</font><font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No </font><font face=Wingdings>&#168;</font></p>

<p align=center><font size=3>Applicable Only to Corporate Issuers</font></p>

<p><font size=3>State the number of shares outstanding of
each of the issuers classes of common equity, as of&nbsp; latest practicable date:</font></p>

<p><font size=3 face=Times>As of March 31, 2001, there are 8,342,867
shares of common stock outstanding and warrants to purchase 150,000 shares of
common stock outstanding.<br>
</font><font>Transitional Small Business Disclosure Format</font></p>

<p><font size=3>Yes </font><font face=Wingdings>&#168;</font><font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No </font><font face=Wingdings>x</font></p>





<hr size=1 width="100%" noshade color=black align=right>






<hr size=2 width="100%" noshade color=black align=right>


<PAGE>


<p>&nbsp;</p>

<p align=center><b><font size=2>Vyrex
Corporation<br>
Index to Form 10-QSB</font></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width="95%" colspan=3 valign=top><b><font size=2>Part I Financial Information</font></b></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_1__Financial_Statements"   title="Click to goto Item 1.&#9;Financial Statements"><br>
  Item 1 - Financial Statements</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="85%" valign=top><font size=2><a
  href="#Condensed_Balance_Sheets"   title="Click to goto Condensed Balance Sheets&#13;">Condensed Balance Sheets</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="85%" valign=top><font size=2><a
  href="#Condensed_Statements_of_Operations"   title="Click to goto Condensed Statements of Operations">Condensed Statements
  of Operations</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="85%" valign=top><font size=2><a
  href="#Condensed_Statements_of_Cash_Flows"   title="Click to goto Condensed Statements of Cash Flows">Condensed Statements
  of Cash Flows</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="85%" valign=top><font size=2><a
  href="#Notes_To_Condensed_Financial_Statements"   title="Click to goto Notes To Condensed Financial Statements&#11;">Notes to
  Condensed Financial Statements</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_2__Managements_Discussion_and_Analy"   title="Click to goto Item 2.&#9;Management's Discussion and Analysis of Financial Condition and Results of Operations&#13;"><br>
  Item 2 - Management's Discussion and Analysis of Financial Condition and
  Results of Operations</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="95%" colspan=3 valign=top><b><font size=2><a
  href="#PART_II_Other_Information"   title="Click to goto PART II  Other Information&#13;"><br>
  Part II Other Information</a></font></b></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_1__Legal_Proceedings"   title="Click to goto Item 1.&#9;Legal Proceedings&#13;"><br>
  Item 1 - Legal Proceedings</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_2__Changes_in_Securities"   title="Click to goto Item 2.&#9;Changes in Securities&#13;"><br>
  Item 2 - Changes in Securities</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_3__Defaults_upon_Senior_Securities"   title="Click to goto Item 3.&#9;Defaults upon Senior Securities&#13;"><br>
  Item 3 - Defaults upon Senior Securities</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_4__Submission_of_Matters_to_a_Vote_"   title="Click to goto Item 4.&#9;Submission of Matters to a Vote of Security Holders&#13;"><br>
  Item 4 - Submission of Matters to a Vote of Security Holders</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_5__Other_Information"   title="Click to goto Item 5.&#9;Other Information&#13;"><br>
  Item 5 - Other Information</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="92%" colspan=2 valign=top><font size=2><a
  href="#Item_6__Exhibits_and_Reports_on_Form_8K"   title="Click to goto Item 6.&#9;Exhibits and Reports on Form 8-K&#13;"><br>
  Item 6 - Exhibits and Reports on Form 8-K</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="95%" colspan=3 valign=top><font size=2><a   href="#SIGNATURES" title="Click to goto SIGNATURES&#13;"><br>
  Signatures</a></font></td>
  <td  align=right width="4%" valign=top>&nbsp;</td>
 </tr>
</TABLE>

<p><font size=2>&nbsp;</font></p>

<PAGE>


<p>&nbsp;</p>

<p align=center><b><font size=2>PART I&nbsp; Financial Information</font></b></p>

<p><a name="Item_1__Financial_Statements"><b><font size=2>Item 1.</font></b></a><font size=2> <b>Financial Statements</b></font></p>

<p align=center><b><font size=2>Vyrex
Corporation<br>
</font></b><font size=2>(a development stage enterprise)<br>
<a name="Condensed_Balance_Sheets"><b>Condensed Balance Sheets</b></a></font></p>



<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td  align=center width="68%" valign=bottom>&nbsp;</td>
  <td  align=center width="15%" valign=bottom><b><font size=2>Mar 31, 2001</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="15%" valign=bottom><b><font size=2>Dec 31, 2000</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
 </tr>
 <tr>
  <td width="68%" valign=bottom bgcolor="#cceeff"><b><font size=2>Assets</font></b></td>
  <td  align=center width="15%" valign=bottom bgcolor="#cceeff"><font size=2>Unaudited</font></td>
  <td  align=center width="15%" valign=bottom bgcolor="#cceeff"><font size=2>(Note 1)</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Current
  asset - cash and cash equivalents</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$191,823</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$238,817</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Furniture
  and equipment, net of accumulated depreciation of&nbsp; $94,514 in 2001 and $146,679 in 2000</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>9,138</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>14,030</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Total
  assets</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$200,961</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>$252,847</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><b><font size=2>Liabilities
  and stockholders&#146; deficiency</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>Current
  liabilities:</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued
  liabilities</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$232,803</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$264,036</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenue</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>1,447</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>2,171</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Notes payable to related parties</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>10,000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>10,000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>Total current liabilities</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>244,250</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>276,207</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>Notes payable</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>160,000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>160,000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Total
  liabilities</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>404,250</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>436,207</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Commitments
  and contingencies</font></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Stockholders&#146;
  deficiency:</font></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock, $.001 par value;
  10,000,000 shares authorized; none issued</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>-</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>-</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Common stock, $.001 par value;
  50,000,000 shares authorized; 8,342,867 issued and outstanding</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>8,343</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>8,343</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Additional paid-in capital</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>12,845,397</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>12,845,397</font></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Deficit accumulated during the
  development stage</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>(13,057,029)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>(13,037,100)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top bgcolor="#cceeff"><font size=2>Total
  stockholders&#146; deficiency</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>(203,289)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font size=2>(183,360)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="68%" valign=top><font size=2>Total
  liabilities and stockholders&#146; deficiency</font></td>
  <td  align=right width="15%" valign=bottom><font size=2>$200,961</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="15%" valign=bottom><font size=2>$252,847</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p><i><font size=2>See
accompanying notes.</font></i></p>

<p><font size=2>&nbsp;</font></p>

<PAGE>


<p align=center>&nbsp;</p>

<p align=center><a name="Condensed_Statements_of_Operations"><font size=2>Condensed
Statements of Operations</font></a><font size=2><br>
(Unaudited)</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td  align=center width="62%" valign=bottom>&nbsp;</td>
  <td  align=center width="24%" colspan=2 valign=bottom><b><font size=2>Three Months ended March 31,</font></b></td>
  <td  align=center width="12%" valign=bottom><b><font size=2>Cumulative from</font></b></td>
 </tr>
 <tr>
  <td  align=center width="62%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" valign=bottom><b><font size=2>2001</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="12%" valign=bottom><b><font size=2>2000</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="12%" valign=bottom><b><font size=2>Inception</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
 </tr>
 <tr>
  <td width="62%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Licensing
  and royalty revenue</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>$724</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>$9,983</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>$441,753</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Operating
  expenses:</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>&nbsp;&nbsp;&nbsp; Research and development</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(39,122)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>7,920</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>6,393,626</font></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp; Marketing and selling</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>822</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>433,924</font></td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>&nbsp;&nbsp;&nbsp; General and administrative</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>57,384</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>201,593</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>5,705,764</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Total
  operating expenses</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>19,084</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>209,513</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>12,533,314</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Loss
  from operations</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(18,360)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(199,530)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(12,091,561)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Other
  income (expense):</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>&nbsp;&nbsp;&nbsp; Interest income</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>1,834</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>394</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>472,286</font></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp; Loss on disposal of fixed assets</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(6,377)</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(12,605)</font></td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>&nbsp;&nbsp;&nbsp; Interest expense</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(3,403)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(4,482)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(75,249)</font></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp; Charge from issuance of stock options
  for bridge financing</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(1,349,900)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>Total
  other income (expense)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(1,569)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>(10,465)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>(965,468)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>Net&nbsp; loss</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(19,929)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(209,995)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(13,057,029)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="62%" valign=top><font size=2>Net
  loss per share &#150; basic and diluted</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(0.00)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(0.03)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(1.95)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="62%" valign=top bgcolor="#cceeff"><font size=2>Weighted-average
  number of common shares outstanding</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>8,342,867</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>7,620,340</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>6,701,555</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p><i><font size=2>See
accompanying notes.</font></i></p>

<PAGE>


<p><b><font size=2>&nbsp;</font></b></p>

<p align=center><a name="Condensed_Statements_of_Cash_Flows"><font size=2>Condensed
Statements of Cash Flows</font></a><font size=2><br>
(Unaudited)</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="58%" valign=bottom>&nbsp;</td>
  <td  align=center width="27%" colspan=2 valign=bottom><b><font size=2>Three Months ended</font></b></td>
  <td  align=center width="13%" valign=bottom><b><font size=2>Cumulative</font></b><font size=2><br><b>From</b></font></td>
 </tr>
 <tr>
  <td  align=center width="58%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" valign=bottom><b><font size=2>Mar 31, 2001</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="13%" valign=bottom><b><font size=2>Mar 31, 2000</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="13%" valign=bottom><b><font size=2>Inception</font></b><div align=right><b><font size=2><hr size=1 width="98%" noshade color=black align=right></font></b></div></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><b><font size=2>&nbsp;Operating activities</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Net loss</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>$(19,929)</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>$(209,995)</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>$(13,057,029)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Adjustments to reconcile net loss to net
  cash used in operating activities:</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Depreciation, amortization and
  impairment charges</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>4,892</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>6,091</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>328,250</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Interest receivable</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>3,506</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Loss on disposal of fixed assets</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>6,377</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>12,605</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Issuance of compensatory notes, stock,
  stock options and warrants</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>148,000</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>2,229,712</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Changes in operating assets and
  liabilities:</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>100,000</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued
  liabilities</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>(31,233)</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>(2,765)</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>655,366</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenue</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(724)</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(9,982)</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(98,553)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest on convertible
  debentures</font></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom><font size=2>9,041</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Net cash used in operating activities</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(46,994)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(62,274)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(9,817,102)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><b><font size=2>&nbsp;Investing activities</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Purchase of short-term investments</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>(8,440,442)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Sale of short-term investments</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>8,467,931</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Purchases of furniture and equipment</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>(209,595)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Proceeds on sale of fixed assets</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>10,000</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Patent, trademark and copyrights costs</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>(133,519)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Other assets, including notes receivable
  from related parties</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(4,202)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Net cash used in investing activities</font></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom><font size=2>(309,827)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top><b><font size=2>&nbsp;Financing activities</font></b></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Net proceeds from issuance of common stock</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>225,000</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>7,889,808</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Exercise of stock options and sale of
  options</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>975,100</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Exercise of warrants</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>10,000</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Proceeds from short-term loan</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>867,730</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Proceeds from note payable</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>15,000</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>591,114</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Repayment of note payable</font></td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom><font size=2>(15,000)</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Advances from potential investors</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>100,000</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Repayment of advances</font></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom><font size=2>(100,000)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Net cash provided by financing activities</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff">
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>240,000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>10,318,752</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Net increase (decrease) in cash and cash
  equivalents</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>(46,994)</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>177,726</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>191,823</font></td>
 </tr>
 <tr>
  <td width="58%" valign=top>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="58%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;Cash and cash equivalents, beginning of period</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>238,817</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>3,184</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font size=2>-</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="58%" valign=top><font size=2>&nbsp;Cash and cash equivalents, end of period</font></td>
  <td  align=right width="13%" valign=bottom><font size=2>$191,823</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom><font size=2>$180,910</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="13%" valign=bottom><font size=2>$191,823</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p><i><font size=2>See accompanying notes.</font></i></p>

<i><PAGE>
</i>

<p><font size=2>&nbsp;</font></p>

<p align=center><a name="Notes_To_Condensed_Financial_Statements"><font size=2>Notes
To Condensed Financial Statements<br>
</font></a><font size=2>(Unaudited)</font></p>

<p><b><i><font size=2>(1) Basis of Presentation</font></i></b></p>

<dir>
<p><font size=2>The accompanying
condensed financial statements have been prepared by the Company in conformity
with accounting principles generally accepted in the United States of America
for interim financial information. Certain information and disclosures normally
included in financial statements prepared in conformity with accounting
principles generally accepted in the United States of America 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, 2001, and its results of operations and cash flows for the three
month periods ended March 31, 2001and 2000. The results of operations for the
period ended March 31, 2001 are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the financial
statements and notes thereto included in Vyrex&#146;s Form 10-KSB for the year ended
December 31, 2000.</font></p>
</dir>

<dir>
<p><font size=2>The accompanying
condensed financial statements have been prepared assuming that the Company
will continue as a going concern.&nbsp; This
basis of accounting contemplates the recovery of the Company&#146;s assets and the
satisfaction of its liabilities in the normal course of business.&nbsp; As of March 31, 2001, the Company had an
accumulated deficit of $13,057,029, a net capital deficiency of $203,289 and
negative working capital of $52,427.&nbsp;
Due to the Company&#146;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&#146;s ability to continue as a
going concern.&nbsp; The accompanying
condensed 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.</font></p>
</dir>

<dir>
<p><font size=2>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.&nbsp; 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.&nbsp;
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&#146;s short-term or long-term funding requirements.</font></p>
</dir>

<dir>
<p><font size=2>The Company&#146;s major
activities through March 31, 2001 have been limited to raising funds for
conducting research and development on its proposed products.&nbsp; These activities have not generated any
significant revenues; accordingly, the Company has been in the development
stage since its inception.&nbsp; Successful
completion of the Company&#146;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&#146;s cost
structure.&nbsp; There can be no assurance
that the Company will be successful in these areas.&nbsp; To supplement its existing resources, the Company will require
additional capital through the sale of debt or equity.&nbsp; 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.</font></p>
</dir>

<p><font size=2>&nbsp;</font></p>

<PAGE>


<p><font size=2>&nbsp;</font></p>

<p><a name="Item_2__Managements_Discussion_and_Analy"><b><font size=2>Item 2.</font></b></a><font size=2> <b>Management's Discussion and Analysis of Financial
Condition and Results of Operations</b></font></p>



<p><font size=2>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.&nbsp; The Company
intends that such forward-looking statements be subject to the safe harbors
created thereby.&nbsp; This report should be
read in conjunction with the Company&#146;s report on Form 10-KSB for the year ended
December 31, 2000.</font></p>

<p><b><i><font size=2>Results of Operations</font></i></b></p>

<p><b><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Three months ended March 31, 2001
and March 31, 2000</font></b></p>

<dir>
<p><font size=2>The Company earned
$1,000 in royalty income from the sale of four nutritional formulations by the
Retired Persons Services Inc. (&#147;RPS&#148;) compared to $10,000 earned in the same
period of 2000. The Company is entitled to a royalty of 15% on the sale of
these formulations. &nbsp;The Company was
notified in September 2000 that RPS was relinquishing the product line.&nbsp; The Company will continue to receive
royalties on sales until the inventory is depleted.</font></p>
</dir>

<dir>
<p><font size=2>Research and development
expenses decreased $47,000 to a credit balance of $39,000 in the three months
ended March 31, 2001 compared to $8,000 in the same period of 2000. This
decrease was due to funding constraints and the reversal of previously accrued,
but contested purchased service liability of $40,000.</font></p>
</dir>

<dir>
<p><font size=2>General and administrative
expenses decreased $145,000 to $57,000 in the current period, compared to
$202,000 for the same period in 2000. This decrease was due to the Company
recognizing a large consulting expense in the first quarter of 2000, relating
to services performed for the Company.&nbsp;
First quarter expenses were limited to maintenance of patents and
general office expenses such as accounting fees, utility expenses, telephone
expenses, rent and postage.</font></p>
</dir>

<dir>
<p><font size=2>Marketing expenses
amounted to $1,000 in the three months ended March 31, 2001.&nbsp; There were no marketing expenses for the
same period of 2000.</font></p>
</dir>

<dir>
<p><font size=2>Net loss decreased
$190,000 to $20,000, compared to $210,000 for the same period during 2000.&nbsp; Basic and diluted loss per share decreased
$0.03 to $0.00 in the three months ended March 31, 2001 compared to $0.03 in
the same period of 2000.&nbsp; The lower net
loss per common share is principally due to the decrease in the net loss.</font></p>
</dir>

<dir>
<p><font size=2>The Company received a
notice of allowance from the U.S. Patent and Trademark Office on claims of its
U.S. patent application for Water Soluble Pro-Drugs of Propofol.&nbsp; These claims cover treatment of diseases,
states or conditions associated with the nervous system, cardiovascular system
and respiratory system, including but not limited to anesthesia, trauma of the
nervous system, Parkinson&#146;s disease, Alzheimer&#146;s disease and migraine
headache.&nbsp; The Company and its
collaborative partner, Immune Response Corporation, have expanded research
activities to expedite the development of these claims.&nbsp; Although these indications are promising,
there is no assurance the Company and Immune Response Corporation will be
successful in funding further development and commercialization of these
compounds.</font></p>
</dir>

<p><b><i><font size=2>Liquidity and Capital Resources</font></i></b></p>

<dir>
<p><font size=2>The Company has financed
its operations since inception solely through the sales of debt and equity
securities. As of March 31, 2001, the Company had negative working capital of
$52,000.&nbsp; Net cash used in operating
activities during the three months ended March 31, 2001 was $47,000, compared
to $62,000 for the same period during 2000.</font></p>
</dir>

<PAGE>


<dir>
<p>&nbsp;</p>
</dir>

<dir>
<p><font size=2>There can be no
assurance that any further revenues will be realized in 2001 or that they will
be significant and therefore without additional financing the Company may be
unable to continue as a going concern.&nbsp;
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.&nbsp; To date the Company does not have any
commitments for financing.&nbsp; To date the
Company has no prospects for merger or acquisition.&nbsp; The Company does not have any lease or other commitments.&nbsp; The Company does not have an existing bank
line of credit or other form of revolving or renewable credit facility.&nbsp; There can be no assurance the Company will
generate significant revenues during 2001 to continue its operations, or that
funds will be available through the public or private markets.</font></p>
</dir>

<dir>
<p><font size=2>The Company believes
that its current cash reserves and other resources will fund the business
through December 2001. 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.</font></p>
</dir>

<p><font size=2>&nbsp;</font></p>

<p align=center><a name="PART_II_Other_Information"><b><font size=2>PART II&nbsp; Other Information</font></b></a></p>



<p><a name="Item_1__Legal_Proceedings"><b><font size=2>Item 1. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Legal Proceedings</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable</font></p>

<p><a name="Item_2__Changes_in_Securities"><b><font size=2>Item 2. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Changes in Securities</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable</font></p>

<p><a name="Item_3__Defaults_upon_Senior_Securities"><b><font size=2>Item 3. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Defaults upon Senior Securities</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable</font></p>

<p><a name="Item_4__Submission_of_Matters_to_a_Vote_"><b><font size=2>Item 4. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Submission of Matters to a Vote of
Security Holders</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable</font></p>

<p><a name="Item_5__Other_Information"><b><font size=2>Item 5. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Other Information</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable</font></p>

<p><a name="Item_6__Exhibits_and_Reports_on_Form_8K"><b><font size=2>Item 6. </font></b></a><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Exhibits and Reports on Form 8-K</b></font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company did not file any
reports on Form 8-K during the three months ended March 31, 2001</font></p>

<p><font size=2>&nbsp;</font></p>

<PAGE>


<p>&nbsp;</p>

<p align=center><a name=SIGNATURES><b><font size=2>SIGNATURES</font></b></a></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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.</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>VYREX CORPORATION</font></td>
 </tr>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Registrant</font></td>
 </tr>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2><br>
  By:<u><i>/S/G.
  Dale Garlow/</i></u></font></td>
 </tr>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>G. Dale Garlow,</font></td>
 </tr>
 <tr>
  <td width="53%" valign=top>&nbsp;</td>
  <td width="14%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Chief Executive
  Officer</font></td>
 </tr>
</TABLE>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>&nbsp;</font></p>

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